A news report from RenewEconomy highlights the transition of Palo Alto, California to 100% renewable energy and it got us to wonder, so what about the rest of you munis?
To be sure, Palo Alto has a significant advantage over most utilities - IOU or municipal - in that it gets 50% of its electricity from hydro-electric sources. Still, this was a giant leap forward toward sustainability for the city which is home to Stanford University. Palo Alto intends to supplement its hydro sources with wind farms, solar arrays and renewable gas captured from landfills. If those aren’t sufficient to meet the city’s needs, they will buy non-renewable energy with renewable energy credits.
If you are expecting that much progress to come with a shocking price tag, you would be right. But the shock is how low - just $3 per customer per year!
From the article:
“Palo Alto has been a leader in reducing its carbon emissions,“ Mayor Greg Scharff said of the decision – the city first established its Climate Action Plan in 2007, setting goals for reducing greenhouse gas emissions from all sources.
“When we realized we could achieve a carbon neutral electric supply right now, we were compelled to take action,” Scharff added. “Climate change is one of the critical challenges of our generation and we hope our actions will inspire others to follow suit.”
But, as PaloAltoPatch notes, being the owner of all of its energy utilities has given the city an advantage in the low-carbon stakes – the autonomy to make decisions based strictly on the best interests of Palo Altans, without worrying about shareholders.
“As a City, we’ve had cheaper, greener power for our citizens for decades, and being able to make this recent move to 100% carbon-free electricity is just another example of how owning our own utilities pays off,” said City Manager James Keene.
Of course, every muni utility has that same advantage - they can do what is best for the local residents without having to answer to far-flung shareholders who may not care what happens within the city. So why are the policies of so many munis every bit as backward as their IOU cousins?
Could it be because in most cities the residents only pay attention to what their utility is doing when it dramatically raises rates? Surely that is the case in Glendale - when Glendale Water & Power rolled out their fatally-flawed Feed-in Tariff, not a single resident spoke on the subject. But now when GWP is trying to institute a 24% rate hike they are getting lots of public participation, that is - anger - in response.
Palo Alto may be in a particularly fortunate place to allow them to take this step, but every muni could be taking similar, if smaller, steps.
The public simply has to demand it.
This coming Tuesday, President Obama will layout his strategy for addressing climate change. As this is the most serious challenge the world faces in the 21st Century, we can only hope his Vision will be up to the Task.
Here’s his announcement of the upcoming speech:
We will be watching on Tuesday with great interest and will offer our thoughts then. Never has the scriptural imperative - “Without Vision the People Perish” - been more apt.
Let’s hope for something big!
ExxonMobil CEO, Rex Tillerson - whose name and position inevitably conjures images of dying dinosaurs - emceed the company’s annual shareholder meeting this past week and he had some blunt words for those who were advocating for a resolution on reducing greenhouse gas emissions - forget about it, we can’t get there.
Mr. Tillerson responded to questions from proponents of the resolution - which Management had recommended be voted down - during the open comment period before the vote. When asked about the problem of exceeding 350 parts per million CO2 - the limit widely acknowledged as the threshold for preventing significant climate change - he replied:
Well, I can not conclude there is something magical about 350 because that suggests these models are very competent and our examination of the models, are that they’re not that competent…
We do not see a viable pathway with any known technology today to achieve the 350 outcome that is not devastating to economies, societies, and people’s health and well being around the world. You cannot get there.
When he speaks of steps that might be “devastating to economies” he is deathly serious:
We do not have a readily available replacement for the energy that provides the means of living that the world has today, not our standard of living but equally, if not more importantly, a standard of living that more than 2 billion people on the planet are below anything any of us would find acceptable from a poverty, hunger, education standpoint.
How do you want to deal with that great social challenge? To what good is it to save the planet if humanity suffers in the process of those efforts when you don’t know exactly what your impacts are going to be?
The irony here is pretty intense - Mr. Tillerson is only focused on the risks associated with reducing the use of his company’s products - but he glosses over the impact that climate change is having now, and will have in the future. It is insulting to suggest that he, or ExxonMobil, is actually concerned with raising the standard of living of the billions to which he refers and yet they are exactly the people who will suffer the most from fossil fuel-ed climate change.
Instead, Mr. Tillerson expounds on his “faith” that technology will allow us - or at least the First-Worlder’s amongst us - to adopt a “mitigation and adaptation” approach to dealing with climate change. That might work in Dallas - where the meeting was held - but it is a death sentence for say, the Maldives.
