Congress Extends Tax Credits for Solar & Wind

The week before Christmas Congress passed a pair of budget bills that contained multi-year extensions of tax credits to encourage solar and wind energy development. The extensions were part of a package deal that included extensions for other renewable energy sources such as geothermal, landfill gas, and hydro in exchange for lifting the 1970s ban on the export of crude oil.

The solar energy Investment Tax Credit (ITC) was set to decline from 30% to 10% at the end of 2016. The legislation extends the tax credit at the 30% level through the end of 2019, after which it will decline annually until it hits 10% in 2022. The extension will help the solar industry avoid the boom and bust cycles that have plagued the wind industry due to chronic uncertainty around the production tax credit.

The wind Production Tax Credit (PTC) was extended at the $0.023/kWh level through 2016. The PTC will then decline 20% per year from 2017 through 2020.

The extension of the ITC will help solar to continue its rapid growth trajectory. GTM research attributes a 30% increase in solar investment through 2020, more than $40 billion, to the extension of the ITC. Overall, GTM is predicting that nearly 100 gigawatts of installations, representing $130 billion in investments by 2020. Though a net positive, Bloomberg New Energy Finance (BNEF) is predicting that the extension of the ITC will reduce the amount of solar installed in 2016 as developers no longer have to rush to meet the ITC expiration deadline at the end of 2016. Overall, BNEF predicts the total solar installations in 2016 will be down about 2.8 gigawatts, but the 2017 increase will more than make up for this reduction.

Bladeless Wind Power

Vortex Bladeless Field

Image courtesy of Vortex Bladeless

Renewable energy sources make up 13% of the U.S. electric generation portfolio; the U.S. Energy Information Administration (EIA) projects that U.S. renewable electricity generation will grow to 18% by 2040; with wind overtaking hydro as the largest renewable source by then.   Though solar has been growing faster year-over-year, the EIA Short-Term Energy Outlook projects that wind will add more absolute capacity between 2014 and 2016; 18 GW for wind compared with 9 GW of utility-scale solar.

The report Enabling Wind Power Nationwide was released by the Department of Energy in May and focuses on new technologies to expand wind energy in the U.S.  The primary focus is on taller turbines and larger rotors to capture the more consistent and stronger winds at greater heights.  Though there are technical and logistical challenges when raising hub heights from the standard 80 meters (262 feet) to 110 meters (360 feet) or more; this is an extension of existing technology rather than a fundamental technological innovation with how wind energy is collected and converted to electricity.

For this latest Future Friday post we’re going to look at a startup company that is trying to create a fundamental shift in how wind energy is generated.  Vortex Bladeless is rethinking wind energy by doing away with the turbine altogether and harnessing the cyclical pattern of vortices that are formed by wind flowing around a tower.  Vortex says their bladeless system can generate electricity for 40% less than standard turbine technology.  According to the EIA land-based wind turbines already have one of the lowest Levelized Costs of Energy (LCOE), conventional or renewable, except for advanced combined cycle natural gas generation and geothermal (EIA 2015 Annual Energy Outlook).  A further 40% reduction in LCOE would make the Vortex Bladeless technology the lowest cost electric generation technology overall.

Vortex Bladeless Single

Image courtesy of Vortex Bladeless

The Vortex system achieves the cost efficiencies with an innovative, but simple design for harnessing wind energy.  The main mast oscillates in the wind due to the vorticity effect; this oscillation force is transmitted through an elastic rod to drive a generator at the base of the system.  According to Vortex Bladeless this design achieves cost efficiencies in a number of ways:

  •  53% lower manufacturing costs – the blades and nacelle of a traditional wind turbine are eliminated.  Further savings are achieved because the generator is at the base, obviating the need for an expensive mast that can hold the generator 300 – 400 feet in the air safely under high wind loads.
  •  80% lower maintenance costs – the mast and elastic rod are magnetically coupled to the generation system, so there are no mechanical elements that can wear out, require lubrication, etc.
  •  Lower installation costs – the Vortex system is estimated to weigh 80% less than a conventional wind turbine, resulting in easier transportation and installation of the system.  This also results in a foundation that is 50% smaller than a conventional turbine, which generates additional savings.

