Buildings and Energy

Will the US adopt EU type Feed-in Tariffs?

An important and troubling issue from one of the closing sessions at this week’s Solar Power International conference reveals that industry leaders are divided on the political feasibility and efficacy of Feed-in Tariffs..

Industry leaders discussed the issues and probability of Solar Feed-in Tariffs at state and national levels.  Stephen Lacey of RenewableEnergyWorld.com led the panel discussion.

A solar feed-in tariff (FiT) is an above-market or premium rate paid by utility companies per kilowatt-hour of electricity generated by solar power.  FiTs are regulated rates mandated by government and/or public utility commissions.  

Julie Blunden of SunPower opened the discussion with a concise description of the essential characteristics of a feed-in tariff:

• A “must take” provision – if the solar electricity is delivered to the grid, the local utility must use and pay for it
• Guaranteed price – a fixed price and stable pricing policy
• Unencumbered access to a grid connection

Ms. Blunden also advised that feed-in tariffs must be carefully designed and modeled before implemented.

A “policy and political pragmatist”, SunPower believes that FiTs are more likely and viable at the state level where energy policy is both more flexible and more adaptable to political and economic climates of individual utility service areas.

At the national level, federal policy derives from a long history of tax-based funding: tax subsidies designed to encourage economic development.  Cash based incentives like feed-in tariffs are not popular with federal lawmakers.

John Geesman, former commissioner on the California Public Utilities Commission and editor of GreenEnergyWar.com, noted that federal subsidies (30% Investment Tax Credit) have been historically vulnerable. The 30% cash grant may be difficult to renew. 

Mr. Geesman advocates feed-in tariffs at the state level to eliminate the uncertainty of federal policy change.  He also advocates changes in the Federal Power Act to remove barriers to state FiT programs.

Rick Gilliam of SunEdison opened his remarks by observing that FiT programs can be expensive and must be market driven so they do not deplete available funding.  He went on to say that solar already enjoys a very generous set of federal subsidies and state incentive programs. 

It could be politically dangerous to ask for too much and risk the good will that solar enjoys on capital hill.  Mr.Gilliam pointed to the California Solar Initiative and its system of declining incentive steps as an effective way to regulate a market and control the rate of development.

We were fortunate to have a European perspective from Adel El Gammal of the European PhotoVoltaic Industry Assocaition.  He agreed that FiTs must be properly designed and beg for a means to adjust tariff rates as market conditions change. As the market grows, the “degression rate” is adjusted based on target growth for a specified period, usually a year”

Mr. El Gammal offered several significant insights into the German Feed-in Tarrif.  He pointed out that the most successful program in the EU had the lowest FiT rate, and that the German FiT is currently declining in response to market conditions for system cost.

He went on to say that FiTs must provide a reasonable incentive, but not an unnecessarily generous rate.  Easy access to the grid and immediate payment are more important to incent participation.

Panelists agreed that Spain‘s foray into Feed-in tariffs was a disaster for many reasons.  With apologies to his Spanish colleagues, Mr. El Gammal stated that the program was clearly too generous, offered a huge rate of return, and the enthusiastic response from investors was unsustainable.

Worse, only “professional investors” were able to participate due to the complex and costly application process.  Spanish citizens saw this as misuse of public money to enrich wealthy investors.  Spain responded with a cap to protect limited funds – a move that quickly collapsed the solar market.

Julie Blunden added that that the Spanish feed-in program favored very large utility-scale projects, but failed to establish a commercial rooftop market segment.

At the same time, the Spanish solar program demonstrated that the solar industry, PV in particular, could ramp up quickly to meet demand.  It also generated improvement cycles in installation efficiency. SunPower cut 50% off the cost off their T-20 tracker.

The Federal Power Act (FPA) of 1935 figures prominently in feed-in tariff politics.  The Federal Power Commission wascreated to maintain reasonable and fair utility rates for consumers; its mandate is consumer protection. 

FPA requires State regulatory agencies to set wholesale electric prices for investor- owned utilities based on cost and a reasonable profit margin.  Most wholesale prices are in the $0.04 to $0.06 range.  A solar FiT is an above-market rate of perhaps $0.20 or more.

As Julie Blundon pointed out, at least one California utility has threatened to file suit against a feed-in tariff as a violation of the FPA. Regardless of the merits, an expensive and protracted lawsuit could effectively eliminate an FiT program.

She went on to say that California Public Utilities Commission staff proposes a “market-based” FiT, wherein solar developers would compete to sign power purchase agreements with California’s major utilities.  The CPUC staff proposal is, in part, a response to this threat.

John Geesman countered that eliminating the barriers to FiT in the Federal Power Act may be included in current federal legislation and is a preferred solution.

It may be important to note that SunEdison and SunPower will likely thrive in the highly competitive market that the CPUC staff proposal will create.  They will succeed in part through access to tax equity and other sources of capital that are in short supply in the current financial markets.

Under the heading of “Most Important Issue” there were several responses:  Julie Bluden expressed concern that no country has yet addressed policy issues beyond 2020 when solar reaches grid parity.  There must be a bridge, she said, between policy and the wholesale market.

Adel El Gammal reiterated that simplicity in the ability to connect to the grid is paramount.

