Tag: "glendale water _ power"

04/09/14

  10:09:00 am, by Jim Jenal - Founder & CEO   , 834 words  
Categories: PWP, GWP, Feed-in Tariff, Ranting

Feed-in Tariff Wrap-up: Also Rans and a New Entry

In our first two posts this week recapping the state of solar feed-in tariffs in the Run on Sun service area, we focused on what is happening with the biggest FiT around, that run by LADWP.  But that isn’t, nominally at least, the only game in town so this post will summarize the progress, or lack of same, at the other FiT programs around: Glendale, Anaheim and Riverside.

Glendale

We have written at great length about the problems with the FiT program that Glendale Water & Power designed to meet their state mandate.  We noted that the prices being offerred—which were actually even 10% lower than what was presented to the Glendale City Council when they approved the program—were way too low to pencil out for a project, and that other uncertainties made it highly unlikely that anyone would participate.  In other words, as we told the Glendale City Council, they were approving a program that was designed to fail.

Nine months into the experiment, where do things stand today?  Let’s take a quick look at the FiT queue as of today:

 GWP FiT queue - Q214Ouch. 

All that empty space is just hard on the eyes.

In nine months, GWP has not received a single application for their FiT program—and contrary to how GWP officials refer to their defunct commercial solar incentive program as a “victim of its own success,” this program is a victim of GWP’s design.

Given the failure to attract a single project application, you might think that GWP would take steps to address their failure by increasing the offer price for energy, but you would be wrong.  This table summarizes the progression on GWP’s FiT offer price for energy:

GWP Offer Price for Energy FiT

The “City Council” price is what GWP suggested to the City Council the offer price might be when the program went live and that is the price the Council had before it when they approved the program.  The “Program Start” price is what was actually offered to potential project developers when the program went live last July. 

The “Q214″ price is what is being offered today—a reduction of 5.5% for Peak and 4.8% for Off-Peak deliveries.  That’s right, in response to offering a price that was already so low that no one was willing to put forward an application, GWP has responded by cutting its offer price by 5%.  Genius.

GWP will no doubt say that they have no choice, that the formula approved by the City Council for setting the offer price mandates this result, but that’s merely self-referential nonsense.  GWP designed the formula and the City Council confessed that they had no way to assess the technical merit of what was before them.  The formula is supposed to be based, in part, on avoided costs—but guess what?  So is the offer price for the LADWP FiT and yet it is twice what GWP is offering.  Are we to believe, therefore, that GWP’s costs are half of those incurred by LADWP?  If so, we suspect the customers of GWP would be surprised then that there rates are as high as they are.

It is high time that the Glendale City Council call GWP to task and insist that they re-create this FiT program so as to achieve what the state law intended—the actual installation of solar power in the City of Glendale.

Anaheim

The representative from Anaheim Water & Power had told us last year that their program to date, despite being started in 2010, had yet to attract a single application.  Checking in on Anaheim’s FiT website confirms that unbroken string of failure continues to this day with no projects in the queue.

Anaheim’s offer price tells us why: it ranges from 3.883¢/kWh for Off-Peak to 6.472¢/kWh for Mid-Peak to a summer On-Peak price of 9.708¢/kWh.

Riverside

Last year Riverside’s representative told us that they knew that their price was so low no one would bite and that was fine because they didn’t want solar installed in Riverside anyway.  Today, Riverside’s “we don’t want anybody to participate” price for energy is 6.2¢/kWh—exactly the same as GWP’s off-peak price.  Looks like GWP is playing follow the (non)leader.

Pasadena?

Which brings us to our friends at Pasadena Water & Power.  At a meeting yesterday we learned that PWP is considering a Feed-in Tariff program of its own.  Now we are fans of PWP, indeed, we think they are the easiest and best utility around to work with (and for, for that matter).  So that begs the question: What sort of FiT will PWP create?  They could base their program on what has been done at LADWP (with necessary tweaks to make small projects viable) and thereby insure a successful program that reduces pollution, creates local jobs and helps to green PWP’s energy mix.  Or they could follow the misguided path of GWP and its ilk, creating a program in name only, that guarantees that not a single kWh of clean energy will ever be generated.

Needless to say, we will follow FiT development at PWP closely.  Watch this space.

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07/26/13

  09:43:00 am, by Jim Jenal - Founder & CEO   , 424 words  
Categories: GWP, Feed-in Tariff

It's Official: Glendale Launches its FiT and its Worse than We Thought!

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:

GWP FiT offer price 3q13These 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.

06/20/13

  03:14:00 pm, by Jim Jenal - Founder & CEO   , 1194 words  
Categories: GWP, Feed-in Tariff, Ranting

Glendale Likely to Approve Doomed FiT

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.

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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.

06/18/13

  04:14:00 pm, by Jim Jenal - Founder & CEO   , 1852 words  
Categories: GWP, Feed-in Tariff, Ranting

Trouble in Glendale City - Someone Needs to Throw a FiT

Glendale’s proposed Feed-in Tariff combines all of the fee expenses associated with its Big Brother in Los Angeles with a payment rate that is just a fraction of what would be paid by LADWP.  What could possibly go wrong?