Traditional wind turbines have one advantage over the Vortex system, they are more efficient.  The Vortex system is estimated to be 30% less efficient that a traditional turbine, but lower costs and the ability to put them closer together than traditional turbines compensates for this disadvantage.

Vortex began field testing a 6 meter scale prototype in 2014 and completed a successful round of crowd funding in June.  The plans are to build a 13 meter system with an output of 4 kW in the next 12 months, and an industrial prototype that is 150 meters with a 1 MW output in the next 36 months.

MN Solar Gardens & Green Power Claims

Florida Power & Light Company's DeSoto Next Generation Solar Energy Center, a 25-MW ground-mount solar power system in DeSoto County, Florida

The Minnesota Solar Garden program has turned out to be much larger and more popular than expected.  Originally expected to be about 100 MW in size, the program received 400+ MW of applications within the first week.  Unlike experience in other states where residents and smaller entities such as schools made up the bulk of subscribers the Minnesota program is seeing large commercial and industrial subscribers as well.  Most notably, Ecolab signed a subscription with SunEdison for 16 MW of solar garden output (see here), and the St. Paul Public Housing Agency signed a subscription to cover 85% of the electricity use at 16 residential high rise buildings (see here).

The Minnesota Legislature established the Community Solar Garden Program in 2013, and Xcel Energy launched the Solar*Rewards Community program in December of 2014.  The program was designed for Xcel customers who can’t install onsite solar because they rent, live in a multifamily building, or otherwise don’t have a site or roof that is suitable for solar.  The program enables residents and businesses to participate in an offsite solar project by subscribing to a solar garden; for each kilowatt-hour (kWh) produced by their share of the garden subscribers receive a credit on their Xcel bill. The MN Clean Energy Resource Teams (CERTS) have put together a good primer on the program, including a list of Frequently Asked Questions, which can be found here.

One aspect of the program that is not well understood is whether subscribers are able to make the claim that they are using renewable (aka “green”) energy.  Most who participate in the program assume that their subscription to a solar garden, a green energy source, enables them to claim that they are now using green energy, but this is not the case.  In order to understand why, we first need to understand what Renewable Energy Certificates (RECs) are, and how they are used to encourage the development and use of renewable energy sources.

The Environmental Protection Agency’s Green Power Partnership  defines a REC as the environmental, social and other non-power attributes of one megawatt hour (MWh) of renewable electricity generation.  RECs can be generated from renewable sources such as solar, wind, or hydro power; and are often sold separately from the physical electricity.  The owner of the REC has the right to claim the use and benefits of renewable generation.

The benefit of being able to sell RECs separately is that they can then be used as a policy tool to incentivize the development of solar projects.  For example, states such as New Jersey, Massachusetts, and Pennsylvania have Renewable Portfolio Standards (RPS) that requires utilities to get a certain percentage of their generation from solar.  Utilities comply with this mandate by purchasing and retiring RECs from third-party solar developers.  Revenue from the sale of RECs creates an incentive for developers to spend capital developing solar projects.  In compliance markets where there is an RPS requirement RECs can sell for hundreds of dollars.  In voluntary markets, where purchase is not mandated, they sell in the range of one to tens of dollars.

Subscribers to solar gardens are not able to claim they are using renewable or green power because they are selling their RECs to Xcel.  The value of the credit that solar garden subscribers see on their Xcel Energy bill is made up of two components: 1) compensations for the electricity generated, and 2) compensation for sale of the RECs generated.  The diagram below shows the breakdown of payments in more detail.

