Comments following the DOE PEIS
“discussion” in Kona, HI, 13 Sept 2012.
A
vote for more support for environmentally benign home solar energy
* Ulrich Bonne is a semi-retired PhD Chemical Physicist in Kailua-Kona, Hawaii
** Jonathan Cole is a
self-employed MBA in Honokaa, Hawaii
7 October 2012
SUMMARY -- Some historical trends are
clear, such as the trend from a few large central systems to many small,
“distributed” or individual ones, as demonstrated by transitions from public to
individual transportation and from big central computers to lap tops.
We
believe that a similar trend is gaining traction towards distributed
electricity generation. This is fueled not only by NIMBY opposition to new
utility-sized plants; but now also by simple economics[1]. Distributed solar PV
(photovoltaic) generation also reduces fossil fuel imports, air pollution,
utility transmission losses and consumer bills. It simultaneously increases
good land use. An added small energy storage yields uninterruptible power. Distributed
solar generation also increases energy security and independence - as we have
detailed below.
We
found the 30-year levelized 3-kW home PV electricity cost in Hawaii to be 0.21 $/kWh before
subsidies (or 0.23 $/kWh with cost of a loan), vs. 0.46 / 0.23 $/kWh for a
central 30-MW PV- / oil-utility, or ~0.15 vs. 0.36 / 0.23 $/kWh after present
PV tax credits.
Despite
well-received federal and state subsidies via renewable energy tax credits, key
barriers to faster implementation of solar PV residential roof systems remain,
such as:
1. The still
significant installed PV system price tag (especially if battery storage is
added),
2. The concern
that lost utility profits will have to be made up by those ratepayers without solar
installations, despite the utility benefit of delayed new plant capitalization,
selling free excess PV capacity and income from the MMC (Minimum Monthly
Charge) and
3. The uncertainty
or unwillingness by utilities to adapt by adding storage to their portfolio to
compensate for the intermittent wind and solar electricity additions to their
grid.
Countries in Europe have been
more aggressive than the US and most US states in promoting the adoption of PV
systems, as evident for example by their published Feed-in Tariff (FIT) terms[2],
and ~2.5x lower PV installation costs in Germany than in the US[13]. Europe has shown that good, long-term,
decreasing incentives may lead to fast deployment of PVs. Despite the gloating of those opposed to any
energy subsidies, after recent downward adjustment of those incentives[2], few disagree
with the notion that PV demand
- Has increased PV sales and also reduced PV manufacturing & installation cost.
- Created competition and with it, increased PV panel efficiency
- Together with wind installations have lowered European market power prices[14]
COMMENTS -- The comments below
A. List how we recommend the DOE, DBEDT &
NREL to get more involved,
B. Illustrate the benefits of more distributed solar
PVs and
C. Demonstrate how greater support for
distributed home PVs with storage would be more environmentally benign (save
land area and emissions), and be more economical than support for adding
utility-scale PVs, storage and transmission lines.
_____________________________
A. We
recommend that DOE and DBEDT (Hawaii Department of Business, Economic
Development and Tourism) be more forcefully involved with:
·
Understanding residential PV generation data &
results, promotion and financial support
·
Validating economic and environmental advantages of home
PV systems with battery storage over utility-scale systems
·
Using PVs for home Electric Vehicle (EV) and Plug-in Hybrid EV (PHEV) charging
·
Supporting EV and PHEV battery development and usage
·
Developing policies to encourage deployment of the above,
including:
-- Test
& publicize efficiency & cost information on available and matching
hardware
-- Structure
support (e.g. tax credits) on a multi-year time scale, even showing how that
support will decline as PV costs are projected to decline, and thereby avoiding
past “boom and bust cycles”
--
Reduce the support that mature Big Oil still receives at the tune of some 4
B$/year, to instead support renewable residential PV systems
--
Smart grid implementations and demonstrations
B. The benefits from the above more forceful
support of home PV+battery vs. utility PV system adoption would be evident in:
·
Reduced renewable energy cost & land-for-energy use
·
Reduced air pollution from fossil fuel combustion
·
Reduced need for biomass-to-fuel processing, & its
potential for increased food costs
·
Greater security for energy in homes & vehicles, and
for food and water
·
Increased US local economic activity due to reduction of
fossil fuel imports[3]
C. To detail how greater support for distributed
home PVs with storage would be more economical than support for utility-scale
PVs, storage and transmission lines, we listed
and added up the main CAPEX and
OPEX items for such systems in Table 1, after normalizing all items for three
3-kW(peak) home-PV (consuming 242 kWh/month), a 30-MW(peak) utility-PV and -oil
installations (last 2 columns) to 1 kW(peak).
