soft costs of solar and what can we do about it

Solar PV:What Can We Do to Make it Mainstream

Paritosh Kasotia

Renewable Energy and Energy Efficiency Advocate

February 22, 2015

Outline

Background

Solar barriers

Potential solutions

Conclusion

Q&A

2Paritosh Kasotia, 2015

About Me

Over eight years of public affairs experience and five years of directly working on energy efficiency (EE) and renewable energy (RE)

Academic qualifications PMP, Project Management Institute MBA, Drake University MPA, Indiana University BA, Drake University

Passionate about the environment and clean energy movement

Self-starter, driven, results-oriented, and a strong team player who takes pride in working hard to advance goals and objectives


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Solar Has Arrived!

Paritosh Kasotia, 2015

However…

Market barriers still linger that prevent solar from becoming cost-competitive with conventional energy sources.

We can have great technology but if the public lacks the means to acquire, it will just sit on the shelf.

DOE’s SunShot Initiative is a significant step to overcome these market barriers.


Soft Costs of Solar

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Soft Costs:

Solar photovoltaic (PV) system’s non-hardware

costs that make up approximately 64% of

the total cost

Bidding process/Customer

Acquisition

Zoning variances

Permits and Inspections

Interconnection and net-metering

process

Financing


Bidding and Customer Acquisition Process

Lack of information on qualified contractors and complex

customer acquisition process

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“Take this home in Bedford. The original solar system was installed by a company that sub-contracts out all its work. Let’s call them

Bad Work Inc. When the homeowner’s inverter failed after a year of operation, Bad

Work Inc. refused to come out to fix it, because they didn’t know how or didn’t

care...When we inspected the system, we were shocked (figuratively not literally,

thankfully). Not only was the installation unattractive, it was unsafe…We had no

choice but to pull down the entire system and start over. …”


Zoning, Permits, and Inspections

Do zoning ordinances support the installation of

Solar PV systems?

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Building and electric inspections are critical for the safety of homeowners.


Policy and Regulatory Barriers


Solar is described as a technology that is “disruptive”, and an “existential threat to utility

business.”

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Three critical areas to be addressed:

1. Connecting and integrating solar resources to the grid

2. Cross-subsidization and fairness to the customers3. Grid reliability issues related to Distributed

Generation (DG)


Connecting Solar to the Grid: Inter-connection

Inter-connection process can be Complex, Expensive, Time-consuming and even Non-Existent.

How can the inter-connection standard be improved?

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Subject all utilities in a given state to

one set of interconnection

standards

Establish tieredstructure for fees

and processing time based on system

size and complexity

Automate application forms

that are easily located on a utility’s

website


Connecting Solar to the Grid: Net-Metering

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Figure 1: Net Metering Grade by State, Freeing the Grid, Year 2014

GA

OK


Connecting Solar to the Grid: Virtual Net-Metering and Community Solar Gardens

Virtual net-metering:

Lack of rooftop space

Works great for multi-tenant buildings

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Community solar gardens:

Utilities offer or customers pool resources to purchase and install a solar array.

Subscribers receive a credit on their electric bill based on their ownership share of the system


Connecting Solar to the Grid: Virtual Net-Metering


Integrating Solar to the Grid and Siting Challenges

How do we integrate bi-directional power flow and high penetration of variable generation into the grid?

Role of battery storage technologies

Smart grid technologies and grid modernization

Siting of large scale solar PV also requires consideration of:

Access to transmission lines

Minimizing the use of productive farm land to be used as solar farms

Impact on natural habitat and wildlife

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How can we make better use of abandoned and contaminated lands? Paritosh Kasotia, 2015

Grid: Cross-subsidization

Cost shifts from one customer class (solar customer) to another customer class (non-solar customer) to cover the grid maintenance costs

Introduction of fees to avoid unfair allocation of costs

Stakeholder backlash against such measurements


Grid: Reliability

Increased use of solar is cited as a cause of concern for grid safety and reliability

Case in place: Hawaii’s Electric Company (HECO) put a hold on the approval of inter-connection applications because it is studying the impact of distributed generation on grid reliability.

Growing rift between the solar industry and the utilities on the impact of solar on grid reliability

More independent studies are needed to understand the correlation between DG and grid reliability


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Financing


How Does One Finance a Solar Project?

Are there state or utility programs that provide financing?

Loan programs Solar rebates Grants Tax credits On-bill financing Property tax exemptions Sales tax exemptions

Does the state allow innovative financing such as third-party power purchase agreements or Property Assessed Clean Energy (PACE)?

