The California Energy Commission’s recent decision to require rooftop solar photovoltaic (PV) systems on most new homes has engendered praise from some quarters and criticism from others. Some see this as a positive force, helping to reduce the cost of solar and contributing to greenhouse gas (GHG) emission reduction. Others despair policymakers’ tendency to choose technology winners and losers and argue that the least-cost choices are usually best.

Regardless of where you are in the cheering section, allow me to offer several red flags to watch for when people put forth critical perspectives on requiring rooftop solar.

  1. When someone argues that rooftop solar is foolish because central station solar is cheaper, they are ignoring, or at least minimizing, several import factors, including the difficulty in siting central station solar, the decade-long process of making such a project happen, the direct land use impacts of that technology and the need for more transmission lines and their related land-use impacts.
     
  2. Beware of critics who say central station solar is the only way to go. There are strong arguments in favor of central station solar, but it is not credible to suggest that we will meet all our electricity needs with big solar farms in the desert. It isn’t an either/or situation. We need both.
     
  3. When someone criticizes the use of renewables by suggesting it could lead to higher bills, what is implicit is that we should continue relying on fossil generation that appears to be cheaper, even though much of that apparent price advantage results from the fact that the generators are not paying for environmental externalities such as air and water pollution and GHG emissions.
     
  4. When people argue that requiring rooftop solar is bad because it will reduce grid-based electricity sales and thereby leave the remaining customers with higher rates to cover fixed costs, think about what they are saying: a policy is bad if it reduces the demand for electricity from the grid. Should we stop encouraging more efficient use of energy?
     
  5. Beware of arguments based on the Duck Chart. This graph suggests that with the introduction of more solar, grid operators are stuck with more renewables than they can use during certain hours and therefore forced to curtail its use. When the grid operators do so, it isn’t because there is more solar generation than demand. It is because so much of the grid-based generation is too inflexible to respond to changes in solar output. It’s fixing the limitations of the grid that needs our attention.
     
  6. Take care when critics raise the specter of economic inequity. The suggestion is that a program is unfair if anybody other than low-income customers might benefit. Does the possibility that middle income or higher income end-use customers who adopt PV might save money mean that a policy should be rejected? Especially when the benefiting customers paid for the benefit by buying a new home with solar?
     
  7. When people argue that putting solar on all new rooftops won’t do much to reduce GHG emissions, beware of the drop-in-the-bucket argument – a favorite of people who want to dismiss any specific strategy to reduce emissions. When it comes to reducing GHG emissions, there is no magic beanstalk that will lead us to the golden egg of a carbon-free life. Deep decarbonization requires all hands on deck.

There is no disputing that the state’s new policy is a landmark event that could set the stage for broader solar adoption nationwide. One benefit of the policy is that it can help bring down the cost of solar. It is cheaper to install solar PV when incorporated in new construction, and doing so adds to overall demand, which can support further economies of scale.

Further, the development of more customer-sited generation supports the development of microgrids that can enhance local reliability and increase the likelihood of continued access to power after a natural disaster such as an earthquake or superstorm.

Maybe there are less expensive ways to produce carbon-free electricity. But will they be deployed in time to meet long-term GHG reduction targets? And when do we stop waiting for a better widget? The time to get fully invested in solar – of all types – is now.

Using Storage to Improve Grid Resiliency

Learn about a SunShot Initiative project with Austin Energy working to develop energy storage solutions to enable higher amounts of solar to be added to the grid, while also developing a storage model that can be used by other utilities.

One of the biggest challenges to maximizing the use of solar energy is enabling it to produce electricity even when the sun isn’t shining—both at night and during inclement weather. While the SunShot Initiative has funded a wide variety of energy storage research that integrates with concentrating solar power, SunShot started tackling storage for photovoltaics (PV) head-on in January 2016 with its Sustainable and Holistic Integration of Energy Storage and Solar PV (SHINES) funding program.

The six SHINES projects are working to develop integrated photovoltaic (PV) and energy storage solutions that are scalable, secure, reliable, and cost-effective. As these projects approach the halfway mark of their three-year performance period, they have made notable progress toward creating solutions that will ultimately allow utilities and consumers alike to benefit from solar energy storage.

The Electric Power Research Institute (EPRI) project is working with five utilities to test energy storage and load management technology. So far, the team has deployed a prototype system that integrates PV, batteries, smart home technology, and weather forecasting equipment onto two adjacent homes in northwest Florida. 

This satellite image shows the two Florida homes where EPRI is conducting its energy storage project.

Researchers are tinkering with the setup of each home to better understand how all of the technologies interact to generate and store power based on the weather forecast. This will help the system automatically store energy when a storm is on the way, enabling the home to rely on solar power without active sunshine. The technology also helps electric grid operators balance the supply and demand of solar energy on the grid. Along with the residential prototype system, the EPRI team will build commercial-scale prototypes in the near future.

