Two Decades of Solar Pioneers in Sacramento – Episode 27 of Local Energy Rules Podcast

Date: 7 Aug 2015 | posted in: agriculture | 0 Facebooktwitterredditmail

Brent Sloan: If SMUD or if Georgia Power or whoever it was, or Salt River Project, whoever, is getting back into the PV business, I think it’s kind of putting up a white flag to saying we didn’t create that viable sustainable marketplace, because if we did, we wouldn’t need to be in it.
John Farrell: The Sacramento Municipal Utility District or SMUD has always been willing to experiment. The Californian city-owned utility built the nation’s first utility scale PV array back in 1984. Then in the 1990s, SMUD turned that solar experience into the PV pioneer programs, where the utility before anybody else experimented with residential solar placing panels on homes in bulk purchasing the PV to provide a cheaper product to rate payers. Join us this week as John Farrell talks to Brent Sloan, Product Service Specialist with SMUD about the PV pioneer programs and how these solar programs created a viable sustainable market for solar power in Sacramento. This is Local Energy Rules, a podcast sharing powerful stories about local, renewable energy.
John Farrell: What I wanted to ask you about first that, you know, the PV pioneer one program, as I understand it, put solar on customers houses, it was something that people actually paid the utility to do. And it was a way for the utility to get experience with distributed solar. And this program ran during the 1990s. According to a year 2000 report to SMUD, which I have read, the cost reductions from this kind of bulk purchase program were astonishing. So for example, this is from the report. The installed cost of the solar arrays was about $3.75 per wat in 1999. Assuming I understood that correctly, about $4.50 if you counted the program costs associated with that installation, but for comparison, the solar energy industry’s association reports that the weighted average installed cost of solar arrays of any size was $10 a wat in the year 2000, more than twice that much. And didn’t fall below $4.50 per wat until 2012. So did I understand the numbers right in that report? And if so, how did SMUD get such a good deal installing solar back in the nineties?
Brent Sloan: Well, we certainly didn’t wave our magic wand. I will share with you that the gentleman who wrote that letter is no longer with us and the person who assisted them on the company, assist them on, is no longer one of our contractors. So I cannot, you know, without seeing their source. I can’t exactly tell you I’m a hundred percent sure of each one of those numbers. I can share with you that the PV pioneer program as you and I are talking about it, which is installing PV on rooftops, but really a section of the PV pioneer program. So if we consider just the PV pioneers, I.E. just those who had PV put on their houses on SMUD side of the grid and paid us a $4 premium each month to do it, the prices were no nowhere near $4.50 a watt, but when we wrap in all of our community based stuff, when we wrap in all of our grid scale stuff, all the things behind the meter in our location, the millions of Watts that we installed during that timeframe, then you’re talking about the economies of scale kicking in.

I mean, we partnered with a thin film manufacturer and they brought ’em here to Sacramento and we used a lot of their stock. I seemed to even remember some B stock we used in some of RIE blends, but were perfectly still good in our installations. So those came to us at almost nothing. So when you start adding in all the economies of scale that we get, when we’re doing megawats at a time, you can lower those costs, but please understand. I mean, we weren’t magicians. I’m very proud. I came on during that time. I’m very proud of what SMUD did in the PV pioneer program. And certainly the PV pioneer two program, which I was more directly involved with at that time.

And you know, I spoke at UEX once, and I said, you can have any solar system you want in Sacramento, as long as it’s a black model T. And I said that for a certain reason, is it, we went to customers’ homes, and we said, here’s your two K cookie cutter system. And we never had to worry about redesigning it. Once we designed it one time, it was simply placing it on the right spot on the roof. So how we delivered the product was substantially cheaper than a custom design system for a home. If I have TV on my home right now and my home, my system is designed for my home, that wasn’t what SMUD was offering. SMUD was saying, Hey, we’re, we’re gonna go down and you’re gonna buy a system. Or when we got to the PV pioneer buy a system, but we’re gonna deliver a system to you. And you have choice a, would you like to participate in the program? We’re trying to learn about distributed generation.

