We think over the next three to five years the solar business will migrate heavily from a utility-sized solar business to a more of a distributed solar model driven by consumer demand not by government largesse.
When is it time to break up with your utility? Perhaps it’s when they come to ratepayers for $30 million in cost overruns on a “free” smart grid project. Or when they fail to meet deadlines to propose a new franchise agreement. Or when they cite national security in an effort to avoid sharing load information. Or when they crash your office with 9 employees to present their delayed franchise plan. Or perhaps when the propose raising rates again to keep up with rising fossil fuel prices.
The citizens of Boulder, CO, have put up with a lot from Xcel Energy, the investor-owned utility that spans several states and currently provides the city’s mostly-coal-powered electricity. So it was energizing to be invited to Boulder by Clean Energy Action last week to share how the city could move forward. (my presentation below)
The city’s saga began in 2003, when it first began studying the option of municipalizing their electricity system, to have more control over the grid and increase clean energy production. The city dropped the plan in 2007 when Xcel offered to build a free smart grid network, called SmartGridCity, a program that deployed advanced meters and fiber optic cables to improve information flow on the local electricity grid. However, with a dubious cost-benefit ratio from the Xcel program and a desire for more clean energy, the city leaders are once again considering their options.
In 2010, the city of Boulder chose not to renew its franchise agreement with Xcel, essentially a monopoly charter that gives Xcel the exclusive right to serve Boulder’s customers for an annual fee. The citizens of Boulder voted to tax themselves to replace those funds for five years, giving the city time to evaluate alternatives. They’re taking it seriously.
For one, their current electricity costs keep going up, according to Anne Butterfield of the Boulder Daily Camera:
In Colorado, plunging costs for renewables are furled against the steady upward march of fossil fuels. In March, Xcel filed for an 18 percent increase in the “electric commodity adjustment” (the ECA on your bill) which allows fuel costs to get passed through to customers. This hike would increase a typical monthly bill by about $3 — with a resultant boost to the RESA of only six pennies. Every buck paid to fossils on Xcel’s system leads to two pennies sent to cost-saving renewables.
For another, they’ve already learned about options to dramatically increase the portion of electricity from renewables. At a Clean Energy Slam, one company proposed providing 50% of Boulder’s energy from renewables by 2014, up to 80% by 2025. Their planning process has also revealed new ways of thinking about the grid. Freed from the paradigm of big, centralized baseload coal power plants, they’re looking at electricity from the “top down.” They start with a load curve, throw in renewables and storage, and then see what gaps need filling, a process that prioritizes renewable energy instead of trying to shoehorn wind and solar into the gaps where fossil fuels fall short.
City officials aren’t just interested in clean, reliable electricity. They also want to learn more about the potential for generating electricity locally. While any new energy generator can add jobs and grow the economy, locally owned renewable energy creates job and economic multipliers.
Local activists are also strongly committed to changing the status quo. They’re not only looking for ways to green the local electric grid, but for ways for citizens and businesses to finance significant energy efficiency improvements as well as distributed renewable energy generation.
Boulder may end up joining the 2,000 existing municipal utilities in the United States and chart their own energy future or perhaps Xcel will finally bring them an attractive offer. But by taking the issue into their own hands, Boulder will definitely do better than before.
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.
Last week I shared a graphic illustrating the dramatic fall in distributed solar PV prices in Germany, down to $4.11 per Watt installed, for rooftop systems under 100 kilowatts. As it turns out, the graphic was out-of-date. In Germany, the average installed cost for rooftop solar PV under 100 kW is $3.70 per Watt (update 7/13/11: $3.40 per Watt). It’s a 50% drop in price since 2006, an average of 13% per year.
For comparison (as in the first post), here’s the average installed cost for under 10 kW rooftop solar PV in the United States, by state.
Chart is from page 19 of the brilliant report, Tracking the Sun III: The Installed Cost of Photovoltaics in the U.S. from 1998-2009 (large pdf).
