Thoughts on Solar by Run on Sun's Founder & CEO, Jim Jenal

The folks at the Los Angeles Department of Water and Power (LADWP) are talking about creating a Feed-in Tariff (FiT) program in their service area, but if the information provided so far is any indication, they have a very long way to go before this program is ready for prime time.

First, before trying to describe what LADWP is doing, we should make clear what they are not.  In particular, this is not a German-style FiT where anyone can put up solar panels and get paid for every kilowatt hour that they produce.  (Ah, for such a program here in California - you would literally see solar panels everywhere!)  To the contrary, this FiT will be entirely unavailable to regular customers.  Instead, this program is designed for systems where all of the energy produced is delivered directly to the grid instead of first off-setting a local load.  In that regard this looks much like a solar farm program, except that participating systems can be as small as 30 kW, but no larger than 1 MW (solar farms are usally in the 1-5 MW range).

Draft FiT Flowchart - it only looks complicated!

Since no local load is being offset, this is not a net metering arrangement.  Instead, LADWP is looking for project developers to enter into a "Standard Offer Power Purchase Agreement" (SOPPA) based on a "bid base price of energy" that is subject to Time of Delivery adjustments.  The initial demonstration program will consist of 5 MW of selected systems.  Project developers must submit a prescribed FiT Application and pay a non-refundable $1,000 application fee.  If the application is deemed to be acceptable based on LADWP's "Technical Screening" (more on that later) the project developer must then pony-up a $1,500 Interconnection Study Fee to determine how much it will cost to interconnect the proposed project into LADWP's grid.  Once that amount is known, the project developer can opt to continue - and pay 10% of the anticipated interconnection cost plus a refundable Development Deposit of $50 per kW - or fold their cards and eat their costs.

When pressed for some guiding parameters, staff was vague.  What, we wondered, was the possible range of interconnection costs?  And without knowing what the worst case cost might be in advance, how could a rational project developer know what to propose for their "bid base price of energy"?  For that matter, what was the anticipated range that would be acceptable to LADWP for the bid base price?  After all, you simply cannot produce energy from a 30kW system as cheaply as you can from a 1MW system.

LADWP indicated that it will likely create some sort of small system (30-150kW) carve out to insure that some smaller systems will be built.  This is important since LADWP's top priority for selecting which systems can proceed is getting the lowest cost energy.  A possible bid energy price for small systems was in the $0.20-0.22/kWh range whereas larger systems (>150kW) would need to be in the $0.15-0.175/kWh range.  Even so, without knowing in advance what interconnection costs might be - or better still - having a way to choose a site so as to minimize those costs - it is next to impossible to make a rational proposal without being at substantial risk of losing your deposits - to say nothing of your time investment.

As presented at the public workshop, the present design includes a number of "Technical Requirements"  and process steps which could use some clarification.  In particular:

• Developer Experience - "At least one member of development team has developed one or more similar projects."  What constitutes a "similar project"?  If the team had previously developed a 75kW system, would they be deemed to have adequate experience to propose a 100 kW system?  What about 150 or 500?  And what sort of experience is key here?  The development team will need to bring together many talents - system design, construction, electrical, financial, legal - does it suffice that the team's lawyer has papered together "similar" projects in the past?
• Site Control - "Must demonstrate site control over proposed site" - if the entire proposal is speculative until the SOPPA is signed, how much control must the developer actually have over the site at the time the application is submitted?  Would a lease or purchase agreement with appropriate contingencies suffice?  Given the degree of uncertainty with this process, it doesn't seem reasonable to require full control at the time the application is submitted.
  (This was not explained during the workshop, but it appears from the Draft Guidelines that a contractual option for lease or purchase will suffice.)
• Inspection & Maintenance Reporting - "Provide Inspection & Maintenance Reports Every Other Year" - staff could not explain what the full scope of this requirement would be and the Guidelines aren't much more help other than to indicate that the inspection must be done by someone not associated with the project.  This seems unduly burdensome - after all, the project owner has as much of a vested interest in keeping the system performing according to expectations as does LADWP.  Since they will need to be doing their own maintenance anyway, the requirement for an unrelated party to do the inspections simply adds unnecessary cost to the project.

