Navigant Research Blog

Solar Lessons from the North of Chile

— October 30, 2015

Northern Chile is dominated by the Atacama Desert, and other than its large mining industry, the location is otherwise isolated. To supply this area with electricity, Chile established a local grid called Sistema Interconectado del Norte Grande (SING) that is segregated from the main grid, known as Sistema Interconectado Central (SIC).

Traditionally, electricity generation in the SING network relied on relatively expensive imports of coal, natural gas (NG), and diesel. Of the 4.97 GW of installed capacity in 2014, coal represented 42.2% and NG 47.5%. As solar energy prices dropped, the region became a hot spot for solar developers because it offered a perfect combination of high electricity prices in an area with the world’s leading insulation levels. A significant number of developers pulled the trigger and began the construction of their plants, planning to sign power purchase agreements once the project was commissioned.

The problem is that every company had the same idea at the same time. Solar projects have mushroomed in the past year. By October 2015, SING had 157 MW of installed solar capacity, 80% of which was commissioned in 2015. Solar now makes up 3% of the total generation capacity, and that was before the commissioning of First Solar’s 141 MW Luz del Norte plant, which will be the largest in Latin America. This plant is in the late stages of the construction process and it is expected to begin operations before the end of 2015.

Impact on Electricity Prices

The impact of new solar capacity on daytime wholesale electricity prices has been staggering. The average hourly wholesale electricity price in October 2015 dropped 42% between 8 a.m. and 9 a.m., whereas it fell only 10% in 2014 and 16% in 2013. In October 2014, prices averaged $54/MWh between 9 a.m. and 7 p.m. versus $67/MWh throughout the rest of the day. By October 2015, the average day-to-night differential widened to $48/MWh between 9 a.m. and 7 p.m. versus $78/MWh in the rest of the day.

Solar developers now find themselves in a predicament. Daytime electricity prices are expected to fall even further as the projects currently under construction come online, creating a death spiral that would threaten the economics of all plants and the sustainability of the whole industry. But no company wants to throw in the towel and write off all of its investment to date. The question is, who will move first?


Nefarious Solar Applications

— October 14, 2015

Beyond generating clean power, solar PV’s unique attributes as a distributed technology result in a variety of applications outside of the major markets of residential, commercial, and utility-scale power plants. Applications include solar lanterns for remote communities in Sub-Saharan Africa and remote microgrids in India; additional applications include powering satellites, the International Space Station, and Mars rovers. Solar can even be applied to fashionable widgets—fans, cellphone chargers, backpacks, and the like.

But what about the nefarious or even sinister opportunities enabled by solar PV? The following are a list of applications that could fall under that list:

  • Solar Bitcoin harvesting: With rough estimates at 1 GWh per day, several articles and videos have been posted recently about using solar PV for powering the mining of the Bitcoin. A so-called cryptocurrency created in 2009, Bitcoin allows users to pay for goods and services anonymously. This can range from pizza (not so nefarious) to drugs—and increasingly, weapons and ransom. For now, at least, bitharvesters have a strong incentive to utilize renewables, albeit on a micro scale, for the same reason that data centers do: power consumption is one of the main costs, and reliability is particularly important.
  • Solar cannabis: With Colorado, Oregon, and Washington legalizing (and heavily taxing) marijuana for recreational use, entrepreneurs—ranging from DIYers to large-scale agribusinesses—are looking to reduce the large amount of electricity consumed by grow rooms. Breakthroughs in LED pricing have made a major impact on the bottom line—not only for lighting common areas, but also for grow rooms. Grow rooms require lights, heaters, fans, and other appliances that consume large amounts of electricity. A 2012 peer-reviewed study found wide variations in marijuana plant production, and estimated that the large energy requirements of these facilities had lighting levels similar to those of hospital operating rooms (which use electricity at 60 times the rate of a modern home). With many U.S. states moving toward legalization in the future, grow operations will be able to transfer to outdoor facilities and reduce indoor energy demand.
  • Solar drones: Since the solar-powered plane Solar Impulse completed its crossing of the Pacific, more attention has been paid toward how solar powers unmanned aerial vehicles (UAVs). For example, in 2010, Boeing won an $89 million contract to build the SolarEagle unmanned reconnaissance aircraft, designed to fly continuously for 5 years at 65,000 feet. (Boeing had previously built Phantom Eye, a hydrogen powered aircraft that could stay aloft at 65,000 feet for four days.) Airbus has built a competing solar drone, Zephyr, which can carry a 1,000 pound payload. (Facebook and Google have recently launched solar drones themselves, designed for beaming the Internet to remote regions of the world, but fall into the not-so-nefarious category.)

The continued cost reductions of solar make once cost-prohibitive applications more realistic—regardless of their potentially illicit uses.


Solar PV for Healthcare

— October 12, 2015

Navigant Consulting and the U.S. Department of Energy’s (DOE) Better Buildings Alliance recently released an On-Site Commercial Solar PV Decision Guide for the Healthcare Sector to address barriers and solutions to solar PV for healthcare facilities.

Why Healthcare?

