California PV: at what price?

With Gov. Brown’s assent, the California legislature has formalized the 33% in 2020 Renewable Portfolio Standard imposed by Gov. Schwarzenegger. Even without a feed-in tariff, the state is marching towards having more RE usage than the rest of the US or Western Europe.

A quick glance at the California Solar Initiative data — back when the CSI incentives were relevant — shows that residential solar is relatively inconsequential in the state’s RE energy footprint. The real action is on large commercial and utility scale installations.

Last year saw a huge rush of utility scale plants being started in the Mojave before before federal subsidies expired.

However, energy writer Richard Nemec wonders whether these plants ever made economic sense. Earlier this week he wrote in the Los Angeles Daily News:

nine projects were given the green light, collectively totaling enough megawatts to equal about two San Onofre nuclear plants. Three months into 2011, however, two of the largest projects slated for the Southern California desert regions have been sold, utility contracts canceled and their futures put in doubt.

To date, three of the major projects are under construction, but a lot of that work is preliminary, awaiting more complete financial backing.

In addition to problems completing projects, there is also the price that the utilities (and thus businesses and consumers) will be paying for their power:

The state regulatory commission's consumer unit report concluded that approved solar contracts for the state's major private-sector utilities have collectively been about $100 million overpriced. This sort of largess does no one any good.

One reason for paying inflated prices is the RPS standard. Another is the expiring federal subsidies which caused firms to rush deals to regulatory approval before key issues were resolved.

This is perhaps the Achilles heel of utility scale: the small-numbers irrationality. When you have nine deals, it takes only a few bad decisions to have one-third or half of the projects collapse.

For residential and small commercial, some owners may behave irrationally, but in the long run we’ll expect buyers to act in their own self-interest: if the systems make sense, people will buy them and if they don’t, they won’t. (Yes, some consumers will pay a green premium to save the planet, but most probably won’t.)

The CPUC report looked at 184 projects — you would think enough to see a pattern in the proposals, and perhaps for the industry to figure out what’s feasible and not feasible. But I think the combination of RPS and federal subsidy deadlines induced an irrationality into the process.

The legislature (and the new governor) has made it clear that it wants more RE power used in the state. It remains to be seen whether they will pay attention to the inherent flaws in their mandated approach — rushing adoption ahead of grid parity — or will just ignore the wasted millions (if not billions) because it doesn’t show up as a tax that they can be blamed for.

US: the once and future PV market

Once upon a time, the global PV market was a US market.

Some 60 years ago, AT&T created the PV market. The industry was sustained during the 60s from military and space applications.

This is not just PV. Meanwhile, during the 1970s energy crisis solar hot water became mainstream (at least temporarily) as Californians replaced water heaters and pool heaters with rooftop collectors. In the 1980s, California created SEGS, the largest facility in the world that once comprised more than 90% of the world’s capacity.

As any reader of this blog knows, the German feed-in-tariff (and similar subsidies in selected other EU countries) has created huge growth and shifted the bulk of the global PV demand to Europe. In 2010, 80+% of the global demand was in Europe — and of that Germany was by far the largest with 8+ GW of capacity added in 2010.

Wednesday at the SolarTech 2011 Solar Leadership Summit, Shayle Kann of GTM Research talked about the growth of US PV demand, based on a state-by-state survey it did in cooperation with SEIA.

First off, Kann said "There is really no such thing as a US market. There’s a loose collection of 50 state markets” or even 3000-utility-specific markets.

In 2010, the US installation of PV reached 878 MW (volts DC, i.e. pre-inverter), up from 290 MW in 2008 and 435 MW in 2009. While US growth has been explosive, so has the US share of the global market , flat at 5-6% over the past six years.

However, GTM is expecting the US market growth will now outpace global sales — continuing to double annually, with global growth only 17-18% per annum. If these trends hold, the US share of the global market could triple to 16% by 2015. With European growth slowing, PV companies are seeking growth elsewhere and Kann said they're targeting the US for that growth.

