2.2 Residential PV Pioneer Project
The 1993 SMUD PV Pioneer Project established
a partnership with customers willing to assist
in the early adoption of photovoltaic (PV) technology.
Under the PV Pioneer Program, SMUD purchases,
installs, owns, and operates 100+ residential
rooftop PV systems, each about 4 kW, each year
(Figure 2 and 3). SMUD plans to continue adding
at least 100 PV Pioneer systems each year for
|SUB - 19932||$6.26/W||$3.89/W||$10.15/W||32|
|SUB - 19943||$6.68/W||$1.07/W||$ 7.75/W||21|
|SUB - 19942||$6.10/W||$0.87/W||$ 6.97/W||19|
|SUB - 19952||$5.71/W||$0.91/W||$ 6.62/W||18|
|RES - 19933||$7.70/W||$1.08/W||$ 8.78/W||23|
|RES - 19943||$6.23/W||$0.90/W||$ 7.13/W||20|
|RES - 19953||$5.98/W||$0.89/W||$ 6.87/W||18|
- Turn-key contract cost up to utility interconnection without tax, bonding or utility add-on costs.
- Single axis tracking system. Includes credit for Energy Production Factor (EPF) [for single-axis tracking, EPF = 1.23 compared to fixed tilt].
- Fixed, non-tracking system, EPF = 1.00
- Includes: interconnections, metering, site preparation, District labor, administration, overheads, tax, bonding, AFUDC, and other costs.
- Includes: O&M, does not include DOE cost-share.
- Preliminary estimate.
2.8 The Roof-top Resource
In metropolitan areas, hundreds of thousands
of square acres of residential and commercial
roof area, parking lots and transmission corridors
are setting unused in the sun. As Skip Fralick
of San Diego Gas & Electric Company pointed
out, "This rooftop area is the equivalent
of "free land" for photovoltaic generation:
it needs no development, environmental impact
statements, or extensions of transmission
lines." In Sacramento alone, these south to
west oriented roofs, parking lots and transmission
corridors represents the potential of hundreds
of megawatts of photovoltaic resource.
Power plant siting is normally a troublesome, time consuming and expensive exercise, especially in a suburban or urban area. However, over the past three years, SMUD has sited about 340 PV power plants all across Sacramento with little trouble or expense. Indeed, hundreds of customers have paid extra on their utility bill to host a SMUD PV power plant on their roof. This ease of siting combined with the environmental, modular and distributed benefits of PV add substantially to the value PV brings to the utility's energy mix.
3. A UTILITY PERSPECTIVE ON PV COMMERCIALIZATION
There is a critical need to accelerate and
complete commercialization of PVs to meet
our needs for grid-connected, utility applications
for year 2000 and beyond. Without a concerted
and collaborative effort we can not assume
that PVs will be ready to serve the utility
market when we will need it. Our actions today
are our investments for tomorrow.
The off-grid, "currently cost-effective" PV applications are not sufficient to commercialize and make cost-effective the grid-connected, utility PV applications. We must continue the process of the grid-connected market development directly. These grid-connected applications have value beyond energy and capacity and include residential and commercial customer sited PV for distributed generation and DSM applications and substation/T&D sited PV for grid-support value.
There are three central concepts necessary to achieve the production levels and cost reductions required for the accelerated commercialization of photovoltaics for utility systems:
- Sustained Orderly Development (SOD)
- Commercialization path life-cycle costing
- Proactive leadership to stimulate early adoption
3.1 Sustained Orderly Development (SOD)
The solar industry needs a reliable and longterm market volume to develop and achieve longterm cost reductions required for full commercialization. Current "costeffective" utility markets have not provided sufficient market volume to accelerate commercialization. Demonstration and R&D projects alone do not accelerate the commercialization of new technologies. In fact, large, one-time purchases tend to dry up supply (and thereby increase price) without stimulating the increase in production capacity necessary for manufacturing cost reductions. Furthermore, manufacturers do not rely upon short term subsidies, mandated purchases, or set-asides in making investment decisions because these programs create "false markets." A combination of aggressive price reductions and commitments for substantial and sustained capacity acquisition is required for full commercialization of these technologies. Sustained orderly development and economies of volume for solar electric systems will result in the rapid development of a mature, costeffective solar industry.