We’re trying to get people to get solar away from being special, unique. Everybody stands around and stares at your roof for six hours. We want it to be something where you drive down the road and you expect to see PV. You and I are living in a world today where we may see that. I jokingly tell people that I’ll know I’ve completed my job here at SMUD when two things happen: one, we no longer have a solar program, because it’s just like putting in HVAC, a heating and air conditioning. It’s just like putting in windows. It’s just what we do. And I’ll also know it because we won’t have a new construction program that incentivizes solar on new construction homes. Why? Because people won’t walk into a house and ask to see if they’re solar, they’ll walk outta the house and go, why was there not solar?

So we’ve, from day one, tried to get to that point of the market where we’re not necessary because it’s a viable, sustainable, mature, part of our economy and the best way for us to do it at the time. And I can agree with the gentleman who designed the program, the PV one program was to just get as many out there as possible. We happen to be blessed to live in a very, what people would call green community here in Sacramento. We’re well above our RPS goals and our people want us to continue to stay well above our RPS goals as a nonprofit. So we were overwhelmed with people who said, yeah, use my roof, see if it’s gonna work SMUD. So it was, it was really a meeting of the mind. It was really an opportunity for a very green community and a very green utility to step forward and say, we’re gonna do some crazy stuff and see if it works, but the way we’re gonna do it is just gonna sell. But we’re gonna put the, a very basic, very simple, very small in today’s world, size system on as many roofs as we can and see if some economy as scale got in.

One of the things we also did through this, which there was none, was build a viable sustainability contracting community. You know, nobody knew about PV when we started. We put it on, we had to go out and find contractors. We had to go out and train contractors. We had to be trained. Good gosh, I even trained building officials at some point because they’d never seen it. We were the subject matter expert on all this. We were doing it before, you know, the state of California decided to join us, which Schwartzenegger signed in the million solar roof program. If you can make a look at the days, we’re a decade or two before him, right?

John Farrell: I’m curious about, so many questions have come to mind to me in this. You know, I guess the first of all, obviously the cookie cutter system design seems to be a really crucial piece of this. And I think that, you know, it, that really resonates with me in terms of, I just read a piece today about, the unexpectedly high cost of concentrating solar power facilities, those very big hundred megawatt facilities that, you know, use mirrors to concentrate sunlight to make hot water and been turbines, blah, blah, blah, to generate power.

And the solar PV systems of course are modular. It’s all these little panels, the same panels that go on a home go on in these larger arrays, even when they build in that utility scale. And, and so there’s a lot more opportunity to sort of iron out the challenges. And it sounds like SMUD had that same approach. I’m curious, you know, you mentioned the PV pioneer two program, which was the sort of the second iteration. As I understand it, that’s the one where customers would buy the system themselves. They would actually own them and have a net metering relationship with the utility. They’d be offsetting their own energy use. How was the utility involved in that, was it the same kind of cookie design? Was there financing, were the costs similarly low?

Brent Sloan: Yeah, it was heavily subsidized because, now people have to realize, your listeners have to realize that that before we live in an incentivized world right now in solar, which means there are federal tax credits, there are some state tax or state subsidy, and then there for California, there’s the SB one program of the million solar roof programs, which is a state mandated rebate system. SMUD was way beyond that. Well, before that we offered, we felt, and our payer owners, cuz again, we’re a nonprofit that is owned by the voters. Our payer owners said we wanna see solar in our marketplace. We incentivize PV systems in the 2001 timeframe at 2.40 a watt, not incentivized. We delivered them at 2.40 watt to customers. Can you imagine the incentive levels that that required for us to do it?

That’s the commitment SMUD had to solar. And what we would do is we would go out and we would use the combination of thin film or crystal in near the end, cuz we matured the thin film partnership we were in. We were, partner, the thin film manufacturer we were partnering with, came into some STR we wanted to continue to deliver the program. We went to crystalin. If you remember back in the early two thousands, there was a lot of promise of what thin film technology was gonna deliver. It hasn’t delivered that yet, but we can always still hope because of the lower cost of manufacturing, but it hasn’t been there yet. So we transferred to, to crystalin what we designed was the same thing. We said years two K or 2.6, four roughly. Um, here’s your two K system string and ver cuz it’s all we had back then.

