1. Sierra Club Palo Verde Group PVG July, 2016, Program
Electric Utilities vs Solar Energy Enterprise
Ronald Roedel
Emeritus Professor of Electrical Engineering
Arizona State University
July 21, 2016

2. Email: r.roedel@asu.edu Webpage: http://roedel.faculty.asu.edu
Ronald Roedel:
Webpage:
Main Affiliation:
Professional Science Masters – Solar Energy Engineering and Commercialization:

3. The Solar Enterprise Current US Solar Power 29.3 GW
Both nationally and globally, the solar business has grown by leaps and bounds in the last two decades
Current US Solar Power
29.3 GW

4. US Photovoltaic (PV) System Installations
SEIA [1]

5. (2% of US electricity demand)
The Solar Enterprise
Both nationally and globally, the solar business has grown by leaps and bounds in the last two decades
Current US Solar Power
29.3 GW
(2% of US electricity demand)

6. The Solar Enterprise
SEIA [1]

7. Advantages to solar power
Inexhaustible input power
The sun’s lifetime is billions of years
Direct conversion to electrical power
Optical energy -> Electrical energy
Zero emissions during operation
No carbon footprint
Earth-abundant raw material supply (for cells)
Silicon is the most abundant element in the earth’s crust
Reliable and durable technology

8. Disadvantages to solar power
1. It is an intermittent energy resource
Night and day
2. It adds instability to the electrical grid
Clouds, shadowing produce output with fluctuations
3. It has low power density
80% of incident sunlight is unused
4. Its power curve does not match the system demand profile
With higher penetration, its marginal value shrinks to zero
5. It is a disruptive technology
It produces “load defection”, possibly followed by “grid defection”

9. What has fueled this growth?
Technological Factors
Silicon solar cells and modules
Inexhaustible input power at zero cost
Societal Factors
Concerns about fossil fuel and nuclear power plants
An increasing awareness of sustainability issues
Economic Factors
Steady reduction in cost of PV systems
Favorable government policies and business climate

10. What might impede this growth?
PV system components
Dependence on materials that are not earth-abundant
High labor costs
New PV system components
Problems with smart components
Certain economic and business factors
Hostile interactions with utilities, utility regulating bodies
Net metering issues
Power demand charges
Expansion of low cost natural gas supply and use in utility scale electricity generation
Recent analysis showing that solar energy suffers from a “merit order effect” which will shrink its value with increasing penetration into the energy market

11. The Photovoltaic (PV) System
A photovoltaic system (or PV system) is an engineered system that carries out these operations:
Absorption of incident solar radiation (optical energy)
Conversion of the absorbed solar energy to DC electrical energy
Controlled transfer of the DC electrical energy to a storage device (such as an array of batteries)
Controlled inversion of the DC electrical energy to AC electrical energy
Controlled transfer of the electrical energy to electrical loads or to the electrical grid

12. Typical Grid-tied Photovoltaic (PV) System
Solar Meter
Utility
Service Panel
UtilityMeter
To House Loads

13. The Real Problem
The Solar Enterprise needs the Electrical Utilities and the Electrical Grid
BUT
The Electrical Utilities and the Electrical Grid do not need the Solar Enterprise

14. The Solar Enterprise
The growth in all renewable energy systems has produced challenges for the electric utilities that must be viewed as disruptive Warren Buffett recently stated, “Solar and Wind Power could erode the economics of the incumbent utility!” The Edison Electric Institute wrote “the cycle of decline [utilities are facing] has been previously witnessed in technology-disrupted sectors (telecommunications and airlines)” [2]

15. Some (seldom mentioned) Utility Issues
David Roberts, Grist, 04/10/13 [3]

16. Some (seldom mentioned) Utility Issues
The electrical power generated by distributed PV (and other renewable approaches) is not generated and sold by the utilities
A belief that increasing PV deployment will lead first to load defection and ultimately to grid defection
The utilities make money from a guaranteed return on capital investment, and since they don’t own the PV systems, they can’t add that value to the rate base

