05/27/13

  02:37:00 pm, by Jim Jenal - Founder & CEO   , 284 words  
Categories: GWP Rebates, GWP, Commercial Solar, Residential Solar, Ranting

Glendale Braces for Five-Year, 24% Rate Increase!

We have just learned that Glendale Water and Power (GWP) is proposing some significant rate increases over the next five years with a Council vote tentatively set for August.

Glendale Water and Power

GWP’s proposed rate increase breaks down as follows:

  • 8% in fiscal year 2014;
  • 7% FY15;
  • 5% FY16;
  • 2% FY17 and
  • 2% FY18

Put that all together and you are looking at a 24% rate increase over the next five years, or 4.8% per year.  (By way of comparison, we generally assume a 4.5%/year rate increase for municipal utilities and 5.7%/year for SCE when we do our Return on Investment modeling.)

GWP is proposing to hold a series of public meetings during June to discuss these new rates.  From the GWP website, here is the presently scheduled set of meeting dates:

  1. Wednesday, June 5, 2013, 7:00 p.m. – 8:30 p.m.
    Dunsmore Park Community Room - 4700 Dunsmore Ave., La Crescenta, 91214
  2. Thursday, June 6, 2013, 7:00 p.m. – 8:30 p.m.
    Sparr Heights Community Center - 1613 Glencoe Way, Glendale, 91208
  3. Wednesday, June 12, 2013, 7:00 p.m. – 8:30 p.m.
    Police Community Room, 131 N. Isabel St. 91206
  4. Thursday, June 13, 2013, 7:00 p.m. – 8:30 p.m.
    Boy Scouts of America - 1325 Grandview Ave. Glendale, CA 91201
  5. Wednesday, June 26, 2013, 7:00 p.m. – 8:30 p.m.
    Glendale Youth Center - 211 W. Chestnut St., Suite 302, Glendale, 91204
  6. Thursday, June 27, 2013, 7:00 p.m. – 8:30 p.m.
    Pacific Edison Community Center - 501 S. Pacific Ave. Glendale, 91204

Unfortunately, at present the GWP solar program for both residential and commercial customers is “not available,” with the website advising interested residential customers to “check back again after July 2013,” but simply telling commercial customers that the “program is currently not available.”

Faced with a substantial rate increase - with 63% of that increase coming in the next two years - GWP customers should have the option to Go Solar NOW! Hopefully the process that implements these new rates will also provide some assistance for GWP customers who wish to do just that - we will keep you posted.

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05/24/13

  08:36:00 am, by Jim Jenal - Founder & CEO   , 1142 words  
Categories: Solar Economics, Solar Rebates, Solar Tax Incentives, Climate Change

Comparing Solar Bids - Part 4: ROI & LCOE

Our Four-Part Series on Comparing Commercial Solar Bids concludes today with Part 4: Comparing Return on Investment (ROI) and Levelized Cost of Energy (LCOE). (You can read our earlier installments here: Part One: Comparing Solar Modules; Part Two: Comparing Solar Inverters; and Part Three: Your Utility Savings Analysis.)


ROI

We learned in Part Three what should be contained in a Utility Savings Analysis - power and energy production over the system lifetime, savings in Year 1, and savings over the subsequent years as a function of guesstimated utility cost increases over time.  Given the energy saving starting in Year 1, the cost of the system, any Operations & Maintenance costs, the anticipated rebate from the utility, and the tax benefits anticipated for the system, your prospective solar contractor should map out for you the cash flows associated with your system.

The O&M piece is worth pausing on for a moment as the system design will play a major role in estimating what your annual O&M costs will be.  It is true that for the most part, solar power systems require little or no maintenance.  Indeed, the solar modules will most likely still be producing plenty of power long after everyone associated with the project is long gone!  (NREL has solar modules that have been producing power for forty years with no sign of stopping and the modules being manufactured today - at least from the top tier manufacturers - are of much higher quality than what was available in the 1970’s.)

