Looking Ahead at Rooftop Solar in the Pacific Northwest Northwest Public Power Association...

Looking Ahead at Rooftop Solarin the Pacific Northwest

Northwest Public Power AssociationCommunications and Energy Innovations Conference

Lake Tahoe, Nevada

September 15, 2015

Charlie BlackCharles J. Black Energy Economics

cjbenergy@msn.com(425) 765-3321

Topics

Instant poll

Where Is Rooftop Solar Likely to Grow Sooner, Later?

Boom 1 –> Bust –> Boom 2

Where Does Energy Storage Fit?

Seasonal Imbalances for Zero Net Energy

Utility Services and Rates with Distributed Solar

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Disclaimer

Information shown in the following slides was gathered from various sources. The ideas reflect the perspective of CJB Energy Economics and were developed to stimulate conversation.

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Residential Rooftop Solar?

In The Northwest???

Instant Poll

For your utility, which of the following will pose a greater challenge during the next five years?

Residential customer adoption of rooftop solar photovoltaic generation

Stagnating retail electric sales due to other causes

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Instant Poll

For your utility, which of the following is likely to pose a greater challenge ten years from now?

Residential customer adoption of rooftop solar photovoltaic generation and complementary technologies

Stagnating retail electric sales due to other causes

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Instant Poll

What proportion of your utility’s residential customers have fairly good awareness of how much their electricity service costs, in dollars per month?

Less than 33 percent

Between 33 and 66 percent

More than 66 percent

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Instant Poll

What proportion of your utility’s residential customers have fairly good awareness of how their electricity service is priced (e.g., customer and energy charges)?

Less than 33 percent

Between 33 and 66 percent

More than 66 percent

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Instant Poll

What proportion of your utility’s residential customers have fairly good awareness that your costs to serve them include both variable energy costs and fixed capacity costs?

Less than 33 percent

Between 33 and 66 percent

More than 66 percent

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Where Is Solar Likely to Grow Sooner, Later?

Factors Affecting Growth of Solar Local solar irradiance

Equipment costs (incl. technological advances)

System installation costs

Complementary technologies

Federal and state subsidies, policies

Third party service providers

Overall utility costs

Design of utility services and rates

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Solar Generating Potential Varies by Location

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Where Is Solar Likely to Grow Sooner, Later?

Grid Parity Differs Geographically

Parity has occurred first in the sunniest states, especially where retail electric rates are also high and policies are favorable (e.g., CA, HI, AZ, NV)

Parity is beginning to spread to more states, including some that are not as sunny (e.g., NY, NJ, MA)

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Where Is Solar Likely to Grow Sooner, Later?

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Could It Happen in the Northwest?

Where Is Solar Likely to Grow Sooner, Later?

What About the Pacific Northwest? Relatively poor solar irradiation

Relatively low retail electric rates

Low greenhouse gas emissions from electric sector

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Where Is Solar Likely to Grow Sooner, Later?

What About the Pacific Northwest? Relatively poor solar irradiation

Relatively low retail electric rates

Low greenhouse gas emissions from electric sector

But:

• Further cost reductions could still make solar competitive here

• Strong environmental ethic, consumer interest

• Potential for new policies, subsidies (including to keep up with the Joneses/California)

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Boom 1 -> Bust -> Boom 2

Boom 1: 2012-2016 (Emergence) Falling costs for rooftop solar (especially PV panels)

Subsidies and policies (e.g., 30% Federal investment tax credit, state incentives, net metering policies)

New entrants (installers, leasing companies)

Early adopters

Majority of growth limited to a few states (e.g., CA, HI, AZ, NV)

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Boom 1 -> Bust -> Boom 2

Bust: 2017-2019 (Retrenchment) Further declines in costs (e.g., inverters)

Reduced subsidies (e.g., 30% ITC drops to 10% after 2016)

Shakeout, consolidation of third party service providers

Community and commercial solar grow moderately, while residential customers wait-and-see?

