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American Utilities Predict Their Own Downfall

It has been predicted that solar power may be a significant hindrance on the electric utility industry… by an electric utility company. In January, a report that went fairly unnoticed by the media was published by the Edison Electric Institute (EEI). The EEI is an association of American share-holder owned electric power companies. The report predicts that as more customers opt for distributed energy resources (DER), specifically photovoltaics (PV), the US electric utility industry could be destroyed. A similar situation has already occurred in Germany and now the US is predicting the same downfall.

American Utility Background

The electrical utility industry is an old system that has been mostly unchanged since its establishment. There are two main types of utilities:

1. Regulated monopolies that generate electricity in a power plant and then sell and provide it to consumers through the power lines within their service area.

2. Deregulated utilities manage a grid that consumers are connected to. However, it is separate from power generation plants so they must buy energy from the market and then provide it to consumers through their grid.

PV energy is causing the slow destruction of American utilities. iStockphoto.com©Richard Schmidt-Zuper

PV energy is causing the slow destruction of American utilities. iStockphoto.com©Richard Schmidt-Zuper

A utility first has to present its case to the public utility commission (PUC) by stating how much electricity they have to produce (or purchase) based on consumer demand for electricity as well as the rates they want to charge for the power. When the PUC accepts their rates, they also guarantee the utility a reasonable return on power investments and grid upkeep.

The electricity utility business model is quite an old and accustomed one. It relies on high demand for electricity and selling this electricity to make a profit. With higher demand for electricity, investments also increase and thus, lead to greater profits for utility shareholders.

Essentially, utilities thrive as they sell more power which could lead them to oppose energy efficiency and demand response programs such as incentives to lower electricity use during peak hours. The ability for solar power to be at its strongest close to peak times also affects utilities’ profit-making mechanisms. PV systems on residential and commercially-owned rooftops are not owned by the utilities so power produced by the PV (or any other DER) is not being returned to the utility as profit. Rather, each kilowatt produced by PV energy is reducing demand for utility produced energy. Power during peak hours are the most expensive and utilities can generate the most profit during this time. Yet, as solar also reaches its maximum near this time, it takes away much of the profit utilities could be making during the peak hours.

Vicious cycle downwards

Normally, the cost of investment and maintaining the grid are placed on ratepayers within the service areas. However, as consumers start to opt out of the grid and produce energy independently, the costs will be placed on a smaller group of ratepayers. When this occurs, the rate for the remaining ratepayers increases and damages the utility’s credit rating. As the rate increases, consumers will switch to DERs such as PV energy. The EEI forecasted up to 20% increase of rates for people without solar energy. This is a vicious positive feed-back cycle that could change how utilities function in America. Solar energy is directly interfering their profit mechanisms, however, utility investors seem to be paying little attention to this issue.

The inevitable changes in a fairly old business model were also compared to the changes experienced by some companies like Kodak and the US Post. However, unlike most companies, electricity utilities are unaccustomed to constant changes in the market and have benefited from a fairly untouched market until now. The EEI report discusses ways to avoid these issues mostly by revising their own tariff structures and by planning for “disruptive challenges” like PV. EEI presents measures to maintain the old business model and the utilities. However, is that what consumers also want or will we soon see the downfall of a possibly outdated industry?

Sources: Grist, Edison Electric Institute

Obama presents US budget for 2014

Last Wednesday President Obama presented his budget for fiscal year 2014.

The Dept. of Energy (DOE) was awarded 28.4 billion in discretionary funds, an 8% increase from last year, to position the US as a world leader in “clean energy and advanced manufacturing” among other goals. 153 million were awarded to R&D for grid modernization efforts.

Obama & Jeffrey Zients, Office of Management and Budget

Obama & Jeffrey Zients, Office of Management and Budget

Other highlights include 6.5 million specifically earmarked to promote and decrease costs of renewable energy, an overall 40% increase in the DOE’s “clean energy technology activities”, and a move to make the production tax credit (PTC) permanent.

Finally, 4 billion in unnecessary oil, gas and coal subsidies have been eliminated from the budget. Cuts of this magnitude have been proposed every year Obama has been in office, and ignored by congress each time. With any luck, fiscal year 2014 holds something different in store…

The budget in its entirety can be downloaded and viewed here.

Additionally, the Senate Committee on Energy and Natural Resources will hold a hearing on the DOE’s portion of the budget this Thursday, April 18th, 10am EST. The webcast can be viewed here.

Solar Energy is a Finally a Net Energy Producer

There has always been somewhat of an unsaid irony that so much fossil-fuel emitting energy is required to create solar panels, a fossil-fuel free energy source. Recently, research from Standford University has found that the amount of clean energy produced from already installed solar panels is finally exceeding the amount of energy that was required to manufacture the panels.

There are high energy costs to purify silicon.

There are high energy costs to purify silicon.

The amount of solar energy produced from all solar sources such as residential, industrial, and commercial, was compared to the energetic costs of manufacturing and installing PV systems as well as the costs required to maintain the systems. Michael Dale, a postdoctoral fellow from Stanford’s Global Climate Energy Project (GCEP) estimated that the world will reach net energy benefit by 2015 and at latest, 2020. Just five years ago, the manufacturing process was using 75% more energy than it actually produced. That value has decreased immensely due to continually increasing efficiency in the production of solar cells.

