The City of Glendale is under a legal mandate to offer a Feed-in Tariff (FiT) program to its customers by July 1 of this year - but as yet, no information about a proposed program has been made public. Given that LADWP literally took years to develop its program that just began in February, Glendale’s silence raised serious questions over whether they would be able to produce a viable program before the deadline. Today we got a tiny glimpse at the process - here’s our update.
We have been trying to get information from GWP about their mandated FiT program since January. At that time we were informed that GWP was “conducting a rate design study” but that the study had not been made public “because it still [is a] work in progress." However, when we pressed for information about when the study would be made public, we received no reply. (Indeed, as of this writing that study has still not been made public.)
We then tried to contact the City’s Commissioners who oversee GWP, specifically sending emails to Commissioners Yao, Dentler, Chan, Armenian, and Adjemian. Sadly, the email addresses for Chan, Dentler and Adjemian - which are set forth on the City’s website - bounced and neither of the other two Commissioners provided any reply.
Today we decided to take a different tack and we turned to Twitter to see if that would provide a means of generating a response. Specifically, we tweeted the following:
@COGWaterPower - when are you going to release info about your mandated Feed-in Tariff program?
Score one for the power of Social Media as we got a direct message in response just 17 minutes later:
We are currently working on the rates and community meetings will be scheduled for May/June. Info. will be posted on meetings soon.Thank u
This was followed shortly thereafter with the following email from Hector Gutierrez:
As you are now aware per our response to your tweet today, the public meetings to inform our GWP customers of the new proposed electrical rates will take place during the months of May and June. Our legal department is currently working on the Feed-in Tariff implementation process. All these issues will be presented to the GWP Commission and City Council for their approval, and put in effect on July 1, 2013.
So, we still don’t know anything about the proposal’s specifics, but we do know that public meetings will be held in the two-months before the program is set to go live, which is more than we knew before. Unfortunately, public meetings in May and June to be followed by votes by the GWP Commission and then the City Council does not really provide much opportunity for changes to the program before a mandated July 1 go-live date. Moreover, it is curious that the public process would be framed as meetings to “inform our GWP customers of the new proposed electrical rates” as if only GWP customers were stakeholders in this process.
For now, we will hold our skepticism in check and await (eagerly!) news of the actual dates for the public meetings. Once any additional information is made public, we will update you on developments.
Of course, if anyone out there has any additional insight into what is happening in Glendale, we would love to hear from you!
Amidst the continuing sturm und drang between the solar industry and the Investor-Owned Utilities (IOUs), we came across this interesting piece over at REWorld documenting some revealing observations by Duke Energy’s CEO, Jim Rogers. Duke - the nation’s largest utility owner, sees the writing on the wall and is not sanguine about what it portends:
“It is obviously a potential threat to us over the long term and an opportunity in the short term… If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using us for backup,” Rogers said.
Rogers’ observation comes at a time when the conventional energy industry is facing “anemic” growth in power demand - due to increased efforts at energy efficiency and the growing impact of consumer-owned generation. Since IOUs make a guaranteed return on investment in building, mostly, added power generation capacity, if there is no need for additional capacity, there is no basis for future returns. Not a promising prognosis for an industry that has grown accustomed to those sweet, sweet guaranteed returns.
And that, in a nutshell, is the IOUs’ dilemma - as renewables become ever more cost-effective, and particularly once intelligent storage solutions become a part of standard solar offerings, the justification for the guaranteed existence of IOUs becomes weaker and weaker. Contrast this with the municipal utility model which is owned by the city in which it is based and which exists for the benefit of its residents. If their preference is for distributed generation, then the muni’s goal should be to facilitate the adoption of such systems. Since its customers are also its owners, the interests are aligned.
But not so with IOUs who exist to make a profit for their shareholders and those interests are not necessarily aligned with those of the monopoly-provided customers they “serve". Not surprisingly, it is the IOUs leading the charge against net metering and questioning the “fairness” of local solar power.