We have gone through the FiT proposal from GWP and it is as bad as we had feared.  Here are our thoughts and concerns.

Public? What Public?

We have been pressing GWP to provide us with details about their FiT since January.  Emails sent to members of the GWP Commission were ignored.  In March we received this Tweet in response to our continued questioning:

We are currently working on the rates and community meetings will be scheduled for May/June.Info. will be posted on meetings soon.Thank u

Well, meetings were held in June about GWP’s proposed rate increase, but they did not touch on the proposed FiT at all.  To the best of our knowledge, no public meetings of any sort have been held by GWP in preparing its FiT proposal.  Contrast that with the years of joint effort between LADWP and stakeholders to produce a program that managed to be over-subscribed in its first tranche.

Sadly, it appears that GWP is actively seeking to avoid public input into its FiT proposal.  Indeed, even at the City Council meeting scheduled for tonight, this is not noticed for a public hearing, rather it is simply an action item.

Comparable Fees? You Betcha!

There is one place where the design of the GWP FiT rivals that of its sibling - the magnitude of the fees being charged to participants.  For the sake of discussion, we will assume throughout a 100 kW project being proposed in both locales.  (GWP caps system size at 1.4MW compared to 3 MW in LADWP territory.)  Both LADWP and GWP will assess the same types of fees: an application fee, an interconnection study fee (to determine how much the project owner will have to pay to get connected to the grid) and a refundable deposit based on the size of the system and which is paid back when the project goes live.  Here’s the comparison between the two:

FiT fees - LADWP vs GWPInitially the 100 kW project in LADWP will payout roughly twice what it will cost to proceed in GWP territory ($6,250 vs $3,135) but the bulk of that gets refunded when the project is online.  So the true comparison is the non-refundable fees and there the two are nearly identical.

GWP’s published materials provide no guidance on what the actual interconnection costs might be - which adds to the uncertainty of the application process and makes it harder for a project developer to predict what her total costs might be.  This was something that all of the stakeholders demanded of LADWP during the development of its program - but that does not appear to be a lesson GWP chose to learn.

Comparable Prices? Not so Much!

While the fees being charged are comparable, the price to be paid for energy is not.

LADWP came up with a simple and predictable method for pricing its program, starting with a Base Price for Energy (BPE) that would step down with each tranche.  To make sure that the ultimate price paid reflected the value of the energy being purchased, they also adopted Time-of-Delivery multipliers that increased the BPE by as much as 225% or reduced it by as much as 50%.  LADWP’s first tranche BPE was 17¢/kWh - and that sold out in two weeks.  The next tranche, set to open sometime in July, will offer a BPE of 16¢/kWh, and each subsequent tranche reduces by one cent.

The virtue of this approach is transparency and predictability.  A project developer who anticipates submitting an application for a project in the time frame of the third tranche knows exactly what her return will be.

GWP’s method for setting its price is the exact opposite: opaque and entirely unpredictable.  From the Council packet, here is their “formula":

(1) for energy delivered to GWP during the peak [offpeak] period, the avoided peak [ offpeak] period cost of energy that would otherwise be purchased from the spot or short-term market during the upcoming calendar quarter, using the MEAD_ ON [MEAD_OFF] forward curve ($/MWh), as posted by the lntercontinentaiExchange (Mead 230 Day Ahead Clearing Price) for on-peak and off-peak periods, respectively; plus

(2) the value of Portfolio Content Category One (PCC1) Renewable Energy Credits (REGs) based on recent actual transactions by GWP ($/MWh); plus

(3) the avoided greenhouse gas (GHG) compliance costs, which are the product of (a) the default carbon emissions rate expressed in carbon allowances/MWh times (b) the price of carbon allowances from the most recent auction conducted by the California Energy Commission ($/MWh); plus

(4) the value of avoided transmission and distribution losses that would occur if energy were purchased on the spot or short-term market and imported into Glendale (eight percent (8%) multiplied by the avoided peak [offpeak] period cost of energy).

The “formula” is to be calculated on a quarterly basis, presumably to provide a new value for FiT contracts entered into that quarter.  So how can our project developer plan against this formula?  She cannot, since every component is subject to market changes. Again, this increases the uncertainty around the program which will only serve to decrease participation.

GWP includes a sample calculation but commits to nothing, saying that the numbers offered are “illustrative only".  Here’s their chart:

GWP FiT pricing example

 

This means that if this were the pricing calculation to actually be used, GWP would be paying between 7.251¢/kWh and 9.292¢/kWh - which makes it a way worse deal than simply having a commercial solar system on a net-metering agreement.  Oh wait, GWP isn’t offering commercial net-metering at this time.

The peak-time rate is paid, according to GWP’s materials, Monday through Saturday from six a.m. to 10 p.m., excluding holidays.  However, since solar power systems without storage do not produce energy outside of those hours, the only time off-peak rates will be paid are on Sundays and holidays.

