Friday, April 29, 2011

Don't Be So Attached to Those Individual Electrons--The Real Model of Solar Power Production

Solar electricity has been around for several decades, and for several decades, it has had it's champions and it's spread-out user base, typically the uber-environmentally conscious, especially those among that movement who preferred many miles of removal from the rest of society, those whose paranoid preparation for all unknowns demand utter self-reliance, or other such folks who found that producing their own power without dependence on the utility was an idea so attractive they put it into practice despite the considerable expense and drastic lifestyle changes involved.

That model is always going to be a small percentage of the population, because for the rest of us, it is vastly most convenient--not to mention cheaper although it is that too and by a couple of order of magnitude--to let somebody else make our power and pay for it as we use it in monthly installments.

Luckily then, that model is not the only, and is not, at this point, the predominant, way in which solar electricity is deployed, precisely because the number of people who are going to live in their little solar cabin the woods is too small to ever kick-start the kind of mass deployment of solar that would help it get cheaper and more efficient--and yet that kind of deployment is already well underway.  One of the attractive things about solar is that it offers an option for somebody who does want to just have his or her own little power farm in a way that minimally disturbs land and often can be doubled on existing space--but that doesn't mean it can't play with the big boys, too.

In today's market, solar is all about the regulatory structure--a vast patchwork of differences, in the case of the United States. Small Solar farms pop up as investments with ROI's estimated to exceed other ways of investing in California, while the solar market in South Carolina is as sparse as the brain cells of Ozzy Osborne.  Tax incentives have something to do with this, certainly, as state tax credits equaling up to a third of the system cost on top of federal tax credits also good for a third of the cost do work wonders on the up-front system price, currently between $6 and $8 a watt--for those who owe that much in taxes.  But the regulatory structure also helps determine distribution.  There are quite a lot of good ideas out there, that when combined with federal tax credits have turned a hippie's pipe dream into an attractive portfolio item. 

Net Metering

Forget batteries, the cheapest way to develop solar energy is to take central production of power and de-centralize it--but still leave everybody connected to the grid.  Net metering laws allow solar-array owners who also use electricity to get credit on their electricity bill for what they've produced with solar.  They won't be using the electrons they produce directly--that just floats out into the grid to get used by somebody, reducing by some fractional amount how much of the instantaneous electricity demand has to come from large power plants.  In essence, your electric meter can run backwards or forwards--forwards when you use electricity, backwards when you produce it.  If you don't produce all of your power, this nonetheless lowers your power bill by some agreeable amount.  If you produce what you consume, no power bill for you.  And if you overproduce, the power company has to pay you.  This setup helps eliminate expense of batteries and the headache of maintaining them, and lets you live solar with no particular change in lifestyle.  You can fall asleep with the TV on and still be able to turn the lights on the next morning.

Too bad that, while still paying the retail price for any electricity purchased from the utility, the utility only has to pay you the wholesale price for whatever extra production it must buy from you.  There are reasons for this--we've generally decided it is in our best interest to not have competition among those who would provide us electricity and this is why the utility industry is so regulated.  But it still sorta stinks for those who want to sell clean energy even if the utility won't.

Renewable Energy Portfolio Standards

I live in North Carolina, where net metering makes pretty much no economic sense compared to the other programs that do exist for systems connected to the grid.  One of them is the Renewable Energy Portfolio Standard, which stipulates that utilities must diversify their fuel sources, and that ever-increasing percentages of their power production must come from renewable energy.  Rather than go out and build their own solar farms, although they are doing this too, most utilities find this a reason to do extra business with the solar enthusiasts out there, and although they'll still just pay you the wholesale price for your kilowatt-hours, they also have to buy the rights to say that your renewable energy helps them comply with the rules.  We call that a Renewable Energy Credit, and it's essentially a market for Units of Greenness.  But Units of Greenness are worth more per kilowatt than the wholesale price of electricity, and produces of grid-tied systems can get both--a sum which currently tops the retail price.   So whereas in net metering, where you produce electricity for yourself and get paid a considerably lower rate for any extra you make, with a system like the ones in North Carolina and New Jersey, any kilowatt you produce with solar is worth more than what you'd have to pay for it.

Power Purchasing Agreements

The whole reason even grid-tied solar remains impractical for individuals is that ownership of something that takes several decades to pay itself back is expensive and risky.  Power Purchasing Agreements (PPAs for you acronym lovers) allow solar customers to nonetheless have the "green" credentials and warm-fuzzies from getting renewable energy, without having to put the up front investment and risk into the proposition--and the solar contractors, who make their money by installing systems, benefit from elevated business installing them.  In fact these agreements transform a solar contractor into a solar service provider, who charges a fee but not one on the order of magnitude of the actual system cost to install solar electricity on the property of the customer, who then leases it from the solar provider for contract periods of up to two decades.  The customer gets the satisfaction of paying a monthly bill for power that goes to renewable energy production with the same convenience of paying power bills to a utility (maintenance remains the responsibility of the solar provider), while the solar provider gets to pocket all of the tax credits for the system, and, depending on the state, might even get a contracted income from its energy.*  Aside from sustainability itself, the only substantial difference between paying a solar provider and paying a utility is that the power production happens on your rooftop.*

Power purchasing agreements allow businesses especially to jump into renewable energy.  My company has 70kw system installed under a power purchase agreement on the roof of our manufacturing facility.  Recently a local and much-maligned paper mill used a PPA to commission a half-Megawatt solar farm on it's old landfill.  I was going to call it the largest to date in North Carolina, but that superlative gets topped by another, larger one, pretty much monthly.

A Local Example

North Carolina has one of the most effective renewable energy programs in the southeast.  We don't match California and we don't even match New Jersey, but we're in the top 10 for most solar-friendly states.  We have net metering, but as I mentioned practically nobody does it, because of the Portfolio Standards and because of an organization called NC Green Power that pays consumers for what they produce but only if they don't do net metering.    We also have Power Purchasing Agreements, but our state does not allow anyone but the utilities to sell electricity to the consumer (although we are trying to change this), so owners of solar electric systems don't get the added benefit selling the power directly to their customers.  Nonetheless, they do get the RECS and paid by the utility a little bit and all that, so Power Purchasing Agreements are still quite popular.

Here are some statistics, gleaned from the recent State Energy Office Conference I just got back from in Raleigh:

The cost of photovoltiacs has gone down 46% in North Carolina since the implementation of the Renewable Energy Portfolio Standards

In 2009, installed solar capacity in North Carolina grew 900%...from 4kW to 4 MW

We have met and exceeded the Portfolio Standard requirement for solar of 0.02% of utility production by 2010 easily, and have built a solar industry that is poised to do much more, ahead of schedule. 

No comments:

Post a Comment