The Economics of, and Threats to, Rooftop Solar

How Do Solar Benefits and Costs StackUp Against 20th Century Nuclear

and Fossil Energyand

What is the Regulatory Process that Could Cause the Utilities to Promote

The Solar Transition?

A Presentation for

Sustainable Tucson5/11/2015

Russell Lowes, Sierra Club Rincon Group Energy Chair, Sierra Club Grand Canyon Chapter Solar Task Force Chair &

Research Director for www.SafeEnergyAnalyst.org

How do you calculate the cost of solar energy for your home?

• Four steps:

1) Do energy efficiency first.

2) Talley all the costs.

3) Add up the energy produced.

4) Divide the costs by the energy produced.

Step 1: What is solar costing for a typical home?

. . .Well let’s use my home as an example.

• First we did energy efficiency. • 1) Switched to dual system of air cooling:

evaporative cooling and HVAC;• 2) Had insulation blown in to our attic;• 3) Installed insulating blinds;• 4) Installed double-pane windows (the noise

reduction alone was worth it);• 5) Replaced our lawn with desert landscaping and

put in a grey-water system on our clothes-washer (with a Watershed Management workshop more water than energy-saving);

• 6) Replaced our A/C system with a much more efficient HVAC system; and

• 7) Insulated behind the cabinets on our external kitchen walls.

• This dropped our electric bill from $65 to $45/month, and enabled us to downsize our solar panels from 4 kWe to 2.5 kWe, reducing the cost of solar from about $14,000 to about $9,000.

• Total of Step 2 (solar costs):• Then we sought, and received, bids from three

local companies (Technicians for Sustainability, Net Zero Solar and GeoInnovations) and one national (Sungevity).

• We selected Net Zero Solar, a local company. • We paid $8925 for 2.55 kWe of DC power,

$3500/kWe. Let’s revise this to $3000/kWe today, in this example I’ll give you, as the costs for solar have declined since our system was installed two years ago.

• There are other costs to solar, and here are the typical ones.

• a) Replace inverters. We opted for micro-inverters, and they are guaranteed for 25 years, so we should have to replace them once before a 30 year lifespan. That would be $275/kWe once during the system lifespan of 30 years. Note that there are many mono-crystalline solar panels that are lasting far longer than 30 years, some over 40 in the Phoenix Area.

• b) Other maintenance costs are projected to be about $300/kWe, or about $765 for the whole system.

• c) Financing via a home equity line of credit (HELOC). Assuming 5% interest per year, $7650 cost of system, The annual payment for 20 years is $605.84 per year or $50.49/month.

• For those who want to be able to do this in Excel, if you enter this equation in Excel, you will get the cost per year for principal and interest payments.

• =-PMT(0.05/12,20*12,8925)

(rate/months,yearsXmonths/year,principal)

Total payments over 20 years for capital and interest: $12,117

Inverter replacement: $701

Other maintenance costs: $765

If not financed, total costs are $9,116 over 30 years.

Step 3: How much energy is produced?

• Gross DC rating of system: 2.5 kWe • Gross AC rating of system: 2.15 kWe, ~86.8%• Average kWhe produced over 1st 2 years: 12.4• Average kWhe produced per year: 4521• Figuring in the lifetime average including

performance decrease of 86.8% based on 1% decline of balance per year, per AzRise study: 3927 kWhe.

- This happens to be a 20.9% capacity factor (3927/(2.15kWeX8760 hrs/yr))

- The total kWhe over 30 years: 117,810

• Step 4: The calculation:

• The cost from Step 2, w/o financing: $9116• With Financing: $13,583• The electric production from Step 3: 117,810

kilowatt-hours.• Without financing costs, $9,116 ÷ 117,810

kWhe = 7.7¢ unsubsidized, or 3.7¢ subsidized.• With financing costs, $13,583 ÷ 117,810

kWhe = 11.5¢/kWhe, or 8.7¢ subsidized.• (In both cases the subsidy is 2.8¢/kWhe.

How does this compare with the other options? The current costs for new power:

20th Century Options:• Coal 13¢ per kilowatt-hour (kWhe), at the

meter• Gas 13¢• Nuclear 24¢ in 2022 (first likely date of

new deployment)• Oil (no longer used at a significant level)

• 21st Century Options:• Solar photovoltaic rooftop (PV): decreasing

about 7% a year, now with financing at 11.5¢/kWhe in AZ, with financing, or subsidized at 8.7¢. Nationwide PV is at 15¢ w/o subsidies, 12¢ w/

Concentrating solar sower (CSP): 14¢+• Utility large centralized photovoltaic: 17¢• Wind turbines: 11¢• Energy efficiency: 3¢• Energy storage: 25¢ or less

The Arizona Corporation Commission

• The AZ Corporation Commission is more powerful than the State’s Governor, in terms of what you pay for your electricity.

