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Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | 1 Comment | Updated on Jun 27, 2011

Pricing CLEAN Contracts – feed-in tariffs – for Solar PV in the U.S.

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/pricing-clean-contracts-feed-tariffs-solar-pv-us/

The price of solar is dropping fast, opening new opportunities for community-scale renewable energy across the country.  But despite the improving economics and tremendously sunnier skies, the United States lags far behind Germany in installing new solar power.  What might happen if the U.S.  adopted Germany’s flagship “feed-in tariff” policy, responsible for 10 gigawatts of solar in just two years?  Let’s take a look at how such a program would be priced.

First, we’re marketing conscious in America, so we’ll call it something better, like a CLEAN contract, for Clean Local Energy Accessible Now. 

Then we’ll need to adjust the German prices in three ways:

  1. Convert euros to dollars
  2. Adjust for U.S. sunshine
  3. Adjust for federal tax incentives 

But before we dive in to the German solar program, let’s quickly look at the raw cost of producing solar electricity in the U.S. along with the major federal incentive.   The following map (click here for an interactive version) illustrates the so-called “levelized cost” of solar PV, the total cost of the system (minus the 30% federal tax credit) divided by its expected electricity production over 25 years, based on an installed cost of $3.50 per Watt (common in Germany, and possible for distributed solar PV in the U.S.):

Levelized Cost of Solar PV @ $3.50/W over 25 years – 30% ITC included

Prices have fallen so much, that they are comparable to or lower than retail electricity rates in selected states in the Southwest (with great sun) or Northeast (with high electricity rates).  The following map illustrates (click here for an interactive version):

Average Residential Retail Electricity Rate (Feb. 2011)

So, solar is narrowing the gap with retail grid electricity rates.

Now, back to the analysis of a U.S. CLEAN contract program.  We start with the rates the Germans pay for solar PV under their feed-in tariff.  The euro to dollar exchange rate is currently around 1 to 1.4, giving us the following starting rates for rooftop solar PV projects in U.S. dollars per kilowatt-hour:

< 30 kW

30-100 kW

> 100 kW

> 1000 kW

$0.405

$0.385

$0.365

$0.304

The Germans pay these rates to anyone who can put up a solar panel, per kilowatt-hour sent to the grid, for 20 years.  These rates may seem high, but we’re just getting started.

Next, we have to adjust these rates down to account for the significantly better sunshine in the U.S.  For illustration, Albany (NY) has 33% better sunshine than Munich (Germany), even though Munich is in the “sunny south” of Germany.  Los Angeles gets almost 70% better sunshine than Munich.  We’ll pick St. Louis, MO, for its central location and average U.S. solar resource.  The following table illustrates the dramatic drop in the price required to offer a modest return on investment for a rooftop solar project.

< 30 kW

30-100 kW

> 100 kW

> 1000 kW

$0.27

$0.26

$0.25

$0.21

As good as these values look, we’re still leaving money on the table.  Almost every solar PV project built in the U.S. will take advantage of the 30% tax credit (even if they have to let a third party skim off up to half its value).  With a full 30% discount, however, the prices for solar PV projects in St. Louis would drop as follows:

< 30 kW

30-100 kW

> 100 kW

> 1000 kW

$0.21

$0.20

$0.19

$0.16

The following map provides a look at the prices for a CLEAN contract for rooftop solar PV (< 30 kW) in each state, based on one of the state’s sunnier locations (click here for an interactive version).  Prices would be up to 25% lower for the largest PV projects (over 1 MW).

CLEAN Rate for < 30 kW Rooftop Solar PV @ $3.50/W – ITC only

In many cases, commercial developers of PV can claim accelerated depreciation in addition to the federal 30% tax credit.  With this additional discount (worth around 20% of the project cost), the cost of a CLEAN contract falls even further, as shown on the map (click here for an interactive version).  Once again, prices would be up to 25% lower for PV projects 1 MW and larger.