17. The Utility Response
Fight, hammer and tong, the changes to the traditional model
Recognize that renewable energy systems are here to stay, so develop and embrace a new business model that has a new outlook and generates a novel partnership among all stakeholders
Wait and see

18. The utilities that fight the changes
Propose eliminating or altering the net electrical metering (NEM) policy
This proposal is related to the energy content of both the solar produced electricity and the utility produced electricity
Utilities have never expected or planned to buy power from residential or commercial sources, and they do not like doing it now

19. The utilities that fight the changes
Propose adding a demand charge to the monthly bill of the utility residential customer
This proposal is related to the electrical power delivered by the utility
For decades, utilities have charged their residential customers only for the electrical energy. No Investor Owned Utility (IOU) has ever charged for the electrical power

20. A Quick Review of Energy and Power
Energy is a measurement of capacity to do work. It is expressed in units of joules (J)
Power is the rate at which energy is employed. It is expressed in units of watts (W). One watt equals one joule per second

21. A Quick Review of Energy and Power
PE = mgh h
PE = 0

22. A Quick Review of Energy and Power
Lets suppose a ball is moved to the top of the ramp, and it gains potential energy of
If the ball is moved to the top of the ramp in 100 seconds, the power required to do this is
If the ball is moved to the top of the ramp in 1 second, the power required to do this is

23. A Quick Review of Energy and Power
Electrical Energy is the energy contained in electrons and other charged particles; Electrical Power is the rate at which electrical energy is delivered to an “electrical load”
Electrical Power is measured in watts (W); but conventionally, Electrical Energy is measured in kilowatt-hours (kWh)
Electrical Power is calculated by multiplying the Electrical Current and the Electrical Voltage in the electrical device
Current is a measure of the flow of electrons (amperes)
Voltage is a measure of the potential energy (volts)

24. Photovoltaic (PV) Systems
Residential
Scale
Non-residential
Scale
Utility
Scale
Self-consumption
Power export
Peak shaving
Self-consumption
Power export
Direct power export to the grid

25. Grid-Tied PV Systems – The Design Process
Design Steps in a Residential Scale System
Examination of site and estimation of performance
Securing financing
Carrying out PV system engineering and design
Securing relevant permits
Construction
Inspection
Connection to the grid
Performance monitoring

26. Motion of Sun Diagram – Perspective View

27. Step 1 - Examination of site and estimation of performance
South vs West

28. Step 2 – Securing financing
Cash Purchase (35%)
Dealer Credit (5%)
Power Purchase Agreement
Solar Lease (60%)
Monthly terms
Prepaid structure

29. Step 3 - Carrying out PV system engineering and design
Evaluation of electrical consumption
Average annual usage – 5300kWh

30. Step 3 - Carrying out PV system engineering and design
Comparison of electrical consumption to solar electricity production
Annual total electrical usage – 5300 kWH
Annual total solar electricity production – 6300 kWh
PVWatts [4]
3500 W system, 18o tilt
Ratio: 6300/5300 = 1.19
By APS regulations, the ratio cannot exceed 1.25

31. Step 3 - Carrying out PV system engineering and design
Special overlay districts
Architectural considerations
Zoning ordinances
Setbacks, elevations, materials
Building permits
Construction practices; electrical enclosures, wiring, components
Engineering approvals
Mechanical considerations
Utility agreements
Connection arrangements; net metering rules; electrical signal quality

32. Grid-Tied PV Systems – The Design Process
Step 5 – Construction
Step 6 – Inspection
Step 7 – Connection to the grid
Step 8 – Performance monitoring

33. Step 5 - Construction

34. Policies impacting Residential PV Systems
Renewable Portfolio Standards (RPS)
Often has a “solar carve-out” – a portion of the RPS must be met by Distributed Generation (DG), or rooftop solar
Incentives
Federal Investment Tax Credit (ITC) – Reduces Initial Investment
Had been scheduled to end 12/2016; recently extended to 2021
State Tax Credits
Utility incentives
Public Utility Commission Policies
Net Electrical Metering – Reduces Annual Cash Payments
Presently under review (attack?) in 41 states