The top 10 states account for about 85% of the US market. According Kann's data, 2010 was the first year that California did not garner for the majority of the US market: from 50.3% down to 29.5%. NJ remains number two (up to 15.6%), but Nevada (6.9%) and Arizona (6.2%) leapfrogged Colorado (6.2%) within the top 5. Florida fell both in absolute and relative terms (from 8.3% to 4.0%).

One key element of growth will be utility scale systems: 6.4 gigawatts (7 years of demand) of utility scale capacity is contracted — with all of that online by 2015. Another 13.6 GW are announced but do not have a signed PPA.

Interestingly, US manufacturing (per GTM numbers) has remained constant at around 38-40% of the market. While Chinese makers have gained share, it’s been at the expense of Japanese makers rather than US ones.

Still, PV remains a drop in the bucket for US electricity generation: PV to date totals 2 GW peak capacity, whereas 50 US power plants (mostly hydro and nuke) have 2GW capacity each. So, as Kann noted, it will be a while before PV actually has a meaningful impact on US electricity generation.

The Tohoku Earthquake and the future of nuclear power

Both the Mercury-News and the LA Times had articles today on whether the problems of Japanese nuclear plants after the Great Tohoku Quake of 2011 (now upgraded to a 9.0 on the Richter scale) could happen in California. This of course is part of the renewed stirring of the nuclear controversy in the light of this tragic quake.

The Merc story was disappointing. After noting that two plants provide 4.7 GW (12%) of California’s electricity, it quoted PG&E (operator of Diablo Canyon) and Southern California Edison (operator of San Onofre) saying predictable things and opponents saying predictable things. It also (as is want around here) gave undue credence to fringe critics rather than actual experts.

Perhaps the most interesting thing in both articles is the discussion of the seismic fault under Diablo Canyon that was discovered after the plant was built. In particular, the Merc quoted the hometown state senator, Sam Blakeslee, who has a Ph.D. from UCSB and various published papers on seismic issues. It quoted Dr. Blakeslee as asking experts to study fully the safety implications of the new fault.

On the other hand, the LA Times quoted actual independent experts (i.e. university scientists) saying that a 9.0 is not very likely to happen near either plant, with “low 7s” being the largest quake expected at either plant. Big tsunamis won’t happen here either because we don’t have offshore subduction zones.

However, as an engineer, I found troubling two questions that were not directly addressed.

The Great Tohoku Quakeis larger than any in Japan’s recorded history. This reminds me of Katrina, which was a large hurricane than was anticipated — after the fact, the Army Corps of Engineers called it a “400 year” storm, but the city had planned for a “100 year” storm.

The largest earthquake in California’s history is the Fort Tejon quake of 1857 (magnitude 7.9). However, the largest earthquake in US history was the 1964 Alaska quake (9.2) which also caused a tidal wave in California, killing 11.

When it comes to record high and low temperatures, record wind or rain, record earthquake magnitude — these are always a first. If every city plans for a 100 year storm, some will not see that 100 year storm over a 100 years, and others will see the 200 or 400 or 1000 year storm. (And, of course, many cities are over 100 years old.)

This suggests to me that planning for earthquakes — at least when there’s a high safety implication — should be planning for more extreme events. If NorCal doesn’t have a 200 year quake in the 21st century, perhaps SoCal will.

Estimating the size of the largest quake is not a policy — or political question — but a scientific question. Of course, science is so politicized nowadays (particularly due to the impact of groupthink on access to funding) that a purely scientific evaluation may be impossible.

Finally, the biggest lesson of TEPCO plant in Fukushuima — the one that will cause power engineers to rip their plans and start over — is that what happens outside the dome is as important as what happens inside the dome. The engineering failure was not nuclear or structural, but in systems design.

The 40-year-old Japanese reactor containment vessel did its job, holding up to the largest earthquake ever. However, the emergency cooling plans depended on the availability of power from outside the plant, and the infrastructure did not survive the quake well enough to provide power for the cooling pumps. Apparently the backup diesel generators worked, but did not survive the tsunami.

