Does the Solyndra failure mean, as some would assert, that the entire DoE loan guarantee program is a scam that puts taxpayer dollars at undue risk? Hardly. The vast majority of the projects approved under the program present very little risk to taxpayers. So why don’t people know that?
We came across a couple of items today that seem to put this in some perspective. The first was a story on NPR that outlined Republican opposition to the loan program even though 16 of the 28 projects that it supported already have in place long-term energy sales contracts - making them nearly risk free. Nevertheless, Rep. Cliff Stearns (R-Fl), now opposes the program entirely (although he backed it when it originated during the Bush Administration) and he believes that we simply “cannot compete with the Chinese” in solar panels and wind turbines.
Here’s the entire story - it is worth a listen:
By way of contrast, the second piece that came to our attention today is from Rhone Resch, head of the Solar Energy Industry Association (SEIA). Resch was sending out an update to the SEIA membership - Run on Sun is a proud SEIA member - sharing with them a blog post he received from Dan Pfeiffer, Communications Director at the White House. Drawing a clear distinction from Rep. Stearns, Pfeiffer cited Energy Secretary Steven Chu’s admonition over this past weekend:
The United States faces a choice today: Will we sit on the sidelines and fall behind or will we play to win the clean energy race? Some say this is a race America can’t win. They’re ready to wave the white flag and declare defeat… Others say this is a race America shouldn’t even be in. They say we can’t afford to invest in clean energy. I say we can’t afford not to.
It’s not enough for our country to invent clean energy technologies – we have to make them and use them too. Invented in America, made in America, and sold around the world – that’s how we’ll create good jobs and lead in the 21st century.
Secretary Chu is absolutely right and it should be a matter of pride for all Americans that we not only compete, but that we win this competition. After all, Solyndra notwithstanding, we are competing successfully right now. Consider:
The solution to our problems is not to throw up our hands in despair and slink from the playing field. Rather, it is time to redouble our efforts and make the sort of investments that will really help our manufacturers - and installers, thank you - thrive.
“Data, data, data, I cannot make bricks without clay.”
Alone among the municipal utilities, and in a most welcome new development, LADWP has started to publish data from its Solar Incentive Program (SIP) which was restarted on September 1. Although this analysis is clearly preliminary given that there are only three weeks of data available in the 9/21/2011 working dataset, nevertheless some interesting trends are already evident and one clear necessity arises - LADWP needs cost caps even more than does CSI.
In restarting the SIP, LADWP allocated $40 million in new funds, evenly divided between the Residential and non-Residential (Commercial, Governmental, Non-Profit) segments of the market. Although the program is technically a Step-driven program with MW allocations for each step, in reality, it is a budget-limited system - when the annual budget for a given segment is met, the program in that segment will shut down.
As part of their new and improved program, DWP has also started to publish datasets that are similar to, but different from the data gathered and released by the California Solar Initiative (CSI). For example, the CSI data reports on the specific products used on the project whereas the DWP data only identifies the manufacturer. Hopefully future releases of the data will correct this limitation. In addition, neither data set allows analysts to distinguish between costs associated with the actual installation versus lease-based financing costs which apparently a handful of companies - most notably SolarCity - include in their reported costs.
For the purpose of this post we analyzed DWP’s most recently released dataset, dated 9/21/2011. That dataset includes data from both the so-called “legacy” program and the newly revised program. As we were only interested in the most recent trends - that is, based on what has happened since the program restarted on September 1 - we excluded all legacy data from our analysis. Also, while system costs are often reported in dollars per DC or Nameplate Watts, we don’t believe that provides much insight into the quality of the systems being installed. For that reason, our system costs are based on dollars per CSI AC Watts.
The big news from the non-residential sector of DWP’s brand new SIP is that it is already over-subscribed!
Wow - that didn’t take long! Indeed, based on the date applications were submitted, the non-residential sector crossed the $20 million limit on September 16 and is now some $2.3 million over-subscribed.
So who got all of that money? A total of 54 projects combined to grab the $20 million - 24 commercial, 24 government and six non-profit. In terms of actual dollars, however, it was the government sector that was the big winner: its 24 projects snagged over $16 million, with commercial set to receive $4.6 million and non-profits picking up the scraps left behind at $1.5 million. (Word to the wise for non-profits that are interested in snagging some solar rebate money from DWP - get your ducks in a row early and be sure that your rebate application hits the stack the day the program re-funds next year.)