The Demonstration phase is supposed to kick-off this Fall.  We will continue to monitor the development of this program and provide additional information as we get it.

UPDATE: The bill was indeed introduced as planned, it is H.R. 2599.  You can follow its progress via OpenCongress here.

After having been left for dead by federal regulators, PACE - Property Assessed Clean Energy funding for solar power and energy efficiency projects - is making a comeback thanks to bipartisan (Yes!) legislation gaining momentum in the House.  You can help get this important legislation passed by contacting your representative - details after the jump.

Full story »

Today we attended LADWP’s morning workshop on the relaunch of the Solar Incentive Program (SIP) and, as promised, we are writing to give you our reactions to the event.  We certainly believe that LADWP is trying to do the right thing - and these comments will also be emailed to LADWP staff.  When we get a response, we will update this post.

The program got underway with an introductory statement from LADWP General Manager, Ron Nichols, who told the 150 or so participants that the SIP was an “important part of the big transition that LADWP needs to make” and he thanked us for coming and providing our insight into how to make the program better.  The rest of the program consisted of four parts - an overview of the SIP followed by the participants being divided into breakout groups to address specific issues, then a presentation about the proposed Feed-in Tariff (FiT) program with a breakout session for the Fit as well.  (We will have a later post just about the FiT - the balance of this post will only concern the SIP.)

LADWP promised to make all of its presentation materials available online and you can find them here.  There were some interesting aspects that popped out of the presentation, for example:

• Staff mentioned several times the desire to avoid the “boom-bust cycle” so common with solar incentive programs.  Instead, they were hoping that this program would:

Maintain [a] steady pace of installations and funding so that our customers and [the] solar industry know what to expect and can plan appropriately.
Foster and grow [the] sustainable solar industry in L.A.

• However, it was made clear that the program will allocate up to $40 million per year in rebates.  Once that amount is reached, the program will stop accepting rebate applications until the next fiscal year.  That doesn’t really sound like a “steady pace".


• The program, before the current hiatus, was on track to be fully subscribed (i.e., out of money) by 2012.  The new program expects to be out of money by the end of 2014.  That’s an improvement, but still not great for a program that was designed intended to continue until 2017.


• All of the rebates under the SIP will be EPBB rebates - that is, paid out all in one lump sum.  This is a good deal for system owners, but a rotten deal for LADWP (click here for our general discussion of PBI vs EPBB rebates.)  The LADWP rep suggested that the overhead problem was too much to handle to implement PBI rebates.  Really?  It would seem that the greater productivity insured by PBI rebates would more than offset the cost, and smaller utilities - like PWP - somehow seem to manage it.


• Even under the new SIP, there will be no payments made to system owners who produce more energy than they consume over the course of the year.  (In other words, no AB 920 compensation is being implemented.)  It is true that LADWP is expressly exempt (albeit in a very roundabout way) from the requirements of AB 920, but no cogent argument was advanced for not providing compensation along the lines of what every other utility in the state must do.

The breakout session that we attended was dominated (nearly hijacked) by the leasing interests who were not at all happy with rebates for leased systems being paid out as commercial systems, particularly given that the commercial rates were lower.  (Presumably, if the commercial rates were higher, we wouldn’t have heard those complaints.)  This argument seems founded more on greed than common sense - after all, the owners of leased systems qualify for 30% treasury grants and bonus depreciation - tax benefits that are not available to residential clients who purchase their systems outright.  It only seems fair that they should receive a higher rebate since the overall economic benefit is better balanced that way.  (It will be interesting to see if LADWP sticks to its guns on this one or caves to the leasing companies.)

Which leaves us with our questions for LADWP.  We were told that the utility is running on a very tight timeline and that they must have comments/questions on the SIP relaunch by this Sunday - July 17! (Not sure why they picked a Sunday for the comment deadline, let alone one that is just three days away, but that is what we were told.)  If you have questions or comments, please send them to solar@ladwp.com.  In any event, here are our questions and we will let you know the responses that we get (if any):

• Step sizes - It appears that we are re-starting at Step 5 with incentive values of $2.20, $1.95, and $2.70/W for residential, commercial and government/non-profit projects respectively.  How big are the Steps?  How will the Steps interact with the $40 million/FY budget allocation?


