Photovoltaic Systems Engineering Residential PV Systems SEC598F18 Photovoltaic Systems Engineering Session 24 Residential PV Systems Wrap-up and Forecast November 28, 2018

Session 24 - Value to class members Additional evaluation and analysis of a residential grid-tied PV systems Policy review Payback Analysis – Net Metering, Net Billing Impact of Demand Charges Forecast Status of current and future PV markets, costs, etc. Status of current and future Energy Storage markets, costs, etc.

The Solar Enterprise Current US Solar Power 58.0 GW Both nationally and globally, the solar business has grown by leaps and bounds in the last two decades Current US Solar Power 58.0 GW

The Situation in Arizona Market Preparation Policies Interconnection Standards - YES Import/Export tariffs - YES Feed-in tariffs - NO Solar rights policies - YES Permitting and zoning - YES Building codes - YES

The Situation in Arizona Market Creation Policies Renewable Portfolio Standards - YES Solar Carve-outs - YES Energy choice, CCAs - NO Market Expansion Policies Financial incentives Grants, rebates, tax incentives - YES Financing options Solar leases - YES Third-part ownership, PACE - NO Lead-by-example policies - MAYBE

The Situation in Arizona Essential Financial Components Federal Investment Tax Credit (ITC) Still in existence, but phasing out State Solar Tax Credit Still in existence Net Metering Eliminated in APS territory, threatened in TEP territory Replaced by Net Billing

Net Metering vs Net Billing The Import Tariff (for kWh purchased from the utility) equals the Export Tariff (for kWh sent to the utility) If the monthly exports exceed the imports, the net kWh are added to an “electricity bank” which can be used to offset bills in months when the imports exceed the exports The electricity bank is reset to zero annually at the wholesale electricity tariff

Net Metering vs Net Billing The Import Tariff (for kWh purchased from the utility) is higher than the Export Tariff (for kWh sent to the utility) If the value of the monthly imports exceed the value of the exports, the net value is part of the monthly bill; if the export value exceeds the import value, it is applied as a credit to the bill. If the credit is larger than the bill, it can be carried forward to the next month There is no banking of kWh or money – the bill is settled every month

Net Metering vs Net Billing The tariffs The Import Tariff is established by the Arizona Corporation Commission through general rate case hearings. At present time, it is roughly $0.139/kWh (APS). The Export Tariff is also established by the ACC, and the initial amount was determined through a Value of Solar docket, using a resource comparison calculation. At present time, it is roughly $0.129/kWh (APS). The docket also established a declining escalator clause to the value (appproximately 10%/year)

The Value of Solar What should the export price point be? The Utility Position It should be set at the lowest replacement cost. The utilities can buy electricity in the wholesale markets, so they should not have to pay retail ($0.03/kWh) The Solar Industry Position It should be set at the retail electricity cost, or higher. The calculation of the retail cost does not include economic factors such as delayed capital expenditures, or any of the so-called externality costs ($0.27/kWh)

The Value of Solar An NREL study described two market scenarios which could emerge from a Value of Solar calculation This come from a comparison between the LCOE of the residential PV system and the VOS tariff VOS tariff < LCOE Installation costs not likely to be recovered, and additional incentives are needed to reduce the difference and sustain the solar market VOS tariff > LCOE An acceptable payback period is achieved and the solar market is self-sustaining

APS Net Metering – Generation Bill Avoided Electricity Cost = 0.123$/kWh * 5225kWh = $643

Simplified Cash Flow Diagram Increased by NEM Reduced by ITC

Revised current residential Payback –> 10.5 years

SRP Demand Charges The billing demand is the maximum thirty-minute integrated kW demand occurring during the on-peak periods of the billing cycle These charges are modest in the months of low utility region usage, but can be quite substantial in the months of high utility region usage The power demand charges are an additional charge above the electrical energy usage charge SRP calls the demand charge a “price signal”

SRP Demand Charges - Example The average high power demand at a residence in the summer is 2kW. Suppose there is a spike in power demand to 12kW for 30 minutes once in the billing cycle Without the spike, the demand charge would have been 2kW*$8.03/kW = $16.06 With the 12kW spike, the demand charge would be 3kW*$8.03/kW + 7kW*$14.63/kW + 2kW*$27.77 = $182.04 Demand Charge First 3kW Next 7kW All additional kW Winter $3.41 $5.46 $9.37 Summer $8.03 $14.63 $27.77 Summer Peak $9.59 $17.82 $34.19

Proposed APS Demand Charges – Same Example The average high power demand at a residence in the summer is 2kW. Suppose there is a spike in power demand to 12kW for 60 minutes once in the billing cycle Without the spike, the demand charge would be: R1 2kW*$6.60/kW = $13.20 R2 2kW*$8.40/kW = $16.80 R3 winter 2kW*$11.50/kW = $23.00 R3 summer 2kW*$16.40/kW = $32.80 With the 12kW spike, the demand charge would be: R1 12kW*$6.60/kW = $79.20 R2 12kW*$8.40/kW = $100.80 R3 winter 12kW*$11.50/kW = $138.00 R3 summer 12kW*$16.40/kW = $196.80

What can a rooftop solar customer do? Design the system to “shave” the power demand peaks Orient the solar modules to the west, to maximize the solar power generated late in the day Operate the system with energy management strategies to eliminate the occurrences of peak surges The utilities sometimes couple demand charges with lower energy (volumetric) charges Employ energy arbitrage strategies (buy low, sell high)

Forecast for future residential customers Replacement of traditional PV systems with Solar+Storage systems Backup Power PV Self-Consumption Time of Use (TOU) Demand Reduction M.B.Krause and D.Brearley, “Residential Energy Storage Economics,” SolarPro, July/August 2016, pp 22-36 Rocky Mountain Institute (RMI), THE ECONOMICS OF BATTERY ENERGY STORAGE, October 2015

Forecast for future residential customers M.B.Krause and D.Brearley

Forecast for future residential customers Solar+Storage requires Energy and Power Mangaement Systems Adara Power Pika Energy Eguana Technologies Schneider Electric Enphase Energy SMA America Fronius USA SolarEdge Technologies JLM Energy Sonnen Magnum Energy Sunverge OutBack Power Tesla/Solar City

Forecast for future residential customers Pika Energy Island

Other New Approaches Technological Factors (Solar+Storage) Aggregated residential S+S systems More offerings for S+S systems at the C&I scale Sophisticated microgrid offerings with community solar, residential solar, smart storage, smart inverters, battery storage, etc.

Sonnen “Sonnen targets utility contract for Arizona aggregated storage project: The company aims to equip 2,900 homes with solar panels and a battery to provide peak demand during evenings.” Utility Dive, Peter Maloney, 11/06/18

SEIA/WoodMac forecasts 1. US Solar Market Insight: Q3_2018 Executive Summary 2. US Energy Storage Monitor: Q3_2018 Executive Summary

US Solar Market Insight: Q3_2018

US Solar Market Insight: Q3_2018

US Solar Market Insight: Q3_2018

US Solar Market Insight: Q3_2018

US Solar Market Insight: Q3_2018

US Solar Market, 2015 Greentech Media, 2015

US Solar Market Insight: Q3_2018

US Energy Storage Monitor: Q3_2018

US Energy Storage Monitor: Q3_2018

US Energy Storage Monitor: Q3_2018

Solar Cells, invented at Bell Labs Telstar 1962 14 W