And my design team, myself and the other solar specialists, we would go out and we would have to crawl the attics. We would literally go through the entire house and do a site survey, but we didn’t have to worry about what equipment we put on anymore because we knew that you got system a, your choice was near the end. Did you want one system or two? Because we had so much feedback about, I want two systems, but you know, at that point it was really leading the building officials through because when we first started to do this, I had to crawl every attic and, and create span tables and prove that the roof wasn’t gonna collapse. Nowadays, you only have to do that because everybody knows it’s two pounds per square foot and you’re not gonna fall through your roof. And so most jurisdictions kind of wave the hand. If it’s crystal and system, wave the hand and you only have to do roof spans anymore because cause it’s a mature technology. Well, at the time we started doing this, every step we had to go through engineer, improve every step we engineer improve. So it doesn’t make sense for me to reengineer a 10 module system, a 20 module system, a 15 module system, a 12 module system and 11, no, no, no. You get your 10 modules, have a good day. You get your 20 modules, I should say, have a good day. So that’s where we got the economies to scale.

John Farrell: You know, in this report that I ended up, that I read about, in the report that I read about SMUD’s PV pioneer program, they, they had this section about the potential for residential solar and SMUD territory was something like 400 megawats. I, there, there wasn’t a whole lot on how they came to that number, but I’m very curious to know, you know, how successful have you been with all of these efforts, the pioneer programs now with the state programs,  how much solar is installed on residential rooftops and how does that compare to the overall sort of renewable energy mix that SMUD has that is continues to be ahead of where other utilities are in the state?
Brent Sloan: Yeah, I have, I’ve looked at those numbers myself and I I’m constantly reminded that Sacramento was called the city of trees, but yet everybody looked at every roof rooftop as something we could put solar on. When we were running the PV pioneer one and two programs, we used to just jokingly say, you’re disqualified by zip code. If you live in Midtown, where if you look on us at Google earth, you can’t see any houses. It just looks like a giant orchard, granted feet tall, we disqualified you for solar. Well, so I don’t know where they get their 450 or whatever their number is. I’m sure as we continue to build and continue to grow and take up farm land and put houses on it, that there there’ll be more opportunities for roof. We’re well over a hundred megawatts just in our programs, not counting our feed ins and things like that.

So we’re nowhere near 450. I think that’s the world needs Mavericks and the world needs people who achieve what the Mavericks dreamed. And we were very lucky with our PV pioneer one and two programs to have Mavericks and leaders in the end industry. People who dream big and I believe achieved well. But those type of folks don’t build viable, sustainable marketplaces. What we need is folks who come in and do the day to day operation, who will retire before we get 500 megawatts of residential solar. As opposed wrote this report. I want to remind you talks about all the different solar types that, that we classified PV pioneers, not just the PV, but where you and I are talking about just residential, as in residential customer side customer-owned distributed generation, I doubt we get to 500 before I retire in six years. I just, I don’t see that happening. The market has gone, intake in our marketplace has gone up 300%. In probably 18 months, I would have to do the exact math now, but we were averaging about 70 interconnections a month less than six months ago. And we’re over 300 connections a month now. So the market’s blowing up even in SMUD’s territory, which is a very hard place to sell solar. I mean, one thing people don’t understand is we’re the third lowest rate in the state, one of the lowest in the, you know, non-coal utilities in the country I heard. So it, the cost benefit for PV is not a good, easy sell here. You’re replacing 9 cent power, 8 cent power, or energy, I should say. So with the biggest comment we get from our contractors is when are you gonna raise rates? It’s like, well, we…