Rick Gilliam of SunEdison warned that if FiT policy were based on recovery of costs plus a reasonable profit – it would sound very much like the policy used to regulate utilities – would this approach lead to regulation of distributed generation on homes and commercial buildings?

The audience was overwhelming in favor of FiTs.  Several used the Q&A format to argue that a $0.20 would result in only a 3% increase in most California utility bills.  Mr. El Gammal added that EU average increase was about 2.2%.  The audience responded with enthusiastic applause.

In closing, John Geesman predicted that 5-10 states will implement some form of FiT but with varying motives.  Some desire solar development for clean power, others for cost stabilization, and still others for regional economic development.

Adel El Gammal had the last word by noting that we are faced with an urgent need for renewable energy and that EU FiTs were the most successful approach.

In general, the mood of this conference reflected the pressures and disappointments of the banking collapse and ensuing recession.  Implicit in remarks by US panelists was a resignation to focus on near-term policy initiatives, even though none are powerful enough to meet widely-accepted renewable energy goals for 2020 and beyond.

Posted in Commercial Solar, Commercial Solar Finance, Commercial Solar Ventures, Energy Policy, Feed-in Tariffs, Renewable Energy | Comments Off

Solar Progress on Capital Hill

As Congress begins debate on the Climate Bill, those attending Solar Power International 2009 got an update on solar progress in Washington.  The 11:00 am session on issues that affect everyone in the industry was surprisingly under-attended.  Perhaps that reflects a dazzling exhibition hall and our perennial frustration with Congress.

John Lushetsky, head of the Department of Energy’s solar program told an audience of about 250 that the DOE commitment to solar will rise from $175 million in 2009 to $320 million in 2010.  Of that, $149.5 million will be directed toward PV.  In addition, DOE will administer stimulus funds totaling $50 million in 2009 and again in 2010.  They will also guarantee up to $40 billion in commercial and utility-scale loans.

The importance of $40 billion in guarantees cannot be overstated.  Construction credit and solar development funding is in short supply.  Banks still in the game are announcing commitments of less that $100 million per portfolio.

The DOE believes that the declining cost of solar will equal the rising cost of fossil energy by about 2015 and could comprise 10-20% of US electric output by 2030.  Many would like to see 30% by that date, but new policy at the DOE is a very positive step.

A slide deck from a similar presentation is available at http://files.eesi.org/lushetsky_051409.pdf

DOE and the Treasury are issuing checks for 30% of the cost of a solar project, There is no limit on the size of the project.  Keith Martin of Chadbourne & Parke (law) told the session that 276 applications were filed for grants through early September. To date, payments totaling $1.2 billion (Treasury funds) were paid to 70 renewable energy projects.

This program is essential to commercial and utility-scale solar.  Until the close of 2008, solar projects were financed, in part, through the Investment Tax Credit (ITC).  As the recession deepened, Congress provided the option of a cash grant in place of a tax subsidy.  In a recession, few need tax breaks.

Kate Johnson, Washington representative of the Sierra Club, is working toward a national Renewable Electric Standard (RES) in the Climate Bill.  It would require at least 20% of US electricity be produced from renewable sources by 2021.  The Sierra Club is fighting efforts to dilute the standard from 20% to 12% or lower.

Katie Cullen of SC Partners LLC has an interesting job.  She advises solar developers and, like Keith Martin, works with Congress to write solar legislation.  Initiatives include extending the 30% DOE Cash Grant program, lengthening the time horizon on the DOE loan guarantees, and extending a 50% bonus on depreciation of solar power assets (tax break).

If you’ve followed the development of utility-scale solar projects in the southern deserts of the US, you know that the permit process can be costly and time consuming.  Cullen supports a provision that gives the Federal Energy Regulatory Commission authority grant approval for solar projects rejected at the state level in 180 days or less. 

Other issues include national standards for net metering, connecting solar to the grid, and encouraging federal agencies to sign power purchase agreements (PPAs) with independent wind and solar power generators.

Jim Presswood of the Natural Resource Defense Council described important provisions that NDRC is working to include in the Climate Bill or other energy legislation.  Perhaps most important is a provision to fund renewable energy deployment (construction of renewable power facilities) by channeling pollution allowance funds (carbon pollution allowances) to renewable energy developers.  NDRC is working to get a 35% “carve out” for renewable deployment.

During Q&A, the audience expressed concern on several issues including the time and cost involved in Environmental Impact Report (EIRs) for solar projects and Feed-in Tariffs (FiTs).  Many were surprised to learn from John Stanton, general council for the Solar Energy Industries Association that SEIA’s board is undecided on a national FiT, but might support FiTs at the state level.  Kate Johnson added that a renewable electric standard was more important at this point in time.

Though I read dozens of solar news reports each day, I was surprised by the progress made on our behalf, but also the extent to which industry organizations and individuals were influencing (and sometimes writing) public policy to bring about a renewable energy future.

Posted in Cap and Trade, Commercial Solar, Commercial Solar Analysis, Commercial Solar Finance, Department of Energy, Energy Policy, Feed-in Tariffs, Renewable Energy, Solar Cash Grants, Utility-scale Solar Power | Comments Off

Energy Freedom Is Not Free

Co-authored by David M Adams of Buildings and Energy and Norman Brand, Ph.D., J.D, with support from Marsha Shenk, a pioneer of Business Anthropology 

As tens of thousands arrive in Anaheim, California for the Solar International Convention there is lots to talk about: Renewable Portfolio Standards, Feed-in Tariffs, the Stimulus Package, and the Climate Bill…just to name a few.