3.2 Commercialization Path LifeCycle Costing
Technology development (or commercialization path) lifecycle costing, and not just "project" lifecycling costing, needs to be used. It is important to analyze total expenditures and total acquired capacity over the entire commercialization path. Higher costs for early applications can be a good investment if they contribute to accelerating the trend towards lower costs and higher performance. When solar investments are selected carefully and in collaboration with other stakeholders in renewable energy development, they can be among the wisest and, ultimately, the lowest risk investment that can be made, despite their higher initial capital costs.
3.3 Proactive Leadership to Stimulate Early Adoption
Sustained orderly development and accelerated
commercialization will not occur early relying
just on natural market forces. Accelerated commercialization
will not occur just by demonstration projects
and watching the cost curve. Utilities and other
potential bulk purchasers must commit to an
early and sustained series of substantial buys
to permit the industry to invest in expanded
production and automation. The "diffusion model"
of PV commercialization where high value applications
are identified and filled, then the next value
level developed is an important starting point.
It does not, however, result in a sufficient
aggregation of order commitments to allow the
needed expansion of production. The utility
grid-connected market needs to foster accelerated
commercialization with multiyear commitments
for substantial and continuing, multimegawatt
per year purchases.
While these early increments of PV may not be cost effective on their own, they represent a beginning of a cost effective process. Support by the other stakeholders in the process, especially by other utilities, the regulators and a reliable DOE shared risk is required on a sustained, multi-year basis to close the early cost-value gap and make the process work. This support, can not be on a year-to-year, stop and go basis. It must be match the multi-year commitment that the utility industry is making. The utility community has taken the responsibility to get this process underway now and to work with regulators, customers and other stakeholders to make it successful. The national Utility PV Group (UPVG, now up to 90 utility members) has implemented the first projects under TEAM-UP. Project TEAM-UP, provides the initial part of a sustained, orderly development process with a target of 50 MW of utility PV purchases over a four year period. Under this proposal the USDOE would provide only about 30% of the estimated $513 million program. As Andrew Vesey, Chairman of the UPVG Board of Directors and Vice President of Niagara Mohawk Power Corporation stated:
While TEAM-UP's partners may greatly help to underwrite today's "cost gap", only the federal government can close it. Critically, this federal support must also be sustained. Funding assurance is essential for gaining market and supplier commitments, gearing up and implementing the program, verifying the march down the cost curve, and establishing the federal government as a reliable partner throughout the entire commercialization process.
The successful, accelerated commercialization of utility PV applications will need to be a collaborative effort of many participants. Utilities, State and Federal agencies and other stakeholders must join together. If manufacturers do not continue to respond with aggressive forward pricing, if utilities do not implement substantial, sustained purchases, if DOE does not provide a reliable and predictable multi-year costshare absorbing a part of the early risk and if other stakeholders do not proactively support the commercialization process, this process won't succeed.
4. PV COMMERCIALIZATION COST CURVE
Photovoltaics (PV) offer many advantages as
distributed generation systems, both as a supply
side option and as a demand-side management
(DSM) option. PV's are the most modular and
operationally simple of the clean, distributed
power technologies. From 1972 to early 1992,
PV module costs have been reduced 100-fold.
Already PV is a cost-effective resource for
a wide variety of remote and grid-independent
applications. The strategic, competitive advantages
of PVs will continue to increase as this cost
Despite tremendous price decreases, PV is still too costly for most grid-connected applications. In addition, cost-effective storage and the related problem of intermittency of the solar generated electricity continue to limit PV utility applications.