Which raises the question: Can we as a society afford to have IOUs anymore? In an era of carbon-driven climate change, are IOUs a dinosaur determined to fight their extinction to the bitter end, even if they take th rest of us with them?
SECOND UPDATE - Over at PVTech, Felicity Carus has written about the Sunrun lawsuit and quoted Run on Sun Founder & CEO, Jim Jenal at length. Here’s a link to her article: Solar lease companies face criticism over calclulating energy savings.
UPDATE - The lawsuit against Sunrun was covered in the March 1, 2013 issue of California Energy Markets (an independent news service from Energy Newsdata) and Run on Sun Founder & CEO, Jim Jenal, is quoted at length. The article, titled Lawsuit Charges Sunrun with Deceptive Marketing, begins on page 8 of the attached pdf and Jenal’s remarks begin on page 9.
Solar leasing giant Sunrun now finds itself the target of a statewide, class-action lawsuit, alleging that its business practices in marketing residential solar leases are false and deceptive. But just because a lease is a bad deal for the consumer doesn’t make Sunrun’s marketing actionable or a lawsuit justified. Here’s our take.
Readers of this blog will know that we are far from fans of residential solar leases. In our view, those leases are a boon to finance companies but not such a great deal for homeowners. By luring potential customers with the enticing prospect of getting something for nothing, residential solar leases have become the driving force in the residential market - even though the customer would be far better off financially if they purchased the system and collected the rebate and tax credit for themselves.
But the lawsuit against Sunrun does not allege that the Plaintiff, Shawn Reed, got a bad deal from the company. Instead, the Complaint claims that:
The central premise of SunRun’s [sic - misspelled throughout the Complaint] uniform marketing campaign is that increases in electricity prices will result in cost savings by installing the SunRun Solar system. But SunRun deceptively states with certainty something that is inherently unknowable. Those whose electricity prices are not as high as estimated by SunRun are already experiencing the cost disadvantage of the SunRun system. Others whose electricity prices will not rise as high as estimated by SunRun will experience the cost disadvantage in the future. But whether the cost disadvantage is experienced or not, the promise of a system sure to result in cost advantage was false when made and likely to deceive consumers into leasing a system they otherwise would not have.
Complaint, ¶ 3 (emphasis added).
To be sure, there are other allegations in the Complaint, including the claim that Sunrun acted as a contractor without a contractor’s license and that Sunrun’s contracts are less than clear about whether a customer can terminate their contract when they move without penalty. However, for our purposes we are only going to focus on the allegations about Sunrun’s “central premise” in their “uniform marketing campaign.”
The gist of Reed’s claim is that Sunrun told him that his system would save him money - “tens of thousands of dollars” according to the Complaint - based on a prediction as to what future energy prices would do, namely rise. Sunrun claims, according to the Complaint, that “Nationwide, electricity rates have been increasing 6% per year over the last thirty years,” but this, according to the Complaint, is itself deceptive, citing data from the California Public Utilities Commission showing the increase from 1982 to 2010 was only “3.25% annually.”
Leaving aside the nit of California data (cited by Plaintiff) versus national (allegedly cited by Sunrun), the larger question arises: what is a fair basis for predicting future costs of electricity? After all, this is an issue that affects far more than solar leasing companies. Every seller that markets a good or service designed to reduce your usage of grid energy - whether by generation or efficiency - makes assumptions about future energy costs as a basis for predicting your return on investment. There simply is no other way to do the calculation. Are all of these folks engaged in “deceptive” marketing tactics? As long as the assumptions are disclosed - and without seeing the contract at issue we cannot say whether they were or not - it is hard to see how even an erroneous prediction could be deceptive.
Moreover, anyone who has looked at a graph of the cost of energy in California over the past fifteen years knows that it more closely resembles a roller-coaster ride than anything consistent - what with a trader-generated energy “crisis” followed by the greatest recession in living memory. With that much noise in the system, what is a “fair” prediction?
