Contact: contact@solardoneright.org

September 10, 2010

Distributed Solar PV: Why It Should Be The Centerpiece Of U.S. Solar Energy Policy

Posted In economics & rooftop solar | By Bill Powers and Sheila Bowers

Introduction

The U.S. could avoid the elevated economic and environmental costs of remote utility-scale solar power development, and greatly expand the direct involvement of individuals and communities in renewable power generation, with a policy that favors distributed PV. Priority development of solar PV and solar hot water heaters within our built environment (cities and towns), combined with high value energy efficiency measures, could meet much of U.S. clean energy and greenhouse gas emission reduction targets.

This paper highlights the cost and environmental advantages of distributed PV, on rooftop and smaller in-city installations, over remote utility-scale solar power. In light of the recent and ongoing tragedy in the Gulf, we should be wary of energy projects – conventional or renewable – that can permanently alter healthy, functioning ecosystems when there are cheaper, cleaner, safer, and more reliable alternatives. In the case of solar power, the U.S. can accomplish the dual goals of improving the economy and improving the environment by prioritizing the deployment of distributed PV.

I. When all costs are factored in—including new transmission infrastructure and line losses—local, distributed solar PV (both polycrystalline and thin-film) is comparable in efficiency, faster to bring online, and less expensive than remote utility-scale solar thermal power or remote utility-scale PV plants.

         
Table 1. May 2010 prices and capacity factors for solar thermal and solar PV reported by the (California) Renewable Energy Transmission Initiative - RETI
Solar TechnologyCost per MWh Cost per kWac Capacity Factor
Dry-Cooled Solar Thermal, 200 MW$195-$226$5,350-$5,55020-28%
Fixed Thin Film PV, 20 MW$138-$206$3,600-$4,00020-27%
Single Axis Tracking PV, 20 MW$135-$214$4,000-$5,00023-30%


Residential rooftop solar, the democratically owned solution: Residential solar PV is much more cost-effective now than most policy makers realize. For example, the residential rooftop solar consolidator 1 Block Off the Grid (1BOG)  reported the following actual installed costs in Watts direct current (Wdc), prior to any rebates, tax credits, or other incentives, for 2009:

 

                                                                                         
Table 2. Survey of 2009/2010 1BOG pricing for 4 kW residential PV systems
LocationInstalled Cost ($/Wdc) Installed Cost ($/Wac)
San Diego5.296.61
Denver6.107.63
San Antonio4.806.00
Palm Springs area5.496.86
North New Jersey5.456.81

These 1BOG prices, specifically the 4 kW residential PV systems sold in the San Antonio area at $6.00/Wac, already approach the capital cost estimate for a 200 MW dry-cooled solar thermal of approximately $5.50/Wac (see Table 1). In addition, solar PV prices are projected to drop at a much faster rate than solar thermal prices over time. Both the California Energy Commission and the Department of Energy project that solar PV prices will drop by half between 2010 and 2020, while solar thermal prices are projected to decline much more gradually. 

Comparison of net energy output: “Higher solar insolation,” meaning higher solar radiant energy, is the most common reason put forth for siting remote utility-scale solar projects in locations like the Mojave Desert. Yet transmission losses largely negate higher insolation and higher capacity factors of solar projects in Mojave Desert locations compared to the slightly lower solar insolation in urban centers like Los Angeles, Riverside, and San Diego.  Transmission losses average 7.5% (average) to 14% (peak) in California.  The difference in solar insolation between the Mojave and Southern California urban centers is approximately 10%, in the same range as expected transmission losses associated with remote solar projects.  This means there is no substantial difference in the net electric power delivered to customers from remote utility-scale solar plants in remote Mojave Desert locations and rooftop PV installations in Riverside or Los Angeles (for projects with the same rated capacity). 

Transmission costs

New transmission infrastructure needed to carry solar-generated energy from remote locations to urban demand centers entails substantial costs. These costs are borne by ratepayers, with actual costs for new California transmission lines currently running at ~$11 to ~$24 million/mile. 

A power delivery strategy that concentrates on large generation and transmission projects to meet load leads to substantial over-building, as projects are often justified on aggressive load growth projections that indicate new electricity supply will be necessary 5-10 years in the future.  This approach is highly profitable for investor-owned utilities (IOU), which are guaranteed a healthy rate of return for “steel in the ground” infrastructure projects like transmission and generation. Local installations such as rooftop or parking lot solar PV reduce peak load at the source of demand and thereby reduce or eliminate the need for additional conventional generation and transmission infrastructure. It is no surprise given how IOUs make money that these utilities are generally opposed to expanded development of local solar power.

