Thoughts on Solar

The Feed-in Tariff (FiT) program for LADWP has been up and running for nearly a year with the first two tranches in the books. Which raises the question: how have those proposals that were accepted, performed? Here’s our first take…

LADWP quietly posted some update statistics about its program the week before Christmas and we stumbled upon it while looking for information about the timing for the Third Trache (presumably set for later this month, although the DWP website simply says that launch info is “coming soon").

The FiT data comes in the form of an Excel spreadsheet, without supporting documentation, which leaves it open to interpretation.

Collectively, the data reports on 256 total projects, 136 from the first tranche and 120 from the second.  Interestingly, the data only records three different status values for these projects: Cancelled, In-Progress and Waiting - there is no category in the data for “Completed".

From the first tranche, out of that total of 136 projects, 20 have been cancelled (14.7%), 45 are in-progress (33%) and 71 - over 52% - are listed as “waiting", though the data does not identify upon whom or what the projects have stalled.  The data is somewhat more encouraging for the second tranche with only 1 project cancelled so far (0.8%), 64 are in-progress (53.3%) and 55 are waiting (45.8%).  This trend suggests that as projects age they are more likely to either be cancelled or end up waiting on something.

The data tracks four milestone dates post lottery selection: Technical Screening Completed, Interconnection Study Completed, Customer Executed Contracts Received, and SOPPA Execution Date.  Curiously, for the projects with a status of “waiting", not a single one of those dates is indicated.  As it is hard to fathom how 110 out of 256 projects haven’t even passed the technical screening stage, we conclude that the “waiting” status is unreliable and needs to be corrected by DWP.

Turning to the cancelled projects, all but 3 of them reflect passing of the technical screening, and 15 of the 21 have completed interconnection studies.  Since it is at that stage that you would expect a project to be dropped if the interconnection cost has turned out to be prohibitively expensive, it is not surprising that only seven got to the point of submitting their contracts.  However, DWP had not executed any of those contracts according to the data.  Which means that seven projects got so far as to submit binding contracts before dropping out.

Which leaves the category of “in-progress” projects.  Out of a total of 109 so designated projects, only three have executed contracts from DWP, and all three of those were executed on September 13, 2013.  This makes for a pretty dramatic winnowing process:

109 start -> 89 pass screening ->31 complete interconnection study -> 20 submit contracts -> 3 have those contracts executed, nearly a year after the process began (all  of those with executed contracts came from last February’s first tranche).

Unfortunately, the data does not reveal why we are looking at such a dismal success rate one year on.  Perhaps things would look different if the “waiting” segment were more revealing, but it is not.

Here’s hoping that 2014 will provide both greater success in getting projects over the finish line, as well as greater clarity in the process.

We wrote last month about how Glendale was late getting to its required Feed-in Tariff program and that the design that they were advancing was seriously flawed. Well the window on the FiT has finally opened and guess what - it is worse than we thought!

When we first looked at the details of GWP’s FiT we were concerned that there had been no public input into the program’s design.  Moreover, the amounts that were going to be offered - based on the staff’s report to the City Council - revealed energy prices so low that no intelligent developer would go anywhere near the program.

The published proposed price for FiT energy - 9.292¢/kWh for peak time delivery and 7.251¢/kWh for off-peak - were well below what a program needed to be subscribed.  In fact, those prices were very close to what was being offered in Anaheim and Riverside - two program which had not seen a single FiT application in two years!

Well as bad as we thought all of that to be, we just learned that the reality is far worse.  GWP just kicked off their FiT website (which curiously has the title: Revenue for Demand Response) which includes a link to the current Offer Price.  As of July 1 (though really not available until today) here is GWP’s actual offer price for FiT energy:

These new prices are 15% lower for peak deliveries and 10% lower for off-peak from the prices described to the City Council just last month! (Interestingly, their fees have not reflected a similar price reduction.)  We previously calculated the FiT payment in Year 1 for a 100 kW project to be $13,599 based on the allocation of energy by peak versus off-peak times.  Under the new rate structure that payment in Year 1 declines to just $11,688, a 14% hit.

The website is typically devoid of any data explaining how the new price was calculated, but does it really stand to reason that GWP’s “avoided costs” for energy declined by 15% in the past month for peak time deliveries?  While the materials submitted to the City Council contained a sample calculation showing how staff reached the originally proposed values, no such calculation is visible on the GWP website.  Were the numbers used last month simply fictitious? Or has there been some amazing change in fortunes for GWP’s ability to purchase energy - mind you this at a time when energy prices throughout Southern California are spiking up 59% due to the loss of the San Onofre Nuclear Generating Station.  Amazing.