We know for a fact that SCE just secured a three-year, 17.2% rate increase from the CPUC. That works out to 5.7% per year - pretty close to the allegedly “deceptive” prediction of 6% cited in the Complaint. As California’s cap-and-trade law begins to be felt, it is expected that there will be more upward pressure on energy prices, yielding even greater cost increases in the future. Add-in an economy recovering from recession and suddenly a prediction of 6% annual increases doesn’t seem to be particularly unlikely, let alone deceptive.
Of course, asking a potentially unsophisticated consumer - no offense intended to Mr. Reed - to push back on the assumptions made in any ROI calculation may be asking too much. But is a lawsuit really the best way to address this problem? Litigation is a painful process which rarely provides societal benefits, and class-action lawsuits are often the worst of the worst with no one really benefiting - except, of course, the lawyers.
A better approach would be to see some appropriate legislation passed that would standardize the disclosures provided to potential clients by all solar companies.
There are plenty of examples that could serve as a model. Think of shopping for a major appliance - when you go to compare two different refrigerators, you will see a prominent label that reveals how much energy each one will consume in a year and how that usage compares relative to other, similar units. You will also see an estimated cost to run that unit for a year - with all of the assumptions set out on the label so that a GE product uses the same assumptions as one made by LG.
The time is ripe to devise a system by which any seller of solar power systems in California would have to provide standardized, regulated disclosures.
You could make it more palatable to solar companies by providing a “safe harbor” against deceptive business practice lawsuits like the one facing Sunrun - as long as the solar company provides the necessary information in a standardized manner, they would be deemed to have satisfied their disclosure requirements to the potential client. (They could always add more information as long as it didn’t obscure the meaning of the required disclosures.)
This would also be a boon to consumers since a properly designed set of disclosures would allow competing proposals to be judged as apples against apples - something that is almost impossible to do now.
So what should those disclosures include? Here is our (non-exhaustive) list:
Such a law would work no hardship on reputable solar companies as we are already providing that information to our clients. But putting it in a standardized format would move the solar industry forward and help avoid pointless litigation like that now facing Sunrun. As responsible members of the solar industry, it is up to us to make this happen.
Two weeks into the reservation period, the latest data from LADWP’s Feed-in Tariff program reveals that the first 20 MW tranche has been fully subscribed. Indeed, the “large” system category (150 kW to 3 MW) was fully subscribed in the first few projects drawn from the lottery whereas the “small” category (30-150 kW) took the full two weeks to be subscribed. Here’s our analysis of what we can glean so far.
Under the FiT Guidelines, projects sited in the remote Owens Valley (oddly enough, part of LADWP’s service area) were capped at an aggregate 4 MW. Given that land is relatively cheap out there, at least compared to real estate prices within the City proper, it was expected that only larger projects would be proposed. Moreover, the Base Price for Energy to be paid was set at 3¢/kWh less than that to be paid for all other projects to account for the transmission losses in getting Owens Valley energy to the City.
Despite all of that, Owens Valley was very popular, with a total of 29 projects proposed to date totaling 65.7 MW, substantially more capacity than that designated for LA. No fewer than 18 of the proposed 29 projects were for the maximum size allowed under the program, 3 MW. (Somewhat surprisingly, there were three projects submitted at the limit of the small range in the Owens Valley. Apart from those, the smallest project proposed was 1.014 MW - which, curiously, was proposed twice.)
One company dominated the proposals, Ecos Energy, LLC, with 14 projects proposed for 31.95 MW. They got lucky in the lottery, drawing the first two lottery numbers for Owens Valley projects. with a combined total of 6 MW.
In the City proper, the numbers look quite different. A total of 57 projects were proposed in the large category for a total of 44.3 MW, but in contrast with the Owens Valley, only one project was proposed at the maximum possible size of 3 MW. Instead, the majority of large projects in the City were much smaller - averaging 778 kW with 500 kW being the most popular size (4 such projects proposed).
