Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional...

27
Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities

Transcript of Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional...

Page 1: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

Utility Planning Perspective For A

Solar Feed In Tariff (FIT)

February 3, 2009Gainesville Regional Utilities

Page 2: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

2

GRU’s Objectives

• Encourage early private investment and innovation in photovoltaic installations

• Capture benefits for customers not directly available to GRU as a public entity

• Assure good performance from installed PV systems

• Make solar PV a good investment for both GRU and our customers

Page 3: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

3

Presentation Outline

• Identify challenges of current rebate-based incentive model

• Review analysis methodology

• Compare alternatives

• Describe the Feed In Tariff Program

• Summary

Page 4: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

4

Gainesville is a Florida Leader in Solar Photovoltaic (PV)

12.9 % of all State solar rebates despite having only 1% of population

Page 5: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

5

GRU’s PV RebateIncentive Program

• Upfront rebate payment– $1.50 per Watt– Business and Residential Customers– Limited to 5kW (Residential) and 25kW (Business)

installations

• Net metering at retail rate– 9.4 to 14.0 cents per kWh, based on rate category and

subject to change with fuel adjustment– Limited to excess energy generated

+

Page 6: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

6

GRU Rate Classes

• Residential (RES)• General Service, Non-Demand (GSN)

– pay for energy, like residential– no extra demand charges – rate class usually assigned to small businesses

• General Service, Demand (GSD)– pay for energy AND a demand charge– rate class for some larger businesses

• Large Power (LP)– rate class for the largest business and industrial customers

Page 7: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

7

Net Metering Value Varies Among Rate Classes

$/kWh Rate Class Parameter

Res GSN GSD LP Net Metering Tariff For Excess PV Production .125 .140 .095 .094

Taxes Avoided – Inside City City Utility Tax .0062 .0077 .0032 .0031 Other Non-Local .0031 .0134 .0093 .0092

Taxes Avoided – Outside City City Electric Surcharge .0062 .0077 .0032 .0031 County Utility .0068 .0085 .0035 .0038 Other Non-Local .0035 .0137 .0094 .0093

Largest RoofsLeast Incentive

Page 8: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

8

Rebate Program Challenges:Customer’s Perspective

• Net metering benefits limited to building owners who occupy the building

• Little incentive for landlords to install PV on their buildings

• Attractiveness of solar PV as a business investment is

dependent on account holder’s particular level of tax

liability

• Uncertainty about future level of savings limits loan

potential and third party financial arrangements

• Customers with the greatest square-footage potential for

PV have the least incentive

Page 9: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

9

Current Rebate Program Challenges: GRU Perspective

• Rebates paid up-front affect cash flow• Incentives pay for capacity with little

guarantee of future performance• GRU responsible for policing system

design to ensure adherence to standards

Page 10: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

10

European Thoughts on Quota or Tender Models

• Creates financial uncertainty• Disincentive to exceed quota

- Collapse of European carbon market• Selects “more of the same”

Page 11: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

11

Feed-In Tariff Addresses All of These Issues

• Predictable, performance-based financial arrangements

• Creates opportunity for creative business models that can capture tax benefits for customers

• Improves financial feasibility of solar PV for all customer classes

Page 12: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

12

• Identify challenges of current rebate-based model

• Review analysis methodology

• Compare alternatives

• Describe the recommended FIT

• Summary

Presentation Outline

Page 13: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

13

Finding the Right FIT

• Collect system cost data• Develop analysis model to test scenarios

with given criteria and assumptions• Evaluate candidate FITs with the model• Choose the FIT that provides the best

overall investment vehicle with given criteria

Page 14: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

14

Actual PV Costs by Size

Figure 1PV Systems Cost vs Size

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Kilowatts Installed

$ per Watt

Gainesville

State of FL

Page 15: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

15

EIA Projected PV Costs

Price per Watt Installed

$0.00

$1.00

$2.00

$3.00

$4.00$5.00

$6.00

$7.00

$8.00

$9.00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Year

Co

st (

$/W

)

Page 16: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

16

Analysis Assumptions

• PV panels have a 20-year life and all analysis is over this lifetime

• PV degradation (i.e., lower output) happens linearly

• Installed system cost = $8.50, the current average for Gainesville.