CLEAN Rate for < 30 kW Rooftop Solar PV @ $3.50/W – ITC and depreciation

There’s a danger to looking at CLEAN contract rates with federal incentives, for two reasons:

1) Many individuals and entities (e.g. schools, cities, nonprofits) can’t effectively use a tax credit incentive.  

2) Tax incentive programs expire or are killed by “budget hawks” (or ideologues) in Congress.  

The 30% federal investment tax credit for solar is in statute until 2016, but let’s assume for a moment that it expired or that we want to look at the CLEAN contract rates for projects not able to use any federal incentives for solar power.  We still assume an installed cost of $3.50 per Watt.  

CLEAN Rate for < 30 kW Rooftop Solar PV @ $3.50/W – no incentives (click here for an interactive version):

This chart is a more accurate representation of the state of solar economics (without incentives).  It’s also the price required for the most democratic solar incentive program, one that would not be prejudiced against participants who couldn’t effectively use the federal tax incentives.

In the end, a CLEAN program in the U.S. will likely be premised on the use of one or both federal tax incentives and pay much less than this last chart.  It will make sense for ratepayers, but will probably not have the same democratizing effect as Germany’s flagship program.

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Article filed under Independent Business | Written by Stacy Mitchell | 5 Comments | Updated on Jun 23, 2011

Why Publishers, Not Amazon, Should Set Book Prices

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/why-publishers-not-amazon-should-set-book-prices/

After winning a high-stakes standoff against Amazon last year, publishers are now setting the prices that retailers can charge for their e-books.

At first blush, one might assume that such price-fixing would result in higher prices. But the evidence from more than a dozen European countries, where laws have long prohibited selling both print and electronic books below a set price, clearly shows that publisher-mandated pricing saves consumers money. It also fosters a more lively and competitive book industry, with far more books published and many more independent bookstores open than in countries where big retailers control pricing. Continue reading

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Article filed under The Public Good, The Public Good News | Written by David Morris | 1 Comment | Updated on Jun 23, 2011

Why Is Mighty Time Warner Scared Of Tiny Salisbury, North Carolina?

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/why-is-mighty-time-warner-scared-of-tiny-salisbury-north-carolina/

Thanks to Christopher Mitchell, Director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance for contributing to this article.  You can, and should follow his reporting on public networks at www.muninetworks.org. Conservatives would have us believe the public sector can’t compete with the private sector. The private sector itself knows better. Nowhere… Continue reading

Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jun 23, 2011

The Electric System: Inflection Point

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/electric-system-inflection-point/

A serialized version of our new report, Democratizing the Electricity System, Part 1 of 5 The 20th century of electricity generation was characterized by ever larger and more distant central power plants.  But a 21st century technological dynamic offers the possibility of a dramatically different electricity future: millions of widely dispersed renewable energy plants and… Continue reading

Pearl St. in Boulder, CO
Article, ILSR Press Room, Resource filed under Energy, Energy Self-Reliant States | Written by admin | No Comments | Updated on Jun 22, 2011

John Farrell talks distributed generation and local authority on Boulder, CO’s KGNU

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/john-farrell-talks-distributed-generation-and-local-authority-boulder-cos-kgnu/

I was on the air with local attorney and renewable energy guru Susan Perkins, interviewed by host Duncan Campbell.  A great conversation about Boulder’s effort to municipalize in order to have more control over its electricity system and energy sources. Click for show listing (and hit the tiny, blue play button) or just download an… Continue reading

Solar panel installation
Article, ILSR Press Room filed under Energy, Energy Self-Reliant States | Written by John Farrell | No Comments | Updated on Jun 22, 2011

Great Battle Over the Scale of Our Electricity System is Underway Argues a New Report

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/great-battle-over-scale-our-electricity-system-underway-argues-new-report/

“Thirty years ago renewable energy was a novelty,” says John Farrell, author of the new report, Democratizing the Electricity System: A Vision for the 21st Century Electric Grid. “Twenty years ago it was little more than a cottage industry.  Today the $100 billion renewable energy industry threatens to overturn the bigger-is-better foundation of the existing, 20th century electricity system.”

