A serialized version of our new report, Democratizing the Electricity System, Part 3 of 5. Click here for: Part 1 (The Electric System: Inflection Point) Part 2 (The Economics of Distributed Generation) Download the report. The Political and Technical Advantages of Distributed Generation While technology has helped change the economics of electricity production (in favor… Continue reading
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They should try 21 times. That’s how much more in-state economic benefit can be gained from developing local energy rather than trying to keep rates low with energy imports.
In 2008, voters approved – with 66% percent of the vote – a referendum establishing a 15% renewable energy standard. The law also required utilities to get the renewable energy within Missouri or surrounding states. In January, however, the state legislature stripped that part of the law, allowing Missouri utilities to import renewable energy from anywhere, even if that electricity never physically reaches Missouri ratepayers.
Renewable energy advocates even tried to reach a compromise with utility lobbyists, reducing the mandate by half but keeping the geographic restriction.
If the measure had passed, it would have guaranteed Missouri “a coal-sized plant of renewable energy over the next decade,” [Rep.] Holsman said. “That means a vast array of economic development, including sales, installation, service and manufacturing jobs for Missouri. It means not having to worry about EPA regulations or adjusted fuel costs for the investment.”
The measure failed, however, because consumer groups thought importing wind power from elsewhere would be cheaper and utilities wanted ratepayers to front the cost for permits for new nuclear power plants (despite the horrendous economics of such power plants).
The irony is that Missouri has strong, local renewable energy resources. According to a 2010 report by the National Renewable Energy Laboratory, Missouri could generate three times its electricity consumption from high-quality, in-state wind power. The cost for this wind power would be 6 to 7 cents per kilowatt-hour (kWh) without the federal tax credit, and less than 5 cents per kWh including the incentive. This compares to average residential retail rates of 8-9 cents. Even solar PV is fairly affordable, with a levelized cost (including the 30% federal tax credit) of just 15 cents per kWh (with an installed cost of $3.50 per Watt). Missouri has enough sun and roofspace to get 21% of its electricity from rooftop solar PV.
The cost savings from importing cheaper wind power pale in comparison to the economic benefits of building locally. The cheapest wind power in the U.S. would be – at best – about 1.5 cents per kWh less than wind power generated in Missouri. If it could (impossibly) be delivered to the state with zero transmission cost, the savings to ratepayers of getting 100% of their electricity from wind would be $1.3 billion.
However, the economic impact of in-state wind power is $1 million per megawatt (MW), according to the American Wind Energy Association. The state would need 28,000 MW of wind power to match its electricity consumption (with a 35% capacity factor), for an economic impact of $28 billion, 21 times the savings from importing out-of-state wind. Furthermore, if those turbines were also owned by Missourans, the economic impact would rise 1.5 to 3.4 times higher, from $42 to $95 billion.
The repeal of the geographic requirement in Missouri’s renewable energy law is penny-wise and (21 times) pound-foolish.
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.
In a press release earlier this week, WWEA released this definition of community power alongside a new study on the public acceptance of community-owned wind:
A project can be defined as Community Power if at least two of the following three criteria are fulfilled:
1. Local stakeholders own the majority or all of a project
A local individual or a group of local stakeholders, whether they are farmers, cooperatives, independent power producers, financial institutions, municipalities, schools, etc., own, immediately or eventually, the majority or all of a project.
2. Voting control rests with the community-based organization:
The community-based organization made up of local stakeholders has the majority of the voting rights concerning the decisions taken on the project.
3. The majority of social and economic benefits are distributed locally:
The major part or all of the social and economic benefits are returned to the local community.
The press release also references this recent study of community ownership that we covered last week: Community Ownership Boosts Support for Renewables.
Yet another Canadian province is showing a serious commitment to the economic benefits of renewable energy development. Ontario’s “buy local” energy policy has the promise of 43,000 local jobs from 5,000 MW of new renewable energy. Now Nova Scotia is completing rulemaking for a provincial goal of 40% renewable power by 2020 that includes a 100 megawatt (MW) set-aside for community-owned distributed generation projects. The policy promises to increase the economic activity from its renewable energy goal by $50 to $240 million. Continue reading
After 10 years of battling incumbent utilities, Marin Clean Energy became California’s first operational community choice aggregation authority in 2010. Already, local ratepayers can opt to get 100 percent of their electricity from renewable resources.
Community choice aggregation (CCA) offers an option for cities, counties, and collaborations to opt out of the traditional role of energy consumers. Instead, they can become the local retail utility, buying electricity in bulk and selecting their power providers on behalf of their citizens in order to find lower prices or cleaner energy (or even reduce energy demand). Marin Clean Energy started operations last year:
“When it launched last fall, Marin Energy Authority’s goal was to offer 20% renewable energy to its customers,” said Ms.Weisz. “We were able to offer 27.5% compared to the state-mandated 20%.” The state recently increased the mandate to one third. PG&E has about 17% under contract, according to Ms. Weisz.
Customers can also opt for the “deep green,” 100% renewable service for a 10 percent premium.
Marin Clean Energy not only contracts for a higher portion of renewable energy than PG&E, it’s trying to increase its share of local, distributed generation.