• Many of its regulations are addressed at this web address: http://www.azcc.gov/divisions/utilities/electric/rules-electric1.asp

How is the ACC so powerful?

• It has executive or legislative level authority under the Arizona Constitution.

• Its rulings cannot be overturned by the Governor.

• The ACC rulings cannot be overturned by the Legislature. This is a rarity amongst utility regulatory bodies in the U.S.

What does the ACC not control, in relation to utilities?

• They do not regulate municipalities. Hence, the 2nd biggest utility in Arizona, the Salt River Project, which is governed as a muni, is not regulated by the ACC.

• Tucson Water is not regulated, as it is a muni also.

• Tucson Electric used to be a muni, decades ago, but is now a regulated monopoly.

• A regulated monopoly under the ACC is granted territory that it has sole electrical sales authority over. . . however,

• If a person/company wants to sell power, TEP can grant them permission if it wants to, or. . .

• The ACC can grant permission for electrical generation sales within the territory of a regulated monopoly.

• It is rare for a monopoly or its regulator (ACC) to grant permission to a party to compete with the monopoly.

• You can, however produce power for yourself.

Where is the ACC at on electrical energy?

• For many years, the ACC regulated utilities with only a few major energy sources in mind. Coal, gas and later nuclear were the mix. This was so up until the 1990s, when the Commission began to ponder solar and other renewables.

• The Commission established a renewable energy portfolio, where 25% of the regulated utilities output is required to be renewable energy by 2025.

• Then, later in the 2000’s the ACC established that these monopolies would be required to reduce their power generation by 22% by 2020 (relative to population growth).

• . . .They ACC mandated energy efficiency. This is called the energy efficiency portfolio.

• However. . .

The ACC goes retro.

• . . .after 15 years of good progress on electrical energy reform, the composition of the ACC altered. It went forward into the past.

• The ACC named a garbage incinerator renewable energy;

• The ACC ruled that solar energy was costing, more than benefiting, non-solar users, with no real study in place;

• It stalled on making energy efficiency and solar supportable with new policies to link profit with service instead of letting the old paradigm of profit based on product prevail.

• This policy is called “decoupling” or as I put it “recoupling” profit from kilowatt-hours and capital investment to instead, service standards like helping residents and businesses reduce electrical consumption.. .

• . . .It needs to be in play with the solar and energy efficiency policies we have. To not recouple profits from products to services dooms these two policies in my view.

HAND OUT E-MIX SHEETS

The Special Blend of Solar, Energy Efficiency

& Storage--what will it cost?

Kilowatt- Cost CO2 grams Grams CO2

Hours % Mix Cost Per KWH /kWhe In the Mix

With a blend that consists of:

Solar PV 500 50.0% $45.00 $0.090 25 12,500

Energy Effcncy. 300 30.0% $10.50 $0.035 5 1,500

Battery 200 20.0% $60.00 $0.300 40 8,000

Blend PV,EE&Battery 1,000 100.0% $115.50 $0.116 22 22,000

Nuclear Coal Gas CCS Coal Solar PV Energy Ef-fcncy.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Kilowatt-Hours Yield Per $1000 Spent

Nuclear Cabon Capture Coal Solar photovoltaic Energy efficiency Blend, Solar&EE Blend: Solar,EE&Storage

0

500

1,000

1,500

2,000

2,500

3,000

3,500Kilowatt-Hours Yield Per $100 Spent

The Special Blend of Solar, Energy Efficiency

& Storage--What Will it Cost for 1000 kWhe?

Kilowatt- Cost CO2 grams Grams CO2

Hours % Mix Cost Per KWH /kWhe In the Mix

With a blend that consists of:

Solar PV blended KWH: 350 35.0% $42.00 $0.120 25 8,750

EE blended KWH: 550 55.0% $16.50 $0.030 5 2,750

Energy storage, example 100 10.0% $40.00 $0.400 40 4,000

Total PV&EE blend: 1,000 100.0% $98.50 $0.099 15.5 15,500

Vote Solar Initiative

• “China got more generation from wind in 2012 than from nuclear and it added more generation from non-hydro renewable energy than fossil andnuclear combined. It is now the world leader in seven of the 10 renewable energies and wants to be top in all 10.

