In January, I plotted the size of state solar markets against their average installed cost and found surprisingly little correlation. When Lawrence Berkeley Labs put out their 2011 version of Tracking the Sun (IV), it was possible to update the chart, which I did in two stages. The first chart simply overlays the 2010 average… Continue reading
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Clean energy advocates should cast aside their worries about increasing Republican scrutiny of energy subsidies. The clean energy industry’s foolish reliance on tax incentives has already handcuffed its expansion. Unlike the leading nations in the clean energy race, the United States has no coherent energy policy. Rather, its energy market is balkanized by 50 distinct… Continue reading
You don’t have to be big to go big on solar power. That’s the lesson from the Gainesville Regional Utilities, the electric utility whose feed-in tariff solar policy has brought over 7 megawatts (MW) of solar to the city’s 125,000 residents. The raw number isn’t much, but it puts Gainesville among the world leaders in solar installed per capita, beating out Japan, France, and China (and besting California, with 32 kilowatts -kW- per 1000 residents).
The basic premise behind the feed-in tariff program is that anyone who wants to be a solar power generator can connect to the grid and get a 20-year contract for their power from the municipal utility. The long-term contract makes getting financing for solar projects easier and the prices are attractive. The utility pays 24 cents per kilowatt-hour generated for large-scale ground-mounted systems and up to 32 cents for small, rooftop systems.
The price differentiation helps accommodate solar arrays of various sizes, from residential to larger commercial installations, spreading the economic opportunity. The differentiation may also help small-scale residential projects that can’t use federal tax incentives for businesses (depreciation).
Thus far, approximately one-third of the city’s 7.3 MW of solar power is in relatively small systems, 100 kW and smaller. About half the installed capacity is in projects 500 kW and larger.
The solar feed-in tariff program also brings value to the local community and electricity system. A report released earlier this year found that the grid benefits and social benefits of solar power far outweigh the typical valuation of solar power by utilities. These benefits include reduced stress on the utility distribution system and reduced transmission losses.
The feed-in tariff program also means local economic development. With a rule of thumb of 8 jobs per MW, according to a University of California, Berkeley, study of the jobs created from renewable energy development, Gainesville has already generated 56 jobs. The National Renewable Energy Laboratory has estimated that each megawatt of solar adds $240,000 to the local economy, and if Gainesville’s solar projects are locally owned, the value could be much higher.
More than anything, Gainesville provides an important lesson in local energy self-reliance. While many communities must await action by a state legislature or investor-owned utility, the municipal utility has the authority to act quickly in support of the community. And when the utility is locally controlled, it can mean big things for local solar power.
For more information on feed-in tariffs and their success in supporting solar power, see CLEAN v. SREC: Finding the More Cost-Effective Solar Policy.
This is a presentation by John Farrell to the MDV-SEIA Solar Energy Focus conference in Washington, DC. In it, I discuss the transformation in the electricity system being wrought by clean energy sources, the winning economies of local solar power, how the drawbacks of solar are technically surmountable, and how public policy must change to… Continue reading
Americans seem unable to resist big things, and solar power plants are no exception. There may be no reasoning with an affinity for all things “super sized,” but the economics of large scale solar projects (and the unwelcome public scrutiny) should bury the notion that bigger is better for solar. In fact, smaller scale solar… Continue reading
In the 20th century electric grid, adding a variable source of power generation like wind or solar upset the paradigm: big coal and nuclear plants run constantly, efficient natural gas plants meet intermediate demand, and fast gas, hydro or diesel peakers fill the peaks.
But the 21st century grid is different and the best strategy for utilties may be to flip their outmoded paradigm on its head.
The Nippon Paper Industries mill in Port Angeles, Wash., which makes paper for telephone books, has an average load of 53 megawatts, which is roughly 1,000 times the peak load of a typical house. But the mill’s load can run up to 73 megawatts.
One of the big electricity consumers at the plant is the pulping operation, which turns wood chips into an intermediate product on its way to becoming paper.
While the mill pulps the paper at the rate at which its machines are the most efficient, it could pulp faster, turning pulp into a kind of battery. “What we’ve looked at is the possibility of more storage capacity,’’ said Harold S. Norlund, the mill manager. “A phone call could come and say, ‘We have a problem for 24 hours — can you use more energy?’“ he said…[the mill] would switch to electricity from wind at certain hours and save the wood pulp for burning as needed later.
The adjacent graphic illustrates the reversed paradigm. By planning on variable sources first (wind, solar, etc) – as in the bottom frame – utilities can think creatively about how to match supply and demand. In some cases, it means finding flexible generation sources to fill the gap. In this case from Wald, it means moving the black demand line.
None of these options is limitless (or always cost-effective), but each is key to making a renewable-first grid work. These example are also instructive in questioning the old grid paradigm’s role in a renewable energy world: should the electricity system limit new wind and solar power just because we’re used to running a lot of big power plants 24-7?
No. And with simple solutions like demand-shifting, we shouldn’t have to.
You’re a city manager hoping to cut electricity costs at sewage treatment plant, a school administrator looking to power schools with solar, or a state park official needing an off-grid solar array for a remote ranger station.
But unlike any private home or business, you can’t get 50% off using the federal tax incentives for solar (a 30% tax credit and ~20% from accelerated depreciation). That’s because the federal government’s energy policies all use the tax code, and your organization is tax exempt.
What about a public-private partnership? The private entity puts up some money and gets the tax benefits, and the public entity only has to pay half. It can work, if you’re lucky, although a good portion of those tax benefits (half, in recent years) pass through to that private entity for their return on investment, not changing the price of your solar array.
But the legal niceties also matter. One common option is a lease, where the public entity leases the solar panels from the private one. One big problem: the IRS doesn’t allow the private entity to collect the 30% tax credit if they lease to a public entity.
The cash grant program in lieu of the tax credit allowed leasing, but it expires in December. Furthermore, it disallowed depreciation of the solar array, equivalent to 20% off.
Another clever arrangement is a power purchase agreement (PPA), where the third-party owns the solar array and simply sells the power to the school or city. The third-party can claim both the tax credit and depreciation, but if you live in a state with a regulated utility market (and no retail competition), your utility might slap you with a lawsuit for violating their right to exclusive retail service.
The following chart illustrates the financial challenge for public entities created by using the tax code to support solar.
Even with a lot of legal creativity, the public sector is often stymied in accessing both federal solar incentives. The result is that private sector solar projects always get a lower cost of solar, because the public sector can only access federal incentives through (costly) partnerships with third parties.
Using the tax code for solar (instead of cash grants, production-based incentives, or CLEAN Contracts) is bad for the solar business, bad for taxpayers and bad for ratepayers. It’s time to change course, and let the public sector go solar, too.
On Tuesday, ILSR Senior Researcher John Farrell was invited on the David Sirota Show on AM760 in Denver to talk about his article on Local Solar Could Power America in 2026. Click here to find the podcast from iTunes (Sirota Tuesday 10-25-11, Hour 3), the segment starts at 16:24. Continue reading
The low risk and transparency of CLEAN Contract Programs can provide states with more solar at a lower cost than solar renewable energy certificate (SREC) programs, says a new report released last week. Produced by the Institute for Local Self-Reliance (ILSR), CLEAN v. SREC: Finding the More Cost-Effective Solar Policy finds that an otherwise identical… Continue reading