This rate is way lower than even LADWP’s Ratepayer Advocate urged - which was a BPE of 11-12¢/kWh - based on his study of 30 MW projects.  And that BPE was still subject to adjustments of as much as 225% based on time of delivery.  LADWP’s General Manager warned his Board that a FiT set at that level would not be subscribed - again, a lesson that GWP has apparently not learned.

So why the difference?  The staff report notes that LADWP is higher (although it frames it in a way to make that as unclear as possible) but insists that “A simple comparison of GWP’s proposed FIT rates and those of other publicly-owned utilities is not possible, because these other utilities have adopted significantly different approaches."  Really?  Why is that, if they all must comply with the same state mandate?  As always, the staff report remains obtuse: “There are multiple reasons for these differences, both in methodology and assumptions about avoided costs."  But there is no discussion whatsoever about those differences or the justification for the radically different approach that GWP is proposing.

How does this compare in terms of actual amounts paid?

We previously calculated the earnings for a 100 kW system in Year 1 under LADWP’s FiT.  For a BPE of 16¢/kWh - the price to be paid in the second tranche - the project owner would earn roughly $25,200 in Year 1, or roughly $463,000 over the twenty year lifetime of the project (allowing for system degradation of 0.9%/year).

To calculate the corresponding payment under GWP’s proposal, we would need to take the total kilowatt hours produced by the system and determine what percentage of those fall on holidays or Sundays.  Looking at 2014, there are 10 federal holidays, none of which occur on Sunday.  There are 365 days in 2014 (i.e., it is not a leap year) and so the total number of off-peak days would be 62, 52 Sundays plus 10 holidays.  Our 100 kW system oriented at 180 degrees with a 10 degree pitch will produce roughly 152,000 kWhs in Year 1.  Thus, the payment calculation is as follows:

Payment, year 1 under GWP FiT

 

For the exact same energy, our project developer is only going to earn 54% of what they would have made building the system in LADWP territory.  Over the course of 20 years, that is more than $213,000 less revenue to the hapless project developer who chooses to build her project in Glendale.

How do these systems compare in terms of Return on Investment?  Assume that our project developer can have her 100 kW system built for $4.00/Watt, making the install price $400,000.  Factoring in an Operations & Maintenance expense of 0.5% of cost/year and tax rates of 39% federal and 10% state (applied solely for calculating the benefit of depreciation), yields an Internal Rate of Return of 11.1% with Payback in Year 6.  Net earnings after 20 years (not adjusted for inflation) are $300,000.

But what of that same investment in Glendale?  Now the IRR drops to just 4.1% with Payback taking twice as long, occurring in Year 12.  Net earnings after 20 years?  Just $87,000.  So what project developer would choose to devote her energies - sorry, pun intended - into building her system in Glendale?

Of course, perhaps this is intended for folks playing at the upper limit of what is allowed - a 1.4 MW project - of which there could be exactly three in GWP territory at which point the entire FiT would be subscribed.  Assuming a conservative economy of scale and imagine that such a project developer could build his system for $3/Watt.  For such a developer the financials improve significantly with the IRR moving up to 7.1% and Payback in Year 8.  Net earnings after 20 years? $1.8M.

So… if you are a high roller developer your investment of $1.4M earns you 43% after 20 years but the little guy earns half of that.  The message seems clear: little guys need not apply.

What’s the Point?

Part of the point of the statute that demanded that GWP provide a Feed-in Tariff was to incentivize solar at all sizes.  Why?  Because small projects provide benefits that larger project do not, such as small business development and local jobs.  LADWP recognized that - and created a carve-out in their proposal to insure that small projects would be built throughout the City of the Angels.  Yet another lesson that Glendale failed to learn.

Having eschewed public input into the process of developing its FiT, GWP has sent the unmistakeable message that it simply does not care what the public thinks.  The program that it has proposed will empower just a handful of large-scale developers - if even they elect to participate.  But having waited until the last minute, GWP has put the City Council in an awkward position - it is unlikely that any Councilmember understands the nuances of this proposal well enough to push back and even if they did, how are they going to demand meaningful changes when staff has effectively managed to run out the clock?

It is unfortunate that in a city about to face a significant rate increase from their city-owned electric utility, this is the only game in town.  There is no commercial rebate program in Glendale, even though such programs thrive just down the road in Pasadena.  At best, this is an unfortunate missed opportunity. At worst, it is way worse.  It will be interesting to see who submits FiT applications when this program finally goes live.

06/17/13

  05:24:00 pm, by Jim Jenal - Founder & CEO   , 128 words  
Categories: All About Solar Power, GWP, Feed-in Tariff

GWP Releases FiT Details - the Day Before the Vote!

We have just learned that Glendale Water & Power has released the details of its proposed Feed-in Tariff program - one day before the City Council is expected to vote on it!  We will post our thoughts tomorrow, but in the meantime, here are some links for interested readers:

From what we can suss out quickly, it appears that the FiT will pay a maximum (peak periods) of 9.292¢/kWh and a low of just 7.251¢/kWh - well below the base price of energy of 17¢/kWh offered by DWP in its initial tranche.

More thoughts when we have had a chance to review these materials.

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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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