Solar Cost Advantage PV

DFN: Great article regarding the relative attractiveness of PV versus Solar Thermal.

Bird’s Eye Lowdown On The Future Of Solar Power
by John Laumer, Philadelphia on 02. 2.11
Design & Architecture (less is more)

Have you noticed. as I have, that widely reported solar projects in the USA have spectacular or controversial attributes?

Computer simulations of huge projects in desert settings were very big in 2010 – creating a stereotype, I’d say. Extra reporting points for protests by environmentalists, charges of government socialism, or a suitably-phallic central heat collection tower.
Could the USA miss important opportunities to mainstream renewable energy by focusing on novelty aspects of big solar projects? Yes! Are there subtle public policy choices that need more attention at both the Federal and state levels? Read on and decide for yourself.

Standing by the river of solar news last week, I immediately spotted one game changer and evidence of a continuing trend in what gets public vs private sector support.

•Solar equivalent of drill here drill now: The Obama Administration has identified ‘solar energy zones’ on public lands in six western states most suitable for utility-scale solar energy production. The tracts amount to roughly 22 million acres of BLM-administered lands in Arizona, California, Colorado, Nevada, New Mexico, and Utah.

•Solar photovoltaics (PV) are about to become a lot cheaper: From the New York Times — Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States…. But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

•Neighborhood-scale photovoltaic market supported by private sector. From a Southern California Edison presser: ROSEMEAD, Calif., Feb. 1, 2011 – Seven new solar power plants capable of providing electricity for 8,125 average homes are now online for Southern California Edison (SCE) customers, the utility announced today…The newest solar photovoltaic installations, located in Ontario and Redlands, Calif., have a combined peak generating capacity of 12.5 million watts (AC). The new plants bring to 10 the number of SCE neighborhood solar stations.

•Government support flowing to the humongous attention getter projects. From a DOE presser: A 290-megawatt thin-film solar project expected to be the world’s largest photovoltaic project (PV) has received a $967 million DOE loan guarantee, the agency announced on January 20. DOE’s backing will support construction of NRG Solar’s Caliente Solar generating facility in Yuma County, Arizona.

The points listed above had added meaning for me after reviewing notes from a conversation I recently had with Brad Meikle, Chairman, of Silverado Power. Here are some highlights from that discussion – note that what Brad said is paraphrased or generalized for this context.

Check this out. I think you’ll agree that things not being widely reported are indeed of interest.

Silverado is focused on the 2 to 50MW size project – distributed, not centralized power provision, with power generation as close as possible to customer(s). (For key benefits of distributed power, see Eight Reasons Distributed Power Generation Is Superior To Central Power Station Expansion.)

Marketing and pricing.
As discussed in a recent article in GreenTechMedia, falling costs for solar photovoltaic technology could potentially create a trend away from central solar thermal and to central solar photovoltaic tech:

Solar thermal plants aren’t as attractive as they were in 2007. Back then, solar thermal was the technology of choice for big solar parks. Declining prices of silicon and silicon solar panels, however, have caused developers and utilities to switch over to building these with PV panels.
Upfront capital cost, reliability, access to water, and other factors figure in too, of course.

‘A principal challenge for small to mid-size US PV project developer is that there are no assured buyers for excess power.

The large central solar power projects must be fostered by large business with legal, financial, contractual expertise to negotiate with utilities, sufficient to obtain a contract for long term power sales.’

The German benchmark – why ‘feed-in’ is crucial.
‘Germany, with feed-in tariff, is the best benchmark case for evaluating policy choices in North America. Some large projects in German have benefited from the feed in tariff, but more than 90% of projects there are of the order of 100kW.

The number of construction and manufacturing jobs created under the German system is much larger and more uniformly distributed than in the USA, simply because mid- and small-size projects are encouraged, without need of institutional investor backing.

There are principally three elements of the German FIT program that have led to its sustainability (which has resulted in 150,000 jobs and >5bil euros per year in exports).