Looks like I won’t have to be making good on my bet come September.  Pity.

We have reviewed the data coming from LADWP for the results of the second tranche lottery - here is our analysis.

Initial Observations

Our first observation is that for some inexplicable reason, LADWP chose to present the data in Adobe pdf format instead of the Excel spreadsheets used previously.  This made the process of analyzing the data far more tedious than it should have been.  Heads up, DWP, please provide data in a data format.  We have nothing against pdf files but that is not the way to publish this type of data.

Second, there was no Owens Valley data here.  We cannot tell if there were no projects submitted from Owens Valley (there were in the first tranche) but none of these projects come from outside the Los Angeles Basin.

Third, one of these proposed projects was for biogas and not solar!  That proposed project, submitted by MM Lopez Energy LLC, was for a 2.95 MW biogas system in Lake View Terrace.  Unfortunately, the tranche was already oversubscribed by 572 kW by the time their lottery number turned up.  This is a first for the FiT (which theoretically is technology neutral) - all of the proposed projects in the first tranche were for solar.

Collectively, the data released documents a total of 112 proposed solar projects, 63 in the large category (>150 kW) and 49 in the small category (30-150 kW).

Large Project Winners & Losers

While there were a total of 64 projects in the large category, it only took 19 to fully subscribe the 16 MW capacity cap available to large projects, and the last project to make the cut will have to downsize by 263 kW (from its proposed 800 kW) to stay within the cap.  Here are the companies that were successful in the lottery along with the number of successful projects and the total capacity they are authorized to install:

Only three companies ended up with more than one project: OM Solar LLC (3 projects), Oakdale Ventures LLC (2) and SunStarter Solar LLC (2).  The largest project appears destined for a warehouse building owned by Forever 21 coming in at just under the program limit of 3 MW.

One non-commercial entity made the list, LA’s Metropolitan Transit District will be installing 350 kW for its Division 13 bus operations center.

Far more numerous, however, were the losing proposals - here they are:

One of the first things that jumps out here is the amount of overlap. Each of the companies with multiple unsuccessful project proposals also had at least one project that made the cut.  In particular, OM Solar LLC lost on 9 but was successful on 3, SunStarter Solar LLC lost on 8 but succeeded on 2, Haizenberg Solar LLC lost on 3, succeeded on 1, PLH LLC lost on 2, succeeded on 1, and SunRay Power LLC lost on 2 but succeeded on 1.

On average, the successful projects were somewhat smaller than the ones that missed the cut.  Successful projects averaged 856 kW in size whereas projects that missed the cut were 1,113 kW.

Total proposed capacity was 66.38 MW, or 415% of the available 16 MW.  Interestingly, this compares to 44.3 MW that were proposed in the first tranche - despite a lower energy price, the number of proposed projects increased!

Overall, the average proposed system size was 964 kW.

Small Project Winners & Losers

There were fewer participants in the small category, with a total of 49 projects of which 47 came within the 4 MW capacity cutoff (although the last project to make the cut will have to trim down by 3.3 kW from its proposed 38.7 kW).  Average system size for a successful small project was right in the middle of the allowed range at 85 kW.  The two projects that missed the cut were for 41 and 108 kW.

Here are the winners:

SunStarter Solar LLC was the big winner here with 10 successful proposals.  Broadstreet, which finished right behind with 9 selected projects was also the bidder on the two that didn’t make the cut.  Interestingly, the average system size for SunStarter was more than twice that from Broadstreet.

Coming to a Zip Code Near You?

As before, the successful projects are scattered about the Basin.  Here’s a listing by city:

Not surprisingly, LA itself is the big winner with thirty projects in the city proper reaching nearly 8 MW of installed capacity.  Seventeen other neighborhoods are also participating overall, with North Hollywood capturing the second greatest number of projects (8) while Sunland comes in second for amount of capacity to be installed (3 MW).

Breaking the same data down by zip code shows that the top 10 zip codes account for 28 of the 68 projects (41%) but 15.7 MW of total capacity (77%).