Do lending institutions have a renewable energy and an energy efficiency loan portfolio?

Does the state have a mechanism to allow non-tax paying entities to benefit from the federal tax credits? 19Paritosh Kasotia, 2015

Financing Options

Lack of up-front financing is often the biggest barrier to undertaking solar PV projects.

Different financing models and incentive programs can overcome this barrier.

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Third-Party Power Purchase Agreement

• Financial arrangement where a third-party developer owns and operates the PV system while the host customer provides the rooftop space and benefits from the system’s electric output

• Third-party is able to claim tax credits

• Host customer benefits from low cost of electricity and does not have to front the initial cost of the system

Challenges:• Most states do not allow this arrangement

• Largely unregulated which can create risks for the consumers as they may not have the expertise to interpret legal documents

• Risk to the industry as a whole

Property-Assessed Clean Energy

• Municipalities and counties form special tax districts to help property owners finance energy projects by placing an additional tax assessment on the property which is paid over 15 to 20 years via additional annual payments on the property tax bills

• Provides upfront capital to finance projects

• Ties the value of the energy improvements to the home which transfers from current owner to future owners, thereby encouraging a homeowner to go solar

Challenges:• States need to first pass an enabling legislation

to allow local jurisdictions to offer PACE.

• Complicated process with a number of stakeholders with differing views

Community Solar Gardens

• Centrally-located solar PV systems that provide electricity to participating subscribers

• Participating subscribers come together to pool resources and purchase solar array system

• Provides flexibility to opt-in and opt-out based on the terms of agreement

• Provides ability to get clean energy without footing the bill individually

• Great alternative for those who lack suitable solar resource

Challenges: • Not all jurisdictions allow this arrangement

• Requires participation from the local utility provider


Financing: PPAs


Financing: PACE


Financing: Lenders

Educate bankers on perceived barriers such as: Market certainty Technology maturity Complex and technical nature of projects

Ways to mitigate these perceptions: Proven case studies and documented experiences on successful loan execution, and repayment Information on the technology to enable understanding of cash flow Clear signals on the market trends Checklist to ease underwriting and credit evaluation process

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Case in Point: Iowa’s Alternative Energy Revolving Loan Program• Borrower works with her choice of a lender who provides half of the loan amount and does

the underwriting process.• The Iowa Energy Center provides second half of the loan and undertakes the technical

evaluation.• All three entities benefit in advancing their own goals and objectives.


Information Access to Communities and Individuals

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Utilization of on-the-ground connectors in target communities

A great example is the Solar Powering Your Community event in March in Dubuque, Iowa.

Creation of targeted information reports Example: Iowa’s ranking of 16th for solar

potential grabbed consumer attention who otherwise thought that solar was not suitable for Iowa climate.

Provide simple to understand cost-benefit analysis so that homeowners are assured that solar is a worthwhile investment

Make it effortless to go solar by educating the Real Estate Industry


Role of the State Governments

Convene stakeholders to identify best practices

Create a solar toolbox that includes: Vetted list or a “minimal criteria” approved list of solar companies Solar calculator Solar mapping tools Checklists, guidelines, and model permitting process

Coordinate building inspectors’ training

Pass legislation on consumer protection

Increase awareness through fraud warnings and solar-friendly policy statements


Role of the Local Governments

Include solar-friendly provisions in comprehensive plans

Standardize permitting and zoning ordinances

A zoning ordinance could be adopted by multiple jurisdictions creating uniformity among different jurisdictions in the states, at lease those that are congruent.

Automate application process


Utilities are an Integral Part of this Process

According to a survey conducted by Utility Dive, 56% of utility executives see the opportunities in DG but aren’t sure how to build a business around it.

How do utilities ensure return on existing infrastructure and assets and at the same time incorporate DG without incurring a loss?

Potential business models:

Energy service providers

Smart Grid Integrators

Hybrid models


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The Biggest Barrier of All:Inertia


Turning Passive Solar Supporters to Active Solar Consumers

Design strategies that play to the consumers ethos

Case example: Organic foods/farming Industry

Authenticity: Solar is cheaper, cleaner, and accessible to everyone.

Value for the money: I may pay more but I also get greater benefits.

Community vs consumers: We want to do solar because it is good for our community.

Choice: I want to exercise my right to decide how I get power.


Questions or Comments?

Paritosh [email protected]

515-802-0412


mailto:[email protected]

soft costs of solar and what can we do about it

Documents

solar resources

soft costs of solar

original solar system

energy efficiency ee

energy efficiency advocate

market barriers

conventional energy

inspections interconnection