Solar Power Heating and Cleaning Up in Germany

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1 Solar Water Heating as a DSM Strategy for Colorado Utilities & Their Customers Joe Bourg October 22, rd Colorado Utility Efficiency Exchange Millennium Energy, LLC Golden, Colorado jbourg@q.com (303)

2 Presentation Summary News you can use Tips on solar program design United Power SHW Pilot Program Utility Perspective Customer Perspective SHW Business Models Tools for Customer Service Reps Q&A

3 US Markets Heating Up for Solar Water Heating In 2007, California approved a 10-year plan to add 200,000 solar water heaters statewide. Renewal of Federal solar investment tax credits provides a long-term extension of tax credits; removes $1,500 cap Lakeland, FL: 3,000+ systems in outsourced package deal February 2009, Energy Star Launched solar water heating promo; U.S. stimulus to include SWH

4 SWH IS Water Heating in Austria, Australia

5 But How Will That Play in Colorado? Solar fraction: the % of typical, annual residential water heating needs that can be met by standard SWH technology. Source: NREL

6 The Utility Can Add Strategic Value Improving customer service Reducing customer bills Diversifying the utility resource mix (easy solar) Supporting local economic development Meeting or anticipating regulatory requirements Generating RECs for possible future use Managing peak loads (demand-side management) Reducing purchased power costs Caveats: 1) Is electric water heating significant in the utility territory, or is fuelswitching from propane or gas advised? 2) Is it worth going after such a small, dispersed solar resource?

7 Principles of Good Program Design Assess co-op program drivers (situation analysis) Review technical potential Adjust for market potential (define the target market) Address technical and market requirements Choose a business model (financing and incentives) Test program economics and make adjustments Plan for implementation Plan for evaluation and improvement

8 Don t Forget the Economic Development Impacts

9 United Power SHW Program Analysis Coincident Peak Demand Reduction - Winter

10 United Power SHW Program Analysis Coincident Peak Demand Reduction - Summer

11 United Power SHW Program Analysis Monthly Coincident Peak Demand Reduction

12 United Power SHW Program Analysis Monthly Coincident Peak Demand $ Savings

13 United Power SHW Program Economics Inputs: Peak Demand Cost Demand Ratchet Avoided Energy Green Tag Value Avoided Coincident Program Cost $/kw-month Months/yr Gross Margin $/kwh Peak kw/swh system $/SWH System $ % $ $ Results (NPV basis): Rebate Model -- Utility Perspective Costs Rebate $0 Program ($200) Gross margin lost energy sales ($568) (Maintenance is customer cost) $0 Benefits Avoided demand charge $2,081 Green Tags $0 Other $0 Total Net Benefit (cost) $1,314

14 United Power SHW Program Customer Economics Inputs: Life of Annual Energy Annual Energy Year '1' Cost Inflation Rate Federal Cost of Solar Water System Savings (kwh) Consumption Of Energy Tax Credits Heating (SWH) System 20 2,703 10, % $2,625 $8,750 Total Rebates for System (GEO) $3,000 Discount Rate 4.25% Results (NPV basis): Estimated Annual O&M Costs ($/kwh) $0.005 Customer Cost of SWH System $3,125 Net Present Value Benefit-Cost Average Annual Simple Payback Lifecycle % of Electric of SWH System Ratio Value of Energy Period (years) IRR Bill Savings $1, $ % 27.03% The economic analysis was conducted with the Millennium Energy developed spreadsheet model available on the GEO Utility SHW Tools and Information Resource CD

15 Customer Payback Vs. System Cost

16 3 Basic SWH Business Models 1. Rebate Model. Utility provides support services and rebates, paid to solar customers or sometimes to trade allies. The most common utility program model. 2. Utility Ownership Model. Utility provides turnkey SWH energy services. Success has been limited, but instructive. 3. Third-Party Vendor Partnership Model. Similar to ESCO model. Customer receives SWH at no charge, but continues to pay for kwh-equivalent energy services. The utility benefits by outsourcing risks and partnering to meet strategic and economic needs. An emerging business model worth watching.

17 Tools and Information for Customer Service Reps: Education and Outreach CD

18 More Resources Denholm, P., The Technical Potential of Solar Water Heating to Reduce Fossil Fuel Use and Greenhouse Gas Emissions in the United States, National Renewable Energy Laboratory, Technical Report, March Available at Energy Star Residential Water Heaters: Second Draft Criteria Analysis and Proposal, U.S. EPA, October Available at Solar and Efficient Water Heating: A Technology Roadmap, U.S. DOE Energy Efficiency and Renewable Energy Program, (New plan under development in 09-10) Available at Solar Thermal Action Plan, European Solar Thermal Industry Federation, September Available at U.S. H2O, utility-solar interest group, information at Contact: Joe Bourg, President Millennium Energy LLC Golden, Colorado jbourg@q.com (303)