Joining Ontario and several U.S. states, the Canadian province of Nova Scotia has proposed a new twist on a common clean energy program. The policy provides a guaranteed, long-term contract for wind, biomass, hydro, and tidal power producers and offers them the same return on equity provided to utiltiies. … Read More
A residential rooftop solar PV system in Los Angeles, CA, has a cheaper cost per kilowatt-hour of electricity delivered than the most cost effective, utility-scale concentrating solar power plant.
In 2010, a buying group called Open Neighborhoods openly advertised an opportunity to get a solar PV system installed for $4.78 per Watt (not including any tax credits, rebates, or grants), a system that would produce approximately 1,492 kilowatt-hours (kWh) per year (AC) for each kilowatt of capacity (DC).
Based on the best available public information about the costs and performance of operational concentrating solar thermal power plants, the PS10 solar power tower – an 11 MW installation in Spain – has the lowest levelized cost of operation of any concentrating solar power plant that produces electricity. PS10 had an installed cost of $4.15 per Watt and produces 2,127 kWh per kW of capacity.
However, due to higher operations costs and a higher cost of capital (8% rather than 5%) for a concentrating solar power plant, the levelized cost of the residential rooftop system (17.3 cents per kWh) is less than that of the power tower (19.9 cents per kWh).
This analysis also does not include any transmission infrastructure or efficiency losses, either of which would increase the levelized cost of the concentrating solar power plant. It also did not include the lower price point from Open Neighborhoods, which advertised a possibility of driving the price down to $4.22 per Watt (driving the levelized cost down to 15.3 cents per kWh).
The Southern California Edison project, also featured in the chart, is another example of low-cost distributed solar PV, with the 250 MW project spread across commercial rooftops in 1-2 MW increments but still achieving large scale.
Ultimately, this data further confirms that distributed solar can be delivered less expensively than centralized solar power.
On Monday we posted a news story about the launch of Hawaii’s feed-in tariff program, and in a review last night we found an interesting anomaly: the price paid for power for residential solar PV (projects smaller than 20 kW) is lower than the residential retail electricity price on most of the Hawaiian islands. On the most populous island, Oahu, the price paid under the feed-in tariff is three-tenths of a cent per kilowatt-hour (kWh) higher than the retail electricity price, but it’s as much as 11 cents per kWh lower on other islands including Maui, Molokai, Lanai, and the Big Island.
Why pay less than the actual retail electricity price?
First, Hawaii has a very strong solar resource. A typical rooftop crystalline silicon PV array could produce nearly 1,600 kWh AC per year for each kW of DC capacity. This is a capacity factor of over 18%.
Second, the state of Hawaii provides a personal tax credit for the lesser of 35% of the system cost or $5,000. This is on top of the federal 30% tax credit.
So what does a Hawaiian solar producer need to make a reasonable return on their solar PV investment (8%)? The following chart illustrates the prices needed for three different system costs.
While a typical individually contracted solar PV system will have a total cost of $8 per Watt or higher, group purchasing of solar PV systems (as discussed in this earlier post) has dropped installed costs down to as low as $4.78 per Watt in a group purchasing program in Los Angeles. At that upfront price, Hawaiians that go solar would only need $0.15 per kWh to make an 8% return on investment! Based on the actual FIT price of $0.21 per kWh, a Hawaiian group solar purchase could offer participants a 13% return on investment!
Note: You may wonder at the choice of installed costs for the chart. These are based on Solarbuzz’s solar price index and our previous analysis of distributed solar PV prices.
Note 2: I’m awaiting confirmation that the Hawaii tax credit is taken off the system cost, rather than cost after the federal tax credit. The FIT prices shown would rise by about 1.5 cents per kWh if the state tax credit is calculated on the system cost after the federal credit. Update: the federal tax credit does not reduce the basis for the Hawaii state tax credit.
It’s been a common argument against feed-in tariffs that federal law preempts states from establishing prices for renewable energy above the utility’s avoided cost (a figure meant to represent what it what otherwise cost the utility to get the same amount of electricity from another source, typically a natural gas-fired power plant). The FERC ruling in mid-October changes everything, allowing states to set the avoided cost rate based on the renewable energy technology in question.
From the ruling, as shown on wind-works.org:
“. . . Avoided cost rates may also ‘differentiate among qualifying facilities using various technologies on the basis of the supply characteristics of the different technologies’. . .”
“. . . We find that the concept of a multi-tiered avoided cost rate structure can be consistent with the avoided cost rate requirements set forth in PURPA and our regulations. Both section 210 of PURPA and our regulations define avoided costs in terms of costs that the electric utility avoids by virtue of purchasing from the QF. The question, then, is what costs the electric utility is avoiding. Under the Commission’s regulations, a state may determine that capacity is being avoided, and so may rely on the cost of such avoided capacity to determine the avoided cost rate. Further, in determining the avoided cost rate, just as a state may take into account the cost of the next marginal unit of generation, so as well the state may take into account obligations imposed by the state that, for example, utilities purchase energy from particular sources of energy or for a long duration.51 Therefore, the CPUC may take into account actual procurement requirements, and resulting costs, imposed on utilities in California. . .” [emphasis added]
The FERC ruling does specify one difference between a U.S. state-based FIT and those in Europe or Ontario – the state must specify the amount of each renewable energy technology it wants, as well as the price (e.g. 100 megawatts of solar PV that is under 10 kilowatts).
There’s also a very nice, plain English explanation of the impact of the FERC ruling from Jen Gleason at Environmental Law Alliance Worldwide.
As it grows, wind power can increasingly displace expensive fossil fuel generators. In Texas (and also in Germany), wind is already helping to drive down electricity prices.
This is commonly known as the “merit order” effect, as sources with greater social merit (wind and solar power) are taken first by the grid, displacing dirtier and more expensive energy sources. The following two illustrations, from Feed-in Tariffs in America, illustrate the effect.
Last November, the consulting firm Global Insight (GI) released a study that found that Wal-Mart saved U.S. consumers $263 billion in 2004. That works out to $2,329 for the average household — a striking degree of economic benefit. But a rigorous new analysis by the Economic Policy Institute (EPI), a non-profit think-tank, concludes that the GI study is “fraught with problems.”
… Read More