Footprint widens (e.g., Northeast, TX, CO, Southeast)

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Boom 1 -> Bust -> Boom 2

Boom 2: 2020 and Beyond (Expansion) Further cost reductions (including installation)

Integration with complementary technologies (e.g., smart homes, electric vehicles, energy storage)

New policy support (e.g., solar as means for GHG reduction)

Maturation and capitalization of third party service providers

Growing consumer interest in solar; may become preferred over legacy utility services and rates

Viability and growth spread across more states

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Solar Photovoltaic is Getting Smaller

Current: 5 kW of panels cover 376 square feet

Post-2015: 5 kW of panels cover

155 square feet

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Solar Photovoltaic is Getting Smaller

Current: 5 kW of panels cover 376 square feet

Post-2015: 5 kW of panels cover

155 square feet

Smaller size lowers installation costs

Higher energy conversion efficiency (watts per square foot)

But, same generation profile (still dark at night, more hours of daylight in summer than winter) 21

Where Does Energy Storage Fit?

While battery technology can help with diurnal shaping, energy volume is limited

Other forms of storage with longer cycles, greater energy volume will also be needed

Consumers will still need to rely on the utility system for energy storage

Single homes not most cost-effective place for batteries (creates opportunity for utilities or others)

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Battery Development is Targeting the Diurnal Imbalance

Source: Tesla23

Source: Tesla

TESLA Powerwall

Launched April 30, 2015

7 kWh daily cycle (~1/4 of average daily residential load)

2.0 kW continuous output

3.3 kW peak output

5.8 amp nominal

8.6 amp peak

~20% roundtrip losses

34” x 51” x 7”

220 lbs.

~$7,000 installed cost

~$0.15/kWh storage cost

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Distributed Energy StorageOpportunity

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Distributed Energy StorageOpportunity

• Example: home peak load 14 kilowatts• 25 kilovolt-amp distribution transformer used

to serve about five homes Diversity benefits allow multiple homes to

share one distribution transformerÞ Same general concept could be applied to

distributed energy storage (e.g., peak output for 12 Powerwalls = 40 kilowatts)

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Seasonal Imbalances for Zero Net Energy

Net metering policies allow customers to use the utility system to “bank” imbalances between their load and their generation

Battery capabilities and costs limit their use to storage of a few hours of energy per day

However, seasonal energy imbalances can be far larger – especially in the Pacific Northwest• Electric load concentrated in winter months

• Solar generation concentrated in summer months

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San Diego, California10 Percent Seasonal Imbalance

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~18 percent annual capacity factor

Long Island, New York10 Percent Seasonal Imbalance

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~15 percent annual capacity factor

Minneapolis, Minnesota12 Percent Seasonal Imbalance

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~15 percent annual capacity factor

Seattle, Washington34 Percent Seasonal Imbalance

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~12 percent annual capacity factor

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If an average Seattle home went “off grid” and generated an amount of rooftop solar power equal to their annual electricity consumption, over 500 Powerwalls would be needed to store the seasonal imbalances between generation and load at the home.

(8,536 kWh * 0.34 / 0.8) /(7 kWh) = 518

Services and Rates with Distributed Solar

Traditional utility residential electric rate designs typically recover variable and significant fixed costs via per-kWh energy charges

Some fixed costs are basically the same for most residential customers (e.g., metering, billing, general administration)

Other fixed costs vary based on the size of the customer (e.g., generating, transmission, distribution capacity costs)

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Services and Rates with Distributed Solar

Traditional rate design has worked well over time• Simple

• Customers who use more electricity pay more via their energy charges – includes roughly accurate recovery of capacity costs

• Energy charges also provide incentive to conserve “energy” (actually capacity too)

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Services and Rates with Distributed Solar

When more than a few of a utility’s customers adopt rooftop solar, traditional retail electric rate design becomes ineffective• Adopters’ net energy use declines, reducing revenue

from energy charges

• Adopters still use the utility system for capacity and now also for energy storage, without paying costs for those services

• Under recovery of costs from adopters shifts costs to non-adopters (can reinforce incentive to adopt)

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Services and Rates with Distributed Solar

Increasing the utility’s fixed charge or customer charge can help - to a certain extent• Simple, mechanically easy to implement

• Partially reduces loss of revenue from adopters (adopters still don’t pay their full share of capacity costs and get subsidized energy storage)

• Including capacity costs in the fixed/customer charge shifts costs onto smaller customers

• Lower energy charges reduce customers’ incentive to conserve “energy” (and capacity)

• Is already being portrayed by solar providers as utilities unfairly protecting their monopolies, blocking competition

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Thank You!

Charlie BlackCharles J. Black Energy Economics

cjbenergy@msn.com(425) 765-3321