The LA Times article talks about gravity fed emergency cooling reservoirs located onsite at Diablo Canyon and San Onofre. Will those reservoirs (and their piping) survive a direct 8.0 earthquake? Will that onetime supply of water be enough to keep the reactor cooled if there is no electric power for 7 days? 14 days?

Again, these are engineering problems, not political problems — Californians should hope that PG&E and SCE will share their revised emergency plans after the lessons of Fukushima have been fully studied.

A smarter way to deploy smart meters

It’s no secret that PG&E has created an enormous controversy in California — encouraged by the PUC — with its aggressive push to force smartmeters on its customers. The newspapers and TVs have run story after story on the controversy, there have been hearings and a state investigation, and still cities are “banning” smart meters on a variety of grounds.

The imposition of smartmeters is the ultimate manifestation of a technocratic view of energy management, fueled by $3 billion in stimulus money. On the one hand, smart meters allow demand management and time-of-day metering, and are seen by many as the lynchpin of $200 billion in worldwide investment on bringing the electric distribution grid from the 19th century into the 21st.

On the other hand, customers are seeing their bills increase — both to pay for the meters and for time-of-day use — without any increase in the available energy. The meters are being fought on the left over price increases and on the right over the invasion of privacy.

Now a Texas utility wants to try a different approach. As VentureBeat reports:

It’s interesting to see that one pilot happening in the U.S. is coming at the game with a new approach: Focus on the making the consumer happy about the smart grid. In particular, it wants to demonstrate that the smart grid can improve the quality of consumers’ lives, much in the same way apps add value to the lives of iPhone and smart phone users.

Brewster McCracken, director of the Pecan Street Project in Austin, Tex., says its smart grid demonstration project is unlike any others in that is most concerned with the value to the customer, and not the utility. Part of the project’s goal will be to study how — and whether — the smart grid can provide value to the customer.

How about that? A public utility working to do something that benefits customers? (I’m guessing they came up with this on their own, without any help from the Public Utility Commission of Texas.)

The idea of being customer-driven is not something that comes naturally to big monopolies, particularly utility companies who get their revenues by spending money by lobbying for rate increases, then increase their rate base that is multiplied by guaranteed rate of return. (NB: This culture proved to be a disaster for the phone companies during the 1980s and 1990s when they actually had to compete for customers.)

This also applies to the big suppliers to the power companies, who wouldn’t know a consumer if one bit them on the backside. Even GE — with more than $90 million spent on its Ecomagination consumer PR blitz — isn’t really interested in listening to customers, but instead wiring its meters into local smart grid procurements.

With their assumption of all-knowing, all-seeing command-and-control planning, the top-down government bureaucracies are even worse than the top-down ones at the utilities or the industrial manufacturers. If you want to see Soviet-style central planning in North America 20 years after the collapse of the Soviet Union, this is where you’ll find it.

So the Austin public-private collaboration and its leaders should be applauded for their initiative. The old “small is beautiful” Jerry Brown would have loved and trumpeted a decentralized initiative like this, but I guess the state budget quagmire and its $25 billion deficit are occupying 110% of his attention right now.

Solar Leadership Summit coming to Santa Clara

The annual Solar Leadership Summit is being held here in Silicon Valley March 28-29. The theme of the conference is “Solar 3.0--A Path from Policy to Profitability.” Speakers include the president of the Public Utilities Commission, CEOs of REC Solar, Cleanpath Ventures, Serious Materials and SolarNexus, and other public and private RE leaders.

The summit will be held at the Santa Clara Hyatt and is sponsored by SolarTech, the solar energy industry trade association. For more information, including pricing and a detailed agenda, see the SolarTech website.

Thank you, Mr. President

The retired POTUS on Thursday voiced his own concerns about the effect corn-based ethanol is having on food prices and political stability in the developing world. As the AP reported:

WASHINGTON (AP) — Former President Bill Clinton on Thursday warned farmers that using too much corn for ethanol fuel could lead to higher food prices and riots in poor countries.
…
He said the United States needs to look at the long term, global effects of its farm policy.