Solar Garden Payments

Solar garden subscribers are compensated for the power their share of the solar garden puts onto the electrical grid, and for the RECs delivered to Xcel Energy.  The price Xcel pays for the power is the Applicable Retail Rate (ARR), which is set once a year for each rate class.  Xcel pays $.02/kWh for RECs from solar gardens larger than 250 kW, which are the most common, and $.03/kWh for RECs from solar gardens smaller than 250kW.  Unlike the ARR, the REC payments are fixed for the 25 year term of a solar garden subscription.  For General Service customers (i.e., larger commercial and industrial customers) the 2015 ARR is $.09914/kWh, adding in the $.02/kWh REC payment you get a total bill credit of $.11914/kWh.  Thus, the REC payment is a significant portion of overall compensation.

What can subscribers do if they want to claim they are using renewable energy?  The easiest solution is to buy and retire RECs in sufficient number to cover the percentage of electricity they want to claim is renewable.  One may ask why they just don’t just keep the RECs generated from their share of the solar garden.  Xcel is paying $.02/kWh for the RECs, which is equivalent to $20 per MWh (RECs are the non-power attributes of 1 MWh).  On the voluntary market RECs can often be purchased for around a dollar.   So, it makes financial sense to sell the solar garden RECs for $20 and purchase RECs for about 5% of that price on the voluntary market.

Moniz Sees Battery-Solar Technology Combination as Transformative

Accupack_10_cellen_side_by_side

By Accu4all (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

 

Bringing together themes from two previous posts Energy Secretary Moniz stated that battery storage technology coupled with rooftop solar PV systems has “huge potential” to transform the U.S. energy system.  Bloomberg News interviewed Secretary Moniz last week at IHS CERAWeek where he suggested the battery-solar combination could be as transformative to the U.S. economy as the current oil and gas boom.  The full Bloomberg story is here:  Batteries May Vie With U.S. Oil Boom as Energy Changer.

The solar boom has been well documented and there is evidence to suggest that a boom in energy storage technology is on the way.  Two weeks ago the car marker Tesla announced plans to build a “Gigafactory” to produce lithium-ion batteries.  One of the goals is to drive down battery cost, by 30% in the first year.  More interesting is the planned size of the facility, which is expected to be able to match the global production of lithium-ion batteries by 2020.  Given the expected production levels applications beyond electric cars, such as solar energy storage systems, are already being discussed.  For more details see: Tesla’s ‘Gigafactory’ To Produce More Than Car Batteries.   For a broader discussion of activity in the energy storage market see the recent Forbes article:  Follow The Money: Who Is Funding Energy Storage And Why.

Will Tariffs Slow U.S. Solar PV Growth?

SolarTAC test facility in Aurora, CO

Source: NREL

2013 is shaping up to be another record year for U.S. Solar installations according to the Solar Energy Industries Association’s (SEIA) Q3 U.S. Solar Market Insight Report.  The third quarter of 2013 was the second largest in U.S. history with 930 MW of solar PV installed.  Overall, SEIA forecasts that 4.3 GW will be installed in 2013; a 27% increase over 2012 levels.  Delivered solar electricity prices continued to fall in 2013 as well.  According the National Renewable Energy Lab the cost of utility scale solar dropped 20% to just over 11 cents per kWh in 2013 (see chart below).  Electricity prices vary greatly by state, but solar PV has already reached grid parity for residential and commercial customers in 10 states (Solar PV at Grid Parity in 10 States According to Deutsche Bank).   There are ongoing efforts to drive the cost of solar down even further.  The Department of Energy’s SunShot Initiative  has set a goal to reduce the cost of utility-scale solar PV to 6 cents per kWh by 2020.

All the solar news is not positive; the ongoing anti-dumping dispute between U.S. and Chinese solar manufacturers has the potential to slow U.S. solar growth.  On February 14 the U.S. International Trade Commission issued a preliminary ruling that enables the U.S. Commerce Department to apply preliminary tariffs to Chinese solar panels made with Taiwanese solar cells, if they are found to harm the U.S. solar industry.  In 2012 the U.S. Commerce Department placed sizable tariffs on Chinese solar panels due to a finding of unfair subsidies and dumping practices.  In order to avoid these tariffs Chinese solar companies employed a tolling strategy: manufacturing solar panels with Taiwanese solar cells.  If the Commerce Department decides to level these new tariffs it will render the tolling strategy ineffective and close a major loophole in the tariff regime on Chinese solar panels.

