Embed Size (px)
Citation preview
Solar Outlook
Deep Dive on Community Solar and PPA Pricing Trends
About SEPA
2
SEPA is an educational non-profit (501c3)
560 Utility Members
521 Non-Utility Members
Core Functions
Education ResearchAdvisory Services
SEPA Mission & Focus
• Our mission is to facilitate the utility industry’s smart transition to a clean energy future through education, research, and collaboration
• Our focus centers on solar, storage, demand response, and other enabling technologies
www.sepapower.org
SEPA Events, Products, & Services
3 www.sepapower.org
Community Solar
4
www.sepapower.org
What is Community Solar?
5
• Voluntary rooftop alternative for groups of participants
• Supply is most often larger, ground-mounted PV system
• Three defining transactions:
Customer Benefits
• Increase customer access to and participation in solar
• Ability to hedge energy costs
• Portability within utility service area
• Leverages economies of scale
Utility Benefits
• Can be strategically sited
• Proactive customer engagement
• Support the local PV industry
• Opportunity to gain understanding of solar resource
www.sepapower.org
Key Questions and Programmatic Attributes
6
Who runs the program?
• Program Administrator
• System Owner/Purchaser
What is the value proposition?
• Offer/Transaction
• Production Guarantee
• Economic Proposition
• Target Customer Classes
What size system is appropriate?
• Siting & Scale
• Participation Limit: Residential
• Participation Limit: Non-Residential
What are the terms & conditions?
• One-Time Sign-Up Fee
• Fee Treatment
• Minimum Term
• Unsubscribed Energy
• Subscription Transferability
• Program Length
• REC Treatment
www.sepapower.org
Most Common Structures
• Customer pays up front to purchase or lease a panel and receives a credit on their bill tied to system production
• Bill credit reflects an allocation of actual system output based on proportionate share of system
• kWh credit• Monetary ($/kWh) credit
• Mimics a rooftop ownership model in that up front capital is required
• Economics based on a payback period analysis
• Majority of programs in existence leverage this structure
• Roughly 84% of all programs today require either an upfront payment, or allow for financing of an upfront payment over a period of time
• Customer subscribes to program in either kW or kWh blocks and receives a credit on their bill tied to system production
• kWh blocks: guaranteed output each month at fixed payment per block
• kW blocks: variable output each month at fixed price per kWh or fixed payment per block
• Customer pays a premium on day one for solar blocks, but that price is fixed for a long term (e.g., 20 years) providing a rate hedge
• Mimics a rooftop lease model• Economics based on break-even
analysis
• Fewer programs historically, but gaining interest across the country
• Roughly 16% of programs today
Up Front Payment Model Ongoing Payment Model
7
www.sepapower.org
New National Survey Data
8
2,001
SEPA and Shelton Group conducted national surveys to
get the data
252
Residential utility customers
95% CI, ± 2.2% MoE
Commercial business utility customers
95% CI, ± 6.2% MoE
1
SEPA and Shelton Group conducted focus groups to
get the stories2
www.sepapower.org
Program Adoption Drivers
9
The financial benefit was the main driver behind why
community solar would be pursued
Customer Protection Implications
Transparent production
and financial performance
REC marketing & clarity of
ownership
Education on what the
customer gets34%
38%
65%
Gain more independence from my utility
Help the environment
Lower monthly energy costs
Customer Preference
Lower monthly
energy costs
Help the
environment
Independence
from my utility
www.sepapower.org
The Community Solar Market is Potentially Huge
10
Information
drives interest
Significant
market
potential –
equal to
rooftop solar
www.sepapower.org
Estimating Market Potential
11
Residential Business
www.sepapower.org
Untapped Market Today
12
Source: SEPA Analysis
Rooftop
Solar
Community
Solar
Utility-Scale
Solar
Cumulative
Installed US
Capacity (2014 MW)
• Median program is 102.5 kW
• 75% of programs leverage systems less than 800 kW
• Largest programs are around 20 MW (TEP, SRP, Xcel, RMP)
Drivers of Utility-Scale Pricing
13
www.sepapower.org
Major PPA Pricing Cost Drivers
14
System Design
Economies of Scale
Project Location
Project Financing
System Orientation
www.sepapower.org
Notes on Pricing
• Base system modeled for this report: • 20 MW
• Fixed tilt
• South facing system
• Located in Phoenix, AZ
• PPA leveraging a third-party who can monetize the ITC
• All modifications from that are noted on the slides to show how different factors impact pricing
• All systems modeled leverage inverter clipping
15
www.sepapower.org
What is Inverter Clipping?
• Panels are a commodity• No longer a major cost driver
• Inverter clipping essentially oversizes the system behind the inverter
• AC-delivered power remains the same
• Increased DC capacity translates into higher capacity factor, because more energy can be delivered as the project ramps up or down
• Increased capacity factor results in more attractive pricing
16
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Pro
du
ctio
n
Impact of Inverter Clipping
Clipped Energy Added Production Standard Project Design
www.sepapower.org
System Design
17
• Fixed tilt, south facing systems are cheaper to build than single-axis tracking (SAT) systems
• Price is coming down significantly, and is expected to be 5% or less in the next 1-2 years
www.sepapower.org
Economies of Scale -Implications
18
• Economies of scale exist for solar projects
• Soft costs (labor, permitting, etc.) can have a large impact on cost-effectiveness
• Identifying ways to leverage larger systems can significantly reduce pricing
www.sepapower.org
Project Location
19
www.sepapower.org
Project Financing
20
• Project financing is impacted by:
• Amount financed by debt
• Debt and Equity return requirements
• Ability to maximize the monetization of the Federal ITC and accelerated depreciation
• Impacts of normalization can be mitigated if you look at full asset life (30-40 years), and consider the replacement cost of the PPA after year 20
www.sepapower.org
Fixed Tilt System Orientation
21
•Trade-off between
pricing and timing of
production–South-facing = more energy
overall and lower PPA price
–West-facing = less energy
overall but more at time of
system peak
www.sepapower.org
Putting it All Together
22
Economies of Scale
Loca
tio
n, D
esig
n, O
rien
tati
on
Representative project Levelized Cost of Energy given different capital costs and
capacity factors
John Sterling
Senior Director, Research & Advisory Services
202-559-202
Contact Information