35. Step 8 – Performance Monitoring
3.5kW system installed in August, 2014
Elevated structure
14 Canadian 250W poly-Si modules
14 Enphase micro-inverters
Enphase monitoring solution
Installed cost: $13,450
$3.84/W (dc)
Incentives:
Installer rebate: $1,000
Federal ITC: $4,035
State Solar Incentive: $1,000
Total out-of-pocket cost: $7,415
$2.12/W (dc)

36. Recent Performance

37. Step 8 – Performance Monitoring

38. Net Metering At the end of each month, a utility bill is calculated:
Electricity Generation =
Number of kWh purchased from utility (after self-consumption) –
Number of kWh exported to utility –
Residual credits (in kWh) from “energy bank”
This is all carried out at the retail rate
Once a year, the residual credits are cashed in:
This is carried out at the wholesale rate
For APS, the “settle-up” date is 12/31

39. Net Electrical Metering – Case 1
PV input = 0 PV
system
Solar Meter
Utility
Service Panel
UtilityMeter
To House Loads
UM runs forward

40. Net Electrical Metering – Case 2 (Self-Consumption)
PV input < Utility input PV
system
Solar Meter
Utility
Service Panel
UtilityMeter
To House Loads
UM runs forward,
but reduced

41. Net Electrical Metering – Case 3 (Power export)
PV input > Utility input PV
system
Solar Meter
Utility
Service Panel
UtilityMeter
To House Loads
UM runs in reverse

42. Net Metering
Crossborder Energy, 02/25/16 [5]

43. Residential PV System, 2015 performance Net Metering
Annual Net Metering B C D E
Month
APS2015 P
APS2015 C
Enphase2015
Excess 2015
APS2015 (no solar)
Net 2015
Bank 2015
Generation Cost
(D-C)
(B+E)
(B-C)
Jan
106
279
341 62
168
-173 $0
Feb 79
391
433 42
121
-312
-485
Mar 70
484
579 95
165
-414
-899
Apr 69
545
650
105
174
-476
-1375
May 99
559
674
115
214
-460
-1835
Jun
567
344
608
264
831
223
-1612
Jul
749
262
613
351
1100
487
-1125
Aug
780
252
583
331
1111
528
-597
Sep
304
524
220
803
-318
Oct
372
478
271
-207
-525
Nov 92
392
402 10
102
-300
-825
Dec
109
244
300 56
-135
-960
-$29
Annual Total
6185
5225
Value of electricity = 5225* *0.030 = $672

44. Economic Analysis Current residential PV system example
Assume that the installed cost of a 3.5kW PV system is $2.12/W after all incentives are accounted for. Assume that the system will produce an annual electrical amount of 6250 kWh (as measured). Assume the utility cost of electricity as $0.123/kWh.
The plan here is to calculate the Life Cycle Cost on both an annualized and cumulative basis, and see when it crosses zero

45. Residential PV System Simplified Cash Flow Diagram Increased by NEM
Reduced by ITC

46. Plotting the cumulative return for 25 years
Residential PV System
Plotting the cumulative return for 25 years
Payback – 10 years

47. Pressure on existing solar policies
The situation
41 states have mandatory net-metering policies (for residential and community PV)
It was 43 states, but Hawaii and Nevada have replaced net metering with net billing
In 2015, 46 states took some form of solar policy action, 30 considered or enacted changes to net-metering rules
Hawaii grandfathered existing net metering customers
Nevada eliminated net metering for all solar customers
California adopted “NEM2.0” – net metering continues, but the 3 large IOUs no longer have to offer net metering after July 2017

48. Pressure on solar policies, cont.
The situation in Arizona
UNS Electric: General Rate Case
Net Metering, Fixed Charges, and Demand Charges
Filed 05/15; Hearings at ACC 03/16
Docket E-04204A
Tucson Electric Power (TEP): Gen. Rate Case
Filed 11/15; Hearings at ACC 08/16
Docket E-01933A
AZ Public Service (APS): Gen. Rate Case
Filed 06/16; Hearings not yet announced
Docket E-01345A