Here is the breakdown by top ten zip codes:

Greatest capacity is set to occur in 91040 (Sunland) with three projects totaling exactly 3 MW, whereas 91605 (North Hollywood) has the greatest number of projects at seven worth a total capacity of 1.1 MW.

Once again we turned to the folks at batchgeo.com to give this data some visual perspective.  We mapped all of the approved projects by zip code including the size of the project, the project name and the company responsible.  The result is the following map where the different color pins represent the size of the projects accumulated in that zip code.  (Unfortunately they do not allow you to represent size by a larger dot on the map - but hey, its a free system!)

(Note - if only a few of the markers are displayed, click on the color of the marker in the space below to deselect that data segment and then all of the proposed projects will appear.)

Who Are These Guys?

As with the first tranche, there are a great many specially created entities in the list of company names which makes it harder to know who is actually scheduled to do the work.  For example, there are numerous proposed projects from companies with names like 17000 Ventura, LLC or Luxe Apartments, LLC - not a lot of insight provided there.  Frankly, since the LADWP FiT requirements call for the experience of the installation team as a basis for possible rejection, the published data should identify the installer and not just the project developer.

Here are the top ten companies by capacity of winning proposals:

Once again, as in the first tranche, OM Solar is the big winner (they had seven projects worth 5.2 MW back then).  OM Solar is headquartered in Torrance.  SunStarter and Broadstreet Energy were also big players in the first tranche: SunStarter had 6 projects worth 3 MW then and Broadstreet had 4 for 1.3 MW.  Broadstreet is headquartered in Stevenson Ranch.  SunStarter Solar has a residential installation group in LA, but the company behind these projects is Solar Provider Group, headquartered in Toronto.  PLH LLC appears to be a property management company out of Oregon.  Oakdale Ventures LLC is listed as a foreign (i.e., out-of-state) entity with offices in Chatsworth.  Lazben Investments is headquartered in Van Nuys.  Heizenberg Solar LLC filed as a business in California on June 7 and appears to be a Delaware corporation headquartered in Denver. No information could be found about Central Plaza.  SunRay Power LLC appears linked to something called Lakewood Six Solar LLC in New York City.

Lessons Learned

A few take-aways from this second tranche:

• Data should always be published in Excel or CSV formats - save the pdf files for presentations.
• Missing from this data is important information about the equipment being used: modules, inverters, and racking should all be made public.
• Similarly, information about the actual proposed installer should be made public.
• LADWP is paying too much for large projects given the degree of over-subscription.
• We need to see follow-up data as these projects move through the pipeline.

We said after the first tranche data was released that it appeared that the program was off to a good start and the results for this second tranche appear to confirm that assessment.  Now we need to see the success rate of these projects actually being developed.

The second 20 MW tranche of LADWP’s Feed-in Tariff (FiT) program went up for grabs on July 8 and all applications received by July 12 were included in the auction that took place on July 19.  The lottery results were posted on Friday (annoyingly as a pdf file - thanks a bunch!) and we will be analyzing them for a detailed post soon.

But here’s the key take-away: it is, once again, over subscribed!

We will tell you who won big and who got shut out as well as where this is all going to go in our upcoming analysis.  Stay tuned!

We attended Tuesday night’s Glendale City Council meeting to share our thoughts with Councilmembers regarding GWP’s proposed Feed-in Tariff.  As might be expected, it was not an encouraging experience - here’s our report.

In our previous post analyzing the proposed FiT, we noted that essentially small players could not produce projects that would pencil out and only the very largest projects - 1.4 MW under the proposed guideline - would be economically viable.  Given the limited size of the overall program - just 4.2MW - three of those largest possible projects would completely subscribe the program.

At the outset of discussion on this item, Glendale Mayor Dave Weaver commented that this was one of the most complicated staff reports he had ever seen and he implored staff to make their presentation something that lay people could understand.  You can watch the full discussion in the clip below - my comments begin around the 11:00 mark.

However we heard something new during the staff presentation - by Senior Assistant City Attorney Christine Godinez - that surprised us: the contracts being offered under the FiT would not be for a set price for the duration of the contract, nor were they even contracts with an established initial rate that would be subject to an escalation provision going forward.  Instead, we were told that the price would be adjusted every quarter with the new price applied to existing contracts!

