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Just Energy Independence or Clean Energy Self-Reliance?

In Thomas Friedman’s latest column, he praises Supreme Court Chief Justice John Roberts because he “took one for the country.”  Friedman sees that “America today is poised for a great renewal” if only it can get some “big, centrist, statesmanlike leadership.” Logically, there would be some renewable (energy) in America’s renewal, right? Wrong.  Here’s Friedman’s vision for America: Our newfound natural gas bounty can give us long-term access to cheap, cleaner energy and, combined with advances in robotics and software, is already bringing blue-collar manufacturing back to America. Web-enabled cellphones and tablets are creating vast new possibilities to bring high-quality, …

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Overturning the ’15% Rule’ Can Expand Distributed Generation

If you haven’t heard yet, there’s a “rule” that precludes distributed renewable energy projects from supplying more than 15% of the power to most “distribution circuits” (part of the low-voltage electric grid that brings power into homes and businesses).  With the rapidly falling cost of solar power, many places in the country are starting to push up against this limit. So there’s good news recently in California, where the state’s investor-owned utilities agreed to raise this somewhat arbitrary limit and accept more distributed generation. The process of setting the rule is almost comical, although the rationale isn’t.  Utilities want to …

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Who Has the Most Cost-Effective Solar CLEAN (feed-in tariff) Program?

In a new report on U.S. CLEAN (Clean Local Energy Accessible Now) programs, I provide a comparison of solar CLEAN Contract (feed-in tariff) rates across the United States. Comparing published rates is not particularly helpful, however, because contract lengths vary (from 15 to 25 years) and the solar resource also varies widely.  For international comparisons (e.g. Germany), it's also necessary to account for the currency exchange rate and the federal tax incentives that are routinely factored in to U.S. solar CLEAN prices. Here's a look at the methodology for normalizing the CLEAN rates for comparison, and two maps illustrating those …

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1.21 Gigawatts!

New Local Solar Policy, Not DeLorean, Moving U.S. to Cleaner Future

In the past five years, a new U.S. renewable energy policy has quietly grown more popular, enabling enough solar power (1.21 gigawatts!) to send Michael J. Fox “Back to the Future.”  CLEAN programs – Clean Local Energy Accessible Now – have been adopted in 14 states and can significantly increase the deployment of local solar power, says a new report from the Institute for Local Self-Reliance (ILSR).

The 1.21 gigawatts of distributed solar power planned under CLEAN programs (also known as “feed-in tariffs”) represents one of the largest expansions of solar power in the country, without a focus on the largest scale projects.  CLEAN programs encourage rooftop and commercial-scale solar power located near where electricity is used.

“The rise of CLEAN programs is the answer to the question of capturing the economic benefits of clean energy development,” notes report author and ILSR senior researcher John Farrell.  “States and municipal utilities have created CLEAN programs to enable their citizens to become local energy and jobs producers.”

Read the Report

The report provides a list of the 17 operational CLEAN programs, from the tiny Farmers Electric Cooperative program in Iowa to the 500 megawatt statewide program in California, to the just-launched CLEAN programs in Los Angeles and Long Island, NY.  The report also explores the lessons learned from these early programs, so that policy makers looking to marry the energy and economic benefits of clean energy will be able to craft the most effective policy.

One of the big lessons is that state and local U.S. CLEAN programs begin to bring order to otherwise fragmented energy policy in the U.S.

“CLEAN is simple and comprehensive, unlike the hodge-podge of federal, state, and utility renewable energy incentives,” says Farrell.

“This local energy policy is getting us to a better future – and we don’t even need a time-traveling DeLorean.”

The report, U.S. CLEAN Programs: Where Are We Now? What Have We Learned? is available at ilsr.org

This post originally appeared on ILSR’s Energy Self-Reliant States blog.

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Local Solar Could Solve ‘Massive Supply-Demand Imbalance’ in Renewable Energy Financing

In the next two years, the U.S. may get a lot less solar and wind power than it could.