While many hope renewable energy will power us out of the recession, hone our competitive edge, and make us energy independent their optimism may be misplaced.  Here’s why.

Renewable energy is currently financed through a complex mix of tax subsidies, tax deductions, cash incentives, production incentives, and – yes – even a bit of power generation.  Some solar developers still succeed with that model.  When the financial markets collapsed at the end of 2008, however, construction of new renewable energy facilities was severely curtailed.  The financial crisis revealed a basic flaw in how we finance renewable energy: Tax subsidies cannot successfully fund a renewable future.  

We propose a more robust strategy: pay for renewable energy development by – paying for it.  By linking three basic policy initiatives, we can have a realistic renewable energy future.

First, we need a national renewable portfolio standard (RPS).  RPS legislation requires utilities to purchase or generate a percentage of their power from renewable sources by a certain date.  Where states have established minimum targets for renewable energy production, utilities and state agencies have created a wide range of incentive programs to meet the challenge.  With few exceptions, construction of new renewable power plants correlates with the financial commitment to state and local incentive programs.  A national standard will create a national commitment and opportunities for every local form of renewable energy.

Second, replace wildly divergent state, federal, and local subsidies and incentives with a single, national, above-market price for every kilowatt-hour of renewable energy generated and delivered to the grid: a “Feed-in Tariff” (FiT).  A feed-in tariff replaces the complex mix of tax subsidies and incentives by offering a premium price for clean, renewable power. This substitute for inefficient subsidies has helped make Germany a leader in solar energy. 

Instead of complex partnerships with investor groups seeking access to tax breaks and incentive funds , FiT allows renewable energy ventures to be run like conventional business ventures.  Entrepreneurs would have a direct incentive: the larger the difference between the cost of producing alternative energy and the FiT, the more you make.  If we guarantee the FiT (even at a declining rate) for twenty years, we will create a huge business opportunity and inspire competition.

Who pays for this above-market rate?  We all do.  No leap into the future is free.  Current FiT proposals suggest a fraction of a cent per kWh be added to every ratepayer’s bill.  But rate-payers should not bear the entire cost or even a majority of the cost.

Instead, we propose channeling the money generated by carbon pollution permits – essentially pollution penalties – into a DOE pool to fund a significant percentage of FiT costs.  Every renewable energy producer is paid from that pool based on the kilowatt-hours of electricity it produces.  Utility-scale installations, every wind turbine, every small business with a solar roof, and perhaps even homeowners, would be compensated for generating carbon-free energy with pollution permits funds,  In this way, carbon polluters pay a large part of the cost of the FiT, minimizing the cost to ratepayers. 

Initially, the DOE pool would grow quickly because less than 300 MW of renewable power is currently on line.  As more projects are commissioned, more money is paid out.  At times determined in the initial legislation, the FiT is reduced.  As the cost of conventional energy increases, the cost of renewable energy decrease.  When they approximate each other, the Fit is the market rate, and the cost of renewable energy reflects the fair market value of the previously externalized cost of carbon pollution.

Initially, everyone pays a small price for energy independence and carbon polluters are encouraged to convert to renewable technologies.  Ultimately, the value of energy independence more than equals its cost.

There are practical challenges.  Utility companies are concerned about “wildcat” energy developers unbalancing the grid.  Just as national security justified the creation of the Interstate Highway system, it justifies a federal commitment to upgrading grid infrastructure to create energy independence.  .

Critics will ask: What about when the sun goes down? What about variations in electric demand by season and time of day?  Initially, solar and wind power will be such a small input to the grid that there will be little or no noticeable difference.  As both expand, the “smart grid” will grow, giving renewable generation priority when it is online. Renewable storage technologies, currently in development, will become a reality long before “clean coal.”

What about existing state and federal programs?  While there would be no immediate change, tax subsidies would be phased out.  Fit will ultimately take the place of state incentive programs that are already designed to decline gradually.  Won’t Feed-in Tariffs tend to keep the costs of renewable energy artificially high?  A carefully modeled policy for feed-in tariffs will have them decline over time, as technology costs decline and power generation becomes more efficient.

All energy is subsidized in some form.  Unfortunately, the current mix of subsidies and incentives is failing to make us energy independent.  But if we move from tax subsidies to pollution permits, RPS, and Fit, we can unleash capitalism to create a renewable energy future.

And best of all, we will investing in America – kilowatt-hour by kilowatt-hour.

Posted in Cap and Trade, Commercial Solar, Commercial Solar Finance, Commercial Solar Ventures, Department of Energy, Energy Policy, Feed-in Tariffs, Renewable Energy, Solar Cash Grants, Utility-scale Solar Power | 1 Comment »

California’s Bold Experiments with Feed-in Tariffs

On Sunday, October 11^th, California Governor Arnold Schwarzenegger signed new legislation that creates a solar Feed-in Tariff paralleling solar policy in the EU.  A Feed-in Tariff (FiT) is a premium price paid for renewable energy, in this case solar power.  Under the new law, if you build a solar facility in California with a rated capacity of 1.5 to 3.0 megawatts, the local utility is now required to pay between $0.15 and $0.17 for each kilowatt hour of solar power produced.

