Solar Installations Improving; Still Only 0.2 Percent of Peak

In summer 2004, after six years of state subsidies for solar photovoltaic installations?more than $200 million so far?less than 0.2 percent of peak load is supplied by photovoltaic (PV) systems. As subsidies are winding down and competition from Europe for PV panels continues, solar electricity is living up to only a fraction of its promise. PVs, which can deliver electricity to power peak summer loads when wind turbines are usually in the doldrums, currently account for 80 MW of the state?s total peak power portfolio. But to mainstream PV advocates?including those in the Legislature and the state administration backing two bills to boost residential solar power?the state?s progress in building PV capacity up from nothing 20 years ago is impressive. Solar advocates say that the combination of incentive programs and the net-metering law, which requires investor-owned utilities to credit renewables customer-generators for their kilowatts at retail rates, has stimulated a robust PV market in California. It is strong enough to increase its growth rate exponentially while being weaned gradually from subsidies, as envisioned in both SB 199 and SB 118. ?The amount of growth in California PV installations has been nothing short of phenomenal,? said Don Osborn, formerly head of the Sacramento Municipal Utility District?s renewables program and now a consultant with Spectrum Energy. ?And we?re still in the very early stages of solar commercialization.? First the good news: The California Energy Commission?s emerging renewables incentive program, begun in 1998, has subsidized about 10,000 small systems installed on homes and businesses. It has put some 40 MW of PV capacity on the three major utilities? grids, according to Percy Della, commission spokesperson. The California Public Utilities Commission?s Self-Generation Incentive Program subsidized 23 MW of larger PV systems installed by businesses, according to spokesperson Terrie Prosper. ?An additional 35 MW of PV project applications have been approved for SGIP funding, but these projects are not yet operational,? she noted. SMUD, the pioneer of grid-connected PV, leads the munis with 8.3 MW of PV capacity, including just under 2 MW of net-metered PV on 400 residences and 25 businesses and about 6.5 MW of its own PV generation assets, according to Jon Bertolino, superintendent of renewable generation assets. Bertolino says SMUD has weathered the perfect storm of 2002 when the utility?s residential PV program was damaged by severe budget overruns. ?We?ve adjusted our perceptions and expectations, so to speak, and evolved the programs that we have to fit within the cost realities that we?re seeing,? said Bertolino. After doing its own purchasing and installing of residential PV for many years, SMUD is moving to the more typical approach of letting private contractors do the work. ?There are now enough contractors out there who can install quality systems,? said Bertolino. ?We?ll facilitate the market through incentives.? The Los Angeles Department of Water & Power is close behind SMUD with about 7.5 MW of net-metered PV capacity, plus about 700 kW of its own PV generation assets, according to Gary Gero, director of energy efficiency and renewables solutions. LADWP has a waiting list of residences and business owners who want to add another 18 MW, an amount of capacity that Gero estimates will come on line over the next seven years. Other munis, from Lodi Electric Utility?s 4 KW to Riverside Public Utility?s 400 KW, amount to about 1.3 MW, according to the CEC. Adding up PV capacity, however, is not as straightforward as some PV boosters would like the public to believe. The megawatts tallied by the Energy Commission can exaggerate the real generation capacity reaching the grid from PV installations. For one thing, the solar resource is intermittent and variable. Bertolino, for example, estimates that while SMUD?s PV capacity accounts for 0.3 percent of its total capacity, PV generates less than 0.1 percent of the utility?s megawatt-hours. Then there?s the stubborn issue of how accurately panels are rated. ?The CEC calculates the supposed output of a PV module based on what a manufacturer tells them,? said Stuart Schonfield, senior distribution manager for RWE Schott Solar, a manufacturer and distributor. ?For module manufacturers, [the standards] require plus or minus 10 percent? between capacity rating and output. ?That?s a big difference.? Poor installations and lack of maintenance, primarily cleaning, can also reduce PV performance, notes Schonfield. He advocates shifting the rebate program to compensate PV generators for actual electricity produced, as Germany?s incentive program does and as Washington State PV proponents are advocating. ?These performance-based systems pay you on kilowatt-hour production, [resolving] any questions of the reliability of the modules or the ability to have it installed properly.? For the proposed solar homes program to reach the goal articulated by Governor Schwarzenegger?2,700 MW of peaking power by 2017?any significant discrepancies between ratings and power production need to be resolved because the technology has to prove itself on more simple economic terms. PV?s envisioned growth will require investment by hundreds of thousands of families. In contrast, only about 12,000 households, businesses, and other entities have installed PVs under existing programs, and many of these ?early adopters? were motivated by environmental goals as well as cost savings. To enlist a larger universe of homeowners?including many who will look only at costs and benefits?ratings and power production need to be clear. There?s also the issue of declining subsidies. Both solar bills being considered this week mandate that PV rebates decline over time. The solar industry has accepted declining subsidies, according to sources. PV industry representatives have assured legislators and regulators that their increasing economies of scale will yield lower prices. ?Just about all of the major PV manufacturers have committed to continuing cost-of-production declines,? said Spectrum Energy?s Osborn. ?Right now we see module costs of about $2.50 to $3/watt. With continued and steady growth due to gradually declining incentives that investors can trust . . . most manufacturers see module costs declining to about $1.50/watt over the next seven to 10 years.? ?Everybody hems and haws and says, ?It?ll be a stretch but if you can guarantee that these programs will be funded for this 10-year horizon, then we?ll commit to meeting the cost targets that will work for this rebate structure,?? echoed SMUD?s Bertolino. Others are skeptical that declining subsidies won?t pull the floor out from under the still-nascent California generation base. ?Given the current market demand, I?m not sure [the declining rebate scenario] is realistic,? said Schonfield of RWE Schott Solar. ?Prices have been increasing due to the German demand. Soon there?s going to be growing Spanish demand. . . . I understand that the Spanish [incentives] program is an even better program than the German program. And Italy is the next possibility.? Finally, some see a materials price problem looming. Increasing worldwide demand for PV panels may lead to sharp increases in costs of silicon, PV?s basic material. ?Yes, we can turn up capacity on the PV manufacturing side, but somebody needs to turn up capacity on the low-grade silicon side simultaneously so that it doesn?t run out and force the prices to go up because you?re having to buy higher-quality silicon,? said Wayne Robertson, Sunwize Technology sales representative.

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Solar Installations Improving; Still Only 0.2 Percent of Peak

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