John Farrell: Don’t
Brent Sloan: That’s not the object. You need to lower your prices. So, you know, it’s still a struggle for us here. We’re very proud of what we do considering the rate structure we have. But you know, people still make decisions on the, to some degree, right? I say, everybody in SMUD territory who buys solar is green. They either want it on the tree or they want it in their wallet, but they’re green. And so to some level, we all wanna make sure we get our money back, not everybody’s like me and has, you know, 9,000 watts of solar on their house, just cause some people, you know, put an intelligently sized system on their house and offset their peak usage or their time of usage, you know, their peak power usage, as opposed to, I had a commitment to wanna be as close to a hundred percent solar powered as possible. So I’m sorry, I can’t tell you that we’re going have, we have 450, not sure where that number came from and I’m just, every day I try to put more on.
John Farrell: Absolutely. Well, I, you know, I was just curious, like I said this report is not only very old at this point, but, you know, it doesn’t have all of the assumptions that were baked into it. There are a few utilities now in Arizona and I guess Georgia Power also just announced a program to do, install solar on residential property, I think. And, and lease that to the customers. I was curious if that is similar to, if you describe that as similar to the PV pioneer program. And if you, what your opinion is about those kinds of programs, where the utilities are owning solar on residential rooftops?
Brent Sloan: Well, that’s a politically loaded question.
John Farrell: Yes, I don’t deny it.
Brent Sloan: I would tell you that I haven’t looked at their programs enough to know whether they’re redoing the PV one or PV two program or a hybrid PV two program. I do think it’s interesting. My first gut reaction follows with what I said earlier that if SMUD or if Georgia Power or whoever, or Salt River Project, whoever is getting back into the PV business, I think it’s kind of putting up a white flag to saying we didn’t create that viable sustainable marketplace, because if we did, we wouldn’t need to be in it. But I think there’s also utilities out there like ourselves who are tired of our customers being taken advantage of. They’re promised to zero down, no money, it’s gonna, no cost. You’d be surprised how many times a day I get a phone call and I literally mean a day talking about I’ll never have a SMUD bill again, because I bought it from X company.

I’m like, last time I checked, God turned lights out every night. So you’re probably gonna still have a SMUD bill. And last time I checked, you’re hooked up to the grid. You know, people are buying a product they’ve never purchased before. I use the example that if you and I were gonna go buy a Tesla, it’s brand new technology, it’s really cool, beautiful car. Doesn’t have an engine. It’s got a motor, totally different technology, but you and I would kind of know what we were buying. We bought cars before. We just hadn’t bought that technology a car before. You and I have never shopped for energy and power, not one day of our lives in this country. Have we shopped for energy or power? I mean, there’s a couple of large entities that are able to do some true shopping of the actual current, but not really the, the interconnection or anything. So it’s almost like buying a Martian spaceship, but yet we have people, guys knocking on a door selling people a Martian spaceship when they’ve never shopped for energy before, and then they’re getting taken.

So I think what you’re gonna see is you’re gonna see utilities decide in some for-profit, but certainly the nonprofits, decide they need to get back into the marketplace to be that trusted energy provider and trusted energy advisor. Because I know there’s people here at SMUD who would probably want to get back into the marketplace. I will continue to say, we need to educate our customers, but we may play that game someday. Salt River Project or whoever it is you said may play that game because there that game, because you know, if customers are going to replace 10 cent power with 14 cent solar power, perhaps somebody just needs to step into the room and say, would you like solar? I t’s gonna cost you 11 cents. Do you want it at least be tell the customers the truth?

I think what you see now is you see so much dishonesty in some of these leasing programs that, you know, if you care about your customer base, I mean, we pulled a large segment, not a huge, but large segment of lease PPA style, zero down agreements, and almost 80% of them either lost money or stayed the same. Less than 20% actually saved money. So 80% of our customers who got involved in solar, how many of that 80% of this sample set, okay, we need to do a bigger survey, but of this sample set, how many of those people thought they were saving money? Were all of them like me? Who said, I really don’t care if I save a lot of money. I just want to have solar on my roof. Or were some of ’em like, you know, Janie Sue, who said, no, I’m doing it to save money. Well, I hope you’re on the 20% and you’re not on the 80% cuz the odds are, you’re not saving money.

