The Energy Show

Our sources of electrical power are quickly shifting. In 2016 there was 26 gigawatts of new electrical-utility capacity added in the U.S. Of this new capacity, 33% natural gas, 30% wind, 30% utility-scale solar (plus another 10% from rooftop solar), 5% nuclear, 1.2% hydro-electric, 0.8% biomass, 0.2% oil and 0.2% coal plants. With 70% from renewable sources, this is a colossal shift from the predominantly oil and coal power-plants that dominated the 20th century. Old technologies are losing steam (hah!) … are they still viable?

Utilities are tasked by Public Utilities Commissions in each state to provide electricity to consumers at “fair” rates, while at the same time maintaining a guaranteed rate of return to the utility (typically about 10%). Since natural gas, wind, and solar are the most cost-effective fuel source, it's no surprise that they have become favored by utilities. While solar and wind are favored for new power plants, there is still a long way to go before replacing all the existing power plants. Nevertheless, favorable economics for solar and wind are accelerating this transition.

One quick way to compare the economics of different power plants is to evaluate their thermal efficiency (the usable kwh energy generated by the plant divided by the heat energy consumed by the plant). Coal, oil, and nuclear hover at roughly 30% efficiency, and new natural gas plants run at 40% efficiency. For these fuels, 60 to 70% of the fuel purchased is wasted as heat. The reason the economics for solar and wind are so favorable is that – once the plants are built – their fuel (sun and wind) is virtually free. For more about utilities transition away from most fossil fuels towards wind and solar, listen up to this week’s Energy Show on Renewable Energy World.

The solar industry is one of our most obvious success stories. Our industry directly employs 261,000 people. We generate energy that is both clean and renewable. And we generate this energy at prices that are less than conventional utility power – as low as 6 cents per kwh. But the industry is not resting on its laurels: installation costs for residential solar will continue to decline (BTW, what’s a laurel?).

$1.50 per installed watt was the original target of the SunShot program for residential solar. I think it’s going to take many more years to get to these low installation costs – even getting to $2.00 watt on the average seems almost insurmountable to me. Not because of the hardware costs; these are continuing to decline. But because of the soft costs like labor, sales & marketing, financing and overhead. Nevertheless, $2.50/watt is a target that is within our sites over the next few years.

Please join me on this Week’s Energy Show on Renewable Energy World as I dissect the current cost stack for residential solar installations. We’ll particularly focus on the three most likely ways that these average installation costs will be reduced: higher panel efficiency, less expensive equipment and better component integration. But don’t hold your breath…overhead is more likely to go up than down.

The promise to homeowner’s is simple: install solar panels on your roof and save money on your electric bills. There are about 10,000 companies in the U.S that offer these solar installation services because they believe in both the economic and environmental benefits of rooftop solar.

While the vast majority of installers are ethical and dedicated to providing long-term benefits to their customers, like every other industry there are individuals looking to make a quick buck. Because the financing, energy savings and warranties for solar systems are complicated, homeowners can be misled. Hence the need for consumer protection measures.

The solar industry is doing a great job of self-regulating, and heading up these efforts is Tom Kimbis, the Executive Vice President and General Counsel of the Solar Energy Industries Association (SEIA). Please Listen Up to this week’s Energy Show as Tom talks about SEIA’s Consumer Protection and Ethics Committees, as well as SEIA’s “Consumer Guide to Solar Power” and Residential Disclosure Forms.

In January the DOE published their annual jobs report. The U.S. energy industry employees 6.4 million people. The largest two employment categories are oil extraction and solar, with solar growing the fastest among all fuel types. According to the DOE, by the end of 2016 there were 374,000 American’s employed at least partially by the solar industry. Paralleling the DOE study, the Solar Foundation recently released their own employment study indicating that 260,000 American’s working directly in the solar industry – one out of every 50 new jobs created.

Although the technology of solar generation is fundamentally different than fossil-generated electricity (lots of up front construction but free fuel) the breakdown of workers is very similar to other electric power generation sources. 37% of solar employees work in installation or maintenance positions, 26% in supply chain positions, 18% in manufacturing and 15% in professional services.