Under this legislation, FiT projects benefit from US DOE 30% cash grants, and, if applicable, Federal accelerated depreciation.  But because FiT is a wholesale program, these projects will not tap incentive funds from the California Solar Initiative. 

In sharp contrast, a California solar developer might finance a commercial power purchase agreement with five separate funding sources:

• DOE cash grant
• Accelerated depreciation
• $0.10 to $0.14 per kilowatt-hour for the life of a 15-20 year power purchase agreement
• $0.15 to $0.22 per kilowatt-hour in CSI incentive payments for five years
• $0.005 to $0.015 per kilowatt-hour for RECs

Smaller commercial PPAs may have revenues of up to $0.375 in years 1-5.  It should be added that commercial PPAs may also have a yearly increase in the kW price of 2% to 3%.

Projects of this size are not built out of pocket.  Equity investors and tax equity investors (banks) have profit and due-diligence requirements that must be met before funding a multi-megawatt solar project.  Along with basic equipment costs, investor expectations and document costs take a large bite out of potential revenues.

I’m not satisfied that the $0.15 to $0.17 legislation is strategically sound. Will solar developers deliver viable solar projects at an abrupt and steep rate decrease of $0.095 to $0.1675 per kilowatt-hour?  Will they be able to walk away from about $3.1 million or more in revenues to build a 1.5 megawatt project that generates a $0.17 per kilowatt hour?

In most cases, NO.  When we ran cash flows, we found that under ideal conditions, a 10 MW, ground mount, thin-film project might work at $0.17 as long as the 30% DOE cash grant is available.  When solar finance returns to the 30% Investment Tax Credit in January 2011, $0.17/kWh may not work at all.

On the other side of the equation, the California Public Utility Commission is working through a staff proposal to award Feed-in Tariff contracts to solar developers through a “reverse auction”.  Solar developers will propose power purchase agreements with the lowest responsible price per wholesale kilowatt.  The CPUC will award power purchase agreements to the lowest bidders.

Can the CPUC experiment in FiT fill the gap in 1 MW to 10 MW solar projects? 

Suntech Power Holdings Co. Ltd., SunPower Corp., and Applied Materials Inc. are quoted as favoring the auction approach to establish market price for mid-scale solar projects.  As seasoned solar developers, Suntech and SunPower already thrive in the competitive RFP environment.

If the CPUC is willing to accept proposals with tariff rates that approach the return on investment derived from commercial PPAs negotiated with large university and municipal customers, for example, then the CPUC experiment may succeed.

The CPUC program has some other advantages.  As a public agency, PPA terms and the kWh pricing will become publicly available.  As such, the availability of the data could produce a model for a national Feed-in Tariff.

There are drawbacks.  Only a handful of solar developers specializing in power purchase agreements are qualified and financially capable of participating in the auction.  Many will be shut-out without the economies of scale that a vertically integrated company like SunPower brings to the competition.

Second, multi-megawatt projects require a tax equity investment partner.  When the banking industry collapsed in 2008-09, so did the market for tax equity investment.  Though that market is gradually recovering, only a few solar developers have the funding commitments to deliver on CPUC auction projects.  This constrains the pace of development.

With the goal in mind of powering solar development, I suggest two different questions:

• Instead of asking if solar developers can meet the financial challenge of either price structure, how about: what tariff price per kilowatt-hour would allow solar development to proceed like a conventional business?
• Under what circumstances might a solar developer invest 20% to 30% of the initial capital, borrow the rest at 6.5%, and produce clean-energy at a modest profit for 15 to 20 years?

Ultimately, California’s Feed-in Tariff programs must be viewed as experiments.  After all, solar finance as we know it today emerged in 2005.  Properly managed and amended, they may contribute to a renewable energy future.

[1] US DOE cash grant as part of the ARRA stimulus package.

[2] Accelerated Depreciation, also known as MACRS is governed by the US Tax Code and is subjest to limits and restrictions

[3] PPA rates per kWh are linked to retail utility rates

[4] CSI incentive rates vary by utility service area and the terms of the CSI program

[5] Renewable Energy Credits or Certificates (RECs) represent the green aspect of clean energy and can be monetized at very low rates.

Posted in Commercial Solar, Commercial Solar Finance, Commercial Solar Ventures, Department of Energy, Energy Policy, Solar Cash Grants, Utility-scale Solar Power | Comments Off

Is Cap and Trade Set to Power a Renewable Energy Future?

Will Cap and Trade legislation, often called ‘The Climate Bill’, effectively enable new renewable energy power plants like wind and solar?  Or, will a complex system of pollution permits and permit-trading actually favor upgrades to existing fossil fuel technologies?

Last Friday, GWF Energy LLC, an independent power producer, announced a ten-year power purchase agreement with Pacific Gas and Electric Company (PG&E) for about 300 megawatts generated with natural gas.  The project is under review with the California Public Utility Commission and is projected to begin generating power in 2012.

GWF will convert its Tracy, California facility into a ‘combined cycle’ power plant.  Combined cycle plants increase efficiency and reduce CO2 and other pollutants by using waste heat –  heat that would otherwise escape via the exhaust stack – to generate more power per cubic foot of natural gas.