In the small project category, 38 projects were proposed to reach the 4 MW limit. The average system size proposed was 106 kW; however the most common size was the maximum for the category, 150 kW which was proposed 5 times.
So where are these systems going? The data does not provide street addresses, but it does provide zip codes for the proposed projects. Here are the top ten zip codes by number of proposed projects:
Nine of the top ten zip codes are in the northern end of the City, with only one zip code, 90502, in the City core (Carson).
And here is a map of the zip codes with two or more potential projects (click image to access interactive map):
Part of the goal of the FiT was to provide economic opportunity for local companies and local workers. However, there were no carve-outs or preferences for local companies in the FiT Guidelines. So how did the “locals” do?
Let’s focus on companies proposing projects in the City proper (thereby ignoring the dominant player in the Owens Valley - Minnesota-based Ecos Energy, LLC.)
Eleven companies proposed two or more projects in the large category for a total of 34 out of the 57: SEC ESSD Solar One, LLC (5 proposals / 3.5 MW), Sun Energy Partners III, LLC (4 / 1.86 MW), SunStarter Solar XC LLC (4 / 2.7 MW), CA Solar One LLC (3 / 1.4 MW), SunStarter Solar XXII LLC (3 / 1.12 MW), CEGALLIANCE (3 / 3.5 MW), Fallbrook Center Solar, LLC (3 / 1 MW), MRB Solar, LLC (3 / 2.165 MW), Extra Space Management Inc. (2 / 501 kW), Century Quality Management (2 / 570 kW), and OM Solar LLC (2 / 4.5 MW).
Eight companies proposed two or more projects in the small category for a total of 25 out of the 38: Extra Space Management Inc. (6 / 824 kW), OM Solar LLC (5 / 674 kW), SEC ESSD Solar One, LLC (3 / 400 kW), Broadstreet Energy Corp. (3 / 112 kW), The Ryzmn Family Trust Dated 8/20/89 (2 / 151 kW), SunStarter Solar XXII LLC (2 / 250 kW), SunStarter Solar XC LLC (2 / 300 kW), and OYA Energy Partners LLC (2 / 100 kW).
Collectively, here are the top ten companies proposing projects in the City:
Three of the top ten companies are LLC’s whose headquarters cannot be readily identified, although one of them, SunStarter XC LLC is most likely related to SunStarter XXII LLC out of Fort Lauderdale, Florida.
The other two - MRB Solar and CA Solar One come up empty in both Google searches and with the California Secretary of State’s office - raising the likelihood that they are actually out-of-state corporations. Of the seven that can be identified with some confidence, three are from California but four are not.
Of course, the company that is the applicant is by not necessarily the company that will be the installer so there is still a decent chance that these projects will boost local employment. But it appears that for as many as 70% of the top applicants, we have no such assurances.
So what can we learn from this? Three points seem to come out of this data:
Overall, the program seems to be off to a promising start. With some minor adjustments - and assuming that the proposed projects can actually be built - LA could really have a program that could serve as a model for the rest of the nation.
The office of State Senator Kevin De León (D-SD22) has announced that the Senate Appropriations Subcommittee will hold a hearing on February 21 in Los Angeles to discuss the implementation of Proposition 39. This may be the best opportunity for the LA solar community to have their voices heard about the legal and practical need for solar projects to be included in Prop 39 funding.
As we reported previously, the measure that Senator De León is advancing, SB 39, does not call for solar projects at all, a clear violation of both the spirit and the letter of Prop. 39 which made solar energy projects a showpiece during the campaign. Now the LA-based solar industry will have a chance to speak to our local legislator (and his subcommittee) to express our concerns.
Here are the details:
February 21, 2013
Murchison Elementary School - Auditorium
We look forward to seeing a strong turnout from solar supporters. Let’s respectfully remind Senator De León of the promises made during the Prop. 39 campaign!
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