Taking comfort in his words, the shareholders dutifully voted down the resolution 73 to 27%.
Our Four-Part Series on Comparing Commercial Solar Bids concludes today with Part 4: Comparing Return on Investment (ROI) and Levelized Cost of Energy (LCOE). (You can read our earlier installments here: Part One: Comparing Solar Modules; Part Two: Comparing Solar Inverters; and Part Three: Your Utility Savings Analysis.)
We learned in Part Three what should be contained in a Utility Savings Analysis - power and energy production over the system lifetime, savings in Year 1, and savings over the subsequent years as a function of guesstimated utility cost increases over time. Given the energy saving starting in Year 1, the cost of the system, any Operations & Maintenance costs, the anticipated rebate from the utility, and the tax benefits anticipated for the system, your prospective solar contractor should map out for you the cash flows associated with your system.
The O&M piece is worth pausing on for a moment as the system design will play a major role in estimating what your annual O&M costs will be. It is true that for the most part, solar power systems require little or no maintenance. Indeed, the solar modules will most likely still be producing plenty of power long after everyone associated with the project is long gone! (NREL has solar modules that have been producing power for forty years with no sign of stopping and the modules being manufactured today - at least from the top tier manufacturers - are of much higher quality than what was available in the 1970’s.)
The inverter(s), however, are another story. There is a reason that central inverters and string inverters come with relatively short warranties - typically five years standard for central inverters and ten years for string inverters - and that reason is heat. Since large inverters process very large amounts of power they also generate a lot of heat and that ultimately takes its toll on the electronics. If you add in adverse environmental conditions - high humidity, dust, the occasional rodent, etc., and sooner or later that inverter will fail. A proper ROI analysis will factor in the cost of inverter replacement over the lifetime of the project. If the included warranty is ten years, then inverter costs should appear every ten years. If the warranty is five, then replacement costs should be included every five.
Conversely, one of the main selling features of microinverters in the commercial marketplace is the length of the warranty provided. At a full twenty-five years, that means that inverter replacement is covered over the modeled lifetime of the system. (Of course, offering a warranty and being able to honor that warranty are two different things and there are few inverter companies that have been around for twenty-five years.) If you can reduce or eliminate inverter replacement costs, that will have a significant impact on O&M costs over the lifetime of the system.
Other O&M items include system monitoring (if not included in the purchase price), security (if conditions warrant), and cleaning (a very nominal expense).
For commercial systems the O&M expense is often modeled as a percentage of the purchase price per year, rather than discrete payments representing replacement events. In this way the O&M expenditure is actually more like a set-aside for a maintenance fund to be used as needed over time. It should accumulate to at least the value of inverter replacement within the inverter warranty period.
The other wildcard element in this analysis involves calculating the cash value of any received tax benefits. While we don’t provide tax advice (and accountants shouldn’t be designing solar power systems, either!), we can say that aspects of tax benefits to be considered are: the 30% federal investment tax credit, plus state and federal depreciation, the latter elements being a function of the tax rate of the system owner who will try to utilize the benefits. Of course, if the client is a non-profit, there will be no tax benefits to consider - the primary reason why the payback on solar for non-profits is so much longer.
The final piece - the rebate from the utility - should be factored in either as a lump-sum payment if the rebate is an EPBB rebate, or in annual payments over time (typically five years worth) if it is a PBI rebate. In California, these will be based on the output from the CSI rebate calculator, and those calculations should be made available.
Put all of that together over time and you have a series of cash flows, positive and negative, from which an Internal Rate of Return can be calculated and, more importantly, the payback period determined. Keep in mind, however, that this calculation is dependent in part upon assumptions about utility rate changes which, while possibly quite accurate in the short term, become increasingly speculative over time. Still, if the calculation is done in a manner where the assumptions are properly identified, the ROI calculation should provide a reasonable means of comparing competing bids as to relative value.
While it is common in the solar industry to express the cost of the system in dollars/Watt, that is a misleading statistic at best since it masks variables affecting real world performance. A far better metric - and one that your installer should be able to provide you - is the cost per kWh for the energy that will be produced by the system over its anticipated lifetime.
The calculation is actually quite simple - determine the total out-of-pocket costs for the system owner over the system’s lifetime (including purchase price less rebate and tax credits, plus all O&M costs) and divide it by the total amount of energy to be produced (allowing for the system’s performance degradation over time).
