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Federal tax credits for wind energy projects are due to start expiring at the end of this year, which means developers face the prospect of dishing up proposals for wind farms that can’t be financed, said White, president of Project Resources Corp., a Minneapolis company that does ‘community wind’ development. The answer, he and others in the community wind industry say, is to go smaller. Smaller projects, which are a hallmark of most community wind projects, are easier to finance and easier to connect to the power grid, they say.
Federal tax credits for wind energy projects are due to start expiring at the end of this year, which means developers face the prospect of dishing up proposals for wind farms that can’t be financed, said White, president of Project Resources Corp., a Minneapolis company that does ‘community wind’ development.
The answer, he and others in the community wind industry say, is to go smaller. Smaller projects, which are a hallmark of most community wind projects, are easier to finance and easier to connect to the power grid, they say.
I had a conversation with a wind developer yesterday and was talking about the difference between putting together large projects (over 80 MW) compared to distributed generation wind projects (80 MW and under). I mentioned that we have a deep interest in understanding the economies of scale of renewable energy projects and he replied, “economies of scale are bullshit.” He noted that large wind projects require significant development costs that smaller projects don’t encounter (including many more landowner negotiations and permits) and that installation and maintenance services are sufficiently widespread for any sized project to find services.
It’s not entirely true that bigger projects have no economies of scale, but these two charts illustrate the larger point: Most economies of scale in solar PV and wind power are captured at a relatively small size.
The first chart is from the California Solar Statistics website, and draws on data from over 70,000 solar PV installations in California since 2005.
Clearly, solar PV installations of 10 kW have captured more of the economies of scale for solar PV. Costs may fall slightly for much larger projects, but the smaller number of projects makes it hard to see trends (interesting note: there seem to be as many > 100 kW solar projects costing over $10 per Watt as there are under $8 per Watt).
The second chart comes from the 2009 Wind Technologies Market Report by Ryan Wiser and Mark Bolinger (which is a must-read).
The wind data is even more striking, with the lowest average project cost found in the projects with just a handful of turbines (5-20 MW of capacity), with costs steadily rising for larger projects. Certainly there’s an advantage to having more than one turbine, but less so for growing the project much larger than 10 turbines.
This data should inform renewable energy policy. If modest-scale, distributed renewable energy projects capture most (or all) economies of scale, then the opportunity to place these projects close to load may reduce the need for new, long-distance, high-voltage transmission lines. It means more renewable energy can come online faster and with fewer political battles.
These smaller-scale projects are also the appropriate size for local ownership (which provides twice the jobs and 1-3 times the economic impact of absentee ownership), allowing more the economic benefits of renewable energy development to accrue to the host community.
Building on the highly acclaimed 2009 report of the same name, the Institute for Local Self-Reliance has launched Energy Self-Reliant States, a new website to provide expert analysis and policy solutions for a decentralized renewable energy future.
Senior Researcher John Farrell is leading the project and has already published a variety of posts showcasing his original research. Visit EnergySelfReliantStates.org to learn more.
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.
A new rooftop solar collector can provide thermal energy rather than producing hot water or electricity for space heating and cooling. With inexpensive fresnel reflectors to concentrate sunlight, the Chromasun could prove an interesting way to use distributed solar thermal energy for more than just hot water.
The unit produces temperatures up to 220 Celsius and promises to use less roofspace than comparable systems using solar PV.
Now, what will it cost?
The original edition of Community Solar Power received a lot of attention, for which we at the Institute for Local Self-Reliance are very grateful. The grading system we used for community solar projects was of particular interest, especially our offer of higher scores for projects placed on rooftops rather than on the ground.
In particular, the excellent folks at the Clean Energy Collective (whose project is featured in this report) engaged us on the criteria we used for rooftop and ground-mounted solar power. After several in-depth conversations, we offer this revision to Community Solar Power and to the grades we provided for solar project location. We think that our revised grading system better reflects the advantages of distributed renewable energy as well as the best efforts of community solar projects to provide their participants with the best value.
The Hawaii Public Utility Commission moved ahead with the state’s feed-in tariff for projects under 500 kW, overruling objections from the state’s largest utility:
The decision came despite requests from Hawaiian Electric Company (HECO) to postpone the program over concerns that added distributed generation resources could destabilize the islands’ power grids. …However, none of HECO’s objections “appeared to be fatal flaws that warranted any further delay in the development and implementation of the FIT [feed-in tariff] program,” according to statement released by the PUC. The prices for the feed-in tariff program are as follows, with 20-year contracts:
The decision came despite requests from Hawaiian Electric Company (HECO) to postpone the program over concerns that added distributed generation resources could destabilize the islands’ power grids.