49. APS proposal Fixed charge increase for all rate payers
$8.67/mo  $14.50/mo (R2)
$16.91/mo  $24.00/mo (R1 and R3)
Elimination of net metering, replacement with net billing for new solar customers
New power demand charge
UNS had proposed demand charge for all rate payers, but decided to keep it only for solar customers

50. APS – Net Billing
Import energy from APS - $0.123/kWh
Export energy to APS - $0.0299/kWh
Settle account at the end of every month – no “energy bank” permitted, although credits carry forward

51. Residential PV System, 2015 performance Net Billing
Annual Net Billing D E
Month
APS2015 P
APS2015 C
APS import
RJR export
Gen cost
(kWh)
$0.123/kWh
$0.030/kWh
(D-E)
Jan
106
279
$13.04
$8.37
$4.67
Feb 79
391
$9.72
$11.73
-$2.01
Mar 70
484
$8.61
$14.52
-$5.91
Apr 69
545
$8.49
$16.35
-$7.86
May 99
559
$12.18
$16.77
-$4.59
Jun
567
344
$69.74
$10.32
$59.42
Jul
749
262
$92.13
$7.86
$84.27
Aug
780
252
$95.94
$7.56
$88.38
Sep
583
304
$71.71
$9.12
$62.59
Oct
165
372
$20.30
$11.16
$9.14
Nov 92
392
$11.32
$11.76
-$0.44
Dec
109
244
$13.41
$7.32
$6.09
Annual Total
$293.72
Value of electricity = $672 - $294 = $378

52. Residential PV System – Net Billing
Plotting the cumulative return for 25 years
Payback – 19.5 years

53. 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”

54. 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

55. 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

56. What can a rooftop solar customer do?
Put in a rooftop PV system NOW! These proposed changes may go into effect on Jun1, 2017
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
Consider solar+storage option
Operate the system with energy management strategies to eliminate the occurrences of peak surges

57. What can a rooftop solar customer do?
Put in a rooftop PV system NOW! These proposed changes may go into effect on Jun1, 2017
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
Consider solar+storage option
Operate the system with energy management strategies to eliminate the occurrences of peak surges

58. What can a rooftop solar customer do?
APS [5]

59. New Approaches A new utility model
A partnership among all stake-holders
Sunpower [6]

60. A Utility-led Smart Microgrid

61. Utility-led Smart Microgrid
Austin Energy [7] received a $4 million grant from DOE (SHINES program) to launch a Solar+Storage+Grid system, called “almost dispatchable”, using:
Austin Energy’s advanced distribution grid management and control system
A distributed energy resource optimizer from 1Energy
Solar analytics from Clean Power Research
Grid batteries from Tesla and Samsung
Smart inverters from Solar Edge and Ideal Power
Smart meters and communications from Landis+Gyr
Integration with Texas grid operator ERCOT
Cost – 14 cents/kWh

62. Another Utility-led Smart Microgrid
Duke Energy [8]

63. Next Steps
Contact the Arizona Corporation Commission with letters, written comments, testimony at the public hearings. APS does not practice Quaker Capitalism, and responds only to direct orders from the ACC
Tell the ACC that renewable electrical energy, especially solar energy, is still a start-up enterprise and needs additional support – just as all energy technologies before them. Keep net-metering in place.

64. Next Steps
Tell the ACC that electricity utilities have billed their customers for energy only for decades. Imposing power demand charges, without providing the means to monitor and alter power usage, is simply a punitive act
Tell the ACC that they should direct APS to devise a plan to become a proper 21st century utility. Tell them to take testimony from forward-looking utilities like PG&E (CA), ComEd (IL), ConEd (NY), Duke Energy (NC), and Austin Energy (TX). Tell them to examine the proposals from progressive think tanks like Rocky Mountain Institute, 21st Century Utility, the SunShot program from the Department of Energy

65. References The Solar Energy Industries Association
Peter Kind, “Disruptive Challenges,” Edison Electric Institute, 2013
David Roberts, “Utilities for Dummies,” Grist, 04/11/13
PVWatts

66. References Arizona Public Service Rate Review Sunpower
Sunpower
Austin Energy SHINES
Duke Energy