“We are filling a niche market for mid-sized renewable energy generation in the 20 to 60 MW range,” said Dawn Weisz, interim director… “When we went out to solicit renewable power offers, Pacific Gas & Electric told us we would not get any bids. We were looking for 40 MW. We were offered over 600. Almost all was solar.”
The local “utility” is also trying to maximize energy efficiency. Currently, a public benefits fund pools ratepayer dollars for energy efficiency programs run by PG&E. However, such programs tend to work against the bottom line of the utility, but not against Marin’s CCA.
Marin Clean Energy thinks it can do a better job and create more local jobs with the money.
It’s a promising start for California’s first community choice authority.
Last month, a Grist writer noted sarcastically that “Money is a miracle cure for ‘wind turbine syndrome’.” It is. And environmental advocates frustrated by the (spurious?) health and aesthetic complaints raised by not-in-my-backyard (NIMBY) actors would do well to consider why.
The implication of the Grist post (and this attitude in general) is that we can’t green our energy system without sacrifice. Getting to big carbon reductions will require enormous new renewable energy development and it will often happen in places where land was previously undeveloped (note: see this counter-argument). The folks who live there, the NIMBYs, need to do their share.
It’s awfully easy to offer sacrifice when you’re not on the altar. And it’s worth considering what’s really behind the “syndrome.”
In a recent study by the ever-methodical Europeans, they found that opponents to new wind and solar power have two key desires: “people want to avoid environmental and personal harm” and they also want to “share in the economic benefits of their local renewable energy resources.” It’s not that people are made physically ill by new renewable energy projects. Rather, they are sick and tired of seeing the economic benefits of their local wind and sun leaving their community.
Such opposition is perfectly rational, since investments in renewable energy can be quite lucrative (private developers and their equity partners routinely seek 10% return on investment or higher). And the economic benefits of local ownership far outweigh the economic colonialism of absentee owners profiting from local renewable energy resources.
Of course, NIMBY-ism only sometimes manifests itself as an economic argument, and there’s a good reason for that, too. In the project development process, there are precious few opportunities for public comment, and almost all of them represent up-or-down votes on project progress. None offer an opportunity to change the structure of the development to allow for greater local buy-in or economic returns. And no project will be halted simply because it isn’t locally owned. Projects can and have been stopped on the basis of health and environmental impacts. Enter Wind Turbine Syndrome.
There are alternatives. In Germany, Ontario, Vermont, and Gainesville, Florida, local citizens can use a renewable energy policy – a feed-in tariff – that offers them a guaranteed long-term contract if they become a renewable energy producer. This contract guarantees a reasonable, if small, return on investment and helps them secure financing. In Germany, the program’s simplicity means that half of their 43,000 megawatts (MW) of renewable energy are owned by regular farmers or citizens.
In Ontario, the provinicial clean energy program specifically requires project developers to use local content, guaranteeing a higher economic benefit for the province in exchange for its robust support for renewable energy. The program is forecast to generate 43,000 local jobs in support of 5,000 MW of new, renewable energy.
In the United Kingdom, public officials are piloting a “community wind fund” program for all new wind projects. Under the program, each wind project must pay in £1000 per megawatt (~$1600 per MW) per year, for 25 years, into a community fund where the project is located.
The impact for the community is significant. Compared to the typical land leases (often $5,000 per turbine for the host landowner), the community fund payments would increase local revenue by over 60 percent, with the additional funds spread to the entire community rather than just the lucky turbine hosts.
The impact on turbine owner net revenue is small but not negligible, reducing the net present value of the project by about 3 percent.
It’s not that any of these policies represent the silver bullet for local opposition to new renewable energy projects, but they do address the underlying problem.
The truth is that many people are frightened of being left behind by the clean energy revolution or angry that their local resources are tapped without commensurate local benefit. They find that there’s no way to be heard in the (democratic?) process without resorting to tangental arguments about health and viewsheds.
NIMBY has been misunderstood by the clean energy community. It is not a knee jerk, it’s a market failure.
When citizens see a new wind or solar energy project, it shouldn’t be from the sidelines. They should see it from the front seat, where they have hitched their wagon to environmental and economic progress by investing in a local energy project.
Our energy policy should make that possible. It doesn’t.
Federal tax policy makes it very difficult to share renewable energy tax incentives among multiple investors. Federal and state tax-based incentives preclude many local organizations (nonprofits, cities, schools) from owning wind turbines or solar panels. And utility billing rules make it nearly impossible (in most states) to share the electricity output from a shared project that isn’t utility owned.
There are brilliant examples of entrepreneurs overcoming these barriers to install community-based projects. Developer Dan Juhl and others have a record of success with community wind in Minnesota. The Clean Energy Collective is piloting a new community solar program in Colorado.
There are even some policy ideas bringing hope. Virtual net metering laws in eight states allow for sharing electricity output. Colorado’s solar gardens bill enshrines a small amount of community solar.
But the theme is one of triumph over adversity, with local ownership the exception rather than the norm. And without better energy policies that give locals a chance to buy in, the wind turbine syndrome epidemic will likely continue.
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.
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…)