• Building Permit before SIP Application - the revised guidelines require a permit be pulled before filing a SIP application.  What is the justification for this?  Most other utilities are either agnostic on the issue (SCE) or require the rebate application before a permit can be pulled (PWP).  Requiring the permit first, cuts into the time available for completing the project before the permit expires.


• 10-hour testing window - the revised guidelines would entirely disqualify for a rebate any system that was operated for more than ten hours prior to inspection.  There was no justification given for this number and it seems arbitrary.  We could well imagine a scenario where a system is brought online on Friday and allowed to operate over the weekend as a burn-in period before being shut off on Monday.  Why would such a system be rendered ineligible for a rebate?  We believe that a more flexible system should be implemented.


• Deficient applications - the guidelines talk about “applicants who … submit 3 deficient applications… will be given a 6 months exclusion from submitting additional applications."  This seems unduly punitive and much more information needs to be given regarding what constitutes a “strike” for these purposes.  For example, we are aware of an application under the prior program that was rejected because a calculation was made - consistent with the text of the guidelines - that was inconsistent with the reviewer’s expectations.  Applicants who abuse the system should be excluded, but good-faith disagreements over interpretations of guidelines should not count as a strike.


• PBI rebates - LADWP really should add these for larger commercial systems under the SIP.


• AB 920 Compensation - LADWP should join the party and pay net energy producers just like every other utility in the state.

We will write more when we hear from LADWP - but remember, deadline for comments is this Sunday, July 17.

The 20th Annual Intersolar North America Conference got underway this week and its growth reflects that of the industry it showcases. More than 800 exhibiting companies from over 30 countries are arrayed (pun intended) over more than 170,000 square feet of floor space. (More than a few people will be exhibiting sore feet before this is over!)

The show’s exhibition space has grown by 30 percent from the year before - an impressive number until you realize that the solar industry itself effectively doubled in 2010.

Along with its bigger cousin, Solar Power International (which this year will be held in Dallas in mid-October), Intersolar North America allows industry players to display their wares - from the latest advances in solar panels and inverters to the smallest component in the Balance of System space, like WEEB clips (used for grounding) and flashings.

Here are a couple of highlights so far:

• Suntech has announced the introduction of two new solar panels including a 290 Watt model designed for large-scale solar installations.  Along with the new product roll-out, Suntech is extending its limited product warranty from five to ten years - making it one of the longest warranties in the industry.  (Suntech also offers a separate 25-year power output warranty.)
• Enphase Energy is showing of its hot, new 215 Watt micro-inverter and the “Engage” cabling system (seriously, that is what they are calling it - they had a contest to pick the name!).

Here is a video showing some other interesting elements of the show:

Who better to give some predictions about the future of solar in America than Rhone Resch, President of the Solar Energy Industry Association?  Check out this interview:

And finally, of course, there is lots of time spent just having a good time!

(The conference is in San Francisco this year - so how could you NOT have a good time?)

UPDATE - 2x - In advance of the meetings this week, LADWP has made available a number of materials so we are linking to them here.

For the Solar Incentive Program (SIP):

• SIP Summary of Revisions
• SIP Guidelines

For the Feed-in Tariff (FIT):

• FiT Draft Guidelines for 5MW Demonstration Project
• FiT Process Diagram
• FiT Submittal Forms
• FiT Service Territory Map

Hope to see you there - if you have any comments about these, feel free to leave them below.  You can also send comments to LADWP at LREP@ladwp.com.

UPDATE - Please note that LADWP has reconfigured their meeting to satisfy popular demand.  Instead of one workshop on the 14th from 2-5, there will now be four, on Thursday and Friday mornings and afternoons.  Here is the revised meeting schedule (along with the necessary links to RSVP):

Thursday, July 14, 2011
9:00 a.m. - 12:00 p.m.  RSVP
2:00 p.m. - 5:00 p.m.    RSVP

Friday, July 15, 2011
9:00 a.m. - 12:00 p.m.  RSVP
2:00 p.m. - 5:00 p.m.    RSVP

We announced earlier that the Los Angeles Department of Water & Power (LADWP) was holding a workshop to discuss the restart of its Solar Incentive Program (SIP) after a 90-day hiatus. We have now received some of the details of the program - along with a copy of their presentation - and want to share some information in advance of next week’s public hearing.