Also from the previous post:
Did I also mention that the German policy (a feed-in tariff) driving solar costs down only costs German ratepayers the equivalent of a loaf of bread per month? In the U.S., the federal renewable energy incentives cost $4 billion in 2007, or about $3.17 per household per month (or about the same price as an Italian baguette).
There’s only way to describe this German success: wunderbar!
Even as distributed generation shows economical and political advantages over centralized renewable energy, the Federal Energy Regulatory Commission (FERC) is running a high voltage gravy train in support of expanded transmission. FERC’s lavish program is expanding large transmission infrastructure at the expense of ratepayers and more economical alternatives. Since 2007, FERC has had 45 requests… Continue reading
Most renewable energy advocates are familiar with feed-in tariffs, also known as CLEAN Contracts. They offer standard, long-term contracts for renewable electricity with prices sufficient to allow producers to get a reasonable return on investment (in Germany, it’s 6 to 8 percent). And research has shown that they tend to drive prices down more effectively… Continue reading
The upfront cost has always been the biggest barrier to solar PV adoption, and one Oregon town has found an innovative way to help its citizens buy down that cost.
The city borrowed from the sewer account to offer no-interest loans of $9,000 each. The repayment schedule, over four years, is tied to residents’ tax returns each spring, when they receive refunds of state and federal renewable energy tax credits.
All told, Lehman estimates the program will cost the city only $10,000 in lost interest over four years.
While the loan terms are short (4 years), the repayment plan is tied to the state and federal tax credit schedule, essentially allowing interested home and business owners the chance to finance solar directly with those credits, rather than having to put their own money up front.
The loan program spurred over 50 solar PV installations in 2010, in a town of just 16,500 residents. The residents not only received discount financing, but the city helped aggregate the purchase of the solar panels to get participants a “group buy” discount. Assuming a system size of 3 kilowatts and installed cost of $6.00 per Watt, the city’s $10,000 investment got their residents approximately $1 million worth of new solar power.
The increase in solar installation activity had an effect even for those who didn’t use the town’s financing option:
Ken Abbott, a retired postal employee, didn’t use the loan program but took advantage of the lower installation prices that resulted from the large number of buyers.
Pendelton’s lesson to cities is that you don’t need a lot of money to make it a lot easier to go solar.
Photo credit: Flickr user chdwckvnstrsslhm
A great story of a city looking to – literally – take ownership of its energy future:
The Colorado Renewable Energy Standard, as amended last year by the state Legislature, requires Xcel Energy to get 30 percent of its electricity from renewable sources by 2020.
…Boulder leaders — who let the city’s 20-year franchise agreement with Xcel Energy lapse at the end of 2010 — are now considering whether they can get an energy mix for their residents with a larger percentage of renewable energy than what Xcel is offering.
…At the “Clean Energy Slam” event in February, which gave participants two minutes to pitch a vision for Boulder’s energy future, a representative of Southwest Generation told the crowd that he believed his company could provide Boulder with an energy mix of 50 percent renewables and 50 percent natural gas by 2014. And by 2025, the company could provide up to 80 percent renewable energy to the city, the representative, David Rhodes, said.
…Jonathan Koehn, the city’s regional sustainability coordinator, said adding more renewables is only part of the equation.
“We’ve heard a lot of concern that, perhaps, more clean energy is driving this analysis,” he said. “But this is about long-term economic stability. When we talk about what our portfolio might look like in the future, we don’t have a predetermined notion of a certain percentage of renewables. What we want is to be able to analyze how we can have long-term stable rates.”
It’s not just about clean energy and stable rates, however. The decision to eschew a utility franchise was also about localization, described on a city website as “taking more control in determining:
- Where the energy supply comes from – Locally produced
- What types of energy are provided – Renewables over fossil fuels
- How much we pay for it – Rate control
Local generation of renewable energy will add more to Boulder’s economy than importing clean electrons, and if those projects can also be locally owned (perhaps via a community solar project like the Clean Energy Collective is doing in Carbondale, CO) then the economic benefits multiply significantly.
