A serialized version of our new report, Democratizing the Electricity System, Part 4 of 5. Click here for: Part 1 (The Electric System: Inflection Point) Part 2 (The Economics of Distributed Generation) Part 3 (The Political and Technical Advantages of Distributed Generation) Download the report. Regulatory Roadblocks / The Political System Despite technology’s march toward more … Read More
The Golden State has covered over 50,000 roofs with solar PV in the past decade, but could it also save 30% or more on its current solar costs? Renewable energy guru Paul Gipe wrote up a study last week that found that Californians pay much more per kilowatt-hour of solar power than Germans do (accounting for the difference in the solar resource). The following chart outlines the various ways Californians pay for solar, compared to the Germans (averaged over 20 years, per kilowatt-hour produced).
While the study doesn’t explore the rationale, here are a few possibilities:
- The inefficiency of federal tax credits artificially inflates the cost of U.S. solar.
- Big banks that offer financing for residential solar leasing routinely overstate the value of the systems, increasing taxpayer costs on otherwise cost-effective systems.
- The complexity and intricacy of the state and federal incentives (4 separate pots of money!) and the lack of guaranteed interconnection means higher risk and higher cost for U.S. solar projects.
- The inconsistency in local permitting standards that increases project overhead costs.
Ultimately, the combination of these market-dampening problems in the California market has hindered the cost savings that have hit the German market. California solar installations of 25 kilowatts (kW) and 100 kW have a quoted price of $4.36 and $3.84 per Watt, respectively, according to the Clean Coalition. This compares to $3.40 per Watt on average for already installed projects of 10-100 kW in Germany.
Given a solar cost disadvantage that is present both in the value of incentives AND in the actual installed cost, renewable energy advocates in California should seriously question whether the current policy framework makes sense. The mish-mash of federal tax credits and state/utility rebates has not led to the same economies of scale and market maturity as Germany has accomplished with their CLEAN contract (a.k.a. feed-in tariff).
Switching energy policies could save ratepayers billions.
A 24-cent CLEAN contract price for California solar (to match the German contract) would replace the entire slate of existing solar incentives with an overall average cost 30% lower than the current combined incentives. If 2011 is a banner year and the state sees 1 gigawatt (GW) of installed capacity, the savings to ratepayers of a CLEAN program (over 20 years) would be nearly $3 billion.
If the CLEAN price were adjusted down to assume that projects could use the federal tax credit, then California could set the contract price as low as 18.5 cents per kWh, 5 cents less than is currently paid by California ratepayers (although requiring projects to use tax credits has significant liabilities).
Several states and municipal utilities (Vermont; Gainesville, FL; San Antonio, TX) have already shifted to this simple, comprehensive policy, with promising early results. Californians should consider whether holding to an outdated and complicated energy policy is worth paying billions of dollars extra for solar power.
A bill in Minnesota’s state legislature would require utilities to offer a green pricing program for local, distributed wind power. The largest investor-owned utility in the state already offers Windsource, a program to buy blocks of wind power at a premium price. The law would essentially require Xcel to offer a “Local Windsource” option for ratepayers.
Under the proposed law, projects supported by “Local Windsource” would have to be 25 megawatts or smaller, located in Minnesota, and owned by Minnesota residents. Only ratepayers that opt in would financially support the program:
2.7 Subd. 2a. Local wind energy rate option. (a) Each utility shall offer its customers
2.8 one or more options allowing a customer to determine that a certain amount of electricity
2.9 generated or purchased on the customer’s behalf is from wind energy conversion systems
2.10 that meet the following criteria:
2.11 (1) have a nameplate capacity of 25 megawatts or less, as determined by the
2.12 commissioner of commerce;
2.13 (2) are owned by Minnesota residents individually or as members of a Minnesota
2.14 limited liability company organized under chapter 322B and formed for the purpose of
2.15 developing the wind energy conversion system project;
2.16 (3) the term of a power purchase agreement extends at least 20 years; and
2.17 (4) the wind energy conversion system is located entirely within Minnesota.
2.18 (b) Each utility shall file a plan with the commission by October 1, 2011, to
2.19 implement paragraph (a).
2.20 (c) Each utility offering a rate under this subdivision shall advertise the offer with
2.21 each billing to customers.
2.22 (d) Rates charged to customers for energy acquired under this subdivision must be
2.23 calculated using the utility’s cost of acquiring the energy for the customer and must be
2.24 distributed on a per-kilowatt hour basis among all customers who choose to participate
2.25 in the program.
The bill hasn’t even had a hearing, but it’s an interesting proposal for increasing the generation of local, distributed wind and its attendant economic benefits.
Photo credit: Flickr user scelis
The following map was the headline graphic to our 2009 report, Energy Self-Reliant States, the report that inspired this blog. I re-created the map for web viewing, so it’s now even easier to share how each state can meet its electricity consumption with in-state renewable energy resources.
The renewable resources considered include on- and off-shore wind, rooftop solar PV, hydro, combined heat and power, and high-temperature geothermal. Read the Energy Self-Reliant States report for more details.
By a vote of 13 to 8, the Nevada Senate earlier this week approved a feed-in tariff to boost renewable energy develoment in the state. The bill, SB184, now heads to the House where it is expected to pass. Unfortunately, a gubernatorial veto is also expected, so supporters are hoping for a 2/3 majority in favor.