The manufacturing process of a solar panel can be heavily energy intensive. Approximately 90% of solar modules on the market are silicon-based. To extract silicon, silica rock must be melted at over 1500°C, often using coal-fired plants. Afterwards, the pure silicon must be melted again to obtain a crystalline structure, with an average purity of 99.9999%. Nevertheless, technology has improved and the process of making a solar cell has become more efficient. Thinner silicon wafers and less highly refined material for silicon feedstock are now used, while less expensive material is being lost throughout manufacturing process. The use of other elements for solar thin films such as copper, zinc, tin, and carbon can also be improved. The energy required to produce solar panels will likely continue to decrease over time.

The solar industry is still aiming primarily at reducing financial costs rather than energetic costs but there are several ways to reduce the latter. An easy solution is to place more PV installations in regions with greater solar resources. Using less material or switching to panels that have lower energy costs than silicon cells are also viable options. Other existing cells based on cadmium telluride and copper indium gallium diselenide can be also used. Together with silicon cells, these solar cells make up over 99% of the current market. Overall, Dale forsees a decline in the energy costs to manufacture panels, more durable panels, and more efficient conversion of sunlight with new technologies. Net energy production measurements should be taken into account in current and future renewable technologies to produce effective energy solutions. GCEP is also looking to apply these measurements to storage technologies and wind energy.

You can also see Stanford’s video on this topic

Source: Phys.org; Environmental Science and Technology

Warren Buffett and Solar PV

Buffett has an uncanny reputation for winning financial bets on undervalued markets. So when the Buffett-backed MidAmerican Renewables exploded onto the market in 2012, investors took notice.

    Buffett and US-President Obama

Buffett and US-President Obama

Where Buffett invests, markets follow

The company bought three major solar PV projects totaling approximately 1,420MW in California and Arizona, and managed to do so at ideal stages of development. Not too risky – yet still early enough to come at a deep discount – these solar investments mesh seamlessly with the “buy and hold” strategy which has made Buffett’s Berkshire Hathaway the success it is today.

While environmental concerns play a role for many investors choosing renewables, rest assured that Berkshire-Hathaway is looking straight to the back page on this move. Buffett has famously stated that the deregulation of the energy industry will be the largest recorded transfer of wealth in history. Previously insufficient performance data on operational thin-film and polycrystalline modules has been cited as the factor preventing involvement until now.

Regarding next moves, while MidAmerican Renewables has looked abroad (primarily Chile and the Middle East), it is most likely to continue investing in US markets first, especially in the south-east (Georgia & Tennessee). Accordingly, future project sizes will be much smaller than the 300MW+ behemoths purchased during this most recent round.

What’s the bottom line? Green. Solar is powering both kinds.

Source: renewableenergyworld.com

Photovoltaics in Canada – An Introduction

Canada is one of the highest energy consumers per capita in the world. Due to its geography, Canada is currently the world’s second largest producer of hydroelectricity and is sixth in wind power generation. Nevertheless, solar energy is also expanding rapidly in Canada and especially, in Ontario. In 2011, there was 289 MWDC photovoltaic (PV) capacity installed throughout the country representing 335 GWh annually.

Canada has a significant amount of annual solar radiation, much greater than that of Germany’s the leader in solar energy. Ontario, Quebec, and the Prairies are leading the country in solar resources. Solar potential tends to accumulate in the southern regions but is much lower in the territories due to their high latitude. Canada’s small population is most scattered throughout the country with very few densely populated regions besides the Greater Toronto Area, Vancouver, and Montreal. In the last decade, PV installations were concentrated in off-grid systems for purposes such as navigational aids, remotes homes, and telecommunication.  These systems made up almost 90% of the solar capacity in Canada in 2009. Off-grid system remains prominent in Canada but will decrease in its market share as grid-connected systems continue to grow swiftly.

Government Regulations

Federal incentives are lacking in Canada, with the exception of the Income Tax Act’s Accelerated Capital Cost Allowance for certain PV systems. Solar energy legislature is almost always left solely to the provincial government. Most provinces in Canada have Net Metering programs that allow smaller renewable energy generating units to connect to the grid system.

Ontario has so far been the clear winner in Canada’s solar race. Ontario’s Renewable Energy Standard Offer Program (RESOP) and feed in tariff (FIT and microFIT) program has had substantial support. In 2010, the public budget for photovoltaics in Canada was $61.8 million with the majority funding Ontario’s solar efforts. Formal solar networks and testing facilities for panels have also been established, funded by both federal and provincial governments, which have worked to increase the collaborations and PV innovations throughout Canada.

Community

In 2010, Sarnia, Ontario’s solar plant, Sarnia Solar, was considered the world’s largest solar plant. It has since been exceeded by other plants around the world. It has an installed capacity of 97MW and consists of 635 acres of modules, approximately 1.3 million thin film panels. Municipal governments and communities have also worked towards developing renewable energy. House owners now view the addition of a PV system as a normal house upgrade and base it on affordability and reductions in environmental impact. In 2007, the Drake Landing Solar Community was completed in Okotoks, Alberta. It is the first community heated by a district system and is able to store energy generated during the summer for the winter months. This allows 90% of each home’s heating to be generated directly from solar energy.

Despite all this, Canada is still behind some of the major competitors. However, politicians all around Canada are aiming to reduce greenhouse gas emissions through use of renewable energies. New legislation such as Ontario’s Green Energy and Green Economy Act established in 2009 is also pushing the country towards a renewable energy  -based economy. As older electricity plants begin to degenerate and age, Canada is looking towards renewable energy to replace ever increasing energy demands. Canada’s vast landscape is an unlimited resource for sustainable energy from renewable sources.

Check out the article on Ontario later on in the week which will expand on its legislation and accomplishments in solar energy.

Sources: Canmet, Cansia, DLSC, Pembina Institute

 

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