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Barriers to Distributed Renewable Energy
John Farrell, Senior Researcher
efficient | economical | equitable
Total Installed Capacity
4,034 MW
47,000 MW
Together = 3.3% of U.S. sales
How Much Community-Owned?
4,034 MW
47,000 MW
5%? 10%? 25%?
1%
Community-Owned
just
Community-Owned = distributed2
(distributed generation) x (distributed ownership)
Why Community-Owned?
Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility
Centralized Power
Utility Perspective
Transmission network
Distribution network
House
Storage
Local CHP plant
Commercialbuilding
Factory
Storage
Storage
Storage
Solar PV power plant
Windpowerplant
House with domestic CHP
Clean, local power
RealityTradition
Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility
Capital
How can they...
...buy this?
Rules for Raising Capital
• Full registration
• Regulation D
• Regulation A
• Intra-State
• Private
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr Accredited investors;
prior relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr Accredited investors;
prior relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
9%3%
Project CostUpfrontCompliance
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr Accredited investors;
prior relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
59% 19%
Project CostUpfrontCompliance Too costly for small projects
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr
Accredited investors; prior relationship w/
investors
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr
Accredited investors; prior
relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr
Accredited investors; prior
relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
≤ 2 turbines
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr
Accredited investors; prior
relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
5%27%
Project CostUpfrontCompliance
Still costly for small projects
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr
Accredited investors; prior
relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr
Accredited investors; prior
relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
5%27%
Project CostUpfrontCompliance
Still costly for small projects
Type of registration
Upfront Cost
Compliance Costs Restrictions
Full SEC $100,000-125,000 Over $400,000/yr None
Regulation D $30,000-50,000 $10,000/yr
Accredited investors; prior
relationship
Regulation A $50,000-75,000 $10,000/yr $5 million offering
Intra-State $50,000-75,000 $10,000/yr (MN) In-state only
Private Minimal Minimal Prior relationship; no advertising
Capital is HARD
• Full = EXPENSIVE
• Regulation D = RICH FOLKS
• Regulation A = SIZE/COST
• Intra-State = COSTLY
• Private = LIMITED
Hope: Crowdfunding• 2012 federal JOBS Act
• $1 million limit
• Minimal compliance
• Lower upfront cost: $10-15k
Private Placement
Example
Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility
complex...
0% 25% 50% 75% 100%
20%25%25%30%
Minnesota Commercial Solar Project Cash Flow
Federal tax credit DepreciationState rebate Net metering
0% 25% 50% 75% 100%
100%
Germany/Ontario Commercial Solar Project Cash Flow
Feed-In Tariff
Feed-In Tariff
• Long-term, fixed price contract
• Guaranteed, simple grid connection
• Price sufficient for small profit
Risk
Policy Shapes CostR
etur
n
Germany
U.S.
Ontario
Low
Hig
h
Low High
Policy Shapes Participation
80%
of German solar is on small rooftops
U.S. Exception
University Park community solar
Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility
Which Makes Sense for Community Solar?
A.Nonprofit
B.City
C. County
D.Cooperative
E.All of the Above
Which Makes Sense for Community Solar?
A.Nonprofit
B.City
C. County
D.Cooperative
E.All of the Above
Which One Works?
A.Nonprofit
B.City
C. County
D.Cooperative
E.All of the Above
Which One Works?
A.Nonprofit
B.City
C. County
D.Cooperative
E.All of the Above
F.None of the Above
0% 25% 50% 75% 100%
20%25%25%15%15%
Minnesota Nonprofit Solar Project Cash Flow
Federal tax credit MiddlemanDepreciation State rebateNet metering
Exception
Group purchase, no legal entity
Mt. Pleasant Solar Cooperative
ExceptionSouth Dakota Wind Partners
7 turbines, 600 owners, 1 expired cash grant
Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility
True or false?
In 2012, most utilities measure how much electricity is used during peak periods and during minimum use periods on their own grid.
True or false?
In 2012, most utilities measure how much electricity is used during peak periods and during minimum use periods on their own grid.
FALSE
≤?
1. A Limit on Local Power GenerationUtilities always want local power generation to be less than local minimum electricity demand so that electricity will not flow out of neighborhoods and back onto the grid.*
2. A Guesstimate of Minimum Demand Whoops! Utilities assume minimum demand is about 30% of peak demand, because they don’t measure minimum demand.
3. An Arbitrary Safety MarginUtilities take this 30% threshold and divide by 2 to get a 15% cap on local solar.
*Also addressed with 2-way electrical equipment
How Local Solar Gets Capped
15%
Peak use
“Minimum”(30%)
÷2
Percent of peak power allowed from local solar
Default cap of
÷2
1. A Daytime MinimumHow much solar power is produced at 4 AM? None. But that’s the time of day utilities used for their minimum demand calculation.
Hawaii solar advocates negotiated a change: to estimate minimum demand when the sun is up (Sundays at noon).
Even though utilities maintain the arbitrary “division by 2” safety margin, this change could allow nearly twice as much local solar on the grid.
How States Can Raise the Cap (Hawaii)
“Daytime min.”
÷2
~25%
Hawaii’s Update (2011)Hawaii estimates the minimum demand during daytime.
Cap is raised toPercent of peak power allowed from local solar
Daytime minimum
~50%Cap is raised toPercent of peak power allowed from local solar
÷
California’s Update (2012)Measured daytime demand
No “division by 2”
How States Can Raise the Cap (California)
1. A Measured Daytime MinimumUtilities must actually measure the minimum demand on a power line between 9 AM and 4 PM and no longer use peak demand as a proxy.
2. No “Division by 2”Utilities can’t arbitrarily divide the cap by 2, now that the power line capacity is actually measured.
The result could nearly triple the original 15% cap on local solar power.
2
LEGENDno statutory net metering limitaggregate limit higher than 1% of peak demandaggregate limit 1% of peak demand or less
Utilities also Want Limits on Total Net Metering
Lets customers pay “net” of own use and own generation
Exception
Replicable community solar!
Distributed Generation
• Tradition• Capital• Cash Flow• Legal• Utility
• Mt. Pleasant Solar Coop• Clean Energy Collective• Maryland Solar LLC• SD Wind Partners
Learn more at EnergySelfReliantStates.org
Barriers Exceptions