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distributed solar value
Article, Resource filed under Energy, Energy Self-Reliant States | Written by John Farrell | 2 Comments | Updated on Jun 19, 2011

Democratizing the Electricity System

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/democratizing-electricity-system/

“Clean local energy provides the most efficient pathway to the smart energy future and the new energy economy.  Democratizing the Electricity System does a brilliant job of illustrating the unparalleled benefits of small- and mid-size renewable energy and the urgent need for new policies that make the enormous economic and political opportunities accessible.”  — Craig… Continue reading

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Article filed under Composting, Waste to Wealth, Zero Waste & Economic Development | Written by admin | No Comments | Updated on Jun 19, 2011

Partnership Update: Elemental Impact: A POWERful Voice in Organics Solutions

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/partnership-update-elemental-impact-a-powerful-voice-in-organics-solutions/

Elemental Impact (EI), a national non-profit based in Atlanta, is a dynamo of projects, ideas and networking for the corporate community and government agencies in the field of organics solutions. EI takes ACTION through the Zero Waste Zones, an EI program in partnership with the National Restaurant Association, the Sustainable Food Court Initiative and POWER – Perishable Organics Waste… Continue reading

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Article, Resource filed under Broadband | Written by admin | No Comments | Updated on Jun 16, 2011

PdF 2011 – Lawrence Lessig: Citizens

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/pdf-2011-lawrence-lessig-citizens/

Lessig presents at the Personal Democracy Forum 2011 using many of the findings and graphs on this website. He reviews the recent struggles with local broadband nationwide. Continue reading

Article filed under Energy, Energy Self-Reliant States | Written by John Farrell | 1 Comment | Updated on Jun 14, 2011

Solar Economies of Scale (Update)

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/solar-economies-scale-update/

In drafts of ILSR’s forthcoming report on a distributed generation future (check back June 22!), I took some flak for my solar PV economies of scale analysis.  In it, I used data from the California Solar Initiative (through 2009) to point out that most economies of scale in solar PV seem to be captured at a size of 10 kilowatts (a large residential-scale project). 

“The solar statements seem way off base,” wrote one reviewer. 

Upon further review, I stand by my initial claim.  But, I note that the critics have a point, as well.

For deeper analysis, I grabbed data from Lawrence Berkeley Labs’ 2010 report Tracking the Sun III, which provided a very nice breakdown of installed costs for solar PV by project size.  I then dropped those size ranges into the California Solar Initiative (CSI) data for the whole data set (2006-2011) as well as for just the past two years (2010 to present).  The following chart illustrates the findings:

The historic data confirms my earlier analysis, that most economies of scale are achieved at small size.  In the full CSI database, there’s a 23% decrease in per Watt cost when increasing project size from under 2 kW to 5-10 kW, but only a further 6% percentage point decrease in sizing up to over 1,000 kW.  The other two curves are quite similar.

But the historic U.S. data is not the only story. 

The Clean Coalition – a distributed generation advocacy organization – has different numbers on installed cost from their network of installer partners.  These figures, data on very recent or proposed installations, tell a different tale, illustrated below:

In the Clean Coalition data, the savings from 5 kW to 25 kW are about 10%, but the savings from upsizing to 100 kW are a cumulative 21%, and growing to 1,000 kW offers a total of 28% off the 5 kW price per Watt. In other words, economies of scale continue strongly through the 100 kW size range.

Their data is not alone.  In the German feed-in tariff, solar PV producers are paid a fixed price per kWh generated, with prices set according to the location of the solar PV plant (roof/ground) and by size (small, medium, large, etc).  Overall, Germany is simply cheaper, with average installed costs for 10-100 kW rooftop PV installations of just $3.70 per Watt.  But their economies of scale are also strong: there is a 10% price differential between rooftop solar arrays smaller than 30 kW and those  100-1000 kW, but an additional 15% price drop for projects over 1000 kW. 

The conclusion is murky.  Historical data in the U.S. supports my original assertion: economies of scale for solar PV are limited beyond 10 kW.  But recent installed cost data and the German experience both suggest that there are stronger economies of scale up to projects 1,000 kW (1 MW) in size.

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