“I think the best thing to say is we have to become energy independent, but we don't want to do it at the cost of food riots,” Clinton said.

In doing so, he was somewhat less decisive than his vice president, Al Gore. (Perhaps Bill’s wife still expects to run for president in Iowa some day.) Still, this is moderating his position clearly in support of ethanol three years ago, as expressed in his book, Giving.

Despite this equivocation, corn ethanol’s most adamant opponent, the Wall Street Journal, offered rare praise for the former president:

America's political addiction to ethanol has consequences, from raising the price of food to lining the pockets of companies like Archer Daniels Midland. So we're delighted to see another prominent booster—Bill Clinton—see the fright.

Actually, the effect of American ethanol consumption on overseas food riots was noted last month by critics on both the left and right, tied to UN statistics showing skyrocketing food prices to record highs over the past six months. The pressure and evidence have been building ever since.

A Princeton researcher, Tim Searchinger, published a thoughtful commentary in the Washington Post two weeks ago, which was followed up by articles in Time and a scathing editorial in the Chicago Tribune entitled “Burning Dinner.” The rebuttal to Searchinger (a former EDF activist) was to call him a “Gasoline Whore.”

While the unrest in the Middle East is new, the opposition to shifting food for use in fuel is not, as 2007 articles in Business Week and Technology Review make clear.

What’s changed in the last four years has been an increasingly wide range of biofuels that can provide a greater quantity of fuel without this impact on food prices. (Some of these alternatives would be very good for California.) Overseas food riots have raised the urgency enough to spark interest in ethanol alternatives across a wide political spectrum.

Given this elevated level of discourse, the time has come for Energy Secretary Steven Chu to re-emphasize that corn-based biofuels are only “a transitional crop” and for the budget-cutting Congress to start the phaseout of subsidies for them. The country has less than a year to forge a new national consensus before the 2012 presidential election prompts a new round of farm state pandering.

Wind: commodity prices, commodity pressures

Last year was not a good year for Denmark’s Vesta, the world’s largest manufacturer of wind turbines. Like the German PV companies, it grew its business based on home country government support, but like the PV companies is facing tougher competition in the global marketplace.

In 2009, publicly traded Vesta announced layoffs of 1900 workers, and last October axed 3000 more, closing four factories.

Now Renewable Energy World has a 2,500 word profile that’s supposed to be an upbeat update on the company’s fortunes, but to me sounds like more bad news. Europe faces overcapacity and 2010 sales were down because government buyers realized they’re broke. The industry’s trade association says their only hope is more aggressive GHG reduction mandates by EU governments.

At the same time, uncertainty in the US — the world’s largest installed base — is increasing.

Meanwhile, the article notes that Vesta faces increasing competition from Europe (Spain's Gamesa, Germany’s Siemens) and the US (GE) which are offering improved products and increasing European production.

If that’s not enough, Vesta — like the German PV companies — faces increasing competition from low cost producers in China and elsewhere in Asia. The money quote of the paper:

"You could say we have been too optimistic for too long," Ditlev Engel, chief executive of Vestas said last October as the company cut its workforce by 15%. He later qualified these words, saying it was right to study the markets before taking "tough decisions" to close four production units in Denmark and another in Sweden, but it was inevitable this phrase would make headlines, sending shockwaves across the industry.

Vestas' move was in response to shifting fortunes, and shifting global markets. "If you can make a turbine in Asia and deliver it to Europe at a comparable price to making it in Europe, we have a problem," said Engel. "So we have to make sure we can always compete with what we call 'Asia plus freight'."

In the comments section, one reader wrote:

He said it all in the beginning...
"Asia + shipping"

The wind folks like to think they’re a tech industry (not really) or a growth industry (depends entirely on subsidies and mandates). The reality is that they make equipment for producing commodity electrons, which makes theirs a commodity industry as well.