Understanding Trends in Solar Development: An Interview with Beautiful Earth Group

Posted on 05. Feb, 2010 by in Business & Policy, Clean Tech, Interviews, Politics

green-earth-going-green-products

I asked Lex Heslin, CEO and Founder of Beautiful Earth Group, a company in the process of developing Photovoltaic Installations in the Mojave Desert: “What are the most interesting trends in the adoption of renewable energy, specifically solar?” He identified three interesting trends affecting solar energy:

  • RPS (Renewable [energy] Portfolio standard)
  • Feed-in Tariffs
  • Government Support
  • 1) Let’s talk about RPS First.

Recently, half of the states in the Union have adopted Renewable Portfolio Standards which require utilities to generate or purchase  20% of their energy produced through renewable energy; from solar, wind, geo-thermal, biomass, biogas, and hydro power.  A lot of states haven’t jumped on board yet.  But, there are many calls from environmental groups and clean energy developers to make sure the RPS’s have the teeth to get it done.  It may take a couple of years, but states might be penalized if they don’t follow through with a renewable portfolio standards.

2)  Feed-in Tariffs

If you look at other countries around the world, they are working on putting legislative systems in place to make sure renewable energy is a focus.  Feed-in tariffs have been an effective method by governments and a reason why Spain and Germany* have the largest solar markets in terms of installed capacity in the world.  Government sets industrial policy by agreeing to pay a high price to encourage solar development.  These tariffs guarantee payment over a certain period of time. In some cases the government agrees to purchase energy at rates as high as 60 cents per KiloWatt Hour. It’s a high price in large part because pollutive energy doesn’t have to pay for the pollution generated, and most costs for solar are up front and then amortized.  However, a big benefit of this growth in renewable energy development is the creation of whole new industries with their necessary service providers, e.g. companies to move the solar panels, provide financing, etc., which tend to ramp up over night once these large incentives are put in place and developers go into production.

(*It should be noted that two weeks ago on January 21st, Germany announced it was lowering the feed-in tariff, following suit with Spain, because people contended the price was too high.)

total_renewable_electricity_generation_large

Here in America we are looking for an effective model for how to price renewable energy.  The first place to adopt a feed-in system was in Gainesville, Florida.  They issued a Request For Proposal that was instantly oversubscribed due to limited MW capacity.  In Sacramento, California the municipal utilities department  introduced 100 MW of capacity and it was oversubscribed immediately.  This a big movement that happens through feed-in tariffs and its happening in a big way.

OG: So why are utilities purchasing these renewable energy contracts if they are currently more expensive than “fossil-fuel energy”?

Utilities are engaging in renewable energy contracts to meet RPS requirements, and also to lock in prices that are maybe just a little above traditional prices.  However, it is more stable and potentially cheaper in the long run.

Here’s some background on costs of energy: When coal, gas, hydro, and nuclear is blended, its on average around 12-15cents per kW/hr in California.  Contracts can be made for so-called peak delivery, during the hours of 2pm to 8pm when the sun is at its highest and hottest.  Solar is a good resource in hot places where people use a lot of A/C.  In some contracts, you can get 28-29cents per KW/hour.  Ultimately, you gotta remember that solar is an intermittent resource.

3) The final leg of what’s big for solar is government support (in large part a recent result of  the American Recovery and Reinvestment Act)

Previously for renewable energy development we had an investment tax credit (for 30% of investment cost).  You would build your project and the equity investors would receive a 30% tax write-off. But, this only works if the investors have a large profit margin in a given year (enough to use the tax write-off to offset taxes on those profits). As corporate profits dried up over the last 2 years, the government  had to create something different. So the government created the cash grant in lieu of the Investor Tax Credit.

Now, after project is completed, instead of going after credits, you just get a check for 30% of the cost of the project (typically in 30-60 days). This is a huge improvement over previous credit programs in which it could take much longer to collect the credit. All this said, that program requires that you have shovels in the ground by Dec 31st 2010. Developers are racing to do so in order to receive the credit.

There’s one other pertinent program: the DOE Loan Guarantee Program. This “1705″ loan guarantee allocated 7 billion dollars in loan guarantees and up to 80% of the total project cost. The banks fund the project and only risk 20% of their funds, making it far easier to get the loan.

In 2009, the DOE budget was approx $30 billion for energy projects. Of that $30 billion, $23 billion went to nuclear and clean coal, which kills me, and only $7 billion was left for all of renewables (including. wind, hydro. etc.).  This program opened at the end of summer ’09 and about half has been non-committed.  The program ends in July, 2011.

OG: As we closed out the interview we asked “what some other cool trends that are emerging?”

Within solar there is cool stuff in new technology and new materials. The radical technology breakthroughs won’t be in Photo Voltaic but rather in the Solar Thermal plants. In California, there are some plants called SEGS (Solar Energy Generating Systems).

solar-tower

The first one is up in Barstow, using parabolic troughs, the C shaped mirrors you may have seen. These Concentrated Solar Thermal (CST) plants have been running for 25-30 years. They focus heat on a synthetic material such as a sodium based liquid, which is then pumped through to heat up water, producing steam and generating energy through a traditional steam turbine.What’s exciting about the CSTs is the ability to store heat–up to 6 hrs after the sun goes down!

Parabolic_trough_solar_thermal_electric_power_plant_1

The other big movement in technology is towards new applications of solar thermal (power towers).  These new materials have a base PV that is organic PV, which grows material during the photovoltaic process and it can eventually replace silicon.

Finally, another emerging trend is smart grid technology.  Imagine if all your appliances ran from 2am-6am in the morning to get all the cooling it needed.  Now think about that with electric cars–you can shift the supply and demand balance. At the highest level, all of these appliances can start talking to the grid and say when it needs electricity.  This allows us to use energy more efficiently as it creates a better awareness of how to use it.

smart grid home diagram

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