For purposes of this comparison,
as shown in Table 1, bottom row A, home PV systems, whether with or without
battery, generator and/or grid back-up, can generate a lower, levelized, unsubsidized,
life-cycle cost of 0.20 to 0.24 $/kWh, than utility-sized PV systems,
despite their size (lower PV installation costs), but because of tougher
voltage and frequency stability requirements; and transmission &
distribution costs and losses. With higher CAPEX and OPEX costs, PV-utilities end
up with a higher price of electricity of 0.45 $/kWh (10% profit
included); the oil-utility with 0.23 $/kWh was within the same range as the
home-PV cost.
The Row B $/kWh costs include
applicable subsidies, and shifted to a new set of values of 0.13 to 0.16 versus
0.36 / 0.23 $/kWh for the PV- and oil-utilities.
The
underlying assumptions and choice of listed costs are detailed in the Appendix. But note that just like utilities have average
utilization percentages of less than 50% of the installed US generation
ability, so might home PV systems be oversized by up to 2x, to have enough
generation “reserve” and to minimize the use of back-up energy from the grid or
on-site generators. This extra reserve means that while the home-generated
$/kWh still remain lower than the PV-utility $/kWh, the absolute $/kWh values
for both home and utility-generated electricity are higher in Row C (based on a
utilization of 70% for PVs and 43% for oil), resulting in the values of 0.19 to
0.23 versus 0.50 / 0.27 $/kWh.
We did not factor in the PTC
(Production Tax Credit) for renewable energy by utilities. As Table 1 shows,
the present credit of 2.2 cents/kWh[7] would not alter our conclusions.
To compensate
for the uncertainty in the price and life of batteries, one could triple the
battery cost for the middle columns from $1000 to $3000, to allow replacement
every ten years. This would increase the home PV + battery total cost and the
levelized $/kWh cost to 64% of the PV utility-based rate, but would not
alter the conclusion that economics favor home PV systems. A similar trend was already
independently reported and highlighted in 2011 by comparing home PV with
utility-scale concentrating solar panels[1].
The
calculations of $/kWh rates for a 2 $/gal oil-fired utility served as a further
sanity check of our economic model, with its own capacity factor of 90% and
utilization of 43% and found its rate to be 0.27 $/kWh (Row C), i.e. only a bit
higher that the favored “Home PV+Battery On-Grid” system. However, that oil-utility
rate would drop to 0.16 $/kWh if fired with 4 $/millionBtu (=0.44 $/GGE)
natural gas, to the rate level close to that of the first two home PV systems
in Row C.
CONCLUSIONS
-- The simple cost
calculations and estimates presented in Table 1 show that the need for building and maintaining transmission lines (and the assumed 10%
transmission loss) tilt the economics to significantly favor off- or on-grid
home or distributed PV systems over large utility-scale PV "farms" or even oil-fired utilities, without or with
subsidies.
The resulting PV-home-30-year-levelized
rates ($/kWh) were estimated to be ~ 36% to 45 % of those of a
PV-utility rate of 0.50 $/kWh, after including subsidies, new transmission
lines, realistic capacity factors (16%) and utilization percentages (70%).
PV home rates
are even lower than $/kWh rates of 2 $/gal oil-fired utility generation of 0.27
$/kWh. This rate becomes comparable to home PV rates if the battery cost is 3x
higher than the assumed $1000 for the reference 1 kW(peak) PV with 5 kWh of
storage.
Furthermore,
the home PV + battery systems provide home and PHEV or EV transportation energy
that is not subject to utility power outages nor to fuel / electricity cost
escalations.
Regarding EV
and PHEV charging, we conclude that the home PV system electricity costs, see
bottom line of Table 1, are equivalent to retail gasoline prices of 5.96, 5.70,
7.25 $/gal (and 16.10 for PV-utility). But thanks to the about 4-fold higher
“fuel-to-wheel” efficiency of EVs, these prices would be equivalent to enabling
EVs and PHEVs to achieve over 3x lower $/mile fuel costs than conventional
gasoline-powered vehicles.
Judging from
prices of electricity and gasoline in many other US states and countries[8,9]
being above 0.20 $/kWh and above 4 $/US gal, the prime conclusion of our
comments about furthering distributed over central electricity generation holds
true well beyond Hawaii or US borders. Distributed solar generation has
profound economic, environmental benefits. It also dramatically increases
energy, water and food security, while leaving agricultural lands for food
production instead of PV-farms or bio-fuels. We would indeed have enough appropriate
roof space for 100% of Hawaii County’s electricity needs, including energy for 100% conversion to EVs[11].