The inverter(s), however, are another story.  There is a reason that central inverters and string inverters come with relatively short warranties - typically five years standard for central inverters and ten years for string inverters - and that reason is heat.  Since large inverters process very large amounts of power they also generate a lot of heat and that ultimately takes its toll on the electronics.  If you add in adverse environmental conditions - high humidity, dust, the occasional rodent, etc., and sooner or later that inverter will fail.  A proper ROI analysis will factor in the cost of inverter replacement over the lifetime of the project.  If the included warranty is ten years, then inverter costs should appear every ten years.  If the warranty is five, then replacement costs should be included every five.

Conversely, one of the main selling features of microinverters in the commercial marketplace is the length of the warranty provided.  At a full twenty-five years, that means that inverter replacement is covered over the modeled lifetime of the system.  (Of course, offering a warranty and being able to honor that warranty are two different things and there are few inverter companies that have been around for twenty-five years.)  If you can reduce or eliminate inverter replacement costs, that will have a significant impact on O&M costs over the lifetime of the system.

Other O&M items include system monitoring (if not included in the purchase price), security (if conditions warrant), and cleaning (a very nominal expense).

For commercial systems the O&M expense is often modeled as a percentage of the purchase price per year, rather than discrete payments representing replacement events.  In this way the O&M expenditure is actually more like a set-aside for a maintenance fund to be used as needed over time.  It should accumulate to at least the value of inverter replacement within the inverter warranty period.

The other wildcard element in this analysis involves calculating the cash value of any received tax benefits.  While we don’t provide tax advice (and accountants shouldn’t be designing solar power systems, either!), we can say that aspects of tax benefits to be considered are: the 30% federal investment tax credit, plus state and federal depreciation, the latter elements being a function of the tax rate of the system owner who will try to utilize the benefits.  Of course, if the client is a non-profit, there will be no tax benefits to consider - the primary reason why the payback on solar for non-profits is so much longer.

The final piece - the rebate from the utility - should be factored in either as a lump-sum payment if the rebate is an EPBB rebate, or in annual payments over time (typically five years worth) if it is a PBI rebate.  In California, these will be based on the output from the CSI rebate calculator, and those calculations should be made available.

Put all of that together over time and you have a series of cash flows, positive and negative, from which an Internal Rate of Return can be calculated and, more importantly, the payback period determined.  Keep in mind, however, that this calculation is dependent in part upon assumptions about utility rate changes which, while possibly quite accurate in the short term, become increasingly speculative over time.  Still, if the calculation is done in a manner where the assumptions are properly identified, the ROI calculation should provide a reasonable means of comparing competing bids as to relative value.

Levelized Cost of Energy

While it is common in the solar industry to express the cost of the system in dollars/Watt, that is a misleading statistic at best since it masks variables affecting real world performance.  A far better metric - and one that your installer should be able to provide you - is the cost per kWh for the energy that will be produced by the system over its anticipated lifetime.

The calculation is actually quite simple - determine the total out-of-pocket costs for the system owner over the system’s lifetime (including purchase price less rebate and tax credits, plus all O&M costs) and divide it by the total amount of energy to be produced (allowing for the system’s performance degradation over time).

We prefer this number because it reflects the real world performance and it allows for direct comparisons against the client’s previous costs for energy. Indeed, we typically find costs per kWh in the 8-10¢ range compared to utility costs of 15-25¢ starting in Year 1. But because the energy cost for the solar power system is fixed over its entire lifetime versus the cost of energy from the utility which is constantly rising (even if we don’t know how fast), the comparison is quite compelling.

LCOE illustration

LCOE: Comparing System to Utility Cost

Note that by applying an agreed upon (or at least disclosed) rate for utility increases, a graphical comparison over time can be produced – but the underlying LCOE is not at all dependent upon future utility rate changes.  This gives the client the ability to compare multiple proposal against a true value proposition – how much will the energy from the proposed system cost?  From a financial perspective, this is the best comparison point that we have been able to identify.  A potential solar contractor who balks at providing this should, you guessed it, be scratched from your list!


The preceding is an excerpt from Jim Jenal’s upcoming book, “Commercial Solar Step-by-Step,” due out in July.