1.The cost of the FIT is passed on to the rate base – not paid for by taxes/the budget. This is most equitable as not everyone pays taxes, but everyone consumes electricity

2.Germany has always differentiated the FIT rate per kwh in 3 tiers – highest for residential, lower for commercial rooftop, and lowest for ground mount. At first most installations were ground mounted but it has evolved to be 95% rooftop, as a % of total installations.

3.Germany has remained flexible and adjusted the FIT as need be based on where module prices are. There is a misunderstood notion that FIT prices are always set at the wrong level, this is not correct. It can certainly be done poorly as Spain illustrated, but if it is actively managed so that IRRs are not excessive – this will drive market growth.’

California & beyond.
PV project incentives in California have slowed as budgets tightened and allocated moneys were consumed. Similar in others states. ‘Yes, the CSI has fallen down to its lowest tranche of support. The gap in momentum in California is the commercial installations. It is too expensive and impractical to negotiate a PPA for one commercial rooftop, and difficult to aggregate many – so this segment needs a FIT mechanism that enables these installations to sell the power at a predetermined rate.’

What all state will need: more than grants and loans.
‘USA lacks feed in tariff regulatory framework that would enable small to mid-size PV projects to obtain customers with ease.

If cash grant aspect of US Federal stimulus program ends, smaller PV projects may be delayed. The cash grant is important, but providing the grant still does not address the issue that incentives should come from the rate base – as this is the bucket that will be paying for transmission upgrades.’ (More localized power generation saves on transmission upgrades.)

Land use and natural resource impacts determined by project scope, location. Roof top, brown-field, and buffer zone installs utilize existing properties and do not drive up land prices (no competition with other land uses) and with no added footprint, storm water runoff or groundwater recharge impacts are trivial.

Also, roof top projects cause less depreciation of natural resource values (green spaces, etc.)

‘There are many opportunities to utilize contaminated land, but also solar installations have helped areas devastated by the real estate collapse and stabilized pricing.’

‘Water availability and other environmental concerns have given utility owners and investors an incentive to convert large scale central solar thermal plants over to large scale PV technology. Solar Thermal is more expensive than PV and not the right option for this reason. Many of these projects would consume 20% of the water available in certain areas. The water shortage in CA is as big a problem as the energy challenges and we can’t do anything that will worsen it .’

Financial market conditions.
‘Institutional investors prefer large scale (non-distributed) size projects Large utilities have access to capital and thus, all other things being equal, have an advantage now over mid-size and small PV project developers.

Utilities do want to buy Solar PV. However, they can’t build it all themselves, legally. The key is that the rules that have been set in place must be adhered to so that as much solar is brought online at the lowest possible price.

With construction industry stalemated, there is strong institutional investor interest in PV projects that require relatively modest capital and are low risk.’

Side by side comparison – solar thermal vs photovoltaic.
PV has more favorable cost curve than solar thermal because of lower water consumption and cooling process costs. (Climate change, specifically drought, is a financial risk of concern long term institutional investors in solar power projects.)

‘PV consumes no water. Solar thermal water consumption can be reduced through dry cooling but this increases the cost per watt by 20-40%.’

Utilities actively interested in investment in distributed PV ‘Greater stability of regional power grid is achieved by linking up a distributed group of small-to-midsized PV generation projects than to add one or two very large solar generation projects. Solar PV if applied in a broad scale way actually is quite stable. While each project is volatile with passing clouds, as they are broadly spread out they will be stable.’

Miscellaneous advantages of distributed PV projects.
Distributed PV projects, small to mid-size, especially, have the added advantage over large solar thermal projects of being more design adaptable to local and regional:

•Labor costs for site development, construction, fabrication, and maintenance. •Locally supported training programs, including community and trade technical colleges.
•Material availability.
•Zoning and municipal building code requirements.
•Mitigating natural resource conflict potential.
•Land pricing.
•Aesthetic concerns.
•Architectural conservation and compatibility requirements.


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