PG&E’s commitment to solar energy is hard to challenge.  New solar power installations in PG&E’s service area represent a large percentage of US solar power generation.  PG&E also leads US utilities in signed power purchase agreements driving development of utility-scale solar power. 

However, combined cycle power plants may represent a threat to a renewable energy future if they can fall below the CO2 emission levels in the final draft of the Climate Bill.

The original Tracy plant was rated at 145 MW and consumed 29.5 acre feet of water per year.  Operating 24/7 the plants might have produced 1.2 million megawatt-hours of electricity.  It was used as a ‘peaker plant’, to meet peak demand loads from PG&E customers.  Natural gas provided a quick response to varying loads in California’s electric market.

The new plant is a significant improvement.  Reuters quotes Duane Nelsen, President and Chief Executive Officer of GWF Energy: “The TCCPP will also reduce greenhouse gas emission rates by 31%, reduce water use by over 95% through use of dry cooling technology, create more than 400 union jobs and contribute $3.5 million to the local economy during construction. When operational, the project will create about 20 full-time jobs and provide approximately $4 million in annual property tax revenue.”

According to the US Energy Information Administration, natural gas represents 22% of US energy consumption and 20% of US CO2 emissions.  Natural gas generates 16% of US electricity and 15% of US CO2 emissions derived from electric power plants.  If GWF’s predictions for its combined cycle plants are correct, a 31% reduction in CO2 from natural gas may be an attractive goal for US legislatures.

What might we expect from national policy if it favored CO2 reductions from existing natural gas power plants over new renewable power installations?

Let’s use the Tracy plant as an example.  A rough guesstimate of the CO2 output might be around ½ a metric ton per megawatt hour.  The existing single-cycle natural gas power plant may emit 540,000 metric tons of CO2 annually if it were in service 85% of the time.  The upgraded plant, with a capacity of 300 MW may emit 760,000 tons of CO2 under the same operating conditions.  A net increase of 220,000 tons of CO2.

Worse, depending on where the Climate Bill sets emissions levels, and how it grants carbon pollution credits, this plant may be able to sell pollution credits to a coal-fired power plant rather than pay a penalty for emitting hundreds of thousands of tons carbon each year.  Does that sound like a renewable future?

Setting aside other snares for the moment (in issues such as commodity trading, political trading, and the danger of a potential derivatives market,) an effective climate bill must be measured in terms of the number of megawatt hours of fossil fuel power that are converted or replaced by megawatt hours of renewable energy.

Posted in Cap and Trade, Energy Policy, Renewable Energy, Uncategorized, Utility-scale Solar Power | 1 Comment »

Is Solar a Good Bet for this Building? Debunking a (solar) Urban Legend

Urban environments can be a challenge to solar development.  When evaluating a building’s solar power potential, solar installers and consultants often turn to Google Earth or Bing Maps to get an early impression of the building; it’s the analog of real estate ‘drive-by’.  Even knowing the pitfalls, it’s hard to resist a quick look at a satellite-based image. 

The recent case study below is a good lesson in the limitations of that approach.

Initial images of this 80,000+/- SF mixed use commercial building were not promising.  The building appeared to be in the shadow of a 42 story skyscraper – one block due South.  But something didn’t look quite right.  Part of the shadow is missing – there is bright sunlight on the street between buildings.  Huh?

Shadows cast by adjacent buildings are the major limiting technical factor to solar development in urban environments.

So we took a look at Microsoft’s new Bing Maps.  No shadow.  We went back to the Google image and began to notice discrepancies in the patterns of shadow between buildings and also a few small shadows that appeared to be pointed in the wrong direction.  We came to conclude, for a variety of reasons, that the length of the shadow must be computer generated.

Returning to Bing Maps, we navigated to a view from the rooftop itself.  Though very slow to respond to incremental commands, Bing ultimately provided a ‘rooftop view’ of the skyline.  Looking due South (solar south, not magnetic south) the image gave us a more encouraging skyline, but one dominated by a skyscraper that extended beyond the computer generated image.

Though both Google and Bing technologies are powerful and, at times, very useful if not truly amazing, they didn’t yield much more useable information about the solar potential of the building than we had when we began.

Since we did not yet have access to the building, we measured the distances at street level, went to City records, and searched published real estate information on both buildings.  With some street level surveying and high school trigonometry, we were able to calculate that the smaller building was free of shadow about 7 +/- months each year – late spring through early fall – when the weather and sun angles were best for solar power generation.  A few additional calculations indicated that during the remaining months, the skyscraper’s shadow passed quickly, in about 1 ¼ hours on average.

With this analysis in hand, we approached the building owners and suggested a full case study.  Granted access to the roof, we mapped shadows created by roof-mounted equipment and then captured digital data of the skyline in relatively open areas of the roof.  Solmetric’s ‘SunEye’ provided a completely new perspective on the available sunlight.

The SunEye image overlays the sun’s path and a calendar on a fisheye image of the city skyline from the surface of the roof.  In other words, this is how a solar panel (module) will ‘see’ the sun’s path from this location.