05/23/13

  07:02:00 am, by Jim Jenal - Founder & CEO   , 1391 words  
Categories: Utilities, Commercial Solar

Comparing Solar Bids - Part 3: Utility Savings Analysis

In Part 1 of our series on Comparing Commercial Solar Bids we looked at how to distinguish bids based on the Solar Modules proposed.  Part 2 did the same for Solar Inverters.  Now our four-part series continues, looking at what to expect from a Utility Savings Analysis.


You want to know what your savings will be from your new solar power system and this analysis should answer that question.  A proper Utility Savings Analysis must do three things: predict the amount of power the system will produce both peak and in terms of energy over time; assess the value of that production in Year 1; and apply appropriate factors to assess the change in value of that production over the lifetime of the system. Let’s break this down.

Power and Energy Production

The peak power and energy yield from the proposed system in Year 1 is a function of system and environmental factors.  The system factors include the modules and inverters chosen (including all of the variables discussed previously).

The environmental factors consist of the azimuth (orientation relative to true North), the pitch of the array and any shading factors that might be present.  If the overall array is comprised of sub-arrays with different environmental factors, then each sub-array must be assessed separately.

For a so-called “fixed-plate array” – that is a solar array that is at a set azimuth and pitch (which is typical for commercial installations) – the ideal azimuth in terms of annual energy yield is due South and the ideal pitch is the latitude of the site.  While deviations from these ideal values will result in reduced annual energy yield, in the real world such deviations, are common.  Indeed, in some settings a deviation might be desirable if, for example, summertime performance is to be maximized (perhaps to mesh with the payment profile of a feed-in tariff program), in which case a flatter array pointed more to the West might be selected.

Regardless of the azimuth and pitch, shading is to be avoided, especially if string or central inverters are used.  When a string of solar modules are wired together, shade falling on one module not only degrades the performance of that module, it will degrade the performance of the entire string.  This in turn will degrade the performance of the entire sub-array of which that string is a part.  (Microinverters overcome this problem because each module operates independently – a shaded module still sees its performance deteriorate, but  that deterioration has no effect on the adjacent, unshaded modules.)

All of these factors, as well as the geographic location of the system site, are then provided as inputs into a PV system performance model – the best known being PVWatts, created by the National Renewable Energy Laboratory (NREL), and used as the underlying mechanism of many utility rebate calculators, such as the CSI rebate calculator.  The output from the calculator will provide a value for the peak output from the system (in AC Watts) and the energy yield profile over a year – either month-by-month, or even hour-by-hour.

Savings in Year 1

Knowing the production profile for the proposed system is just the first step in the Utility Savings Analysis.  The next crucial step is to calculate the savings from that production in Year 1 – the first year the system goes live.  To do this accurately requires a detailed analysis of the relevant utility rate structure and possibly detailed information about how the existing loads at the site behave.  A simple-minded analysis that assumes that all kWh’s of energy are worth the same fails to meet this standard and will not accurately predict the savings to be achieved.

Most commercial solar customers pay for both total energy usage and peak power demand.  To accurately determine savings requires a clear understanding of how the solar power system will affect both of those components.  Unfortunately, it is not uncommon that the data necessary for such an analysis will be incomplete or missing altogether.

Savings from usage reduction, by comparison, are easy to calculate – if you have past usage data (pretty much always available except for new buildings or new utility customers) and a properly designed rate structure model, it easy to apply the energy yield profile from the performance calculator to the rate structure and determine savings.  For customers on usage only rate structures, this provides a nearly perfect estimate of annual savings as of Year 1.

It is in trying to determine how the solar power system will alter demand charges where things get complicated.  To do this accurately – and honestly – requires hour-by-hour demand data so that the client and the solar contractor know when peak demands occur.  If the peak demand occurs at high Noon and is driven by HVAC loads, the solar system will directly reduce that peak – perhaps by the full value of the solar power system’s output.  Conversely, if the peak demand occurs at eight o’clock in the morning – say, when the first shift arrives – the solar power system will have next to zero effect on peak demand.

Unfortunately, unless the potential client has been on a time-of-use based rate structure, such data is almost certainly unavailable.

Under those circumstances client and contractor have only two choices: gather the data as part of the site evaluation process (by temporarily or permanently installing data logging equipment), or make a well-documented estimate (also known as a wag) of what the effect of the solar power system will be on peak demand.  The client should insist that all of its bids use the same estimate.