We decided to follow-up on that point and spoke today with Ms. Godinez.  She confirmed that payments under 20-year FiT contracts would change every quarter and cited the programs in Anaheim and Riverside (but not LA) as examples of that approach.  Frankly, we do not see how any developer would agree to such an approach when, as Ms. Godinez conceded, the price to be paid could go up or down with no way to predict what it would do in advance.  Think about it, what developer is going to spend hundreds of thousands of dollar to sell renewable energy based on a reimbursement rate that is solely and unilaterally under the discretion of the buyer?  Indeed, does this even meet the definition of a long-term contract when the most important term - price - is undefined?

That got us to wondering what was really going on in Anaheim and Riverside and whether those programs had been successful.  We were able to confirm that both cities have FiT programs that change their rates annually (as opposed to quarterly under GWP’s proposal) but we could not see any evidence of actual FiT installations in either City.  We managed to speak to representatives of both utilities.

Ms. Carrie Thompson, an Integrated Resource Planner for Anaheim, explained that they do adjust their offered price each year but, contrary to what GWP is proposing, that price is then held fixed for the lifetime of the contract.  (The price is presently 4.587¢/kWh - which is roughly where it has been since the program began in 2011.  It is due to increase by 8/10’s of a cent on July 1 - but please, curb your enthusiasm.)  But this is largely a theoretical difference since not a single project application has been submitted to the City since the program went live more than two years ago.  Ms. Thompson, who was extremely helpful - calling us back twice to return our call - noted somewhat wistfully that there is a difference between “designing a program that meets the letter of the law and designing a program that works.”

“Jerry” from Riverside told us that their FiT price of 5.8¢/kWh is the same price they have offered since the program went live in 2011 and that it was tied to the City’s  price for energy under long-term utility-scale renewable energy contracts with remote suppliers.  He said that the City understood that at that price, there would be no developers building projects under the FiT because “it cannot make economical sense."  Indeed, the City, “doesn’t want solar here” and in that sense their FiT “program” has been a success - there are no FiT projects in Riverside.

In other words, GWP is patterning its FiT program on two programs that were designed to fail and which have resulted in the installation of no solar whatsoever within their respective City boundaries!

Two other points - Councilmember Quintero (at 14:18 into the video) pointed out his concern that entrepreneurial individuals who might want to install solar along San Fernando road would be shut out of this program because the rate was too low.  Of course, he is exactly correct - no commercial building owner is going to be able to participate in this program because of the low rate being paid and the tremendous lack of clarity about where payment rates will go in the future.

The second point concerns the comments from GWP’s Chief Assistant General Manager, Steve Lins.  He sought to contradict my statement that there was no net-metered rebate program for commercial customers in Glendale.  No, he said, there was a program - its just that it was over-subscribed last year (i.e., it ran out of funds without notice) and that there would be no funds for it this year because it has been over-subscribed in the past - “a victim of its own success."  Of course, that is not a rebuttal of my assertion that no such program is presently available in Glendale.

In response to Councilmember Quintero’s concern, he responded that under the statute (SB 1332) they could only pay based on their avoided costs.  But that, of course, is a misreading of the statute which makes avoided costs only one component to be considered.  Here is the relevant text of the law:

The governing board of the local publicly owned electric utility shall ensure that the tariff adopted pursuant to subdivision © reflects the value of every kilowatthour of electricity generated on a time-of-delivery basis, and shall consider avoided costs for distribution and transmission system upgrades, whether the facility generates electricity in a manner that offsets peak demand on the distribution circuit, and all current and anticipated environmental and greenhouse gases reduction compliance costs. The governing board may adjust this value based on the other attributes of renewable generation. The governing board shall ensure, with respect to rates and charges, that ratepayers that do not receive service pursuant to the tariff are indifferent to whether a ratepayer with an electric generation facility receives service pursuant to the tariff.

SB 1332 - Public Utilities Code §399.32(d)

Moreover, because GWP released no information - nor held any public hearings - about how it calculated avoided costs, even that assertion is subject to question.  Given that the stated purpose of SB 1332 is to “encourage electrical generation from eligible renewable energy resources… located within the service territory of, and developed to sell electricity to, a local publicly  owned electric utility,” comparing avoided costs from large, utility-scale resources located far away is not an appropriate comparison.

Bottom line: GWP is proposing, and next week the Glendale City Council is almost certain to approve, a program that ignores the intent of the law and may well be in violation of it.  One thing is for certain, very little, if any, renewable energy will be generated as a result of this program.  And apparently - like in Riverside - that is the whole point.