The Irrationality of Complicated Subsidies

Date: 1 Nov 2010 | posted in: Energy | 0 Facebooktwitterredditmail

But assuming we can agree that there’s good reason to subsidize solar power, as well as other forms of low-carbon electricity (including nuclear), you have to ask — is this hodge-podge of loan guarantees, federal funds and ratepayer support an efficient way to do so? Wouldn’t it be better to enact a steep carbon tax, and then let all forms of energy compete? Should a friend of mine who lives in upscale Los Altos and put a $35,000 solar system on his roof be subsidized by the rest of us? Is this going to lead us to a sustainable energy future, one in which we can collectively make smart choices? I don’t know. But somehow I think not.

A great argument for a feed-in tariff as well.

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Hermann Scheer’s Feed-in Tariff Legacy: 75% of World’s Solar PV

Date: 27 Oct 2010 | posted in: Energy | 0 Facebooktwitterredditmail

The death of German renewable energy advocate Hermann Scheer last week – dubbed the sun king or even the Stalin of renewables – is a unique opportunity to reflect on his largest legacy, the feed-in tariff, a policy responsible for the rise of the renewable energy industry.

The feed-in tariff offers prospective renewable energy producers three simple and powerful tools: a guaranteed connection to the grid, a long-term contract for their electricity, and a price for their power sufficient to make a reasonable return on investment.  The result of the feed-in tariff is to make renewable energy generation easier to develop and easy to finance.  It creates a sort of energy democracy where, to paraphrase the chef from the Disney movie Ratatouille, “anyone can generate”.  

The feed-in tariff was the dominate policy in Denmark as wind power rose on the back of local cooperatives to provide as much as 20 percent of that country’s electricity.  Thanks to Dr. Scheer, it was the policy that energized Germany’s solar industry, one that now generates gigawatts of new distributed solar PV every year.  In fact, as the feed-in tariff policy spread to other nations, it has been responsible for the deployment of 75 percent of all solar PV projects and 45 percent of all wind projects worldwide.  

Though many policy makers are not familiar with the feed-in tariff, the policy has spread to North America, shepherding $9 billion of investment to Ontario’s renewable energy market as well as shaping the market in Vermont, California, and Gainesville, Florida.  

To learn more about the feed-in tariff, check out our 2009 report: Feed-in Tariffs in America: Driving the Economy with Renewable Energy Policy that Works or visit the Alliance for Renewable Energy or the FIT Coalition websites.

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FERC Decision Clears Way for State-Based Feed-in Tariffs

Date: 25 Oct 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

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.

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Community Solar – Better on the Roof?

Date: 22 Oct 2010 | posted in: Energy, Energy Self Reliant States | 3 Facebooktwitterredditmail

When we released our report on community solar power last month, we expected a few comments on the grades we gave to the nine featured community solar projects. We also generated a really robust conversation about the location (on buildings or on the ground) of community solar PV projects and made a disheartening discovery about the cost of roof repairs when a solar PV array is present.

 

In the report, our criteria for solar PV location gave high marks for rooftop solar PV systems because of their use of existing infrastructure, lower marks for ground-mounted systems in brownfields, and the lowest grades for greenfield systems. In one particular case, we gave a ‘C’ grade to the Clean Energy Collective’s project because while it used otherwise unusable land near a sewage treatment plant, it was still ground-mounted.

The response to their ‘C’ grade made us re-evaluate our grading system. On reflection, there are three major considerations for the location of a community solar (or any distributed renewable energy) project.

Location Criteria for Community Solar

  1. Preservation of Open Space 
  2. Use of Existing Grid Infrastructure 
  3. Lifetime Cost for Participants 

 

Open Space

The open space issue cannot be ignored, as demonstrated by the opposition to centralized concentrating solar thermal power and solar PV power plants in the Mojave Desert and San Luis Valley in Colorado. Projects that use rooftops will rarely encounter resistance on environmental grounds (although there can be issues with historic districts). From the perspective of open space, there is still a higher value in a rooftop project than a ground-mounted one.

Existing Grid Infrastructure

The issue of existing grid infrastructure is not as clear cut. In general, distributed solar PV projects minimize the need for new grid infrastructure by plugging into the grid at low voltages and in a variety of places.

Rooftop solar would seem to have an advantage in this.  With few exceptions, a rooftop solar PV system can easily interconnect through the building’s grid connection. A rooftop solar PV system doesn’t change the capacity required by the local grid connection because net metering limits typically mean that no one installs a system that produces more than the building consumers.

But our error was to assume that ground-mounted systems would not take advantage of existing infrastructure, as well. In fact, the Clean Energy Collective solar project connects to existing infrastructure at an adjacent sewage treatment plant. Several other community solar projects in the report were constructed by utilities and presumably built next to existing substations where the new generation could easily be absorbed into the local grid. In other words, we should have graded this location criteria separately from the open space issue.