…However, none of HECO’s objections “appeared to be fatal flaws that warranted any further delay in the development and implementation of the FIT [feed-in tariff] program,” according to statement released by the PUC.
The prices for the feed-in tariff program are as follows, with 20-year contracts:
|Tier||Technology||Eligible System Size||Rate|
|Tier 1||Photovoltaics||Less than or equal to 20 kW||$0.218/kWh|
|Tier 1||Concentrating Solar Power||Less than or equal to 20 kW||$0.269/kWh|
|Tier 1||On-Shore Wind||Less than or equal to 20 kW||$0.161/kWh|
|Tier 1||In-line Hydro||Less than or equal to 20 kW||$0.213/kWh|
|Tier 2||Photovoltaics||Greater than 20 kW, less than or equal to 500 kW||$0.189/kWh|
|Tier 2||Concentrating Solar Power||Greater than 20 kW, less than or equal to 500 kW||$0.254/kWh|
|Tier 2||On-Shore Wind||Greater than 20 kW, less than or equal to 100 kW||$0.138/kWh|
|Tier 2||In-line Hydro||Greater than 20 kW, less than or equal to 100 kW||$0.189/kWh|
|Baseline FIT||Other RPS-Eligible Renewable Energy Technologies**||Maximum size limits for facilities||$0.138/kWh|
The prices assume that the producer will take the Hawaii renewable energy income tax credit (35%).
The program is capped at 80 MW of production: 60 MW on Oahu, 10 MW on the Big Island, and 10 MW for Maui, Lanai, Molokai combined.
Utility helps developers find capacity
The largest utility on the islands, HECO, has also published Locational Value Maps (LVM) to help developers identify places of greatest capacity on the existing grid.
This story on Sunday suggests that utilities are pulling back from investments in renewable energy over concerns about the cost.
“The ratepayers of Virginia must be protected from costs for renewable energy that are unreasonably high,” the regulators said. Wind power would have increased the monthly bill of a typical residential customer by 0.2 percent.
Based on what price forecast? The following chart illustrates the complexity of relying on fossil fuel prices when making decisions about renewable energy. Note that wind and solar prices are relatively stable (i.e. zero).
The chart does a good job of showing the futility of predicting natural gas prices, but the timeline smooths out coal price changes, particularly by region. Here’s a closer look at coal prices since 2007, courtesy of the federal EIA:
Utilities that are making shortsighted decisions about renewables based on current fossil fuel price trajectories are going to get burned, and so are their ratepayers.
With its feed-in tariff, the Canadian province of Ontario is set to become the leading community renewable energy center in North America.
In an Oct. 12, 2010 report, [Ontario Power Authority] said that it has signed contracts for 264 megawatts of community-owned projects, and another 120 megawatts of projects owned by Ontario’s aboriginal peoples. The contracts represent 16 percent of Ontario’s 2,500 megawatts of feed-in tariff contracts to date.
No other jurisdiction in North America has made such a concerted effort as Ontario has to guarantee that a portion of the new renewable generating capacity to be built will be owned by its own citizens and native peoples through the province’s innovative feed-in tariff program.
This is in addition to Ontario’s microFIT program (a small renewable energy project program under the umbrella of feed-in tariff programs), which assures connection for homeowners and farmers wanting to generate electricity with solar panels for sale to the grid. There are 20,000 applications for microFIT contracts.
It’s noteworthy that despite Ontario’s success, Europeans still have significant leads based on their longstanding feed-in tariff policies.
…One-half of all wind generation in Germany, or more than 12,000 megawatts, is owned by local investors. The percentage of local ownership is even higher in Denmark and the Netherlands.
But North Americans are learning. Vermont recently adopted a feed-in tariff, and the several other U.S. states and the Canadian province of Nova Scotia are also considering it.
Nova Scotia begins hearings Nov. 8, 2010 on the province’s community feed-in tariff program. The Nova Scotia Utility and Review Board will determine feed-in tariffs for large and small wind, biomass, and tidal power that will go into effect on April 4, 2011. Projects in the 100 megawatt program are set aside for Nova Scotians.