Designing Successful Solar Programs 4 Pillars for Success

Transcription

1 Designing Successful Solar Programs 4 Pillars for Success NCSL Solar Energy Institute Washington DC 2007 Christopher Cook Sr. Vice President Regulatory Affairs & New Markets SunEdison ccook@sunedison.com

2 SunEdison Background Vision To be the largest provider of solar services in the USA Business Overview SunEdison helps customers achieve predictable electricity pricing for the long-term, without the upfront costs required by traditional solar product vendors. 1. SunEdison takes 100% responsibility to build, own and operate the solar asset 2. The customer pays monthly based on the solar energy produced, in much the same way and at prices comparable to current retail utility energy rates Key customers include: Whole Foods, Staples, Kohls, Wal Mart, State of CA Key project financing partners include: Goldman Sachs, TD Banknorth.

3 Background -- A Surging Global Industry Increased volume decreases costs $35B market, 30% annual growth through 2017 Retail cost parity in some US markets within 8 years.

4 Solar/Grid Price Cross-Over Daily Output of Solar PV System (July) kw Hour TOU PEAK

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6 Net Metering Pillar 2 What is it? Tariff arrangement that simplifies the economic interaction between a customer-generator and the utility Always ask the question: what would a single old fashioned meter do? KISS A Safe Harbor Key element -- size Aggregate limit (if any) that fits with solar program goals Don t target 2% from solar but limit net metering to 1%

7 Net Metering Important Policy elements Allow size limit that does not constrain to smaller higher cost systems 2MW (fits with Interconnection) Larger project size = lower installed cost Size of individual systems DOES NOT matter from utility economics Single meter do not require additional meters customer s don t like and it becomes a barrier Customer retains RECs TOU debate allow customer to stay on current tariff or switch to flat rate if available DO NOT require mandatory rate structure shifting Best Net Metering models: States: New Jersey; Colorado (golden meter award winners); Oregon?? Model Rules: IREC Slide 5

8 Interconnection Pillar 3 -- What is it? Engineering review of impacts of distributed generator protection AND at the particular location on the grid where the DG system is proposed Blind to generator type Policy distinctions should not be involved IEEE and UL standards Additional grid specific inquiry required cannot connect a large power plant through a residential service Bifurcate simple proposed projects from those requiring significant study

9 Interconnection key elements of a successful policy For the simple: quick low cost review Eliminate barriers build on elements of interconnection rules that have been proven by empiricism New Jersey; Arizona; Colorado; Oregon?; using FERC screens IEEE 1547 and UL 1741 (accepted everywhere) Ensure all barriers are eliminated Notes: >33,000 dg systems interconnected nationwide some >20 years Not a single safety issue Not a single request for insurance payment Recommendation: IREC Model Interconnection Rules MR-I2005

10 Solar Incentives Pillar 1 Long term, stable, designed to accomplish transformation Incentive design With incentives reach or get near grid prices and solar market is huge require a substantial premium and market is nil Good program starts with low volume but higher incentives and moves over time to high volumes with low incentives Should identify time and volume required to move to grid parity Examples: CA 3,000MW to 2017; NJ 1,500MW to 2021; MD 1,400MW to 2022; PA 700MW to 2020; CO 230MW to 2020 Slide 10

11 Incentives Alternative designs California Upfront Rebate now transitioned to 5 year PBI New Jersey & Colorado Hybrid rebate / Solar REC NJ transitioning to REC only Maryland & Pennsylvania & Delaware S-REC only Oregon & N. Carolina & Hawaii State Income Tax credit

12 Other Solar program designs Feed in tariff Model used in Germany Great for starting a solar program but some growth and total incentive issues Difficult with PPA: no customer power reduction Residential rebate with identified declining cost structure Japanese model now at cost parity

13 Key program design elements what we ve learned Must be a long term program should provide as much industry certainty as possible Good target: 2% by 2020 Incentives and structure should be able to grow with expanding market Rebate programs often overwhelmed Program should encourage lowest cost solar installations minimize ratepayer impact (cap 1%) Administration should be aligned with program goals

14 Solar Program elements that are not a solid pillar Project by project grant awards No predictability market size unknown barrier to entry Module manufacturing extra rebate Skews market towards smaller manufacturing when cost declines come from existing plant expansion No domestic markets for product

15 A Look at the Maryland Solar program design (new law as of April 25, 2007) S-REC based bilateral contracts with electricity cos. lowest cost installation should be selected (no fiscal note) Starts at.005% grows to 2% of energy (=1400MW ) Offsets all future load growth no transmission lines Law caps rate impact at 1% ACP set in law declines every 2 years ($450/MWh) 15 year contract term required Upfront payment for R installations (like Colo.) Virtual in-state requirement

16 Pillar 4 Rate Design Various rate structures for electricity rates effect the value of solar Predominance of energy charges is good Increasing block rates help solar cost-effectiveness Moving to demand or fixed charges undercuts the value of solar Largely a Regulatory Commission Legislators can provide direction however

17 Rate Design Example Ex. 1: Electric bill = $ cents PV system on home produced 350kWh = $52.50 Ex. 2: Utility changes rates to include fixed (or demand) charge Fixed charge for monthly service = $ kwh is 11.4 cents per kwh Electric bill = $105 PV system on home produced 350kWh = $40.00 PV worth 24% less even though customer bill is the same

18 Where to Find Us Solar Alliance