Timing is everything: Important Renewable Energy Milestone Reached by City of LA

In Los Angeles, the LADWP will begin accepting applications for the first 20 MW of its new solar Feed-in-Tariff (FiT) program on Feb. 1. For the first time, customers, solar companies and other third parties can develop solar projects in DWP’s service territory and sell the power to LADWP at a fixed price for distribution on the city’s power grid. LADWP will sign 20 year contracts to purchase ALL of the power produced. None of the power will produced by the PV system will be used onsite.

This is a landmark decision to create the largest program of its kind in the nation. And just this week, as the LA Times reports, the LA City Council averted a bid to further study and potentially delay the program. LA City Councilperson Richard Alarcon said “We make these kinds of investments all the time in order to get a greater return in the future. Let’s get this thing going.”

We applaud this decision because it is time to “get this thing going.”

This size and model of this program is ideally suited for utility scale plants to be constructed on large rooftops, especially those atop commercial buildings and warehouses. That’s why Absolutely Solar is actively seeking property owners who would like to lease their rooftops for the 20-year term. ASI may also be able to extend roof life and provide roof warranties. There are also opportunities to invest and collaborate in the revenue-producing facility itself.

But time is of the essence. New applications will be accepted on a first-come, first-serve basis and space is very limited.

Americans are embracing the exciting possibilities – and challenges – of the new alternate energy economy. To manage the growing demand for rooftop solar, a program was needed to process applications and guide the development to help utilities efficiently embrace the connection of new solar systems safely and reliably in our area. This is the program and the time is now.

Read more about this decision in the KCET ReWire article, “LADWP Solar Program Clears Hurdle.”



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Letter to the LA Times in Response to "Taxpayers, Ratepayers will Fund California Solar Plants"

The LA Times article “Taxpayers, Ratepayers will Fund California Solar Plants” took on the world of solar policy in a totally irresponsible way and got it all wrong.  Renewable energy and distributed generation are too important to LA, the U.S. and the world to be dismissed so flippantly.

There’s no solar gold rush or windfall profit.  Most solar developers and their projects are struggling.  The failure rate is extraordinarily high.  Financing and investment is hard to come by.  There are few viable programs and they all have small capacity and difficult requirements and limitations.  Interconnection processes are highly complex, costly, uncertain, and time consuming.  Land use entitlements, environmental approvals, zoning, planning, building and safety issues all add additional barriers to solar development.

These barriers INCREASE the cost of solar unnecessarily.  As a result, GERMANY, with the same sunshine as Anchorage, Alaska, INSTALLED FAR MORE SOLAR IN THE FOURTH QUARTER OF 2012 THAN CALIFORNIA HAS INSTALLED IN TOTAL (EVER).

The article focuses on the few giant projects that received government loans (which were only for very large projects and are no longer available), are very far from load centers and require huge transmission upgrades.  These projects make up a small part and definitely not the best opportunity for California solar development.  Even with government help, considering that they can take 5 to 10 years to permit and that most giant projects fail, their returns are probably not excessive.

Solar policy should be focused on smaller projects closer to load centers (called “distributed generation” or DG).  DG projects can connect quickly to the grid, do not require any transmission upgrades, can be developed and permitted and built fast and efficiently and cause no environmental damage.  DG is resilient and helps strengthen the grid and reduce blackouts and enhances energy security.  And like all solar, it will provide peak power; power at the time we need it most and by far the most valuable.

Almost all of Germany’s solar is DG—on farms and schools and warehouses and freeways, factories and homes.  Even though Germany gets very little sun compared to California, because their program is so robust, competition and increased expertise and experience have driven prices way down.  Germany has also dramatically reduced the paperwork and other administrative processes that raise costs and cause delays.  German banks are required to make reasonably priced loans for solar (essentially no risk loans secured by the long term contracts to purchase the power).  As a result, it costs HALF as much to build a solar project in Germany as it does in California.  In all, Germany’s solar program has cost ratepayers about the price of a loaf of bread each month.   Of course, even that cost is only a short term investment because these systems will SAVE money over their productive lives.

It’s true that solar PV costs more in the first few years than the cost of business as usual.  But, most responsible experts agree that it’s a good business decision, because the AVERAGE COST of solar, over the life of that 20 year fixed price contract, will actually be LOWER, NOT HIGHER, than the cost of power from conventional fuels.   Moreover, these solar PV plants are likely, with minor maintenance and upgrades, to produce ALMOST FREE power for a very long time beyond the original 20 year contract.

The article also makes comparisons between the cost of renewable energy and the cost of carbon based energy.  However, the prices quoted in the article for conventional power understate its true cost.  According to various studies that have been done by academics and non-profits, the value of widely distributed, renewable energy is at least 3 to 6 cents more a kWh than the value of central station produced, carbon based energy.  This added value of DG comes from avoiding transmission losses (which average 10 to 11% system wide); avoiding investment in transmission, generation and other new facilities; the hedge value of a fixed price for 20 years; providing peak power which is the most valuable, reducing greenhouse gasses and pollution, etc.  When this added value is considered, solar only costs a very small amount more.  AND, that cost is short term and should be seen as an investment.