• Inverter replacement takes place at year 10 at a cost of $1000/kW

Page 17: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

17

Analysis Assumptions, cont’d

• Customer chooses MACRS accelerated tax depreciation

• State rebate is not considered and assumed to be zero throughout the analysis

• Capacity factor is assumed 17% with a degradation factor of 0.8%/year throughout this analysis

• Federal Investment Tax Credit rate is 30% and IRS income tax rate is 35%

Page 18: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

18

• Identify challenges of current rebate-based model

• Review analysis methodology

• Compare alternatives

• Describe the recommended FIT

• Summary

Presentation Outline

Page 19: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

19

FIT Cases Analyzed(@ $.26/kWh, Before Taxes)

Scenario

Rate Class Current 100%

Excess

Current No

Excess

Flat Solar FIT

Escalating Solar FIT

Front Loaded

Solar FIT First Year ROI Results (%/Year)

Residential 6.67 7.16 11.56 9.19 15.72 Gen. Serv. Non-Demand 7.46 8.52 11.56 9.19 15.72 Gen. Service-Demand 5.09 5.75 11.56 9.19 15.72 Large Power 5.03 5.68 11.56 9.19 15.72

IRR Results (%) Residential 1.33 2.29 6.43 6.39 6.51 Gen. Serv. Non-Demand 2.86 4.73 6.43 6.39 6.51 Gen. Service-Demand -2.21 -0.64 6.43 6.39 6.51 Large Power -2.35 -0.79 6.43 6.39 6.51

Page 20: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

20

Flat Rate Brings Forward Benefits

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Years

$/k

Wh

GSN GSN+Tax Float FIT Flat FIT Front Load FIT

Page 21: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

21

Flat Rate FIT Outperforms Front-Load FIT

• Although the “Front Load” has a better first year ROI, after year six it is outperformed by the “Flat Rate”

• The 20-year average ROI is higher for the Flat-Rate than the Front-Load

Page 22: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

22

Presentation Outline

• Identify challenges of current rebate-based model

• Review analysis methodology

• Compare alternatives

• Describe the recommended FIT

• Summary

Page 23: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

23

GRU’s Program Overview

• Residential customers can choose rebate + net metering or the FIT (not both)

• All other customers only have access to FIT (not rebates)

• Stop loss provision does not affect executed agreements

- 4 MW installed per year

- Trigger review of price level

Page 24: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

24

Interconnection And Purchase Agreements

• Interconnection Agreement- Approved Electrical Design- Operation Rights- Liability + Indemnification

• Solar Energy Purchase Agreements - SEPA- Price per kWh, Term- $0.32/kWh, ≥20years- GRU retains REC + Carbon Rights- Assignability + Collateralization- Completion Requirement

Page 25: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

25

GRU’s Solar Feed In Tariff Schedule

Building or Pavement Mounted (any size) or Ground Mounted

< 25 kW

2009 2030 $0.32 $0.262010 2031 $0.32 $0.262011 2032 $0.30 $0.252012 2033 $0.28 $0.232013 2034 $0.27 $0.222014 2035 $0.26 $0.212015 2036 $0.25 $0.202016 2037 $0.23 $0.19

Contract Entered into Under This Policy

During Calendar Year

Fixed Rate per kWh Applied Uniformly From the Date of

Installation Through December 31,

Fixed Rate $/kWh Over Life of Contract

Free Standing (Non-Building or Non-Pavement

Mounted)

Effective March 1, 2009

Page 26: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

26

FIT in a Nutshell

Simple to understand, easy to explain

“GRU will purchase all the energy produced by your PV system over the next 20 years for 32 cents per kWh.”

Page 27: Utility Planning Perspective For A Solar Feed In Tariff (FIT) February 3, 2009 Gainesville Regional Utilities.

27

GRU Online FIT Discussion

• www.gru.com

• Click on “About GRU” tab

• Click on “Future Power Needs” on left menu