• “It appears to have added 12GW of photovoltaics in 2012 -- that's more than the total that have been installed in the US.”

• (from: http://www.theguardian.com/environment/2014/feb/17/amory-lovins-renewable-energy

U.S. Energy Efficiency Grows by the Year

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

0

20

40

60

80

100

120

140

160

180

Billions of Dollars GDP/ Quad (All in 2009 $ Adjusted for Inflation)

Billions of Dollars / Quad (All 2009 Real $)

Per Capita Electricity Use in the U.S. and CA: 1960-2004

• (Go to spreadsheet, 2-SubsidyPerType)

Questions??

• Russell Lowes, 321-3670 in Tucson• Energy Chair for the Sierra Club Rincon

Group

www.SafeEnergyAnalyst.org

What about nuclear energy?

• Isn’t nuclear energy touted as better than fossil fuels, environmentally?

• Isn’t the nuclear option supposed to be low-CO2 and affordable?

• Is the low-CO2 claim accurate?

• What are the costs of nuclear energy?

Let’s go at this in a simple way.• Construction of a nuclear plant in the U.S.

has not been completed for many years. • 1) What did a nuclear plant cost in the last

round of nukes?• 2) What cost would that be, adjusted for

inflation?• 3) How would that cost be adjusted up or

down, considering the different variables we have today?

• 1) A nuclear plant averaged about $3100 per kilowatt of electrical capacity in 1988.

• 2) In 2013 dollars, that would be $6105/kWe• In 2022 inflation-adjusted dollars (assuming

4% inflation, 2013-22), the pre-adjusted projection is $8147 per kilowatt of design electrical rating.

• 3) With a matrix of 27 cost escalation factors, the cost of new nuclear reactors is likely to be about $9149/kWe in 2022 dollars.

• What does this mean for local ratepayers who fund a nuclear plant? And for the nation?

Local Cost Wherever Reactors are Sited

• Cost of average reactor for 2022. . .• 1,350,000 kWe (1350 MWe) average reactor size• $9149 cost per kWe constructed• $12.35 billion per reactor

National Cost of 100 ReactorsSome in the U.S. Senate and the House have called for 100 reactors. This is the cost of such a program, in 2022 dollars (the year the first of the new reactors might be finished).

-- $1.24 trillion construction cost

-- $173 billion at a 14% annual capital payback

-- $5.19 trillion over 30 years. . .

-- $494 cost per citizen PER YEAR over 30 years.

-- $988 cost per taxpayer (175 million taxpayers).

Note: This $173 billion/year is just the capital payback on construction. It would not cover fuel, operation and maintenance, waste storage, etc.

This is what it would cost if socialized/nationalized.

• If nukes are not fully socialized, then the cost would be born amongst the ratepayers . . . Or it could be a blend.

Cost per kWhe, Again, 3 Steps:

1) COST PORTION

Cost divided by kilowatt-hours of e = ¢/kWe• Cost portion for 1 kilowatt of capacity (kWe):• $9149/kWe• X 14% capitalization rate (interest, principal & taxes)• X 30 years• $38,425.80 for 1 kWe capacity for 30 years

2) KILOWATT-HOURS PRODUCED PORTION• 1 kWhe• X 85% capacity factor• X 8766 hours/year average• X 40 years (even though financing is 30 years, plant

lasts 40)• 298,044 kWhe produced by that 1 kWe of capacity.

3) THE COST/kWhe PORTION• $38,425.80 for 1 kWe capacity for 30 years• DIVIDED BY• 298,044 kWhe produced by that 1 kWe of capacity. • = 12.9¢/kWhe

Adding the other costs

• The multi-disciplinary “Keystone Report” lists for fuel, operation & maintenance:

• 4.3¢/kWhe• + prior 12.9¢ for capital costs• = 17.2¢ production cost• + 7¢ transmission and distribution cost• = 24.2¢ average cost per kWhe to your

meter.

Time to nuke the nuclear & fossil fuel options?

• When solar in Tucson is 9¢/kWhe delivered,• And wind is 11¢• And energy efficiency is 3¢• And energy storage is highly variable, but

when put in reasonable combo with the other three, it is far less than 24¢ of the nuclear option. . .

• Yes, it’s time to nuke the nuclear option!