The residential side is somewhat more interesting if only because it is still open for business! Indeed, we got stated looking at this data because a potential client was being told by another solar company that they had to get their application on file by October 15th or they would be left out. How accurate is that contention? Well, it is always hard to predict the future, but based on the data so far, that appears to be mostly marketing hype. Here’s what the program looks like so far:
That linear trendline seems to fit the data rather nicely. If we use that trendline to predict when the cumulative rebate reservations will hit the $20 million threshold, the answer is - not anytime soon. Indeed, the predicted date is not until April 3 next year. (We will check back next April to see how well this preliminary prediction fared!)
Of course, there is also the step limitation to consider - presently the SIP is on Step 5 with 3.37 MW available (as of 9/15) and is paying residential rebates of $2.20/Watt. When the Step 5 allocation is exhausted, the rebate will decline to $1.62/Watt. What does the data so far suggest about when that will occur?
Here the equation for the trendline does offer some reason for greater urgency - it predicts that Step 5 would be exhausted by November 26. (Of course, if that happens, it will extend the lifetime of the current funding for the residential sector beyond the April 3 target predicted above since rebates after November 26 would be paid out at the lower rebate rate.)
Finally, as we did with the CSI data, it is informative to go hunting for outliers in this early data. This is especially important since these applications are still being reviewed and DWP staff is in a position to push back against any of these applications that appear to grossly exceed expectations.
We filtered the data to only include residential projects from the new program. We additionally excluded any company that did not have 20 or more kilowatts of project applications pending. Finally, to try and isolate sold systems only (as opposed to leased) we required the system owner to also be residential. As filtered, our remaining data accounts for 133 of the 239 total residential projects in the dataset. Here’s what we found:
Now what is going on here? A.S.E.S. Electrical Group, Inc., is installing three systems for a total of 35.9 kW at a total cost of $597,500 or $16.66/Watt! (This makes our lead outlier in the CSI data - Galkos Construction, Inc. - look like a real slacker.) From the data, A.S.E.S. (not to be confused with - or was that the intent? - the American Solar Energy Society which is commonly known by the acronym ASES) appears to be planning to use Schuco panels. Although the data does not reveal the precise model Schuco panel they are proposing, a quick search online for Schuco panel pricing suggests that Schuco panels can be purchased for somewhere in the range of $2.00 to $2.28/Nameplate Watt, retail. If we apply the nameplate to CSI derating factor that appears in the data for the A.S.E.S. projects, that works out to a retail price average of $2.61/CSI AC Watt. Where is the remaining $14/W going? And why would any residential customer choose to have an installation performed at a cost nearly twice the local average?
We hope staff at DWP will take notice of these results and give some serious thought to imposing cost caps to protect their customers.
When is a Feed-in Tariff Program not a feed-in tariff? Apparently when it is conceived by the LADWP - or at least that was the prevailing view in a sometimes raucous public workshop at LADWP headquarters earlier this month. Here’s our report and recommendations.
It might help to begin by defining one’s terms. As it is commonly understood, a feed-in tariff is a provision by which a utility pays an energy producer for every kilowatt hour their system produces, usually at a preset price that is above market value (to provide an incentive for the installation in the first place). A feed-in tariff differs from a net metering arrangement since the payment is based on production, not on whether the energy produced is “surplus” to the needs of the site where the production is hosted.
By that definition, what LADWP is proposing to do is not a FiT since they are not offering developers a set price for the energy to be produced. Instead, at least during their initial “demonstration phase", LADWP is asking developers to compete amongst themselves by offering proposals for a fixed price (as adjusted by LADWP’s time of use modifiers) and LADWP will pick the “winners” based on lowest cost to the utility.
It was this “reverse auction mechanism” that produced the most animated response from a well-engaged audience which included community activists alongside solar industry participants. Despite the sometimes pointed objections to the demonstration program’s structure, it was clear that DWP staff was committed to this approach, at least for the demonstration phase. Their adamance seemed to be tied to the idea of “price discovery” - staff seemed to suggest that despite having lots of data about other FiT programs around the world, they were not in a position to properly price their program and so they were going to use the demonstration period to determine just how low a price they could get out of the bidding developers.
Of course, just as with any lowest bid proposal process, there is no guarantee that the lowest bid developers can actually produce a successful project at that cost, and in any event, it seems to violate the fundamental concept of a FiT. (Interestingly, Black & Veatch - the consulting firm that is working with DWP - notes that until July of this year the FiT was called the LREP or Local Renewable Energy Program. Perhaps they too realize that what is being proposed might be a good thing, but it is a poor FiT.)