John Farrell: Is SMUD still involved in selling solar or have you sort of created that successful marketplace and feel like the utility doesn’t need to be in there as the seller anymore?
Brent Sloan: No. So SMUD is not involved in the solar sales price. We are the trusted advisor of our payer-owners. We’re the person that they can call, the person they can talk to and say, is this a good deal? I hold classes every two months. We’ll probably go to more classes soon. We’re about ready to launch an online video series of is solar right for you? Are you right for solar? How to read your solar bill, how to figure out this solar pricing. We wanna be that person who continues to be an advocate for solar power and continues to be an advocate for our rate payer owners. Okay. And that doesn’t mean we’re hostile to our contractors. I work with contractors all the time and I’m friends with many of ’em. I love our contracting community, but I will continually, with a smile on my face, of course, push them to lower their prices to deliver the product cheaper and more efficiently. I want them to get to grid parity as soon as possible. I want to get out of this business and go retire and live somewhere beautiful. But until that point, you know.
John Farrell: Speaking of grid parity, this is my last question, which is, you know, you are encouraging a lot of solar development and I presume that most customers are using net metering to offset their energy bills. At what point does that, you know, for most utilities, I hear that that is not a sustainable system in the long run because, you know, giving away power at the retail rate doesn’t account for the cost of maintaining the grid system. How is SMUD preparing to deal with that, or you know, is that, I know California also has a state process. But I’m kind of curious in your view on that.
Brent Sloan: Well, we will follow the state mandated policies. We do that, in fact, we’re ahead of most of them and it’s very clear there will be a net metering 2.0 or, you know, net metering B whatever version you want to use. Because this first version is designed to create a viable, sustainable marketplace. And I understand both sides of the question as somebody who benefits from net metering. I love the net metering policy, but you’re right. You cannot continue to give people retail credit for a wholesale commodity. They’re not selling the can of Pepsi with the case and the marketing and the me talking to you and the people on the grid and all that. They’re just selling us the fluid inside the can, but we’re giving ’em value for the whole can of Pepsi. So I understand that.

I mean, I’m a big fan in that [inaudible].  I want everybody to get it, but at some point, if we are truly looking to have a viable, sustainable marketplace, if that’s truly what we all want, if we truly want an interactive grid, which is which I allow you, you and I get to come onto the grid and produce our own power and use SMUD grid as a giant battery and interact with that grid. If we want all those things to happen, then we need to make sure the grid is stable, which means I need to make, know what comes on the grid and what goes off the grid, which means I need to be able to balance the grid, which means I need men and women on poles and transformers. And yes, I even need people to talk on a phone, there are costs involved in that.

I think what you’ll probably see in the future is a continually move towards, first time of use. Everybody in the country’s gonna go time of use. It’s pretty much a happening thing which helps solar. But it also, you’re gonna see what’s called a deep bundling of rates. You’re say, okay, we’re gonna start pricing the fluid in the can as the fluid in the can. And we’re gonna price the infrastructure to deliver that product as the infrastructure to deliver that product. We haven’t got there yet. Don’t know when we’re gonna get there, but as you’re just as much of an economist as I am probably, I mean, you can’t look at this business model and go, wow, you’re continuing to deliver retail product, but you’re buying it at retail, but yet you’re having deliver. You’re not recouping those costs. It just doesn’t work for a long term solution.

Question is, will we achieve our goal? And I, that’s why I keep pushing on, as long as we have the same goals, then we’re gonna come to the same solution. Some people may come to it before others, but if we want a viable, sustainable marketplace, we want a marketplace that doesn’t need the government to give us incentives. Doesn’t need the utility to give us incentives. It’s just like buying an HVAC. And what the utility does, we incentivize new and groundbreaking technologies. At that point, we don’t incentivize you to go put an air conditioner on your house, but if you wanna put a super hyper efficient air conditioner on your house, that’ll give you an incentive, right? So that’s where we need to be, that person who continually pushes the industry to these next thresholds. And we need to get out of the market base and just into the let’s do cool new technology.

John Farrell: That was John Farrell, ILSR’s director of democratic energy, talking to Brent Sloan, a product service specialist with Sacramento Municipal Utility District about the PV Pioneer programs. More information about SMUD and other solar goods can be found on ilsr.org, where you can also find more Local Energy Rules podcasts. Until next time, keep your energy local and thanks for listening.

 


The publicly-owned Sacramento Municipal Utility District, or SMUD, had already installed the first utility-scale PV array in the nation back in 1984. By the early 1990s, the utility saw a potential for rooftop solar and launched its PV Pioneer program, placing dozens of solar arrays on their customer’s rooftops, for a fee. The standardized rollout meant dramatic declines in the cost of solar, long before the industry had launched anywhere else.

In June, ILSR’s Director of Democratic Energy John Farrell spoke with Brent Sloan, the “solar dude” at SMUD, to talk about these ahead-of-the-curve PV Pioneer programs and how his utility was created a viable rooftop solar market 20 years before other utility’s have “waved the white flag.”