Lifetime Costs

The third issue – and one we’d never considered – is that rooftop PV systems may have to be removed and reinstalled if the roof needs replacement or repairs. While PV systems typically lose a small portion of their potential output (< 1%) each year, the systems can operate for decades, far longer than the typical residential or commercial roof (20-25 years in Minnesota). In other words, there’s likely to be one roof replacement during the life of a PV system.

Reinstalling a residential rooftop PV system could cost $6,250 or 25% of the installed cost of the system

In our investigation, we found that moving residential PV systems to accommodate a roof replacement could cost as much as 25% of the initial system cost (and over 35% of the net cost after the application of the 30% federal tax credit).  Moving systems on a commercial roof was less expensive, on the order of 15% of initial installed cost (around 25% of the system cost after the tax credit).   

The following chart illustrates the range of costs we found relative to an initial installed cost of $5.00 per Watt for commercial and residential PV systems.  

But this chart is somewhat disingenuous, because solar PV owners never pay the full installed cost.  Instead, there are a slew of tax credits and rebates that reduce this initial price.  The next chart shows these roof repair reinstallation costs relative to the net cost after the 30% federal tax credit.  

The cost issue is also complicated by various ownership arrangements. If the building owner also owns the array, the cost of moving the PV system is their responsibility. But what if they lease the solar array? Does the leasing company bear the cost of system safety when the roof is repaired or replaced or is it still the responsibility of the building owner? Will that cost be assessed when the roof is repaired or escrowed from the start of the project?

A CEC representative noted, “I guarantee you that a building owner (lessee) will never sign a long term lease that requires them to pay the costs of reinstalling a system after roof repairs, etc.” If CEC’s recently completed 77 kW community solar array had been built on a rooftop and required a move, the cost to its individual investors would likely be around $2,000, increasing the upfront cost for those individuals by nearly 30%. In addition, CEC couldn’t have offered the utility or its customers a 50-year service level agreement.

Conclusion: Location is Complicated

Obviously, there’s much more to the ground v. rooftop issue than meets the eye, from interconnections to roof repairs. Look for a transformation in our Community Solar Report in the next few weeks reflecting on this complex issue.

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Distributed solar less variable than centralized solar

Date: 21 Oct 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Traditionally, the reliability of small PV systems’ power output has been a concern for utilities, project developers and grid operators, since all it takes is a few clouds to disrupt the power flow of a small array. But the Berkeley Lab study suggests that when PV plant arrays are spread out over a geographic area, the variability in power output is largely eliminated.

This means that for utilities, the distributed generation of small PV arrays could mean increased efficiency, reduced costs and a quicker path to a cleaner energy portfolio.

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Vermont Says Its Feed-in Tariff Complies with Federal Law

Date: 20 Oct 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

There’s been much discussion of whether state-based feed-in tariff policies comply with federal energy law, including PURPA and the Federal Power Act. Fortunately, the brilliant folks at NREL released a report earlier this year providing feed-in tariff policy design options for state policy makers [pdf]. Furthermore, the state of Vermont recently affirmed that their feed-in tariff policy conforms to federal law.

The PSB, the regulatory authority, ruled that no challenger, including DPS, had “demonstrated that the standard offer program is invalid”. Under Vermont law, the PSB has the “obligation to implement statutes passed by the legislature,” it said, and, thus, it was their duty to do so if the law is valid.

Some challengers suggested that the PSB suspend the program while it seeks clarification from FERC. The PSB ruled definitively saying that to seek clarification from FERC; the PSB would be making a determination that the program is invalid. The program is valid, says the PSB, therefore there’s no need to seek clarification.

Good news for a policy that delivers strong support for distributed renewable energy generation.

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Why we need a local energy movement

Date: 19 Oct 2010 | posted in: Energy | 0 Facebooktwitterredditmail

When author Michael Pollan spoke at Cal Poly San Luis Obispo in mid-October, it’s a safe bet his hosts didn’t offer fresh cherries to the “local foods” advocate. As a locavore — someone who tries to eat only food grown within a 100-mile radius of them — Pollan would have likely reacted to cherries like a vampire reacts to garlic. At this time of year, any fresh cherries in northern California would most likely have come from orchards in Chile, roughly 6,000 miles to the southeast.

Yet, when Pollan was handed the microphone he probably did not turn to David Wehner, Dean of the college hosting the event, and ask, “By the way, Dean – Where did the electricity powering this thing come from?”

Maybe he should have.

At least some of that electricity had just completed a 1,000 mile journey. The energy was converted from wind to electricity at the Klondike generating facility just south of the Washington-Oregon border. The electricity traveled over power lines down the entire state of Oregon, then traversing three-quarters of the length of California to arrive at the microphone in Pollan’s hand at Cal Poly. So, does it matter that this electricity began life 1,000 miles from the microphone it powered?

That question is at the heart of the report, “Energy Self-Reliant States,” published in October by the New Rules Project. The report shows why “local energy” matters and then looks at the renewable energy potential of each state.

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