As we can see from the chart above most of the decline in the cost of solar over the past here years has been due to declining solar module prices.  If the new tariffs close the tolling strategy loophole this could slow or even halt the decline in solar system prices and negatively impact the pace of solar installations in the U.S.  In the short term, the price impacts of tariffs may be mitigated some by developers who want to ensure they capture the 30% Investment Tax Credit before it drops to 10% in 2017.  The International Trade Commission is scheduled to make a preliminary decision on unfair subsidies on March 28 and on dumping practices on June 11.

Storing Energy with Trains

ARES Image #4

Source: ARES North America

An earlier Future Friday post was titled Batteries: The Key to Renewable Energy Expansion.  A better title would have been Energy Storage: The Key to Renewable Energy Expansion.  Batteries are just one of many energy storage technologies currently in use.  One of the oldest and most well established technologies is pumped hydro-power.  Pumped hydro systems move water to a higher elevation during times of excess power, and release it to drive a turbine generator during times of increased demand.  Compressed air energy storage (CAES) systems operate on the same principle as pumped-hydro, using low-cost, excess power to store energy in the form of compressed air, which is released to drive a generator when power is needed. Other technologies include thermal storage (e.g., ice making for cooling) and flywheels that store energy as rotational inertia.  To learn more, the Energy Storage Association has detailed information on each of these technologies.

The trade-off with renewable energy sources such as solar and wind is that even though the fuel (i.e., sun and wind) is free the production is intermittent.  Intermittency is the primary roadblock to the expansion of renewable generation resources.  One way to address the intermittency problem is to store solar and wind energy in times of excess generation for times when production does not meet demand.

Advanced Rail Energy Storage (ARES) is currently testing a new, large-scale energy storage technology in Tehachapi, CA.  When power prices and demand are low the system drives electric rail cars carrying a load up an incline.  When demand and prices are high gravity pulls the trains back down hill turning the onboard electric motor into a generator.  When fully built out each train will haul a 230 ton load uphill, and be the equivalent of a 2 MW generator on the way down.  ARES’ website states that systems can be scaled as large as 3 GW, with 16-24 GWh of storage capacity.  Scalability is also a function of geography.  The system runs best on grades of 6 – 8%, and the longer the track, the more energy the system can store.  Currently, the system returns 86% of the energy used to drive the train uphill, though ARES believes this number can be improved.

ARES has already met with some commercial success.  They are working with Valley Electric, a Nevada-based electric co-op to build a 50 MW system with 12.5 MWh of storage capacity.  The goal is to have the system up and running by 2016.

Solar PV at Grid Parity in 10 States According to Deutsche Bank

Photo Source: NREL

With installed system costs declining to $3 per Watt Deutsche Bank (DB) finds that solar photovoltaic systems can produce electricity at or below grid prices in 10 states.  The DB Market Research Report: Distributed Generation to Herald New US Growth Era finds that grid parity already exists for residential and commercial systems in the following states:

 States at Grid Parity for Solar Systems

Residential Commercial
 1 Hawaii Hawaii
 2 California California
 3 New York New York
 4 Connecticut Connecticut
 5 Nevada Massachusetts
 6 Vermont Arizona
 7 New Mexico Vermont
 8 Arizona New Mexico
 9 New Hampshire New Hampshire
 10 New Jersey Nevada

The DB analysis assumes that system costs are offset by the 30% Federal Investment Tax Credit (ITC), but does not offset the cost of electricity with any other federal or state incentives.  The Levelized Cost of Energy (LCOE) for solar systems in these states is between 11-15 ¢/kWh while the price of electricity is between 11-37 ¢/kWh.  DB also finds that an additional 11 states will reach grid parity once installed prices fall another 50¢ to $2.50 per Watt.  Though panel prices have accounted for much of the decrease in system costs they make up less than half of the cost of a typical installation.  Researchers find ample room to lower the balance-of-system, or soft costs to further reduce overall installed costs.  A recent report from the Department of Energy found that balance of system costs are five times higher in the U.S. than Germany, which has over 35 GW currently installed, indicating there is room for further cost reductions (Revolution Now: The Future Arrives for Four Clean Energy Technologies).

