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When SolarCity announced last year that it was moving into Texas, solar industry watchers scratched their heads. How, they asked, could a rooftop solar installer put together a money-making proposition for itself and its customers in a state without net metering?
The answer lies with its partner, MP2 Energy. The Texas-based energy company has joined SolarCity in its first rollout in Dallas last year, and in last month’s move into the Houston market. Together, they’ve created a customer offering that closely matches net metering, by paying the retail rate for solar power in excess of what the customer consumes, and locking in rates for the power they do buy from the grid in 12- or 24-month terms.
It’s an unusual offer in a state where, outside a few vertically integrated utilities like Austin Energy or San Antonio’s CPS Energy, solar incentives for customers are few and far between. Texas also has some very low electricity prices, driven by today’s low natural-gas prices and competition amongst energy retailers in the state’s fully deregulated electricity market.
That’s limited rooftop solar growth in what otherwise could be a hot market, as the state's growth in utility-scale solar and its low PV prices attest. What makes the SolarCity-MP2 deal pencil out is MP2’s ability to tap the benefits of distributed PV, as both an energy retailer and “qualified scheduling entity,” or QSE, able to sell and buy energy in the energy markets run by state grid operator ERCOT, according to Maura Yates, the company’s vice president of sustainability.
MP2 managed about 1.5 gigawatts of power, including large-scale solar and wind generation assets, as well as about 50 megawatts of natural-gas-fired peaker plants, she said. It also does demand response, and serves as a retail energy provider for commercial and industrial customers including Southern Methodist University and Rice University, oil and gas facilities, and manufacturing sites.
Until recently, however, “We haven’t served the residential market, because we’re not in a race to the bottom” in terms of competing against other retailers on low prices, she said. “We did say we were going to enter residential when it made strategic sense…and it’s the partnership with SolarCity that makes it make sense.”
Specifically, rooftop solar provides a valuable resource in the form of a predictable source of generation during the times when Texas energy companies need it most — primarily on hot summer days, when the state’s wholesale energy prices tend to spike the highest, and show the most volatility.
And, unlike the blocks of power that Texas energy companies must buy on the wholesale market to cover their commitments during those high-risk times, solar generation comes in nice bell-curve shapes that more closely match the energy consumption patterns of the customers that MP2 serves, she said.
It makes sense to trade energy in blocks, or set amounts of power deliverable over specific increments of time. But power consumption rises and falls in curves, not blocks. That forces electricity retailers to create “shapes” through quickly buying and liquidating market positions, using complicated mathematical equations to hedge risk throughout the process, she said.
“Shape is the most valuable thing that solar has, and it’s more valuable in ERCOT than any other market we’ve worked in.” Those markets include Illinois, Pennsylvania and Ohio, she said. ”When you start trending where volatility comes, when risk comes in the market, it’s highly correlated with when solar is in the market as well.”
“The shape brings value in almost every level of the market,” she said. “On the retail side, you can extract more value, because I’m able to reduce some of my peak distribution charges.” That’s because rooftop solar is generated at the distribution grid level, and doesn’t need to be transported across the state’s transmission grid from far-off generators, which adds costs to the power delivered to end customers.
“But on the wholesale side, that shape brings a lot of value from a sheer optionality standpoint,” she said. In other words, “When I’m a retailer and looking at a bilateral deal with a generator, the fact that I can purchase shape, rather than going to the market and buying a block — that’s a big deal.”
There are other Texas retail electricity providers with net-metering-like offers, she noted. But most limit how much net exported power they’ll pay for in a month, or force customers to forfeit any unused solar power at the end of each month. MP2 doesn’t cap for its program and allows customers to carry forward excess generation through the course of a year, like most net metering programs across the country.
That’s likely because they’re not in a position to use the relative certainty of rooftop solar production curves to manage risk in their portfolio as MP2 does, she said. “We don’t see ourselves as energy retailers — we see ourselves as energy risk managers.”
Taking this approach to rooftop solar seems more fruitful to Yates than seeking out changes to state solar incentive policies, such as lobbying for adding capacity markets to the state’s energy-only market regime, as she used to do in her previous job as government affairs director for the now-bankrupt SunEdison.