Significant RD&D efforts are underway nationally to develop more efficient batteries and other electricity storage methods that will help to resolve the storage and intermittency problems. The problem of cost is being attacked on several fronts. New PV materials and designs are being developed to improve efficiency and reduce manufacturing costs and niche markets are being developed and exploited to continue the initial phases of commercialization. Indeed, the current level of production capability is all but sold out for remote applications, consumer devices and third world applications.
To achieve the next series of price reductions, firm utility scale markets must be generated and sustained to encourage the investments needed in new technology and production. Utilities can play a leading role in accelerating the further commercialization of PVs through assisting the development of utility PV markets. This effort can reap benefits for our customers by the resulting improvements in PV systems, distributed generation support to our system and accelerated reductions in PV costs.
Residential "rooftop" systems in the 2 to 4 kW range were costing about $15/W installed in 1992. Substation applications were costing about $10/W. The SMUD 1993 PV projects cost about $7.70/W and for the 1994 PV projects averaged about $6.44/W with a low of $6.10/W. The 1995 projects, despite constrained PV module supplies, have continued tracking down the accelerated commercialization cost curve with prices as low as $5.71. With a sustained, widespread collaborative effort, one could expect prices to drop below $3/W by about the turn of the century. Figure 7 summarizes SMUD's analysis of the TEAM-UP commercialization plan. It shows the expected results of a sustained orderly development process on the utility PV market based on a number of market studies by the PV industry, analysis by SMUD, UPVG and others and from sources from DOE and the national labs.
In 1993 SMUD implemented its commitment to a sustained orderly development effort starting with the 640 kW of grid-connected utility PV systems and a 5 year program of yearly PV Pioneer and T&D buys. This 5 year program leads to a 5 year period starting in 1998 where SMUD will purchase about 10 MW per year of renewable energy resources including PV. It is expected that this multi-year effort would involve the establishment of a new PV manufacturing facility with part of it's production dedicated to the multi-year, multi-megawatt utility commitment. This is especially important since it is generally agreed that "ramping up" to commercial scale PV production for utility applications cannot be at few kilowatts at a time, but rather in annual sales in the multi-megawatt range. These orders need to have continuity and be steadily increasing. Early utility industry orders and PV production increases need to be in the range of 2-5 MW/year, and they must quickly (within 2-3 years) reach 10 MW/year and 50-100 MW/year nationwide by the end of this decade. While the efforts of a few utilities, such as SMUD, can achieve some initial reductions of price, the needed cost reductions for commercialization will require a much broader effort. The level of response to the 1995 TEAM-UP program is indicative that this level of commercialization can be maintained given only modest - but sustained - DOE shared-risk. These efforts, supported by all the stakeholders in the PV commercialization process, will be necessary if PVs are to achieve the cost reductions needed to meet our needs in a reasonable time-frame.
Figure 7. SMUD PV SOD Commercialization Cost-curve
Sustained Orderly Development (SOD) assumes
fully implemented, sustained TEAM-UP commercialization
Prices ($/W) are Turn-key system prices up to meter, AC, PTC, 30 year life. Includes installation and tax. Does not include Utility Add-on Costs. Real 1994 $.
Year 2000 Cost-effectiveness range based on: SMUD Gas Fired Generation (GFG) to Lower Bound Renewables (LBR) Year 2000 costs. Fixed, Rooftop PV systems. Tracking systems adjusted by Energy Production Factor (EPF). Turn-key system prices (total project cost less Utility Add-on Costs). Does not include non-traditional benefits such as Distributed Benefits.
5. SMUD'S CONTINUING SOD PV PROGRAM
During 1996, the District will continue its
efforts to accelerate the commercialization
of grid-connected PV applications and to define
and compare the relative costs and benefits
of the various models of utility PV applications
including the issues of systems ownership, shared
risk and benefits, levels of T&D benefits
and the general issue of the appropriate accounting
for all the value of distributed generation.