Fewer states have reached grid parity when displacing electricity supplied at lower industrial rates.  Though larger industrial systems typically have lower installed costs due to economies of scale, residential and commercial systems can achieve greater savings because they are displacing higher cost electricity.  Currently, DB finds that four states are at grid parity for industrial systems: Hawaii, California, Massachusetts, and Connecticut.  Though other states are close to reaching grid parity – Xcel energy recently proposed to the Colorado Public Utilities Commission that it triple the amount of solar on the grid in Colorado, installing an additional 170 MW of utility scale solar.  Xcel found in the current round of bidding that solar was cost competitive with natural gas power generation; purely on a price basis, without other incentives (Xcel Energy hopes to triple Colorado solar, and wind power).

The increasing competitiveness of solar will lead to just under a six-fold increase in solar PV installed in the U.S. over the next three years according to DB.  The U.S. currently has 8.5 GW of solar installed; DB projects that an additional 8.0 GW in 2014, 12.0 GW in 2015, and 16.0 GW in 2016 for a total installed base of 49 GW by the end of 2016.  In addition to falling panel prices DB cites lower financing costs, and the push to install solar systems in advance of the 30% Federal Investment Tax Credit dropping to 10% after 2016.

Solar is also poised to expand growth globally.  In their second quarter solar industry outlook DB finds that 10 major markets around the world are already at grid parity.  The report (Solar Industry – Q2 Preview: Improving Fundamentals Outlook) also finds that solar could become competitive in another 10-20 markets over the next three years.

 

Batteries: The Key to Renewable Energy Expansion

For this Future Friday post were going to look at an old, but key technology for achieving many sustainability goals related to energy and the environment: batteries. The expansion of renewable energy sources such as solar and wind are seen as the key to addressing the environmental and climate concerns from traditional fossil fuel based electric generation. The major roadblock to the expansion of these renewable energy technologies is that they are intermittent by nature, and often don’t produce electricity when it is needed. This means solar and wind resources need to be backed up by a traditional generating resource to pick up slack when the wind isn’t blowing or the sun isn’t shining. The solution to this problem is to store solar and wind energy in times of excess for times when it is needed. Though large scale batteries are currently technically feasible, they can be cost prohibitive in many applications.

Recognizing the pivotal role that innovation in battery technologies will play in the expansion of renewable energy the U.S. Department of Energy (DOE) opened the Joint Center for Energy Storage Research (JCESR) at the end of 2012. JCESR is a collaboration of government, universities and industry to produce breakthroughs in battery technology that will enable reliable, efficient, high-capacity, and low cost batteries. JCESR was established with two national goals in mind:

  • By 2025, produce 25% of all electricity consumed in the United States from solar and wind.
  • By 2015, have 1 million all-electric, plug-in hybrid (PHEV) vehicles on the road.

For more on JCESR see the New York Times article: Seeking to Start a Silicon Valley for Battery Science.

Though the future of renewable energy may rely on breakthroughs in battery technology there are many examples of innovative technologies being applied today. Two Intercontinental Hotels in the San Francisco Bay Area are using battery systems from Stem to reduce their electricity costs by 15%. The batteries store energy at night when it is cheaper, and discharges during the day when prices are higher. This peak shaving produces the 15% savings. (Stem Energy Optimization Reduces San Francisco Hotel Energy Bill 15%).