Subsidies and externalized costs

Large-scale remote solar projects are preferred by Southwestern IOUs over local solar primarily because of the revenue that such projects can generate indirectly in the form of new IOU-owned transmission capacity. These large-scale remote solar projects enjoy a number of direct and indirect subsidies that are too seldom taken into account. These include federal cash grants and loan guarantees; exclusive use of public lands and resources designated for multiple use; waivers of millions of dollars in state application fees; and externalization of costs onto local communities and ecosystems.

Timeframes

Large-scale remote solar projects and related transmission lines take many years to complete.  In contrast, distributed PV can be brought online quickly.  Germany, using a simple and effective feed-in tariff (FIT) contract structure to spur cost-effective development of distributed PV, installed nearly 4,000 MW of distributed PV in 2009 and may install as much as 6,000 MW in 2010. 

Needed action

The Solar Done Right Coalition requests that permitting of all remote utility-scale solar projects and associated transmission projects be suspended on public lands, with the exception of proposed projects on Superfund sites or brownfield sites. Concurrently, solar energy subsidies and policies should be redirected to advance point-of-use solar solutions in the built environment to reflect the greater value of local solar to communities, ecosystems, the economy, and the climate crisis.

II. Large, remote solar projects could permanently reduce natural uptake of carbon by the desert environment cleared for development. In contrast, increased efficiency and distributed solar PV will reduce carbon emissions without this tradeoff.

Desert ecosystems may sequester substantial amounts of CO2: Researchers at the University of Nevada Las Vegas have been monitoring carbon uptake in Mojave Desert ecosystems for the past seven years and have consistently found substantial uptake, processing and sequestration of carbon.  Likewise, wetland and grassland ecosystems, such as those found in Colorado’s San Luis Valley (targeted for industrial solar development), are well-known for their ability to uptake and store CO2.  More study is needed to determine how much carbon uptake will be lost when thousands of acres of natural desert cover are converted to scraped earth and covered with solar collectors. To the extent that the lost carbon uptake is substantial, it undercuts the greenhouse gas reduction justification for building the solar facility at that location.

Transmission infrastructure emits greenhouse gas SF6: Sulfur hexafluoride (SF6) is the most potent greenhouse gas evaluated by the Intergovernmental Panel on Climate Change,  and eighty percent of the SF6 in the atmosphere derives directly from electrical transmission infrastructure.  With an atmospheric life of 3,200 years, one pound of SF6 has the same global warming impact of 11 tons of CO2 and nothing sequesters it.  The Environmental Protection Agency has identified SF6 as one of six emissions most critically in need of regulation.  With policies favoring transmission, the U.S. may contribute to a surge in unnecessary SF6 emissions.

Remote utility-scale solar construction and operation creates substantial emissions: Emissions from the manufacturing, transportation, construction, transmission, and operations associated with remote utility-scale solar are substantial.

For example, over 4 years of construction, the 370 MW Ivanpah solar project in California will release 17,779 metric tons of CO2-equivalent emissions, with additional operating emissions of 27,444 metric tons of CO2.  During the construction of the 250 MW Blythe solar project, 103,900 metric tons of CO2-equivalent emissions will be released. The project will cause a loss in carbon uptake of about 8,806 metric tons of CO2 per year due to vegetation removal, plus 14,789 metric tons of CO2-equivalent for operations. Decommissioning is expected to emit nearly as much again as construction.  These projects are not benign with regard to environmental impacts.

Emissions are reduced only if the offset power is not used: The EPA has set forth its requirements for accounting for emission reductions which can be used as a guideline :

“… emission reductions from offset projects [must] meet four key accounting principles—they must be real, additional, permanent, and verifiable.”

Needed actions

The Solar Done Right Coalition requests that the GAO immediately undertake a comprehensive, cradle-to-grave analysis of the total emissions related to all aspects of remote utility-scale solar development and associated transmission, and compare these to the total emissions derived from producing an equivalent amount of intermittent power from local PV, hydro and high-efficiency natural gas. The EPA’s accounting requirements should apply to all remote utility-scale solar projects proposed. The solar developers and utilities buying the power should be required to demonstrate that the EPA accounting requirements will be met before a construction permit can be issued. Calculations should be based on actual outputs in verifiable kWh, rather than rated capacities.

Pending completion of the GAO study, neither federal funding, including loan guarantees and investment cash grants, nor construction permits should be issued to projects for which the National Environmental Policy Act (NEPA) or other relevant federal environmental laws have been wholly or partially overridden on the basis of presumed reduction benefits from these remote utility-scale solar projects.

“Fast-tracking” of remote utility-scale solar projects, based on the untested presumption of overwhelming reduction benefit, should be immediately halted.

The EPA should study the phase-out of SF6.

The 2005 Energy Policy Act should be amended to (a) site the mandated 10,000 MW of clean energy production described in the Act on federal buildings and federal properties within the built environment rather than on public lands; and (b) repeal the National Interest Electric Transmission Corridors provisions.