The majority of U.S. photovoltaic generation is utility-scale, roughly 28,081,000 MWh, compared to 16,974,000 MWh of distributed solar generation (note that this is energy generated, not capacity). However, in 2016, over half of the nation’s solar workers were spending the majority of their time working on residential solar. This imbalance reflects the fact that utility-scale generation typically produces more MWh’s per labor unit installed compared to distributed generation. On the other hand, residential and commercial solar provides more value to customers. Power generated at utility-scale facilities costs 5 cents/kwh, totaling $1.4 billion for this energy. Power generated on residential and commercial rooftops cost an average of 10 cents/kwh, but the savings to consumers were even greater at $1.7 billion.

So by all accounts, solar energy is a jobs engine. Although there may be environmental headwinds from the Trump Administration, there are no signs that the economics for solar-generated electricity will falter any time soon. Please Listen Up to this week’s Energy Show on Renewable Energy World as we delve into the technologies and market segments that make up the U.S.’s energy industry.

If you have an electric bill there are three basic ways for you to get your electricity from renewable sources. The most popular is rooftop solar; virtually anyone with a sunny rooftop can install a system. The second is with a Community Choice Aggregation (CCA) program, if available in your area. The third is from your utility, if they offer a renewable electricity option.

Some people are passionate about clean, renewable power -- but most people just want to save money. These three renewable power options require different up-front investments, and have different ongoing energy cost profiles. Rooftop solar requires a relatively big up-front investment, averaging about $15,000. But once you’ve made this investment your electricity cost is only about 7 cents per kwh, locked in for the lifespan of the equipment (typically 25 years). CCA programs strive to supply energy to residential and business customers at a slight discount to regular utility rates. They can provide this discount since they are not motivated to maximize their profits, and usually acquire power from new solar and wind facilities (which are less expensive than legacy utility power plants). Finally, many local utilities have an option for customers to buy renewable power, but they usually charge a premium for this power.

Often the selling price of electricity to customers bears little resemblance to its underlying costs. In my locale a homeowner can install a simple rooftop solar system for about 6 cents per kwh. The new CCA program offers renewable power at 1% less than the local utility. And our local utility offers renewable power for a slight premium. Listen up to this week’s Energy Show on Renewable Energy World so you can determine for yourself which renewable energy source best meets your needs.

We’re in the middle of winter – and there’s some serious precipitation. It’s snowing in much of the country, and California is finally getting a lot of rain. Although these storms are good for replenishing our water supplies, wind, rain and snow are the biggest causes of power failures.

Our society has become almost totally dependent on electricity. Not only for such necessities of 21st century life as cellphones, TVs and WiFi, but also for former necessities such as heat and hot water. Pilot lights in natural gas equipment are a thing of the past: most new furnaces, hot water heaters and stoves need electricity to operate. We can’t even depend on functioning fireplaces anymore; some new construction codes prohibit wood-burning fireplaces.

Understandably, people are even more interested in backup power these days – and many people expect that rooftop solar can provide usable power when the grid is down. For safety reasons, almost all solar power systems need reference power from the grid to operate. So from a practical standpoint there are only two options for home or business backup power: a generator, or a solar system with a battery backup powered inverter.

There’s no doubt in my mind that eventually almost every solar system will be equipped with battery storage. We are just beginning to see the first solar and battery storage systems that have done a reasonable job integrating cost effective hardware with functional software in a turnkey system. On this week’s Energy Show on Renewable Energy World we’ll talk about the pluses and minuses of these new battery backup power systems, as well as old-fashioned fossil fuel generators.

“Pigovian Tax.” If you know what this means, then you can skip this week’s Energy Show on Renewable Energy World. For everyone else (including me until I looked up the word) a Pigovian tax is a tax levied on an undesirable market activity to offset the negative effects of said activity. A tax on carbon is a Pigovian tax – hence the addition of this obscure word to our Renewable Energy World vocabulary.

Nobody likes to be taxed – especially the industries that are directly affected. However, sometimes vice taxes are a necessary evil in order to discourage bad behavior. In the case of taxing carbon usage, most economists have concluded this is the most effective way to reduce CO2 gas emissions. The European Union has implemented an effective carbon tax, and leads the world in reducing carbon dioxide emissions. But here in the United States, where the word “tax” can quite literally get you thrown into the Boston Harbor (with your chests of tea), we have been slower to adopt these changes.