To summarize,
we recommend that DOE, DBEDT and NREL dramatically increase its
support for the development of distributed PV systems by focusing on those
businesses who demonstrate best practice integrations, sizing and lowest installed
cost*** of PV systems, which combine PV, storage and EV charging means. Likewise,
they should watch for legislation that might hinder effective or rapid growth
of distributed PV generation, as reported from Australia[12]. *** The installed cost of PV systems is 2.5x
less in Germany than in the US, despite similar PV panel costs[12,13].
Our recommendations
also include thoughts about the role of utilities. They could profit from
distributed solar PV in a number of ways, e.g. by using their access to
low-cost capital to become low-cost installers of home PV systems. Despite
utility costs for centrally generated power being higher than for distributed
PV and despite kWh billing reductions due to new home PV systems, we see revenue
opportunities for utilities such as:
·
Reduce $/kWh rates as indicated
below, to stimulate demand for more electricity business. New on-grid PV homes
increase revenue via the MMC and via excess kWh sales. The “loss” of kWh sales
due to conversion of one old home to PV generation can be balanced by the
excess PV energy from it and about half of a new PV home installation, from
both of which the utility receives MMC (Monthly Minimum Charge) revenue and for
which the utility can sell the free excess PV energy.
·
Income from the MMC (Monthly
Minimum Charge) – $20/month now in Hawaii County, which would
allow an overall utility rate reduction by 3 and 11 cents/kWh for oil- and
PV-utilities, respectively, for each new PV-home with a NEM contract added to
the utility customers,
·
Free home-PV excess PV energy,
which maintains some kWh sales without fuel purchases. The sale of these excess
kWh are equivalent to rate drops of 2 and 12 cents/kWh, for oil- and
PV-utilities, respectively, for the assumed home PV utilization of 70% or 1.43x
PV system oversize. Note that for a utility to maintain kWh sales
as PV penetration increases, it is enough that the utility acquire 1.3 new
PV-home customers for each old home “loss” to on-grid PV, because each “loss”
is worth the excess energy from 1/(1.43-1) = 2.3 PV homes, including the one
“lost”.
·
Revenue balance -- Even for an
oil-utility, the above benefits, MMC, free PV energy and fuel savings compensate
8 + 43 + 25 = 76% of the kWh sales loss when one old home is converted to on-grid
PV. By adding just a fraction (24/51 = 47%) of a new PV home to the grid, the
utility will have recovered 100% of the “lost” revenue, saved 100+30+30*0.47 =
144% of the fossil fuel (it only takes 0.86% of its output to serve as back-up
for these PV systems), and still distributes 30+30*0.47 = 44% of the original
kWh-energy, with its transmission losses, to mostly non-PV rate payers..
·
The reduction of transmission
losses per total community generated kWh from central & distributed
sources is especially well achievable if PV homes are equipped with battery back-up,
which further reduces and dampens transmission peaks and its losses, besides the uninterrupted power valued by
electricity consumers.
·
Decreased costs and $/kWh rates
of utility-installed PV systems, because of standardization benefits, and reduced
regulatory and land costs.
The above analysis did not
consider the utility dynamics of meeting the load demand minute-by-minute &
24/7, especially when increasing the contribution of distributed PV generation.
However, many regions, including
Germany, found that the wind and PV day-time energy additions helped to flatten
the daily load demand curve[14], reduce the operating time of costly peaking
units and thus lowered the overall European $/kWh rate.
APPENDIX – For Table 1, we assumed a conservative
PV capacity factor of 16%. The ability of a PV system to deliver kWh to the
home was assumed to be 1.34x greater than the average needed amount, i.e. the PV
system utilization was assumed to be 70% for home and utility PV systems (free
fuel !) and US-average of 43% for the fossil fuel utility. We ignored the cost
of capital (which would further favor home PV systems because of its lower
CAPEX), ignored inflation and fuel escalation rates, and assumed installation &
miscellaneous costs to equal 100% of the equipment cost. Exception: The home (but not the utility) PV
panel cost includes installation, inverter and installer profit.