In this view, the skyscraper – that looks so huge from roof level – is a relatively small part of the sky during daylight hours. More importantly, the building turns out to be a good candidate for solar power with strong ROI.

Two takeaways from this case:  though Google and Bing technologies can be very useful, visual impressions and satellite-based images may be misleading in terms of solar potential of a specific building or location.  Second, only careful data capture from the rooftop can provide an accurate assessment of the amount of solar power a building can generate.

More about this case study in future blogs including details of the ‘business case’ for urban solar.

Posted in Commercial Solar, Commercial Solar Analysis, Green Buildings, Renewable Energy, Urban Planning and Solar | Comments Off

BrightSource Debacle in the Desert: Can Solar Power, Conservation, and Sustainability Co-Exist?

On Thursday, September 17, BrightSource formally announced that they are abandoning efforts to build a solar farm on 5,000 acres of public land in the Mohave desert near Ludlow, California.  Though the announcement ended months of contentious – and at times, bitter - conflict between a well funded and well managed solar venture and a committed and respected conservation non-profit, the underlying issues are far from resolved.

The Mohave project was the first of three 200 MW solar thermal plants using heliostats to focus the sun on 200-foot towers creating high-pressure steam to run electric turbines.  A day earlier, the L.A. Department of Water and Power dropped plans for “Green Path North” a transmission line project facing opposition from desert residents.

BrightSource applied to build on a small tract within a 600,000 acre preserve of federal lands in the Mohave Desert.  The Wildlands Conservancy raised $40 million to purchase the land (former railroad lands) and then donated the property to the Department of the Interior for conservation and protection from development.  The Energy Policy Act of 2005 (Bush era) relaxed restrictions for solar development.

Environmentalists described the area as “…one of the most beautiful vistas in the desert” and home to a large herd of about 200 bighorn sheep (Classified as endangered under the California Endangered Species Act). 

The California Energy Commission and the U.S. Bureau of Land Management are tracking 27 utility-scale solar projects in the California Desert Conservation District totaling 10,000+ MW of solar power.  BrightSource is associated with 10 of the 27 proposed projects, with completion dates stretching well into the next decade.  Construction on their Ivanpah Valley project could begin early next year.  Map. 

How will those projects address the conservation, environmental, and sustainability issues that are sure to be raised as those projects progress through the application process?

Few have seen the construction process for a solar power plant, or any large-scale power facility for that matter.  Whether coal-fired or solar, the construction process starts with site clearing and grading.  In many cases, specification calls for removal of top soil to “mineral earth”.  “Clear and grub”, as it is called, serves several purposes: it places the facility on solid ground and removes vegetation that might interfere with layout and construction activities.  Often, native contours are shaped and drainage swales are enhanced.

In the solar (and coal) power plants I’ve visited, the top soil and vegetation are seldom replaced and very little of the local ecosystem remains.  The bare site provides easy access for maintenance, prevents shadowing from re-growth, and protection from wildfires so common to California. ( In some wind conditions, 2″ stubble can produce 15′ flame lengths.)

Utility-scale solar will either address these issues voluntarily or be forced to into costly mitigation measures. 

eSolar has been praised by many, including David Myers, executive director of the Wildlands Conservancy, for their use of “previously disturbed” lands – primarily farmland.  Google-backed eSolar has spend $30 million to acquire such land.  Still, some suggest that eSolar will eventually meet opposition on other environmental issues. 

Solar developers could consider other options.  Across the West, there are other disturbed and damaged tracts including abandoned mines, ore smelters, and even abandoned company towns.  Some still have high capacity transmission lines. Google’s server farm on the Columbia River was once the site of an aluminum smelter and chosen for its transmission capacity (and nearby hydroelectric). 

Several abandoned solar power sites from the 1990s might be repurposed.  And there are military bases in the area with large tracts of unused land that might be swapped for the Mohave area in dispute. 

But the solar industry is especially interested in the general area around the Ludlow site, especially the former railway land currently owned by Cattellus Development.   Robert F. Kennedy Jr., a stakeholder in BrightSource, told the New York Times: “This area is probably one of the best solar areas in the world..” and went on to say that BLM review of land use is one of the most transparent and thorough in the nation. 

US Senator Diane Feinstein opposes development of any kind in the area and is drafting a bill to designate 100,000 acres in question to be part of a new National Monument connecting Joshua Tree National Park to Mojave National Preserve.  The bill is said to set aside other sites for solar energy, but in that NYTimes piece, John White, with the Center for Energy Efficiency and Renewable Technologies, said that setting aside 1 million acres in the eastern Mojave would mean “less land for solar than for off-road vehicles … in the very best land that has the highest solar radiation.”

During the policy delay that would be created by designation as a national monument, Department of Energy stimulus grants for projects of this type will expire (at the end of 2010.)

Reframing the question, perhaps the argument posed as ‘solar development vs conservation’ is the wrong approach.  Perhaps the real issue is sustainable development of both solar energy and desert lands. 

There is a fascinating engineering document in the Brightsource application for another project near Ivanpah.  A computer rendering (by CH2MHill) of the proposed solar power plant shows that the completed project would follow the topographic contours of the site and the native vegetation undisturbed or, most likely, restored. 

If the computer rendering is a true indication of the project intent and specification, then both parties to this dispute may have their answer: sustainable development of a small fraction of BLM lands.