“Texas and ERCOT are probably better equipped to take on solar than any other market in the country,” she said. “And when you look at risk,” and matching solar generation profiles against it, “we think solar is better than anything we can get on the market.”
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Fortune: Apple Car Might Have Already Been Delayed a Year
The Apple Car doesn’t even technically exist, but it’s already been delayed, according to a new report.
In a look at brothers working on Apple’s ultra-secret car project said to be called Project Titan, technology site The Information revealed that Apple has delayed its vehicle to 2021. Several rumors have claimed Apple had planned a 2020 launch for Apple Car, but The Information’s sources say that the project has “run into challenges,” and that a person who had worked on the Project Titan team confirmed Apple has pushed back its target launch from 2020 to 2021.
Utility Dive: Net Metering Could Damage Utility Creditworthiness, Warns Fitch
Fitch said that inaction could lead to a “death spiral” for electric utilities as increasing power bills could propel customers to install more rooftop solar and recommended utilities increase fixed charges as a possible solution, SNL Energy reports.
“The conundrum for regulators and utilities from an energy policy point of view is facilitating development of distributed … solar and its clean energy attributes without unduly burdening [non net-metering] customers with higher bills due to cross-subsidization,” Fitch said in a report, “Net Energy Metering: A Secular Credit Challenge for IOUs,” according to SNL.
PV-Tech: Solar Is Not the Solution Africa Needs, Says Bill Gates
Bill Gates once again shunned solar power from his vision for energy access in Africa in his talk at the University of Pretoria in South Africa on Sunday, where he argued that whilst “cheap, clean energy” is what Africa needs, solar does not fit the bill.
During the delivery of his Nelson Mandela Annual Lecture, the Microsoft founder and philanthropist identified that Africa, like the rest of the world, is in need of a “breakthrough energy miracle that provides cheap, clean energy for everyone.”
Africa is more dependent on such a phenomenon than other continents, because seven in ten Africans still lack power at present, while more than 500 million Africans still will not have electricity by 2040.
Reuters: Obama Administration Offers EV Charging Loan Guarantees
The White House on Thursday said it was expanding a federal loan guarantee program to include companies building electric vehicle (EV) charging stations, part of a broader effort to boost EV sales.
The U.S. Energy Department issued a notice clarifying that charging facilities, including hardware and software, are now an eligible technology. The program can provide up to $4.5 billion in loan guarantees for renewable energy and energy efficiency projects.
ANS Nuclear Cafe: Small Modular Reactors Take Large Step Forward
In recent years the allure of small, flexible, easy to construct and operate nuclear plants incorporating small modular reactors (SMR) have continued to grow for a host of reasons. Here in the United States, we’ve watched the saga of the SMR unfold fairly slowly over the last few years, as companies have entered the fray to various levels of success and have achieved varied degrees of progress.*
Now, the latest large step in getting these small and versatile reactors into the worldwide commercial market has been taken – by an effort involving Saudi Arabia and South Korea.
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I’m sitting on the rooftop deck at Dream Heaven, a funky lakefront hotel in Udaipur, India. Across the lake, the opulent City Palace is lit up against the night sky, casting a medieval reflection on the waters of Lake Pichola.
Air conditioners are working hard against the humid night air here in Rajasthan. The monsoon is late, and temperatures have been rising to over 100 degrees in the day. The people, the land, and the cows and dogs in the streets are all praying for rain.
Suddenly, the lights go out. The buzz of the air conditioners goes quiet. It is yet another power outage, though only on our side of the lake. City Palace continues to glow serenely.
After a few minutes, diesel generators begin to fire up, including a huge one at the luxury hotel next door that sounds like a tractor-trailer.
It’s a typical event here in India, where utilities use outages to manage the system.
The shadow utility
While the country has plenty of generation overall — something like 270 gigawatts of capacity in a system that typically peaks around 180 gigawatts — local distribution utilities can’t always afford to pay for power from state-owned or private generators.
The unreliability of the power system has led to customers building their own shadow utility system, almost as big as the official one.