III. Distributed generation, supported through Feed-in Tariffs (FITs), Property Assessed Clean Energy (PACE) loan financing, and expanded net metering would be more effective than remote utility-scale solar in creating renewable energy and addressing the climate crisis.

FITs are proven to work quickly, economically, and reliably: FITs provide a simple contract mechanism for individual homeowners and business owners to profitably install as much solar PV as their buildings/properties will allow, maximizing the potential of rooftops, parking areas, and brownfields in urban and suburban environments. Germany installed over 714 MW of solar PV in the three months of 2010, 80 percent of which is rooftop systems under 100 kW. This is more PV than was installed in that country during the first half of 2009.  Even as its solar PV tariffs shrink, Germany continues to increase the amount of PV installed. The reason for this is the rapid decline in the cost of PV systems. As stated earlier, DOE currently projects that the cost of solar PV systems will drop by half between 2010 and 2020.  The steadily declining German tariff for solar PV reflects this market reality. 

A recent study done by the Los Angeles Business Council and UCLA indicates that 3,300 MW of rooftop solar is currently “economically available” for German-style FITs for Los Angeles. The study indicates that the FITs program would create over 11,000 local jobs.  Modest feed-in tariffs would also cost ratepayers very little. The UCLA study projects an average monthly additional cost of only $0.48 per month for households and $9.37 per month for business and industry for the first 10 years of the proposed 600 MW FITs program. Based on historical and projected price increases in natural gas and the rapidly declining cost of solar PV, after 10 years a net savings to all ratepayers is projected. 

Germany’s numerous rooftop installations, supported by generous feed-in tariffs, have had minimal impact on non-generating ratepayers,  while providing unprecedented gains in clean energy generation and jobs creation while providing a reasonable return on investment for PV system owners.

PACE loans make local efficiency and PV improvements possible: PACE (Property Assessed Clean Energy) loans that allow ratepayers to amortize the costs of rooftop solar and efficiency upgrades over 20 years and repay them along with property tax payments have proven very popular where offered. There is no cost to taxpayers or other ratepayers, and virtually no risk to lenders or borrowers. Unfortunately, Freddie Mac and Fannie Mae (FM) have suggested that because property tax assessments take the first lien on the applicable property, PACE loans will pose a threat to the supremacy of mortgages held by these agencies.  Although California and other jurisdictions are demanding that FM treat these funds like any other property tax assessments,  FM’s current position has resulted in a collapse in PACE loan funding.

Expansion of net metering programs would help in the interim:  All states that establish or maintain RPS to meet clean energy goals should account for all net metered clean electricity and off-grid power as eligible power for meeting RPS goals, not simply as “demand reduction” as is currently done. By failing to count clean, net metered solar power as renewable power, such programs create an artificial preference for large, central-station power plants. 

Community benefits of local focus are substantial: In addition to improvements in property values and the creation of well-paid local jobs from efficiency upgrades and local solar PV, the local focus provides “green energy premiums” to communities, rather than merely profiting large corporations. This stimulates a cycle of local spending, local jobs creation, debt reductions, and other tangible economic benefits. 

Needed actions:  Fannie Mae, Freddie Mac, and FHFA must immediately reverse their positions on PACE loans.  These loans should be classified similarly to local bond issues (which also take first lien as part of a property tax assessment) and not as “loans” for purposes of seniority of lien.  Substantial additional federal funding for PACE loans should be made available to stimulate job creation, decrease energy consumption and emissions, and bolster sagging property values to keep families in their homes. PACE is a very strong tool with which to meet stated societal, economic, environmental and political goals, and ongoing PACE funding should be made available immediately to lead our nation down the path to sustainability.

FITs similar to Germany’s should be implemented nationwide, with fair tariffs and simple contract requirements, so that system owners receive return on investment for doing the right thing. Amendments to the Public Utility Regulatory Policies Act could be made to ensure that fair market value, based on cost of generation, and access to the grid are afforded to all Americans willing to invest in this nation’s renewable energy infrastructure.

Policies like the California RPS, which has largely been a failure to date, should be discarded in favor of well-crafted FITs.

Net metering should also be standardized, expanded and improved as an interim step until fully functional FITs are in place. Understandably, states will want to administer their own programs, but there should be some Federal minimum standards established to ensure that national objectives for greenhouse gas reduction are being met. 

Conclusion

This is an overview document. More detail is available in the reference documents, reports such as the study recently prepared by the Sierra Club of California on the economic benefits of local solar power compared to remote utility-scale solar power, as well as materials and updates which will be periodically made available on our website http://www.solardoneright.org

CONTACT INFO

Email: contact@solardoneright.org