Austin Energy in Texas is integrating energy storage technology into its energy management tools, allowing for better control of the solar energy generated by homes within its service territory. When homes generate solar electricity, that power flows to a utility’s feeder. With the new distributed energy resource optimizer that Austin Energy created, that energy can now be diverted to massive battery storage facilities so the utility can rely on that power when it’s needed. 

Austin Energy in Texas is constructing energy storage facilities to house batteries that will retain the sun’s energy for later use.

This tool will continue to be refined throughout the remainder of the project, but its development enables the team to move forward with plans to construct energy storage facilities that incorporate this new storage system. Austin Energy isn’t the only entity to benefit from this work. The utility is developing a template so other utilities across the country can implement similar systems based on this project.

Similar to the other projects, Carnegie Mellon University (CMU) is developing a utility operating framework that incorporates PV and energy storage. The team’s unique algorithm prevents any communications malfunctions between a rooftop solar array and the utility. If something goes wrong, like a storm knocking down some power lines, the system as a whole will still be able to function regardless of any faulty devices or communication breakdowns. This resilience is an important capability for utilities, especially in areas that are prone to severe weather. With the algorithm complete, the next step for CMU is to field-test the technology on feeders at Vermont Electric Cooperative.

Learn more about the SunShot Initiative

Solar Energy Technologies Office Homepage

As more American homes and businesses are powered by sunshine every day, these SHINES projects are making sure that solar power is available even when the sun is not. The energy storage capabilities under development will enable renewable energy sources like solar to play a larger role on our nation’s electric grid. This is a critical component of the Energy Department’s Grid Modernization Initiative, as we work to create the grid of the future that will be capable of delivering resilient, reliable, flexible, secure, sustainable, and affordable electricity.

Learn more about all of the SHINES projects.


Photo: Pixabay Creative Commons

Solar power is experiencing a surge in popularity across the globe. It prevents carbon emissions, helps diversify the power generation mix, reduces dependence on fossil fuels, and can increase off-grid energy access.
 
With falling costs of solar photovoltaic (PV) technology, advancing storage technology, and grid integration, prices for solar PV electricity have been falling rapidly around the world and solar is now in many countries price competitive with traditional energy sources and has become particularly attractive for developing countries.

In recent years, global cumulative installed solar PV capacity has grown exponentially and

In addition to direct or indirect government support through public financing or fiscal incentives, many countries have introduced regulatory and pricing policies such as targets and quotas, feed-in tariffs (FiTs), and competitive auctions, which have spurred some of these developments:

1. Renewable energy (RE) targets have been used by almost all countries to scale up the RE share in the energy mix. They are a crucial policy signal for investment and are increasingly included in nationally determined contributions (NDCs) submitted under the Paris Agreement.

2. To achieve RE targets many countries require utilities to get specific amounts or percentages of their electricity sales from RE. These quota systems exist in many different variations worldwide and are often supported by tradable RE certificates. The RE support system in Chile—a solar PV leader in Latin America with 2.11 GW installed capacity in 2017—uses this approach alongside with auctions and other incentive mechanisms, and mandates severe penalties for non-compliance by utilities.

3. Feed-in tariffs (FiTs) set by the regulator and similar instruments used to be the preferred regulatory mechanism globally to boost deployment of solar PV through private investment as they provide a stable and predictable policy environment. FiT guarantee the purchase of generated RE under long-term contracts at a tariff set by the regulator and are often combined with facilitated grid access and dispatch. In Germany, FiTs were a key element of the RE incentive scheme for many years and led to the major growth of solar PV (42.39 GW installed solar capacity in 2017). Based on the German Renewable Energy Law, the system guarantees RE producers an attractive fixed return on investment that now decreases at regular intervals over a period of 20 years. It mandates priority grid access and dispatch and is financed by consumers through their electricity bill.

4. With solar PV maturing and markets growing, price discovery through competitive tenders with long-term contracts has become an effective and increasingly popular way to procure utility-scale solar PV for fixed quantities.   

Here are some trends related to competitive tenders:

  • Solar prices are not fully comparable because of country-specific factors and different parameters of each auction. Competitive solar tenders have, however, decisively contributed to rapidly declining solar PV prices across the globe. In Saudi Arabia, an October 2017 auction resulted in a new record low for solar PV with one bid at 1.79 US cent/kWh.
  • While tender schemes open up flexible and innovative design options (e.g. time blocks, storage components), the quality of the design and implementation is crucial to the success of competitive tenders. In Chile, an energy auction in November 2017 received the lowest price for solar in the region with 2.15 US cent/kWh after the tender process was amended in 2015 (Law 20,805) and a longer contract term (20 years) and different sized hourly blocks of energy supply (day, peak, night, 24 hours) were introduced.
  • Many countries have adopted parallel “price-finding” mechanisms for different market segments. Germany has kept its FiT scheme for smaller PV installations and recently introduced competitive bidding for projects above 750 kW to reduce costs, control speed of deployment, and dovetail grid-expansion.
  • Many successful solar PV programs—in particular, tender-based support schemes—are also combined with standardized project documents that ensure a speedy and transparent process and bring down transaction costs.
Experience from one country cannot simply be replicated in another country.
 
