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

“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.

Background

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.

Non-Residential Systems

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.)

Residential Systems

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.)

Outlier - A.S.E.S. Electrical Group Inc (American Solar Energy Solutions)

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.