First, a reminder - the public hearing on the proposed revisions to the program will be held next Thursday, July 14 from 2:00 to 5:00 p.m. at LADWP headquarters, 111 N. Hope St., Los Angeles in the A-Level Auditorium.  Hope to see you there.

LADWP staff will make a presentation about two customer-related programs, the SIP and a new Feed-in-Tariff (FIT).  The primary difference between the two programs is that the SIP is a net-metering program, meaning the customer who hosts the solar power system consumes the energy produced by the system and uses that to lower their LADWP bills.  Under the proposed FIT program, LADWP purchases all of the output from the solar power system and pays the system owner a at a rate to be determined for that energy.  (In other words - this is NOT a German-style FIT that would benefit residential customers.)  The balance of this post will only address the SIP.

As we had noted previously, the LADWP SIP had been a victim of its own success - resulting in a lengthy application processing backlog, a corresponding inspection backlog and lengthy delays in paying rebates.  Moreover, the program was over-subscribed with more applications coming in than there was money to support them.  Accordingly, a 90-day moratorium was imposed while LADWP went back to the drawing board to revise the program.

It would appear that LADWP put that time to good use - reportedly reducing their application backlog from 800 to zero, authorizing the start-up of 2.2 MW of solar power systems and cutting over 150 rebate checks worth $10 million.  More importantly for the program going forward, they devised changes to bring stability and predictability - or so they say - to the program for the next three years.

So what are the major changes proposed? Here are the highlights:

• Program funding will be doubled - from $30 M to $60 M each year for the next three years.  This is accomplished through the use of LADWP bond proceeds and approved as part of the FY 2011-12 budget.  Interestingly, the administrative overhead for the system appears to be 10% since the actual program cost is billed at $66M per year for the next three years.  LADWP claims that the cost to fund the program will be 0.7% of the average customer’s bill.
• Rebate levels will decline significantly - although still higher than those paid by SCE under the California Solar Initiative (CSI), the new rates appear to be lower than what other municipal utilities like Pasadena Water & Power (PWP) are paying.
• Contractors will be required to pull a permit for the job before submitting a rebate application - in our experience this is opposite from what every other local jurisdiction is doing.  Typically the utilities have either wanted to review your application first as a pre-condition to pulling the permit (e.g., PWP and other munis) or in parallel with the permit process (SCE).  It will be interesting to hear why LADWP wants to go this way.
• Accelerated inspection procedure - allegedly this will reduce the wait time for net meters to be installed to one week.

Rebate rate details

The LADWP presentation provided a series of charts (not tables) to depict rebate rates going forward.  There are some omissions here that are important - the charts show rebates at different steps, but they do not say how many MW are in each step.  For example, here is the residential rebate rate graph (click for full size):

Based on where the “Proposed Incentive Levels” plot begins, presumably we are starting at Step 5.  What the chart doesn’t tell you is how many MWs of applications will LADWP accept before stepping down to the next incentive level.  The lack of data points is also annoying - apparently we are starting at somewhere around $2.20 W.  Nor is there anything said about how the system size will be calculated going forward - will LADWP adopt the CSI calculator that everyone else uses or will they continue to use their idiosyncratic - and error prone - system using PVWatts directly?

Here is the graph for commercial rebate rates (click for full size):

That graph seems to show that the rebate rate when the program resumes will be just under $2.00/Watt.  But again, a question - is LADWP only using EPBB rebates, even for large commercial projects?  Or did they simply omit the graph showing PBI rates?

Finally, here is the graph for Government/Non-Profit rebates (click for full size):

Our best guess is that the rebate rate here is roughly $2.75/Watt.

Obviously lots of questions remain - we will report back after the July 14th meeting and hopefully we will have some answers.