This information will be used to update the
analysis of PV benefit/cost as part of the integrated
In Spring 1996, SMUD will release its multi-year Request for Proposals for Renewables (RFP4R). This RFP4R plans to obtain 50 MW of renewable energy resource over a 5 year period, 1998 -2002. As part of this solicitation, a 10 MW PV set-aside has been included. Proposals are expected that will provide for PV systems that will continue the SMUD PV Program, meet or exceed the cost goals indicated by the cost curve in figure 7 and result in significant PV and PV related manufacturing and jobs in the Sacramento region. Proposals are expected to be due to SMUD in the summer of 1996 and SMUD expects to sign contracts in early 1997.
6. COLLABORATIVE PV COMMERCIALIZATION
To succeed in accelerating the commercialization
of grid-connected utility PV applications, the
commercialization process must truly be a collaborative
effort. The PV industry needs to nurture the
grid-connected, utility market. They need to
aggressively forward price to foster this developing
market and to enable utilities to field systems.
They need to look at investing in this market
development now to create a profitable market
for the future. Utilities need to proactively
assist in developing a substantial, growing
and sustainable grid-connected utility PV market.
They need to aggressively account for the non-traditional
benefits of distributed PV generation and maximize
what they can afford to invest in early systems
to accelerate the cost reduction and commercialization
of grid-connected PV. Regulators need to recognize
that the long term best interests of the ratepayer
will be served by permitting and encouraging
modest early investments in higher cost PV today
when these investments will lead to earlier
and greater cost reductions of PV for the future.
They need to account for societal and economic
development benefits and the benefit of commercializing
a source of "green and inflation-proof" energy.
The Federal government needs to share the risk
by helping to fill the cost-value gap, a gap
declining as commercialization moves forward,
between how high utilities and regulators can
value PV benefits and how low the PV industry
can forward price grid-connected PV systems.
The Federal government must show that it can
be a reliable, sustained partner and not jerk
support up and down as the winds of the political
moment shift back and forth.
Each party needs to analyze their investment for a "commercialization-path" life cycle cost rather than a project-by-project basis. This process must be developed as a sustainable, orderly development of the market in a way that the PV industry can invest with confidence in new processes and manufacturing lines to lower costs and that utilities and their regulators can see accelerated and continuous progress to cost-effectiveness.
Efforts such as the Utility PhotoVoltaic Group's Project TEAM-UP with the USDOE and the PV4U collaborative state working groups offer the framework to make this collaborative commercialization of the grid-connected, utility PV market succeed.
As was stated in Time Magazine of October 18, 1993:
Some of the biggest boosters of solar power are bound to be utility companies, eager for a clean source of electricity that will enable them to produce more power without new billion-dollar plants. Both as consumers of solar technology and as the promoters of home solar panels, utilities will drive much of the industry's growth into the next century. "Utilities are beginning to realize that they're going to have to get on the solar bandwagon, says S. David Freeman, (former) general manager of the Sacramento Municipal Utility District (SMUD). "If they don't and rates go up sharply, people are going to buy their own solar panels and pull the plug on the utilities." ... "Solar is competitive now if you take the long view. And it's going to be highly competitive by the end of the decade."
The use of solar energy has many benefits to utilities, the our local communities and the country in general. Solar technology reduces the use of non-renewable resources. It is a renewable and sustainable energy source and helps improve air quality. PV power generation systems are clean, quiet and environmentally beneficial. They use no fuel and have no emissions. Each MW of PV power generated by a plant with a 25% capacity factor, will eliminate the production of more than 20,000 tons of carbon dioxide and more than 25 tons of NOx during its life as compared to the cleanest fossil fuel plants available for purchase today. Solar electric systems stimulate economic development and employment opportunities to a much greater extent than conventional energy sources. They represent a source of diversified, inflation-proof energy. For all these reasons, PV represents an energy supply that utility customers are demanding. The question is, do we have the national will to make a modest but sustained commitment to the investment in our future that will make this a cost-effective and substantial part of our national energy mix in the timeframe that we need.
National Solar Energy Conference, ASES Solar 96,
Asheville, NC, April 1996
This page Most Recently Updated August 9, 2000
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