Posted in Department of Energy, Energy Policy, Renewable Energy, Solar Cash Grants, Utility-scale Solar Power | 1 Comment »

Thoughts on Thomas Friedman’s Sept 15th Op-Ed on Solar Investment

In a September 15^th NY Time op-ed piece, Thomas Friedman makes that case that innovative solar technology is invented in the US, but only finds manufacturing customers overseas, primarily in China and Germany. 

Applied Materials, he writes, is a US company that makes the machinery that produces microchips and another silicon product: solar panels.  All 14 solar panels factories built by Applied Materials in the past two years were constructed in Europe, Asia, and “…even Abu Dhabi.”   Revenues in the last 12 months alone were $1.3 billion.

Mr. Friedman argues that Germany, for example, generates nearly 50% of the world’s solar power and in doing so is a world leader in “…solar research, engineering, manufacturing, and installations” that generated 50,000 new solar industry jobs.  I would add that US solar, by contrast, has yet to equal the kWh output of ONE typical coal-fired power plant.

He goes on to point out that Germany succeeds by allowing any business or homeowner to sell solar power to their local utility at a viable price and with reasonable access to the electric power grid.  In contrast, US solar relies on a fragmented and complex set of subsidies and incentives, many of which vary from state to state.  Ironically, he writes “…our federal and state subsidies for installing solar systems are largely paying for the cost of importing solar panels made in China, by Chinese workers, using hi-tech manufacturing equipment invented in America.”

To summarize, US financial markets favor investment in technology innovation, but do not fuel implementation of the technology.  I would add that public policy and private investment favor investment in start-ups over construction of renewable power generation plants.  Many in the solar industry believe that while innovation is always welcome, existing technology is sufficient to power US electric consumption many times over.

Financial complexity is very important factor in the rate at which the US adopts solar energy.  The technology is simple, but the money side is not.  For the most part, solar finance consists of either an all cash investment or a complicated deal where investors “exchange” project funding for access to tax credits and subsidies plus a lion’s share of revenues and incentives.  The new two-year program of 30% cash grants administered by the US Department of Energy has given rise to other equally complex finance models.

Banks are the primary source of tax-based financing.  As such, there may be an upper limit on the market for complex tax subsidies deals, especially in a recession. If so, this limits the number of potential installations and may shut new developers out of the commercial solar market.

US domestic policy has long favored tax subsidies and tax credits as a means of encouraging investment in new ideas and specific industries.  This is not new.  Oil, coal, nuclear power, and even breakfast cereal receive subsidies and/or incentives at some point in the value chain.  The best state programs tap ratepayer funds to provide cash incentives.  Each subsidy and incentive has its own set of standards and conditions.

Combining state, local, and federal programs adds another layer of complexity.  In many states, solar finance requires five separate programs (plus a construction loan on larger projects) to fund a solar facility.  Securing and managing five sources of funding is daunting and serves as a barrier to entry. 

Only major changes policy and finance will enable us to achieve widespread adoption of solar power.  Why not replace the myriad of taxpayer subsidies and ratepayer incentives with a single, simple, and accessible program that enables everyone – from homeowners to commercial solar developers – to own and operate a viable solar power system.  Whether we hide the costs in tax subsidies and incentives or pay a premium price per kilowatt-hour for renewable energy, the cost is essentially the same, and probably less without the layers of program costs.

Like health care reform, the challenge to greatly expand renewable energy requires that we interfere with current patterns of policy and finance.  Like health care reform, there will be significant opposition.

Posted in Commercial Solar, Commercial Solar Finance, Commercial Solar Ventures, Department of Energy, Energy Policy, Green Jobs, Health Insurance Reform, Renewable Energy, Solar Cash Grants, Utility-scale Solar Power | Comments Off

Oregon’s Surprising Solar Industry

Oregon, ranked 27^th by population, is ranked 9^th in US solar energy according to the Solar Energy Industry Association.  At the close of 2008, Oregonians had installed 4.8 MW, a 330% increase over 1.1 MW in 2007. Oregon is 7^th overall in cumulative US installations with 7.5 megawatts.

This is due in large part to an innovative and well run slate of state incentives and subsidies.

The largest single installation is the state is the 858 kW system on the roof of the Portland Portland Habilitation Center (PHC).   The installation uses 4,766 Day 4 modules, was installed by Dynalectric, and Commercial Solar Ventures of Portland brought US Bank and others to form a structured partnership to fund the $7.5 million installation.  It may be the first significant example of 3^rd party finance in Oregon.

Other notable commercial installations include Pepsi Cola (2), Kettle Foods, Lewis & Clark College, and the Oregon Department of Transportation.  In May of this year, Oregon’s Energy Trust reported funding approx 300 PV projects in 2008 and over 1,000 systems since 2003.  In addition, they have funded 2.5 MW of larger, custom projects.

There is very little activity in Oregon’s 3^rd party finance market.  In several states, solar developers own and operate solar power systems and sell electricity to a “host” customer through a power purchase agreement (PPA).  PPAs were approved 2007, but collapse of US financial markets may have delayed expansion of PPAs into Oregon.  Also, most Oregon banks rejected the type of 3^rdparty investment that has fueled meteoric growth of PPAs in other states.  However, SunEdison (leading US PPA company) and SolarCity (residential leasing) have recently entered the Oregon market.