We prefer this number because it reflects the real world performance and it allows for direct comparisons against the client’s previous costs for energy. Indeed, we typically find costs per kWh in the 8-10¢ range compared to utility costs of 15-25¢ starting in Year 1. But because the energy cost for the solar power system is fixed over its entire lifetime versus the cost of energy from the utility which is constantly rising (even if we don’t know how fast), the comparison is quite compelling.
Note that by applying an agreed upon (or at least disclosed) rate for utility increases, a graphical comparison over time can be produced – but the underlying LCOE is not at all dependent upon future utility rate changes. This gives the client the ability to compare multiple proposal against a true value proposition – how much will the energy from the proposed system cost? From a financial perspective, this is the best comparison point that we have been able to identify. A potential solar contractor who balks at providing this should, you guessed it, be scratched from your list!
The preceding is an excerpt from Jim Jenal’s upcoming book, “Commercial Solar Step-by-Step,” due out in July.
We learned two, somewhat related things this past week - atmospheric concentrations of CO2 exceeded 400 parts per million for the first time in three million years, and the Republican Party is internally divided on how, or whether, to address that fact. Way more than the electoral fate of the GOP may hang in the balance. (H/t - Climate Denial Crock of the Week.)
First the bad news - the chart above shows CO2 concentrations over the past 300 years. The really steep bend in the curve is our recent history with the unprecedented 400 ppm point being reached just now. Keep in mind that 350 ppm was the level that scientists thought we could tolerate without experiencing radical environmental changes.
But as some of the news reporting makes clear - not only have none of us ever seen this much CO2 in the atmosphere - neither has any human being. Indeed, the last time CO2 levels were this high - based on ice core data - was roughly three million years ago, long before human beings appeared on the scene.
I say some of the reporting because you don’t have to poke at the underbelly of the Interwebs for long before you find denialist sites that will ask, “Hey, what’s the big deal? CO2 is good for plants so why are you folks all freaking out." As if sea level rise and massive changes in weather leading to crop failures around the world were just a walk in the park.
Which brings me to the second story from last week - that of a “civil war” within the Republican Party over how to address the issue of climate change. This is a fascinating piece at the National Journal by Coral Davenport and it describes how there is a growing divide in the GOP between politicians who refuse to admit climate change is happening and rank and file members who have become convinced based on recent events. For example, the article describes the efforts of MIT professor of atmospheric science, Kerry Emanuel, to reason with Republican Presidential hopefuls during the last election cycle. It didn’t go well:
In January 2012, just before South Carolina’s Republican presidential primary, the Charleston-based Christian Coalition of America, one of the most influential advocacy groups in conservative politics, flew Emanuel down to meet with the GOP presidential candidates. Perhaps an unlikely prophet of doom where global warming is concerned, the coalition has begun to push Republicans to take action on climate change, out of worry that coming catastrophes could hit the next generation hard, especially the world’s poor.
The meetings didn’t take. “[Newt] Gingrich and [Mitt] Romney understood, … and I think they even believed the evidence and understood the risk,” Emanuel says. “But they were so terrified by the extremists in their party that in the primaries they felt compelled to deny it. Which is not good leadership, good integrity. I got a low impression of them as leaders.” Throughout the Republican presidential primaries, every candidate but one—former Utah Gov. Jon Huntsman, who was knocked out of the race at the start—questioned, denied, or outright mocked the science of climate change.
Soon after his experience in South Carolina, Emanuel changed his lifelong Republican Party registration to independent. “The idea that you could look a huge amount of evidence straight in the face and, for purely ideological reasons, deny it, is anathema to me,” he says.
Emanuel predicts that many more voters like him, people who think of themselves as conservative or independent but are turned off by what they see as a willful denial of science and facts, will also abandon the GOP, unless the party comes to an honest reckoning about global warming.
That doesn’t sound like good news for the GOP as a party, but in the short term it is even worse news for the planet. If the USA cannot lead on climate change very little will happen. If Republican politicians fear for their political survival if they acknowledge climate change is real and we need to make changes to prevent its worst consequences - then they will do nothing to help, and all too often actively work to obstruct progress. (See, e.g., Senator Inhofe.) That is a missed opportunity that we can ill afford.
As I said, the piece is fascinating reading and I commend it to you.