Photo credit: Flickr user respres (photo is of Denver, not Boulder, but I wanted a sunrise…)
Consumers Energy in Michigan, with a peak demand of around 4,000 megawatts (MW) just put the brakes on its pilot 2 MW solar PV program. The program sold out very fast, but rather than expand the program to accommodate demand, the utility says it needs to study the program.
The program was modeled on CLEAN Contracts, also known as feed-in tariffs, that provided a fixed payment per kilowatt-hour over 12 years that was high enough for residential and commercial solar PV systems to earn a decent rate of return. Similar programs operate on a larger scale in Gainesville, FL, Vermont, Ontario, and in many European countries. A lot of local businesses were strongly interested in participating, in part for the spillover economic benefits:
“When I looked at all the businesses that benefited,” [said Mr. Draper, regarding Fluid Process Company's] installation, “the local steel fabricator for the mounting poles, the tree remover, the ditch digging, crane, and concrete companies—Consumers would be giving the state a much-needed boost.” For now, many solar industry and advocacy groups are trying to convince Consumers Energy to reinstate the program, especially since the utility is also trying to roll back its renewable energy surcharge from $2.50 to 70 cents per customer. Said David Wright, of the non-profit Ecology Center, in Ann Arbor, “We just don’t want to see the program end. It’s in everyone’s best interest to diversify power supplies, find out about cost reductions, improve the program, and support our local solar industry.”
While seeming counterintuitive, a focus on smaller-scale distributed generation enables more and faster development of cost-effective renewable energy.
Last week I wrote about the illusion that we can “move forward on all fronts” in renewable energy development; rather, a bias toward centralized electricity generation in U.S. policy reduces the potential and resources for distributed generation.
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In contrast, distributed generation provides unique value to the grid and society, and its development can also smooth the path for more centralized renewable energy generation.
First, distributed generation is cost-effective. Economies of scale for the two fastest-growing renewable energy technologies (wind and solar) level off well within the definition of distributed generation (under 80 megawatts and connected to the distribution grid). Solar PV economies of scale are mostly captured at 10 kilowatts, as shown in this chart of tens of thousands of solar PV projects in California. Wind projects in the U.S. are most economical at 5-20 megawatts, illustrated in a chart taken from the 2009 Wind Technologies Market Report.
Besides providing economical power relative to large-scale renewable energy projects, distributed renewable energy generation also has unique value to the electric grid. Distributed solar PV provides an average of 22 cents per kWh of value in addition to the electricity produced because of various benefits to the grid and society. The adjacent chart illustrates with data coming from this analysis of the New York electric grid. Grid benefits include peak load shaving, reduce transmission losses, and deferred infrastructure upgrades as well as providing a hedge against volatile fossil fuel prices. Social benefits include prevented blackouts, reduced pollution, and job creation.
Distributed wind and solar also largely eliminate the largest issue of renewable power generation – variability. Variability of solar power is significantly reduced by dispersing solar power plants. Variability of wind is similarly reduced when wind farms are dispersed over larger geographic areas.
Not only are integration costs reduced, but periods of zero to low production are virtually eliminated by dispersing wind and solar projects over a wide area.
As mentioned at the start, distributed generation also scales rapidly to meet aggressive renewable energy targets. Despite the conventional wisdom that getting big numbers requires big project sizes, the countries with the largest renewable energy capacities have achieved by building distributed generation, not centralized generation. Germany, for example, has over 16,000 megawatts of solar PV, over 80 percent installed on rooftops. Its wind power has also scaled up in small blocks, with over half of Germany’s 27,000 megawatts built in 20 megawatt or smaller wind projects. In Denmark, wind provides 15-20 percent of the country’s electricity, and 80 percent of wind projects are owned by local cooperatives.
With all these benefits, distributed generation can also smooth the way for centralized renewable energy, in spite of energy policies that favor centralized power. When distributed generation reduces grid stress and transmission losses by provided power and voltage response near load, it can defer upgrades to existing infrastructure and open up capacity on existing transmission lines for new centralized renewable energy projects. A focus on distributed generation means more opportunity for all types of renewable energy development.
It may seem counterintuitive, but distributed renewable energy should be the priority for reaching clean energy goals in the United States.
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