Oregon may have one of the best state incentive programs in the nation.  In combination with federal cash grants and tax subsidies, Oregon’s cash buy-down program and state tax credits can re-pay 90% of the initial construction cost of a solar installation.  The simple payback period is about three years for commercial projects.

Energy Trust of Oregon is a ratepayer funded non-profit tasked with investing in effective energy conservation and offsetting the “above-market” costs of renewable energy.  Along with energy efficiency programs, Energy Trust offers a solar “buy-down” program that pays up to $640,000 of a project’s cost.  Cash payments from the buy-down program range from $0.90 to $1.75 per installed watt depending system size and utility service area.

The Oregon Department of Energy (ODOE) administers what may be the most innovative solar incentive in the nation.  The Oregon tax code grants a 50% state tax credit for business that install solar power systems (Business Energy Tax Credit or BETC).  For those who do not need the tax credit, the ODOE administers a “pass-through” program wherein individuals exchange their tax credit for a discounted cash payment equal to 33.5% of the initial cost of the system.

Many US states are in the process of developing a serious solar incentive program to meet climate and energy challenges.  Oregon‘s Energy Trust and ODOE’s BETC (Betsy) programs could be a model for emerging incentive programs across the US.

Solar energy in Oregon still faces several challenges.  Oregon also has a surprisingly small percentage of commercial projects.  In conversations with building and facilities managers we found significant resistance to the initial cash outlay.  We also learned that commercial lease structures were an obstacle. 

Commercial installations grew from 29 in 2003 to 109 in 2007. Though official statistics are not yet available, we estimate the number of commercial installations may have dropped to between 50 and 75 in 2008 due to the recession.  Equally surprising, there are currently only about 15 commercial, 6 school, and 5 government installations in the greater Portland Area.   We believe that the limited financing for power purchase agreements is a major factor.

There are other clouds on the Oregon horizon.  The state legislature is planning to cut or eliminate the Business Energy Tax Credit citing budget shortfalls.  Governor Ted Kulongoski vetoed a similar bill (HB2472) earlier this year.  This is a serious challenge to Oregon’s solar future.  Many in the industry believe that killing the BETC will severely limit commercial, and perhaps, any future utility-scale solar in Oregon.

Posted in Commercial Solar, Commercial Solar Analysis, Commercial Solar Finance, Commercial Solar Ventures, Energy Policy, Oregon, Portland, Renewable Energy, Solar Cash Grants, Utility-scale Solar Power | Comments Off

6 Dangers Facing US Solar Energy

All across the West, firefighters are forging through a long hot summer of wildfires.  Along with their boots, helmet, Nomex clothing, fire shelter, and canteen they carry a pocket-sized reference of “Ten Standing Orders” and “Ten Situations that Shout Danger.” 

A red skull and crossed bones smiles at them from the cover.  Inside, the twenty commandments of wild-land firefighting warn against “…advancing a hose-line downhill toward a fire…” or “…attempting a frontal assault on a fire…”  Having fought California’s wildfires for 18 years, I take those warnings seriously.

This season I’m wondering, if the Solar Industry had a pocket-sized danger-warning reference, what would it say?  What pitfalls might it point to? 

◊  In a failing economy, your best customers are unable to find financing and can’t use available tax subsidies and credits. Fire-fighting analogy: You and your crew are running out of water.

◊  Wall Street invests in renewable energy startups but not installations. Fire-fighting analogy: The fire district board purchases bright new fire engines, but does not fund new personnel to use them.

◊  You are trying to explain that “solar power really isn’t all that expensive” using terminology created by the oil and gas industry. Fire-fighting analogy: When you radio for more resources, no one understands you.

◊  Oil and coal companies pour millions into a national campaign to defeat climate and renewable energy legislation.  Fire-fighting analogy: An arsonist is a couple of steps ahead of you and your crew.

◊  Though there are a dozen renewable energy industry organizations, only one or two are waging an effective and focused national campaign. Fire-fighting analogy: it would be deadly if personnel were not coordinating with one another.

If the fire service were to coach the solar industry, what would they advise?

√  “Once on scene, establish an incident command and a unified strategy.” The solar industry is currently an entrepreneurial free-for-all. Good. From time to time, however, activism on public policy issues benefits everyone in the solar industry.

√  “Make a direct, aggressive attack on the fire.” Combine policy and strategy efforts into to a unified campaign to accelerate construction of new solar power installations.

√  “Order early – Order often!” Don’t wait for the fire to spread before calling for more equipment, personnel, and water. The Federal 30% cash grant program is multi-year, with unlimited funds. Use it effectively. Use it often.

 √  “Use ‘Clear Speak’ when talking on the radio.” Employ direct and simple language that listeners will understand even when there is static. Avoid the temptations of insider’s jargon; use terms that everyone can readily comprehend.

√  “Be prepared for unexpected changes in the weather.” US political weather changes often and unexpectedly. Over the next eight years, install enough solar energy to change the weather.

Posted in Commercial Solar, Commercial Solar Analysis, Commercial Solar Finance, Commercial Solar Ventures, Department of Energy, Energy Policy, Renewable Energy, Solar Cash Grants | 1 Comment »