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MULTI-PERSPECTIVE SOLARNOMICS
A Road Map To Rational Policy Discussion
Green Summit, March 8, 2012Duane T. Kexel
President, Duane T. Kexel Consulting, LLC
Motivations For This Paper
Polarization Does Not Promote Progress – Can We Find The Common Ground?
Economics, Not Politics Nor Religion Should Guide Renewable Energy Policy
Issues Are Consequential and Immediate in Wisconsin
Identify Stakeholder Groups Roles for Each and Research Agendas In Moving Policy Forward
Why Solar As Case Study?Generally Seen As An Acid Test Frontier For Policy
Cottage Glen Project Provides 2011 Test Case• 14.1 kW Condo Rec Center PV Project – HOA NFP Sponsor• One Year of Project Evaluation and Development• July 11 – Feb 12 - 10 Minute Production History• Installed Cost Per Watt
Total $5.33 100.0 FOE/WPS Grant $3.52 66.0 Fed Tax Credit $0.54 10.1 Total Net $1.27 23.8
Will Players Each Push or Pull?
Policy SF
Utilities
Suppliers
Buyers
Buyer Group Challenges
Communicate Willingness To Pay Tied to Payback Assess Potential Demonstrate Impact of Various Incentives Expose Critical Barriers Champion Programs That Work
Must Let Policy Makers Know What Incentives Are Needed and Likely Impacts !!!
Modeling Impacts of IncentivesPotl HH (000) Share
2.0% 500 20.0%19.0%18.0%
6.0% 17.0%400 16.0%
15.0%14.0%13.0% Base Less FTC and State Incentive
12.0% 300 12.0%11.0%10.0%
9.0%200 8.0%
7.0% Base Less FTC6.0%5.0%
100 4.0%3.0% Base Cost2.0%1.0%
28 24 20 16 12 8 4 5 10 15 20 25 30 35 40HH Installs FTC & State FTC Base Payback Years
HH Ave kW MW GWh/a4,000 4.0 16.0 19.2
12,000 4.0 48.0 57.6 24,000 4.0 96.0 115.2
Actual 2009 5.31
Cottage Glen Survey Results
Irrelevant (1)4%
Of Interest (3)35%
Influential (4)13%
Decisive (5)48%
Payback Impact
Irrelevant (1)4%
Some Impact
(2)13%
Of Interest (3)30%Influential (4)
22%
Decisive (5)30%
Environmental Impact
52% Decisive or Strong Influ-ence
61% Decisive or Strong Influence
Anecdotal Evidence
Co-op Panel Leasing Programs Sell Out Quickly With 12 Year Payback
Full Cost Leasing – 30 to 40 Year Paybacks
Consumers Power 25 Cents/kWh for 15 Years Oversubscribed
MGE Green Pricing Participation @+2.0 Cents?
10 Year27%
15 Year23%
20 Year27%
Don’t Know23%
Accceptable Payback Period
Supplier Challenges
020406080
100120140160
Ten Year Incentive-Payback Linkage
2011 2016 2021
Commit To Cost and Performance GoalsDemonstrate That Incentives Are Transitory
Item 2011 2016 2021Cost/kW 5,000$ $4,000 3,000$ Wis Incent 3,000$ $1,500 -$ Fed ITC 600$ 750$ 900$ Net Investm 1,400$ 1,750$ 2,100$ kWh/kW 1,200 1,300 1,400 O&M/kW/a 10.00$ 11.00$ 12.25$ Retail Rate 0.120$ 0.146$ 0.169$ Escalation 3.0% 3.0% 3.0%Return 5.0% 5.0% 5.0%Payback 15 14 13
Utilities – A Major Focus
CONTRARIAN VIEWS ADVOCATE VIEWS
Solar Expensive, Rates Up
Solar Not Firm – No Capacity Value
MISO Prices Do Not Support
DOE Sunshot – 10 Years $1.00 Per Watt
Green Pricing Now Provides Choice for Those WTP
CG Prodn At WPS Peaks ~50 – 55% of Capacity
Synergistic Solar Wind, DR, Seasonal Cap Plans
Nor Any New or Some Existing Capacity
Can Solar Compete With New Capacity On Cost and Risk?
$133
$83 $88
$170
$203$191
$156
$0
$50
$100
$150
$200
$250
Pulv Coal Adv Gas CC Gas CC Adv Gas CT Gas CT Util Solar ITC RA3 Util Sol
Levelized (40-Year)$/MWh for New 2016 Capacity
Cap Rec O&M Fuel Carbon Health Total
Utility Solar Leasing Programs
Utility Builds, Owns and Operates Solar Plant Financing Costs Much Lower Than Fossil Plants
Smaller Projects, Modular Designs Strong Long-Term Warranties Federal ITC – 30% Dramatic Risk Reduction Compared to Fossil Plants – WACC Less
3.0% Sell 25 Year Panel Leases At Cost With Proportionate Bill
Reductions – Customers Finance New Capacity Allows Solar Participation in $1,000 blocs – Better than
Packer Stock Mitigates Affordability Barrier
Utility Incentive Programs Design Incentives To Yield 5.0% Return & 10 to 15 Year Payback on Roof Top
Solar – Say 50% of Investment
Utility Gets 40 Year Load Reduction of X kW and kWh at 50% Of Known Up-front Cost + Admin (20%)
Load Reduction of X equals (1+Loss %) X Capacity Addition – Reduces Future T&D Needs
Utility Expenses Incentives and Admin Costs – After Tax Cost = 60% of 60% = 36%.
Customer/Owner Pays All Future Costs Tune Design To Response to Match Needs Incentives Reduced Over Time As Solar Costs Decrease
Policy Maker Agendas
Federal – Investment Tax Credit Is Key
State – Shaw-WPSC Redesigning Renewable Incentives Q1 - 2012 Believe “Incentives to Renewables Were Excessive” “Overcommitment Harmed Cost Effectiveness of FOE” “Incentives Artificially Inflate Renewable Costs” “TRC > 1.0 Is Relevant Test for FOE Portfolio” “Select Non-Monetary Criteria – Maturity, Risk, Jobs
Will Public Be Engaged To Provide Input In A Transparent Process On This Major Policy Revision?
WPSC Requires Portfolio TRC>1.0
$-
$50,000
$100,000
$150,000
$200,000
$250,000
Annual Capacity
Costs/MW
Avoided With Solar
Avoided Energy W
Carbon
Avoided Energy No
Carbon
Total Avoided W
Carbon
Total Avoided No
Carbon
TRC Test - Solar Vs CTs
Conv CT Adv CT RA Solar
Total Resource Vs Conv CT Vs Adv CT With Carbon 1.11 0.93
Without Carbon 1.05 0.88
Will Additional B-C Tests Be Prepared?
TRC Test – Should Measure Public Interest Societal Test – Should Include Externalities Utility Test – Impact on Revenue Requirements Participant Test – Impact on Adoptions (Payback?) Non-Participant Test – Impact on Rates
All Tests Combine To Inform Public Policy
Conclusions
Detailed TRC Requires Specific Data on Marginal Resources and Avoided Costs Over Time
Results Suggest That Utility Solar May Pass TRC Test If Solar Passes Test, Combined Solar-Wind, Solar DR,
Solar EE, Programs Will Certainly Pass Solar Incentives That Yield Paybacks in the 10 – 15
Year Range Should be Possible and Beneficial Cottage Glen Incentives Were Just Sufficient to
Proceed and Can Be Justified In the Public Interest All Stakeholders Must Contribute To Gain Ideal Share