Ujjwal Bhattacharjee of TERI, a leading energy think tank in Delhi, estimates that customers have installed about 100 gigawatts' worth of backup generators, with another 70 gigawatts for cell phone transmitters.
Many homes opt for battery systems, with lead-acid systems that provide juice during outages. The India Energy Storage Association estimates lead-acid battery sales for stationary and motive applications (like electric tuk-tuks) at about $1.9 billion in 2015. This could double by 2020.
This DIY attitude extends to illegal hookups and stolen electricity as well. The back streets of Delhi are lined with a chaotic tangle of power lines. As much as 20 percent of power is stolen in some areas.
Photo credit: Bentham Paulos
As part of national renewable energy goals through 2022, the Indian government has called for 100 gigawatts of solar, including 40 gigawatts on rooftops.
The shadow utility already built implies that Indians can do the same with solar — acting on their own where government-owned power systems have failed.
But there are many impediments to rooftop solar in the country. And it's still unclear whether the country can get anywhere close to the ambitious targets established by the government.
Getting to 100 gigawatts of solar
A week later, I’m sitting on another deck, at The Park Hotel in Hyderabad, talking to Dr. P. Jayakumar. The Park is the nicest hotel in town, with a swept aluminum façade and a deck overlooking Hussain Sagar, a lake built in 1562. Next door is a vacant lot full of trash, some of which is on fire, sending toxic fumes of burning plastic across the deck, spoiling my gin and tonic.
Dr. Jayakumar runs Arbutus Consulting in Pune, and has helped develop 1 gigawatt of the 7 gigawatts of solar in India. He also helped Jigar Shah, his colleague from BP Solar days, get SunEdison started in India in 2007.
But I was focused on one question: How can India meet its huge solar goal?
In addition to the 7 gigawatts already built, India has 20 gigawatts in the development pipeline, according to the government.
“When we started in 2007, grid-connected systems were very new,” Jayakumar recalls. “Utilities weren’t familiar with the technology, and land ownership was often unclear, making project development difficult.”
Things are progressing, but Jayakumar still sees two major things that need to be solved: finance and coordinated development. “If we don’t solve these problems, I have the feeling we may be doing 50 percent of the goal.”
The utility system in India is largely owned by state and federal governments, through a series of public corporations. The one exception is renewables, which have largely been built by private developers in recent years.
India spent decades as a planned socialist economy, with an army of bureaucrats controlling business though the “permit raj.” Reforms in 1991 spurred a move away from central planning; this June the pro-business administration of Narendra Modi announced further measures to encourage development, such as easing limits on foreign investment.
But the energy sector is a stalwart of the old economy, and efforts to modernize run up against a host of barriers. Energy policy has a strong “social mission,” and electricity is often sold at less than cost to low-income customers or given away for free to promote economic development.
“About 75 percent of customers pay full price for electricity,” estimates Ravi Vora, a former managing director of an Indian utility.
The rest of the power is simply not paid for, and goes onto the books of the state-owned distribution utilities. Debt has gotten so catastrophically large — estimated losses of $9 billion per year and an accumulated debt of $64 billion — that utilities have been unable to pay their bills or borrow money to invest in their systems.
The federal government is now pursuing what it calls “the most comprehensive power-sector reform ever,” a plan called UDAY, to roll that debt onto bonds to allow the utilities to stay solvent. A total of $15 billion in bonds has been sold in the past year.
Rural areas are central to the problem. While almost all villages have been connected to the grid in recent years, only half of village homes have power and none enjoy reliable power. An estimated 300 million people are poorly served, or are not served at all. (This dashboard tracks weekly progress in the quest for village electrification.)
According to the World Bank, poverty rates in India have fallen from 20 percent in 2011 to 12.4 percent today. Still, that means that 172 million people in the country are living on less than $1.90 per day. Electricity is a luxury.
The government sees rural electrification as a key part of the war on poverty. “Rural electrification in India has caused changes in consumption and earnings, with increases in the labor supply of both men and women, and promoted girls’ schooling by reallocating their time to tasks more conducive to school attendance,” said the World Bank in a recent report.