From the Ground Up

In the 1980s and ‘90s, the electric utility industry was all about Big: big mergers, building bigger power plants, selling big amounts of energy. But the Sacramento Municipal Utility District in California decided to go another direction.

Unlike investor-owned utilities, beholden to shareholders, SMUD was and is owned by the local government. It had a history of being responsive to its customers, such as when it closed the Rancho Seco nuclear power plant just 14 years after it began operations. The closure, in 1989, was one of the catalysts for the utility’s search for energy alternatives like solar.

The PV Pioneer program launched in 1993, with the intention of rapidly driving down the cost of solar. The “secret sauce” was the utility’s buying-down power and providing a standardized solar panel package to its ratepayers, and  standard permit application to local governments. “You can have any solar system you want in Sacramento as long as it’s a black Model T,” Sloan says about the 2 kilowatt solar system then offered to all SMUD customers. The popular program asked customers to pay a $4 per month premium to host a SMUD-owned solar array on their rooftop.

By the late 1990s, the utility felt that cost reductions made customer ownership of solar more feasible, and its Pioneer II program offered subsidized, utility installed solar arrays to customers. In 2001, the total cost of a 2 kW solar array purchased under the program was $9,000 ($4.50 per Watt) with the customer’s share at just $6,000. That installed cost was nearly 10 years ahead of its time: $4.50 per Watt was the weighted average installed cost of all solar PV tracked by the Solar Energy Industries Association in 2011.

Sloan couldn’t vouch for the linked study where we got our numbers from, but he said the price drop from PV wasn’t magic. Before most others, SMUD workers were learning best solar installation practices, and potential solar contractors and building officials were then trained by the utility. Sloan and his team were crawling through attics, determining how many pounds of solar equipment could fit on the roof, long before industry-approved numbers became the norm.

Softening the Costs

Alongside the PV Pioneer program, SMUD created a standardized permit package for its several jurisdictions. That meant solar contractors could get a permit within 24 hours of submission and, for some time, all involved cities waived rooftop solar application fees for SMUD customers. The ultimate goal was to drive down the installed cost of solar far enough that SMUD and subsidies would not be necessary.

SMUD’s efforts were superseded—to some extent—by the statewide California Solar Initiative program, which dramatically diversified the solar market (to the potential disadvantage for cost reductions). Although solar installations have continued steadily for some time, SMUD customers have less financial incentive due to their low electricity prices (around 9 cents per kilowatt-hour).

“The biggest comment we get from contractors is, ‘When are you going to raise your rates?’” he laughs.

But that may be changing. Less than six months ago the municipal utility had 70 interconnections a month. Now it’s up to 300 a month.

On his own home, Sloan has 9 kilowatts of solar, getting him as close to 100% sun-power as possible (on a net annual basis). Though he benefits from net metering, he believes it’s a compensation arrangement that will have to change, and time-of-use rates will need to be used, along with policies that get at the true value of solar energy to an electrical grid.

Following SMUD’s Lead, or Pursuing Something Else?

Some investor-owned utilities such as Tucson Electric Power and Georgia Power are now creating programs to own solar on their customers’ homes (look for an ILSR article on this next week). Sloan doesn’t see that as necessarily a positive sign, but more of a “white flag” that these electric utilities didn’t do enough to create a viable private marketplace for solar power.

As he and SMUD could attest, that solar value is there, even if you have to make a PV Pioneer program or two to make a sustainable marketplace for it to shine.

If you liked the short version, you call also listen to the full 40-minute interview.

This is the 27th edition of Local Energy Rules, an ILSR podcast with Director of Democratic Energy John Farrell that shares powerful stories of successful local renewable energy and exposes the policy and practical barriers to its expansion. Other than his immediate family, the audience is primarily researchers, grassroots organizers, and grasstops policy wonks who want vivid examples of how local renewable energy can power local economies.

It is published intermittently on ilsr.org, but you can Click to subscribe to the podcast: iTunes or RSS/XML

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter or get the Democratic Energy weekly update.

Photo credit: Tim Fuller via Flickr (CC BY 2.0 license)

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John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.