It’s not a shortage of solar panels or the cost of turbines.  Rather, it’s a problem of the perverse nature of federal incentives for renewable energy.  Right now, the owner of a solar or wind energy project can get a federal tax credit based on the value of the project or the electricity it produces.  But many owners don’t have enough tax liability to make use of the entire credit, and their search for a “tax equity” partner has created a logjam in the renewable energy market.

As reported in Greentechmedia,

CITI calculates there is a need in solar for $10 billion to $12 billion in tax equity for 2012 through 2014,  but not more than $5 billion in tax equity is available. That, Salant said, is “a massive supply-demand imbalance” that is not “going away anytime soon.” [emphasis mine]

The following graphic (from the article) illustrates:

A big part of this big money problem is a focus on big projects (and technologies that can’t economically be done at small scale):

“PV can be done on a much smaller scale and be economic, and a large project can be done in phases. It’s a lot easier to finance $250 million or $500 million than it is to get $3 billion all at once.” [Concentrating solar power] requires vital economies of scale “so you’ve got to raise $2 billion all at once. That’s a lot harder to do than to raise $500 million four times.”

That’s a small-scale solution to a big problem.  There may be a handful more folks who can invest $500 million than $2 billion.

But there are millions more Americans who could invest a few thousand dollars in community-based solar and wind power.  In 2009, American taxpayers cumulatively paid $865 billion in federal income taxes.  If just 1 in 100 could invest in a renewable energy project, it would nearly quadruple the tax equity market (from $3.2 billion to ~$12 billion).  And since 1 in 3 Americans will be able to get electricity from rooftop solar for less than their utility provides in the next decade, policy makers should find a way to open the small investor floodgates

The answer is community-based solar and wind projects, for three reasons:

  1. Economies of scale (without excessive size)
  2. Smaller investment increments (financed with bank loans and paid back with energy savings)
  3. Much greater political support

But there are three policy solutions needed to enable community power:

  1. Community net metering – to allow project owners to share the project’s electricity output.  Right now, most state policies require utilities to allow net metering, but only for a solar or wind project on your own property.
  2. Simplified securities law – to make community-based projects easier.  Right now, there’s little difference between setting up a mutual fund and setting up a community solar project, and both take a lot of lawyers.  (Learn more in this report)
  3. Smarter federal tax incentives – to allow community-based institutions to host community-based projects.  Non-profits, cooperatives, cities and counties are logical entities to build projects, but they can’t (easily) use federal tax incentives for solar and wind power.  This raises the stakes for problem #2.

Some of these policy solutions are already in play.  As many as eight states already offer community net metering.  The federal 1603 cash grant (now expired) was one of the best tools for community-based projects (like this one); President Obama has proposed another solution.

The U.S. could spend the next few years letting wind and solar power development lag because of artificial financing constraints.  Or policy makers could use two or three carefully crafted tools to open the floodgates to a massively democratic investment in local, clean energy.

This post originally appeared on ILSR’s Energy Self-Reliant States blog.

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Local Ownership Doubles Economic Value of Wind

Local ownership of a wind project accounts for half of its lifetime economic value to the community!

From: Value Creation for Local Communities through Renewable Energies [pdf]

This post originally appeared on ILSR’s Energy Self-Reliant States blog.

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Net metering a cost to utilities, or a benefit?

A version of this article originally appeared on ILSR’s Energy Self-Reliant States blog.

Utilities often claim that allowing customers to run their meter backward (by generating electricity on-site, e.g. from rooftop solar) can affect their bottom line because these customers don’t pay enough to cover the cost of maintaining the grid.  In at least one case, however, a utility’s cost-benefit analysis of net metering was turned on its head in an independent review.