Larger scale battery applications are happening as well. The City University of New York recently installed a 100kW zinc-nickel oxide battery from Urban Electric Power. The battery is said to match the performance of lithium ion batteries but at the cost of a traditional lead acid battery. (Zinc Anode 100kW Battery from CUNY, Urban Electric Power). The Yerba Buena Battery Energy Storage System Pilot Project is a 4 MW system installed by Pacific Gas & Electric that is being tested for its ability to help balance demand and maintain grid stability. (PG&E Pilots 4 MW Battery Storage System).

New Advanced Energy Legislation Tracking Tool

Advanced Energy TrackerStaying on top of the changing landscape of energy legislation across all 50 states can be challenging.  For example, Minnesota’s legislature recently passed the Solar Energy Jobs Act, which requires private utilities to generate 1.5% of their power from solar energy by 2020; that’s more than 450 MW of solar in the next seven years.  These types of legislative changes present opportunities in the form of incentives, and challenges such as potential utility rate increases.

Learning about and tracking these types of proposed changes got easier recently with the introduction of the Advanced Energy Legislation (AEL) Tracker database; a collaboration between Advanced Energy Economy and the Center for the New Energy Economy at Colorado State University.  The searchable database provides free access to pending energy legislation in all 50 states.  Legislation is searchable by state, or one of the 10 policy categories shown below:

  1. Electricity Generation
  2. Energy Efficiency
  3. Financing
  4. Regulatory
  5. Natural Gas
  6. Emissions
  7. Transportation
  8. Infrastructure
  9. Economic Development
  10. Other Energy

The website also identifies trends and provides analysis on advanced energy legislation.  For example, a report dated May 20 analyzed legislative activity addressing the financing barrier to the deployment of advanced energy technology.   The report finds that of the 551 bills introduced in the 2013 legislative session over 53% focused on providing tax incentives, while 18% provide loans or grants to encourage the adoption of advanced energy technologies.

The Future is Hydrogen?

Is Hydrogen more than the punch line of a joke?  At U.S. Energy’s 25th Annual Energy Conference this past May Scott Tinker, the State Geologist of Texas said that hydrogen would be widely available as a fuel source in 10 years.  The joke is that if asked 5 years ago when hydrogen would be available, or 5 years from now, the answer would be the same, in 10 years.  For all the research and hype around hydrogen as a fuel source, it has remained just over the horizon of commercial viability.  Given this, hydrogen is a good candidate for Future Fridays post to see whether new technologies might truly make hydrogen a reality.

800px-Hydrogen_fuel_cell_busHydrogen is seen by many as the key enabling component of a sustainable future.  When used in fuel cells hydrogen produces electricity and steam, an emission free source of energy.  Combined with cars and buses hydrogen fuel cells address many of the environmental concerns of  hydrocarbon-based transportation.  Perhaps even more important, hydrogen is seen as the key to enabling the wider penetration of renewable energy sources such as solar and wind by addressing the intermittency problem.  Hydrogen enables the storage of energy during times of abundance for times when it is needed.  To date, hydrogen production is too costly to make these sustainable strategies a reality.

Recent breakthroughs in the fields of chemistry and biology suggests that our hydrogen future might be closer than we think.  Researchers at Virginia Tech recently announced that they have developed a process to produce hydrogen from Xylose, the most abundant simple plant sugar.  The researchers believe the process is both low cost, and able produce high volumes of hydrogen from any source of biomass.  For more on their research see: Breakthrough in hydrogen fuel production could revolutionize alternative energy market.

Not to be outdone by the biologists at Virginia Tech, two chemistry professors at the University of Calgary recently announced that they had developed a process for making inexpensive catalysts to produce hydrogen.  One of the barriers to hydrogen as a fuel source has been the expensive catalysts required to split hydrogen away from the oxygen in water.  The cost of these catalysts are driven by the need to use expensive metals such as platinum.  The pair of chemistry professors has found a way to produce inexpensive catalysts from a combination common metals such as iron, nickel, and cobalt.  You can read more about their work here: A Cheaper Way to Make Hydrogen from Water.  So confident are they in the technology that they have started a company called FireWater, that hopes to have a product available sometime in 2014.