Overall, it appeared that DWP staff had learned from the July workshops and had made some changes to the program’s details - if not underlying design - to respond to the concerns that were raised. In no particular order, here are the points that struck us:
DWP will be taking comments through September 30th and hopes to go to their Board with this proposal later this Fall. You can access the supporting documents for the FiT at the LADWP website.
We have previously noted some pretty outlandish outliers in the cost of installing solar power systems in California, but now that is going to change. Under SB 585 (Kehoe D-39) that was just signed into law, the Public Utilities Commission (PUC) has 90 days to establish and impose cost caps on residential and non-residential solar installations for the California Solar Initiative (CSI). From our perspective that cannot come a moment too soon.
Senator Kehoe’s bill started out as an urgency measure to refund the CSI program which had exhausted its available funding for projects in PG&E and SDG&E territories. The bill still does that, directing an additional $200 million into the program and that is a very good thing. But what we like every bit as much is the amendment that was added in the State Assembly which provides for the following:
Within 90 days of the enactment of this act, the Public Utilities Commission shall establish and impose project cost caps for residential and nonresidential projects under the California Solar Initiative, based on national and state installed cost data.
We believe that this is an important, and long overdue consumer protection feature for CSI and we hope that other rebating entities such as LADWP and PWP will also adopt such caps.
Why is this so important? Well, take a look again at this chart that we prepared from the CSI data for the first half of this year showing the reported installed costs for the largest solar installers in the CSI program:
The range here is striking, even shocking. At the low end you see an installed cost of $6.56/Watt, ranging all the way up to an outlandish $13.32/Watt! And that price is an average over hundreds of installations by Galkos Construction. If the PUC were to establish a hard cap for residential installations of, say, $10/Watt and if that cap had been in place during the first half of the year, the customers of Galkos Construction would have saved $2.97 million - or on average, $7,618 each!
The cap, of course, should be lower than $10/Watt. We sincerely hope that the PUC will look closely at the abuses evident in the CSI data and put some teeth into this new law. Only then will potential solar clients be protected from the predatory actions of the few outliers that needlessly inflate costs to pad their pockets.
UPDATE: The folks over at 1 Block Off the Grid have a great infographic that does a fine job of putting the Solyndra situation into perspective. You should go check it out and then come on back here to see what we have to say. Go ahead - check it out - we’ll wait!
Unless you have been hiding in a cave lately, you have undoubtedly encountered the media orgy over the collapse of solar panel manufacturer Solyndra. Yet amidst much media hype - most of it driven for political gain - the fact remains that as to the overall solar industry, Solyndra just doesn’t matter.
Much has been written about the so-called failure of federal solar subsidies in light of Solyndra’s $535 million dollar loan guarantee debacle. Indeed, some would go so far as to demand that all solar subsidies should be abolished. To be sure, there are many, more reasoned voices explaining the error of such thinking, including at the NY Times, Time magazine, and the Washington Post, but the fact of the matter is that for most solar installations, loan guarantees play no role whatsoever.
Here is where federal money does assist solar power installations:
Collectively, these federal tax subsidies save residential clients thousands of dollars, and as much as 50% of the total system cost for commercial clients. As a result, these subsidies play a part in every solar project installed in this country and they have gone a long way toward making solar more affordable, particularly during difficult economic times. The money is distributed to all who qualify for it without favorites - mostly - and in terms of actual dollars, it represents a tiny fraction of the $$$ lavished on other players in the energy marketplace.
Against that backdrop of how most solar projects operate in this country, the top executives at Solyndra just pleaded the Fifth Amendment in refusing to answer questions posed by a decidedly hostile House committee. That is their right - enshrined in the Constitution, no less - and it does not mean that they are guilty of any wrongdoing. (Indeed, the lawyer in me notes that it would constitute malpractice to let your client testify before such a committee while multiple investigations are in the works.)
But the optics are awful.
Add this sad display on top of solar’s pre-existing PR problems and it is clear that, once again, the solar industry is in for some harsh words and tough times.
So what can the rest of us - who aren’t taking the Fifth but are actively promoting solar for our clients because we know that it is a great deal for them - do about this? Plenty. Here are some suggestions:
Solar is an exciting and dynamic industry and as such it has had and will continue to have winners and losers. But Solyndra aside, the future for solar is bright, and for those of us at Run on Sun, there’s nowhere else we would rather be - join us!
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