Fortunately, relatively inexpensive data logging equipment is now available and it should be used whenever available decision-making timing permits.  A contractor who refuses to provide such a service – for a fee, of course – should be scratched from the list of potential candidates.

Savings Over System Lifetime

So now you have an estimate of your utility savings in Year 1 – how can you determine what your savings will be over the lifetime of the system?  After all, that is the key question in determining your ultimate Return on Investment.

To answer that question requires figuring out two more puzzle pieces – one straight-forward and the other unavoidably controversial.  The straight-forward puzzle piece is how will the system’s performance will change over time.  This is straight-forward because we have reliable data for making that prediction.  Assuming reasonable maintenance for the system – cleaning the modules occasionally, replacing broken modules or repairing faulty inverters, etc. – the performance from one year to the next is really a function of the deterioration in the performance of the solar modules installed.  That rate will be documented in the performance warranty of the module, and hence it will be easily modeled.  (For modules that guarantee 80% of nameplate power after twenty-five years, that works out to a degradation factor of ~-0.9%/year.)

The controversial puzzle piece is in guesstimating what will happen with utility rates over the lifetime of the system.  Not only is this a difficult task at best, it has even lead to class-action litigation when solar leasing giant SunRun was sued for over-estimating (according to the Plaintiff) the magnitude of utility rate increases in the future.

Over the years solar companies have used annual rate increase factors ranging from 6.8% (almost certainly too high) to 3% (almost certainly too low, at least in California).  SunRun was sued for picking 6%, and yet in 2012 SCE secured a three-year, 17.2% average rate increase – which works out to 5.7%/year!

So what is the right number to use?  At Run on Sun we generally use 4.5% for municipal utilities and 5.7% for SCE.  But in our view, the rate selected is not as important as the need to clearly disclose the rate being used in the model.  If that is done, the client is free to do their own calculation with a different rate or to insist that all potential bidders use the same rate.  At the very least, such disclosure should render lawsuits such as the one facing SunRun moot.

However the rate is determined, and ultimately disclosed, the result should be a series of values for how much savings will be generated by the system for the next twenty-five years.  Now you are ready to receive your payoff analysis – that demonstrating your anticipated Return on Investment and LCOE, the topic of our final installment.


The preceding is an excerpt from Jim Jenal’s upcoming book, “Commercial Solar Step-by-Step,” due out in July.

05/22/13

  07:02:00 am, by Jim Jenal - Founder & CEO   , 661 words  
Categories: Residential Solar, Ranting

SMA for the Save - Well Done!

We often claim that the solar industry is called to be better - more honest, more ethical, more community oriented - than the average business.  One way that can manifest itself is by going out of your way to help when there is nothing in it for you. Today we want to recognize SMA and their marvelous Melody Kenoyer for doing just that.

First some background.  Back in 2010 we were contacted by a lady we’ll call Sophia about a problem that she was having with her solar power system.  Sophia lives in a modest home in Glendale that was built for her by Habitat for Humanity.  The three townhomes in the project were each topped with a 1.6kW solar power system.  Unfortunately, the solar installer who had worked on the project had long since gone out of business and that left Sophia to go searching on the Web to find someone who might help.  She found Run on Sun.  As luck would have it, we were able to fix her system and get her back online without much difficulty.  Sophia was so grateful she sent us an amazing Christmas card that year.

Fast forward to last Friday when Sophia called again.  She had a different problem this time that couldn’t be resolved quite so easily.

Inverter displaying eeprom_d faultTurns out that her long-since out-of-warranty SMA 1800U inverter had stopped working and was displaying an EEPROM_d error message.  We had seen this problem before and we knew that while you could reset the error, there was no way to prevent the problem from happening again without installing an EEPROM upgrade - a task we had performed on another 1800U years earlier.  We reset the inverter and it came back online - Sophia was very relieved to have the unit working again, but concerned that the problem might return.  We promised to contact SMA and see what we could do.