The RE section of the PPP in Infrastructure Resource Center for Contracts, Laws and Regulations (PPPIRC) offers links to best practice examples for solar policies and legislation, bidding documents, as well as sample and standard contracts. This section is currently being updated and feedback or suggestions are welcome at [email protected]This blog is the first in a series that will discuss and explore legal and regulatory issues around PPPs and Climate Change.

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Why Zambia’s 6 cents is more significant than Dubai’s 3 cents
 

Manik, a solar pump operator for Nusra works near the solar panels in Rohertek, Bangladesh. © Dominic Chavez/World Bank
Manik, a solar pump operator for Nusra works near the solar panels in Rohertek, Bangladesh. © Dominic Chavez/World Bank

Solar’s growing share of the energy mix is being driven by better storage capacity and attractive generation costs. Large solar parks are now competitive with most alternatives; their average cost is below 5 cents per kilowatt-hour in some developing countries. Smaller-scale solar grids are also getting more competitive, opening new paths to financing this clean energy source. With rapid improvements in energy efficient lighting, refrigeration, water pumps, and other technologies for households, solar may soon be as game-changing as mobile phones have been in the last decade.

Solar’s potential is evident from its quick growth in India, where installed capacity recently topped 20 gigawatts (GW), putting the country closer to its ambitious target of 100 GW from clean energy by 2022 (an amount comparable to total installed capacity in the United Kingdom).

Solar can reach people in areas that are poorly served by the national grid or electric utilities. Mini-grids and off-grid generation are well suited to low-income countries where much of the population lives in rural areas; they can also increase access in urban areas. This relieves pressure on traditional energy companies, which are often unable to provide adequate service because consumer tariffs are not enough to cover their costs. They have had to rely on government transfers, which have become more and more precarious. Inadequate service, in turn, makes customers less willing to pay for an expensive and erratic power supply. In a vicious cycle, large physical and commercial losses have further weakened the financial capacity of these companies and their ability to invest.

 With costs falling and effective pay-as-you-go sales plans being introduced, the landscape is becoming like mobile communications, where consumers are ready to pre-pay if they value a service and find it affordable.  This scenario already applies to small grids, especially in communities where users can easily verify each other’s behavior and help install and maintain equipment. It may soon apply to rooftop units, especially if storage costs drop further. The flexibility of deploying solar power can also make the provision of electricity subject to price competition that benefits consumers.

Solar offers a new financing equation in part because it does not face the price volatility associated with fuel costs for traditional power plants. Together with the ability to charge more effectively for the service, lower volatility makes it easier for investors to hedge their income streams and helps compensate for the higher capital intensity of solar. Less uncertainty also simplifies the design of contracts, the ex-ante determination of the subsidies needed, and budgeting over the lifetime of a project. 

In this new environment, the regulatory burden to protect rights and align expectations of investors and consumers becomes lighter and easier to standardize. This can reduce transaction costs and the need for credit enhancement.  The main risk becomes macroeconomic, from the impact of currency fluctuations on the cost of hard currency financing. This can largely be addressed by government guarantees to top off the debt service when the currency goes beyond a certain threshold. The liquidity can be repaid by the electricity provider as the impact of depreciation wears off or is absorbed by gradual tariff adjustments that permit the pass-through of currency fluctuations while keeping the service affordable. In these conditions, the macroeconomic risk becomes a liquidity risk rather than a solvency risk. The guarantees can be efficiently backed by contingent loans from multilateral development banks (MDBs), helping reduce the risk premium on commercial financing. 

In some cases, MDBs can also help provide low-cost finance; blending it with commercial finance would help defray some investment costs and reduce the payback period to investors. This could address some of the obsolescence risks in the solar industry. In specific cases, the overall financing equation could benefit from treating solar energy as a potential export resource from low-income countries to mature economies.  One early example is a new transmission link between Italy and Tunisia’s electricity grids, a project being prepared by the Global Infrastructure Facility (GIF), housed at the World Bank. 

To make the most of solar power’s potential for profound transformation in many countries, it will be important to introduce low-cost, efficient energy storage at scale and understand better what’s possible in the new financial equation. It will also be essential to coordinate efforts globally. To help jump-start cooperation, the The alliance is helping realize a global vision in which solar plays a crucial role in mitigating climate change and ensuring a cleaner energy future. 

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