But there continues to be momentum behind effective economic mechanisms to reduce CO2 emissions. To avoid the specter of increasing taxes, some states have implemented more business-friendly cap and trade programs. California’s cap and trade program, initiated in 2011, continues to reduce that state’s emissions, while at the same time directing the resulting proceeds back to the state’s transportation, clean energy, energy efficiency, natural resources and recycling activities. Listen up to this week’s Energy Show on Renewable Energy World as we talk about practical carbon tax options – in spite of the temporary political reluctance to do so in the U.S.

Home solar systems are pretty simple: put some solar panels on your roof, wire them up, get connected by your utility, and enjoy cheap electricity for 25+ years. But the technology and options can be confusing – especially as solar salespeople strive to point out differences in their products and services. I’ve watched customer’s eyes glaze over as I talk about the differences between poly and mono crystalline cells, string and micro-inverters, degradation rates and warranties.

The reality is that there is very little difference between equipment manufacturers. Solar panels are a commodity sold on a $/watt basis. Many of the solar panels get their cells from the same sources in Asia – just as different brands of gasoline are manufactured in the same refineries. As a result, two homes with the same total wattage of solar panels on the roof with the same exposure will have virtually identical annual energy production.

Listen up to this week’s Energy Show on Renewable Energy World as we talk about a simple way to compare solar quotes on a dollar per watt basis. We also discuss important home solar contract terms, inverter choices, monitoring, and the ways to pick a good installer.

Everyone makes mistakes – and I’ve certainly made my share of them. On this week’s Energy Show on Renewable Energy World we will discuss in detail some of the most common homeowner and installer mistakes that I’ve seen over the past 15+ years – as well as the actions we can take to do things right the first time.

The vast majority of solar installers are honest and ethical; they truly believe in their products and company. Nevertheless, there are some companies (and unfortunately rogue employees) who take advantage of customers. Here are a few of the solar mistakes I have observed during the sales and installation process:

1. Poor installation practices - missed rafters, inadequate safety procedures, etc.

2. Employees who are not properly trained or incentivized - compensation per kw, poor quality control, etc.

3. Oversizing the system - panels in the shade, orphan panels, stuffing the roof, etc.

4. Overestimating system output or dollar savings – easy to do by fudging inputs for design and proposal software

5. Financial or contractual monkey business – poor explanations of actual contract terms, escalation rates, warranty obligations, etc.

Since solar is still relatively new, what customers learn about solar technology, installation processes and savings comes from the solar salesperson. With a little bit of education and caution, homeowners can avoid these common mistakes:

1. Comparing solar estimates based on total costs -- not the more accurate $/watt basis

2. Lack of understanding of solar financing options and terms – escalation rates, buyouts, warranties, etc.

3. Getting pressured into buying immediately – the “drop close,” special pricing, artificial incentive deadlines, etc.

4. Hiring an inexperienced or improperly licensed contractor -- usually not from a referral

5. Installing a system that is undersized for current or near future needs – adding on to a system at a later date is usually expensive

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At the center of our solar system, approximately 92.96 million miles away, is a nuclear power plant capable of powering the entire globe. We know it by its most common name: our sun. The sun's diffuse energy can be used to heat water in thermal solar panels, or can be converted to electricity with photovoltaic (PV) panels. Since our modern society is moving towards using electricity for heating and cooling, transportation, communications, appliances and even entertainment, PV panels are the most expedient way to convert this solar energy to usable energy.

PV-generated electricity used to be expensive. But no longer. A typical solar panel generates about 400 kwh of electricity per year which, at $0.25/kwh (the average electric rate in California), amounts to $100 of electricity. With 20 solar panels on your roof you can reduce your annual electric bill by $2,000. Since each panel costs around $500 to install (including equipment and labor), the payback is only 5 years! So why can't we run our nation's electricity with solar power?

We can. Such an elegant and environmentally sensitive solution. But there are many people who are either in denial of solar’s ability to affordably power our economy, or have ulterior motives -- usually these are people who have financial interests tied to the fossil fuel or utility industry. According to a recent report by the National Renewable Energy Lab, rooftop solar has the potential to power almost 40% of the country's total electricity needs – using only the roofs of residential/commercial buildings. When you consider community solar and ground mount installations we can easily generate 100% of total U.S. electricity needs. Still not convinced? Listen Up to the Energy Show on Renewable Energy World for the highlights of NREL’s report entitled “Rooftop Solar Photovoltaic Technical Potential in the United States.”