When we called on Monday we reached Ms. Melody Kenoyer at the service support desk.  We explained about the problem and she pointed out that the 1800U was no longer being made and that as they were all outside of their warranty period - an understatement given that they had carried 5-year warranties and they were phased out long ago when the CSI program mandated 10-year warrantied products. Not surprisingly, SMA was no longer servicing them.  They did have an upgrade program for customers who wanted to upgrade to newer units - but that was not going to be a viable option for Sophia.

Ms. Kenoyer checked with her supervisor who confirmed that apart from assisting us in resetting the inverter, there was nothing more that they could do for us.  I told her that we had already done the reset and the system was back online - it was just that we were hoping to be able to give Sophia some greater piece of mind.  Ms. Kenoyer listened, and then promised that she would personally take this to her Manager to see if there wasn’t something else that they might do.  I thanked her for that and hung up, fully expecting that we had played this out as far as it could go.

But then, lo and behold, I received the following email from Ms. Kenoyer:

I spoke with my Manager about the pro bono job you are doing for the single Mom in the Habitat for Humanity home.   We do have some EEPROM chips for special circumstances and my Supervisor will send you some.

Well what do you know about that!

From utility attacks on the one hand to shady behavior by certain solar companies on the other, at times it is hard to cling to our view that solar is special.  But then along comes Ms. Kenoyer, and her Manager, and SMA to help convince us that our view is the right one after all - solar is special.

So a hearty “Thank You” to everyone involved in making this happen - don’t be surprised if Sophia sends you a Christmas card!

05/21/13

  08:36:00 am, by Jim Jenal - Founder & CEO   , 525 words  
Categories: All About Solar Power, Commercial Solar

Comparing Solar Bids - Part 2: Solar Inverters

In Part One of this series we looked at the factors that could go into comparing solar modules proposed in competing commercial solar bids.  Now our series continues with a look into solar inverters for commercial projects.


Solar power inverters for commercial installations range from large, central inverters to a collection of string inverters to microinverters (one inverter per solar module) in some settings.  You should check for: a) the efficiency of the inverter (should be in the 95-97% range with the higher the number the better); b) whether monitoring is built into the inverter or must be added; c) the warranty period applicable to the inverter; and d) the manufacturer’s reliability.  Inverter recalls in the solar industry are rare, but they have been known to happen.

Power-One Aurora 100kW central inverter

Power-One Aurora 100kW
Central Inverter

There are trade-offs associated with the different approaches - a central inverter consolidates your equipment in one place and makes for a clean, cost-effective and efficient system, often with sophisticated monitoring capabilities built-in.  Yet a central inverter represents a single point of failure for your entire project - if the central inverter fails, your system will produce nothing until it can be repaired. Moreover, not every small commercial project has the space to accommodate the bulk of a central inverter.

In contrast, using a series of smaller string inverters may fit the available space, but at the risk of looking more cluttered, and interconnecting them for monitoring purposes may be more complicated and costly.

String inverters for a commercial project

Eight SMA 7000 String Inverters at commercial site

However, by distributing the inverter function over a number of devices, you have also distributed your risk - if one inverter fails, the others are unaffected and you will continue to produce the majority of your available energy while the faulty device is repaired or replaced.  Most commonly, small commercial systems - those below 50 kW - may well benefit from using multiple, smaller inverters.  As system sizes increase, however, the cost-savings and ease of installation of the central inverter probably makes it the preferred approach.

Enphase microinverters being installed at Westridge

Enphase Microinverters being installed at Westridge
(Click for video)

Microinverters have been making inroads into the small commercial market because of better warranties (as long as twenty-five years compared to ten for string or central inverters), higher energy yields (due to shade tolerance, the ability to make use of multiple sub-array alignments, and no problems with module mis-match), and system monitoring down to the module level. On the other hand, because AC wiring runs occur at a lower voltage than do DC string runs, the conductors from a microinverter system will be carrying higher currents for the same amount of power (since power is the product of voltage times current) which means larger conductors will be needed to avoid efficiency losses in the system.

Inverter configuration is ultimately a design choice and your installer should be able to explain to you why they have made the choice that they are recommending.

In our next installment we will shift from looking at equipment and consider how that equipment will save you money when we tackle the question of assessing your Utility Savings Analysis.


The preceding is an excerpt from Jim Jenal’s upcoming book, “Commercial Solar Step-by-Step,” due out in July.

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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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