Agricultural customers get power at very low or no cost, often unmetered, in the name of food security and rural economic development, resulting in a massive operating deficit for the local utility. In Maharashtra, for example, agricultural load — especially for water pumping — makes up about one-quarter of total sales (12 to 13 gigawatts) and is charged at 0.8 rupees per kilowatt-hour, whereas the cost of procuring that electricity to the utility is 2.4 rupees. Other states have an even higher share of agricultural customers.
While many reformers get excited about the potential for distributed solar to power rural India, heavy subsidies for rural energy actually make farmers less likely to buy it.
“A 1-kilowatt solar water pump may be only 30,000 rupees, but they say, ‘I’m getting my power for free today, why should I pay for it?’” asks Dr. Jayakumar.
“Many states use free power for agriculture as a political tool,” he argues.
In theory, solar can be an opportunity for utilities to move these money-losing customers off their books. But in practice, it is cheaper simply to cut off power. “Utilities serve rural areas only certain hours of the day,” Jayakumar says, “which already limits their losses.”
The financial problems of the Indian power sector limit new investment by the state utilities and scare off potential private-sector developers. As a result, “power-sector investments are seen often to have junk status,” according to the Renewable Energy Roadmap 2030, a report written for the National Institution for Transforming India Aayog, a government think tank.
High risk means high finance costs. Jayakumar says government-owned banks are a major source of finance for solar projects, but because they don’t offer “concessional” rates, project finance costs are around 13 percent.
“The most important thing is to bring down financing costs to 5 percent to 7 percent,” he says.
Private banks have shied away from such risk, he says, though this could be changing. A report from the Institute for Energy Economics and Financial Analysis chronicles over $100 billion of firm commitments for renewables announced by a variety of multinational banks and companies. The World Bank and others recently committed $2.5 billion in low-cost financing for solar.
Dr. Jayakumar’s second recommendation is greater coordination of development. He sees utility-scale projects as the main pathway for solar, since they are “the easiest question to answer.” Because the low-voltage grid is so unreliable, distributed projects in the range of 1 megawatt to 5 megawatts can lose access to their markets on a daily basis. Big solar plants, such as those 100 megawatts or more, that are connected to the high-voltage transmission grid are more secure.
“I think the way forward is not individual projects but through solar parks,” he says.
Solar parks, essentially industrial parks for solar projects, are being developed by state business agencies to streamline development. The parks clear up the issue of land ownership, since in many rural areas of India title to the land is uncertain, leading to expensive delays.
They are also sited near high-voltage grid connections, enabling big projects to be developed quickly. These solar parks can be integrated into broader transmission planning, such as the Green Corridor project.
While some observers look on India as a land of opportunity for clean energy, the truth is that it’s hard to get things done there. Financial problems, massive poverty, legal issues and a stubborn bureaucracy are all big red flags on the green pathway.
Over the past half century, most development in India has come from the government, as the only institution that can function in the chaos. As the Modi government continues to turn away from the centrally planned economy of Nehru and his descendents, they are seeking to unleash the power of the people to change the energy system.
A small example of this attitude was rolled out this spring in a quintessentially modern way — through two new smartphone apps.
Vidyut Pravah gives real-time information on power availability and price, while Urban Jyoti Abhiyaan has a “consumer dashboard” with data on outages, complaints, and energy theft for each local utility.
The apps aim to generate political pressure as much as energy.
“The mobile application will empower the Common People to demand 24×7 power from the States,” said Power Minister Piyush Goyal, speaking at an event in Delhi on March 31. “[T]his app will work as a manifestation of the Prime Minister’s vision of good governance via inculcating transparency in the system and will put pressure on power producers across the country.”
The app “will empower the consumer, thereby leading all the stakeholders to be more responsive and efficient, bringing more economy to the country.”
When it comes to energy, nothing is more grassroots than solar power. Modular and nimble, with many ways to be deployed, solar may succeed where other “hard-path” energy solutions fail. Most importantly for India, solar works with both the official utility and the shadow utility of diesel generators and batteries. This alone may make the 100-gigawatt goal possible — but certainly not easy.
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