Instead of characterizing solar as a boondoggle for developers and investors, the article should have carefully and thoughtfully analyzed and presented all sides of this complex topic.  Most people know very little about it and already suffer from serious misconceptions.  You should write another article and interview the people who are really knowledgeable about this field.  It’s too important to be poisoned by ignorance and inaccuracy.



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Response to: The Energy Subsidy Tally (Published by the WSJ)

The argument that subsidy rates for renewable energies are economically draining is severely flawed.  Articles, such as “The Energy Subsidy Tally”, published by the Wall Street Journal, fail to evaluate the performance of renewable energies relative to the oil, gas and coal industries in their nascence. The economic reality of renewables is therefore distorted, often in favor of a political agenda.

Early Energy Subsidies Were Higher Than They Are Now

Adjusting for inflation, the earliest subsidies for the oil, gas and coal industries were significantly higher than the subsidies supporting renewable energies today.  In fact, research by Nancy Pfund and Ben Healey at Yale University found that the government spent an inflation-adjusted $1.8 billion annually on oil and gas subsidies in early years, while current subsidies for renewable energies amount to approximately $400 million, annually[i].  Accounting for 5 percent of the Federal budget, subsidy dollars for “traditional” energy sources poured significant capital into early research and development, leading to innovation and eventually to reduced costs in these industries.

What’s more, renewable energy subsidies have generated greater economic growth than earlier subsidies for oil and gas did.  To this point, Pfund and Healey found that the per-dollar increase in energy generation is ten times higher for current renewable energy subsidies than it was for early oil subsidies. [ii]

Renewables Drive Real Growth

The fact that renewable energy is driving more growth for the U.S. economy than oil and gas did in earlier years should be applauded.  However, commonly used metrics do not take into account the significant investment required to integrate such a new, sophisticated industry into the U.S. market.  Failure to effectively communicate progress in renewable energies therefore leads to misconceptions about the industry’s economic sustainability.

Policy makers should evaluate the renewable energies sector relative to traditional energies at similar periods in their development.  Decisions should be made based on the industry’s proven potential given the benchmarks it has surpassed, despite serious headwinds and lackluster support.  If we’re already generating more power, per subsidy dollar, than our competitors did during their formative years, think of how far innovation in the renewable energy sector could take America.

i,ii Pfund, Nancy and Ben Healey. “Should the Government Subsidize Alternative Energy?” Yale School of Management. http://qn.som.yale.edu/content/should-government-subsidize-alternative-energy



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The Feed-in-Tariff Pricing Struggle Continues

No applications were received for Palo Alto’s CLEAN program, which offers $0.14 per kWh for energy produced by medium and large commercial rooftop photovoltaic systems.  The program’s lack of success “was the result of offering a price too low to incentivize solar developers and system owners to participate” (Al Rosen, Absolutely Solar).  The program’s lack of success is another indication that metrics used to determine appropriate feed-in-tariff rates are all-too-often severely flawed.  Spain’s unsustainable feed-in-tariff program (priced too high), as well as the new ReMAT program (priced too low) scheduled to be implemented in California within the new few months, are additional testaments to this fact.

The best source of Goldilocks pricing for solar feed in tariffs is an examination of the actual costs of developing, building and financing the systems.

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The Opportunity for Large-Scale Rooftop Solar

A fortuitous confluence of lower material and construction costs for solar projects and a program that requires Southern California Edison (SCE) to buy the power produced at a reasonable price makes the development of roof top solar feasible.  Owners of large rooftops have a short window to participate in this program.  Owners with the appropriate roofs, tax appetite and capital can invest in and own their own systems and make very high returns.

Absolutely Solar is currently working with owners of roofs that exceed 100,000 square feet, to install revenue-generating solar photovoltaic systems under SCE’s CREST feed-in-tariff program.  Unlike most solar programs, CREST’s feed-in-tariff is not related to on-site electricity use.  Instead, the solar photovoltaic systems are connected directly to the electrical grid, and all energy produced by the systems is sold to SCE on a fixed-price 20-year contract.

This opportunity, however, will end soon, when Power Purchase Agreements (PPA) for the remaining available capacity are signed or when the program ends by the end of this year or early in 2013.

Clearly, the opportunities available to property owners and solar developers alike will be seriously limited when the CREST program ends.  However, rooftop owners who collaborate with Absolutely Solar now, to take advantage of Southern California Edison’s current program, will benefit from steady, secure cash flows under a 20-year contract.

The amount of these cash flows is determined by the property owner’s level of ownership of the photovoltaic system.  For example, should the rooftop owner choose to own the system in part, he or she could participate in the system’s income stream and or/use the available tax benefits (30% immediate tax credit, plus accelerated depreciation).  Alternatively, the property owner could choose to own the system in full or to simply lease the rooftop space.

Solar Power has the potential to relieve our nation’s over-dependence on unsustainable energy sources, to make a positive impact on our environment, and to create countless jobs in America.  Property owners must recognize the opportunity that their open rooftop presents to not only generate significant cash flows over the next two decades, but to also make a statement in support of our country’s investment in renewable energy.

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