One easy-to-install PV system
which may appeal to many home owners is shown in Fig.1, and is represented in
Table 1 by the 3rd column from the right: Adapted from ref.[10], it
features PV panels, batteries, charge controller, inverters and a disconnect
switch, as needed for each parallel PV panel, so that the PV system output can
be plugged into either one of many existing home (grid) outlets, like an
appliance, or into a separate, uninterruptible power cord outlet or circuit,
which does not get disconnected during grid outages. The shown battery back-up
from the grid via a rectifier is safe, thanks to its isolation transformer. Such a PV system, after UL-type approvals,
might not even need utility or building permits as in Germany[12].
REFERENCES
[1] John Farrell, "Home
solar PV cheaper than concentrating solar power," RenewableWorldEnergy.com
(blog) February 24, 2011 http://www.renewableenergyworld.com/rea/blog/post/2011/02/home-solar-pv-cheaper-than-any-concentrating-solar-power-plant
[2] Kate Garrat, ”Solar PV needs more PR power
in light of subsidy cuts,” The Energy Collective, Blog, http://theenergycollective.com/kate-garratt/114916/solar-pv-needs-more-pr-power-light-subsidy-cuts
20 Sept 2012
[3] Thomas Loudat, PhD (Consultant, Oahu. HI), “Analysis of the economic and
fiscal impacts of the Hawaii solar energy credit for residential
and commercial photovoltaic systems,” Report to Department for Business,
Economic Development & Tourism (DBEDT), Hawaii, (2012), in preparation, based the
“2007 DBEDT Input Output Model.” Parts of the report and the underlying
model[3a] are available on DBEDT website
[3a] Binsheng Li, PhD, (Research and Economic Analysis Division, DBEDT, Hawaii), “The Hawaii State input-output
study: 2007 Benchmark Report,” State of Hawaii, July 2011, http://hawaii.gov/dbedt/info/economic/data_reports/2007-io/State2007IO-7-2011.pdf
[4] Danny King, "Plug-in
vehicle battery costs of $250 per kWh coming with "dramatic" price
fall," Jul
13th 2012, http://green.autoblog.com/2012/07/13/plug-in-vehicle-battery-costs-of-250-per-kwh-coming-with-drama/
[5] Engine generators available at CostCo and
others for 0.1 $/W
[6] Rob Shikina,
"Stubborn fire destroys 15-MW battery building at Kahuku wind farm," 2 Aug.'12
(Blog) http://www.staradvertiser.com/news/breaking/164684136.html?id=164684136
[7] Wikipedia, “Renewable
Energy/Production Tax Credit (PTC),” Energy Policy Act of 1992, Unless extended, the PTC of 2.2
cents/kWh for utilities will expire by end of 2012 http://en.wikipedia.org/wiki/Tax_credit#Renewable_Energy.2FProduction_Tax_Credit_.28PTC.29
[8] Wikipedia, “Global electricity prices by
country,” http://en.wikipedia.org/wiki/Electricity_pricing,
2011 all in US cents/kWh; US 5-36, Denmark 40.38, Germany 27.81, Netherlands 28.89, Spain 22.73, UK 17.85.
[9] Wikipedia, “Gasoline (and diesel) usage and
pricing,” in $/US-gal: US ~4, Europe ~9; http://en.wikipedia.org/wiki/Gasoline_and_diesel_usage_and_pricing
2012
[10] Jonathan Cole (Honokaa, Hawaii),
"Accelerating the Solar Transition," NASA Tech Briefs, 2012 Design
Contest, 23 June 2011,
http://contest.techbriefs.com/sustainable-technologies-2011/1612-accelerating-the-solar-transition
[11] U. Bonne, "Can Hawaii County Really Be
Energy Self-Sufficient? (yes, with PV only!)," 6
Nov.’09, http://www.energyfuturehawaii.org/Hawaii-County-Energy-Self-Sufficient
[12] Giles Parkinson, "How big
utilities propose to kill solar PV," 9
July 2012, http://reneweconomy.com.au/2012/how-big-utilities-propose-to-kill-solar-pv-81496
[13] Barry Cinnamon (former chief executive
of Westinghouse Solar), "Cut the price of solar In half by cutting red tape,"
5 July 2012, http://www.forbes.com/sites/toddwoody/2012/07/05/cut-the-price-of-solar-in-half-by-cutting-red-tape/
[14] Craig Morris, "German wind and PV
lower European market power prices," 24
July 2012, http://www.renewablesinternational.net/german-wind-and-pv-lower-european-market-power-prices/150/407/39758
_____________________________________
PEIS
= Programmatic Environmental Impact Statement (for Hawaii’s renewable energy goals)
The deadline for submitting
written testimony is Oct 3 or 9, 2012
To get involved:
To submit comments