Presenting as part of Vote Solar’s Data Not Drama webinar on net metering last month, Interstate Renewable Energy Council’s (IREC) Joe Wiedman showed the Public Service Company of New Mexico (PNM) erred in proposed standby charge of 5.3 cents per kWh for net metering customers. The utility asserted that this charge -- ostensibly to backup these on-site generators -- would allow the utility to recover its costs from these customers busily spinning back their meters. IREC’s review of their analysis, however, showed that net metering was actually a net benefit to the utility.

The differences were substantial. While PNM had given almost no value to net metering systems, IREC’s review found that the on-site generation helped the utility avoid energy costs, line losses, capacity upgrades, and transmission costs worth over 15 cents per kWh. Even when balance against the transmission and distribution costs, and power generation costs to the utility of supporting net metering, the policy had a net benefit of 7.8 cents per kWh, a 13-cent difference!

The following chart illustrates, with the perceived costs shown in red (positive) and perceived benefits in green (negative).

The lesson for advocates of distributed generation is clear: challenge utility valuation of net metering and of distributed renewable energy.  You can never be sure what they overlook.

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Lots of solar power may reduce, not increase, electricity prices

A version of this post originally appeared on Energy Self-Reliant States, a resource of the Institute for Local Self-Reliance.

Whether German feed-in tariffs or U.S. tax incentives, opponents of solar rail at its perceived high cost. But a story making rounds this week, "why power generators are terrified of solar," presents a powerful image that may flip this conventional wisdom on its head. Building lots of solar power can actually reduce electricity prices, to the dismay of utilities.

The story comes from Germany, where a decade of consistent policy has resulted in thousands of megawatts of distributed solar installed on urban rooftops and rural barns. This year, it was noted that the surge of "solar PV was cutting peak electricity prices by up to 40 percent." The following graphic of prices on the German electricity exchange -- which Craig Morris calls "the afternoon dip" -- illustrates the effect. The left view is 2008, showing steady, high prices in the market throughout the afternoon. The chart on the right shows the same time period in 2012, where an abundance of solar has sharply cut afternoon power costs.

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Ontario feed-in tariff prices drop, Germans pay much less

A version of this post originally appeared on Energy Self-Reliant States, a resource of the Institute for Local Self-Reliance.

Ontario just completed a revision of their landmark feed-in tariff program and rates for renewable electricity generation and prices fell sharply: 30 percent for solar and 15 percent for wind power. This continues a trend of falling costs for renewable energy around the world.

As a bit of background, Ontario’s feed-in tariff gives wind and solar producers (and many other technologies) long-term contracts at premium prices to support deployment of new renewable energy. In a unique marriage of environmental and economic goals, the province also provides price bonuses to community-based projects and requires wind and solar projects to source much of their labor and materials within Ontario (for more on this, see our 2011 report).

Modeled after Germany’s landmark program, Ontario is starting to see the price declines as their renewable energy market matures. Here’s a quick look at how the new prices stack up against world-leader Germany, as well as against two of the prominent feed-in tariff programs in the United States, Vermont and Gainesville. The prices for all programs have been changed to U.S. dollars, adjusted to the same contract length of 20 years, and to an equivalent solar insolation (for Gainesville, Fla.). Prices for U.S. programs were also increased by 30 percent to account for the federal tax credit, which is usually taken in addition to the feed-in tariff contract price. More on the methodology can be found in this post.

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Solar policy can advance (or delay) grid parity by a decade

A version of this post originally appeared on the Institute for Local Self-Reliance.

In their interactive graphic, Bloomberg Energy Finance calls solar grid parity (when electricity from solar costs less than grid power) the "golden goal."  It's an excellent illustration of how the right energy policy can help a nation go gold on solar or wallow in metallurgical obscurity. In the case of the U.S., it may mean delaying grid parity by eight years.

In the screenshot below, countries in purple have reached the golden goal in 2012 based on the quality of their solar resource and the cost of grid electricity, as well as a 6 percent expected return on investment for solar developers. (Note to Bloomberg graphic designers -- countries meeting the golden goal could be colored gold.)

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