More and more, healthcare facilities are looking for ways to reduce energy costs. According to the DOE, hospitals and healthcare facilities consumed more than 8% of the total energy used in U.S. commercial buildings in 2012 and spend more than $8 billion on energy annually. Following the food service industry, healthcare is the second most energy-intensive sector, with energy costs rising an alarming 56% between 2003 and 2008, according to the Healthier Hospitals Initiative. Many hospitals are focusing on energy efficiency, and Navigant Research forecasts the market for healthcare energy management systems will more than double by 2024. Solar PV is a key solution to reduce energy costs.

Some of the benefits of solar PV include:

  • It reduces electricity consumption and helps decrease peak demand, meaning lower operating costs and more resources for patient care.
  • It protects against rising energy costs and price volatility.
  • It generates electricity without any direct emissions.

Barriers to solar PV include:

  • Hospital roofs are crowded with other equipment and there is limited space for a solar array.
  • Staff have limited availability, and many hospitals do not have a dedicated energy manager.
  • Large healthcare systems are often made up of small, autonomous organizations, which complicates ownership models.
  • Nonprofit healthcare organizations and real estate investment trusts cannot take direct advantage of tax benefits.
  • Management sees solar PV as a large investment that may not be financially viable, especially compared to medical equipment.

Solutions and Strategies

Installation type: If the roof is dominated by medical equipment, design a carport or ground-mounted array. A carport array may be more expensive, but it also provides benefits like shading cars from the sun. Ground-mounted arrays put underutilized land to use and usually accommodate larger systems.

Commercial Carport-Mounted PV Array

Jay Blog Picture

(Source: National Renewable Energy Laboratory)

Location: Healthcare facilities other than hospitals often make better hosts and should be considered when siting a PV system. Medical office buildings, laboratories, material management centers, outpatient facilities, and other care centers typically have less rooftop equipment than a hospital.

Financing: Third-party ownership structures often involve a power purchase agreement (PPA), under which the healthcare facility purchases electricity at an agreed upon price. For non-profit organizations that cannot take advantage of tax benefits, a PPA is likely the best financing strategy because the third party will be able to access tax incentives and reflect this in a lower price.

Planning: The PV project should be approved by the Chief Financial Officer and the Facilities Manager/Director of Engineering. It will eventually go to the Board of Directors for approval, and would benefit from having an internal champion—like a Sustainability Manager—see it through the process. Healthcare organizations can also integrate sustainability efforts into the organizational structure.

Organizational Structure

Jay Blog Figure

 (Source: Navigant Consulting)



Solar vs. Utilities: Can’t We All Just Get Along?

— September 4, 2015

Tightrope_webTo say that the battle over net metering payment schemes is getting heated is an understatement. But nearly 2 years after I wrote about how the net metering debate was playing out globally (see those blogs here, here, here, and here), what troubles me most is that little progress appears to have been made in terms of finding an equitable, transitional solution that promotes solar adoption without unfairly affecting the business models of regulated power utilities.

In the United States, the state-level regulation of utilities means that 50 different public utilities commissions (PUCs) are considering proposals from numerous utilities, and no two proposals are exactly alike. But nationwide, solar supporters are still doing their best to make utilities look like the bad guy—and inflammatory solar tax headlines still dominate in the media.

War in the Great Lakes State

This summer, a bill before the Michigan State Senate has created more sturm und drang because, as written, the bill would not grandfather in existing solar customers. I found article after article where homeowners who’ve invested tens of thousands say that rather than a 10-year payback, it will now take 20, 30, or more years for their solar system to pay for itself. Why? Because the proposal would make solar customers sell their power to their utility at wholesale rates, then buy back what they need at retail.

As in most net metering battles, solar advocates argue that the incentive for consumers to install solar will be eliminated under such rules. Combine that with that the expiration of the federal solar tax credits at the end of 2016, and solar supporters imply the end of their industry (and jobs) is nigh.

On the other side of the table are utilities that typically rely upon the cross-subsidization argument to defend their efforts to implement higher fixed fees or reduced net metering payments for solar customers. Their argument is that, in order to pay for the grid that everyone—even solar customers—still needs, those customers should pay a connection fee so that fixed grid maintenance costs aren’t unfairly shouldered by non-solar (often lower income) customers.


Both sides of the argument have merit. Increased fees or reduced net metering payments to solar customers will make a potential customer think twice before committing to a $20,000 (or much more) investment. But utilities do have to maintain and operate their power plants, distribution grids, billing systems, etc. whether a customer buys $200 worth of power in a month or $20. Today, solar penetration in the United States is still low, but it’s growing rapidly. There’s no reason to think that growth will slow—especially if the federal tax incentives are extended, as has been proposed by New York Senator Charles Schumer.

What’s harder to understand is why more utilities and solar companies aren’t working together to create a plan that allows solar investment to continue growing—creating jobs, reducing carbon footprints, and taking stress off of the grid—without creating abrupt, unfair financial stresses for these utilities that have been bringing power to Americans for more than a century.

Yes, the business is changing. Yes, regulatory action often comes too slowly while business forces can shift rapidly—just ask the old school telcos that still had more customers than mobile carriers less than 10 years ago. But there ought to be enough creative juice among advocates on both sides to imagine a transition plan that works for all. Industry-driven compromise would be embraced and emulated by regulators nationwide. Let the mudslinging end and productive dialogue begin, I say.


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