The large transmission authority serving the upper midwest – the Midwest Independent System Operator – has plans for new high-voltage transmission lines leading from windy states like the Dakotas to places like Michigan. The purpose is to bring renewable energy from big western wind farms to places East.
Some of these places – like Michigan – would rather do it themselves.
The initial list of projects in the MISO region has an estimated cost of $4.8 billion. But MISO has pointed to additional projects over the next several years that could total between $16 billion and $20 billion. Michigan’s share of $16 billion worth of projects would be about $640 million annually. And most of these funds would be sent out of the state.
…This would happen even though Michigan already has its own state law requiring that 10 percent of its power must be generated using alternative sources by 2015. And all of that renewable-source energy must be generated within Michigan — which means electricity consumers likely won’t be buying or using power generated in other states.
The article doesn’t even get into the meat of the issue: that renewable electricity imports may be marginally cheaper than wind and solar power in Michigan, but that the economic impact of locally developed projects doesn’t show up on electricity bills.
Michigan isn’t alone in their desire for self-reliance. Ten East Coast governors signed a letter to members of Congress to protest visions for a new nationwide network of transmission that would have them importing Midwest wind at the expense of domestically built renewable energy. And the Canadian province of Ontario developed a comprehensive clean energy program with a requirement that all renewable energy and a majority of the actual components of new renewable energy facilities come from inside Ontario.
It may seem counter-intuitive that citizens would prefer more expensive electricity, but when weighed against the economic opportunity of local ownership and development, perhaps it’s no surprise.
Vote Solar recently teamed up with COSEIA to collect and evaluate the current state of [solar] permitting in 34 local jurisdictions throughout the state. Survey says? In practice, solar permitting requirements vary widely from one jurisdiction to the next due to different permitting plan review processes and other extraneous fees. This has resulted in piecemeal local permitting practices that are often costly, complex, non-transparent and time-intensive. The process is arduous for solar installers and increases costs to consumers. Among the 34 cities and counties surveyed, Breckenridge, Colorado Springs, and Denver are doing permits on the fast and cheap. On the slower, more expensive end are Arapahoe County, Aurora and Commerce City…
The findings reinforce the need for Colorado’s juridications to adopt standardized, streamlined solar permitting practices. The Colorado Fair Permit Act (HB 11-1199) has passed out of the House on a 64-1 vote and now moves on to the Senate. Stay tuned!
Solar permitting remains a looming cost barrier to distributed solar, so it’s great to see that Vote Solar’s Project:Permit is gaining traction.
Vote Solar reports that Ohio utility First Energy is claiming for the second straight year that it can’t meet the state’s solar carve out.
First Energy Corp – which is parent company to Toledo Edison, Ohio Edison and Cleveland Electric Illuminating – reports that they were unable to find enough solar renewable energy credits in Ohio needed to satisfy their 2010 benchmark for solar energy. First Energy has filed for force majeure for the second year in a row claiming that it was a circumstance beyond their control, a legal ‘act of God’, that prevented the company from buying the needed SRECs….it’s awfully suspect that an Act of God would occur twice in a row.
It is, for two reasons. First, as we detailed in our 2009 report – Energy Self-Reliant States – Ohio is like many states in having sufficient rooftop space for solar PV to supply 20 percent of the state’s electricity. There’s no shortage of sunshine.
Additionally, it’s far less expensive for the utility to buy solar than to pay the alternative compliance payment. In 2011, utilities must either acquire the necessary solar renewable energy credits (RECs) or pay $400 per megawatt-hour (MWh) that they fail to acquire.
However, a large-scale solar PV system in Ohio with an installed cost of $6 per Watt only needs 22.6 cents per kWh ($226 per MWh) to break even over 25 years (if they use federal incentives). With a long-term contract with a known price for solar RECs (something they have yet to offer), First Energy can surely find a solar developer willing to help them out.
After all, that’s exactly what other Ohio utilities are doing:
First Energy could have followed the example of AEP Ohio, a neighboring utility that has successfully entered into a long term PPA with a 10 MW solar farm and is in development for another 49 MW solar facility as we write. If AEP can do it, so can First Energy.
First Energy’s problems with solar have little to do with God or their state’s solar resources, and everything to do with giving up.
Currently, Minnesota’s public schools spend approximately $84 million per year on electricity costs, money diverted from the classroom. But a bill to make clean, local energy accessible now (CLEAN) could help the state’s public schools use solar to zero out their electricity bills and add $193 million per year to their operating budgets.
The proposed bill would create a CLEAN Contract for public entities in Minnesota, requiring local utilities to buy electricity from solar PV systems on public property on a long-term contract and at a price sufficient to offer a small return on investment. The program mimics the traditional model for utility power development, where the public utilities commission rewards utilities a fixed rate of return on investments in new power generation. If schools maximize their participation in the new program, and cover their available roofspace with solar PV, the 750 megawatts of power would provide $193 million per year for school budgets, create hundreds of local jobs, and make the schools electricity self-reliant.
The cost of the program would be negligible: adding less than two-tenths of a cent per kilowatt-hour to customer bills.
Minnesota’s CLEAN Contract proposal is one of several programs spreading across North America, from Ontario to Vermont to Gainesville, Florida, and one that has ushered in thousands of megawatts of solar across Europe. In Ontario, the full-scale program has contracted over 2,700 megawatts of renewable energy and is responsible for 43,000 new jobs. Minnesota’s program is restricted to solar PV on public property, but as this analysis shows, it could still have a significant impact on school budgets without a significant impact on ratepayers.