What is the best market support program?

What is the best solar design option for the White House?

What is the best standard for PV module rating?

Discussion Questions

 

What is the purpose of the incentive? Which ends should it serve?

 

Which role is assigned to the investors? Are they considered power producers? Or are they still consumers who are only allowed to lower their consumption?

 

Is the program market oriented and customer friendly?

 

  

Discussion

 

If the goal of the subsidy is to foster an emerging technology with environmental advantages and lead it to market competitiveness there is one clear winner among the programs: that’s the feed-in tariff system. The feed-in tariffs provide investment security for 20 years, stimulate competition, and reward performance. The country that adapts a feed-in law is likely to experience a boom in the desired market.

 

If, alternatively, a country chooses a capacity-based subsidy, the likely outcome is a much slower growing economy if not even a deformed economy. The problem with capacity-based rebates is that performance becomes irrelevant. The investor gets his money anyway. If he puts his solar system in a shaded area, neglects maintenance etc. won’t matter. None of which has an influence on his ability to obtain the rebate. The full negative impact of capacity-based incentives can be seen on the example of the Dutch wind industry. The Dutch law granted a wind energy subsidy based on the size of the generator. Subsequently it became popular to build very small wind turbines with very large generators. These wind turbines were optimized for the Dutch incentive program, but they didn’t work anywhere else. In the end, the Dutch industry failed to export their products to other countries.

 

The same phenomenon can be observed in California. What makes these two states comparable is that they are both world-famous for their respective natural resources: what the wind is to the Netherlands, the sunshine is to California. California has one of the longest running incentive programs and is rich in the solar resource, but its solar economy never really took off. This highlights even more the importance to look at policy options that offer better prospects. A good example comes from Germany, the country that invented the feed-in tariffs. Though Germany is not known for having a sunny climate, the German feed-in law more than makes up for it. Today Germany holds the lion's share of about 50% of the global PV market while the US accounts for only 10%. It will take up to 2012 for the US market to equal that of Germany.

Photovoltaic market growth. Source: www.epia.org, Global Market Outlook for Photovoltaics until 2012. Factual data until 2007, forecast from then on.

 

The feed-in law is a fundamentally new concept. It basically says that everybody has the right to feed-in electricity into the utility grid. The price for every generated kWh is guaranteed. In short, Germans make money with their solar systems. By contrast, Californians only reduce their bills. The law in California limits the role of a solar system owner to be a net-consumer of electricity. The slogan “turn your meter backward” might sound attractive at first, but is seriously limited: The best you can hope for is to have a zero balance with the utility company. Some people in California have reduced their consumption below the level of what their systems generate. You might think that’s a noble achievement which should be rewarded. But no, it isn’t. At the end of the year, when the numbers are balanced, the utility takes the surplus without any reimbursement. And that’s legal.

 

Underlying the debate are some really serious questions. How do we understand the rights of citizenship in regards to energy production? Is it a right to generate energy and deliver it to your neighbor by means of the utility grid? Germany went forward and said yes, that's a right. The net metering laws adapted by many US states are much more restrictive. They only allow for momentary energy flows into the grid, but sustained net energy flows over long time periods are not being compensated. Net metering implies that the generating party has to redeem the surplus energy at a later time. It's redeem it or lose it. A feed-in law, by contrast, has no limits to energy production. Renewable energy is fed into the grid at the fastest technically feasible rate, without accounting barriers.

 

The California Solar Initiative which took effect on January 1, 2007 is changing things in a quantitative, but not in a qualitative way. The part of the law which applies to home owners is called "expected performance based buydown". Though the word "performance" appears in the title, the law has nothing to do with actual performance. It's still a rebate program where the rebate is paid upfront before the system goes into operation. There is only a new bureaucratic procedure used for estimating the rebate amount (which is also smaller than it used to be). The rebate is calculated in a complicated way based on expected performance. Given that systematic performance evaluations have just begun, the value of a foregone performance claim is rather questionable. Regarding the role which home owners are allowed to play, there is no change. The two major drawbacks from the old program are persistent in the new law:

1. a lack of financial stimulus for good practice and maintenance of solar systems and
   
2. an artificial cap on electricity production limiting annual system output to the level of household consumption.
   

That's because the generated electricity is not sold to the utility. The owners are not paid for system output and over time they might lose interest in looking after their systems. The utility, on the other hand, has a clever deal. The law defines the direction of cash flow between the utility and grid-connected homes as one-way. To the utility, everyone is a customer, whether with or without solar panels. But in California, it's pretty realistic for home owners to be net producers of electricity. The average California household consumption of 6,500 kWh per year could be met by a 5 kW system, which is not terribly big. You don't have to reduce your comforts to meet 100% of your needs by solar! If you were to improve the energy efficiency of your appliances before you invest in solar (which is generally a good idea), even a 3 kW system might be sufficient. The bottom line is, solar investors should not be punished for going beyond the 100% line. But the lawmakers still need to do their homework to create an appropriate place for home owners who are net producers of electricity.

 

Is there actually any good argument for California's solar incentive? Yes, there is: people are rewarded with the rebate money right at the time of purchase. That's very convenient. But eventually we have to ask ourselves: What do we really want with the incentive? Do we want convenience or the solar economy? When we want the solar economy, there is no way around real performance and a real learning curve until the solar economy will have grown mature and competitive. 

 

How did Germany succeed to make the feed-in tariff system attractive to small-scale investors? The logic is very simple: Renewable energy is treated as preferred energy and receives a higher price than conventional coal or nuclear energy. Compared to net metering, this means that the meter spins with different speed when it spins forward and when it spins backward. At the present tariff level, the meter spins backward about three times faster than it spins forward. Wouldn't you like the same situation for yourself? German households are actually equipped with two meters: one measures consumption, the other production. While consumption is treated the same way as before with the usual utility prices, the utility pays for the production at a premium rate. That's what brings money into people's pockets. There is no rebate, no rebate bureaucracy, and no need to finance an expensive rebate by tax money. After all, why should the government pay for the provision of clean energy? That's the function of business. The role of government is to create laws which ensure that renewable power producers are appropriately paid - by the right market players, and not by tapping into public funds. While California spends three billion dollars of its own tax money on a solar bill that's hardly anything more than mediocre, Germany placed the responsibility for the fair payment of renewable energy on the utilities.

The situation is not significantly better for large PV systems above 100 kWp which are governed by PBI under the California Solar Initiative. The advantage of PBI or "performance based incentive" is that the owners are paid per kWh produced solar electricity. In this way, PBI is a performance based market tool, but it's still not measuring up to a feed-in tariff system. Under PBI, the investor has no guarantee to sell the produced electricity, and when he cannot consume it himself, he must find a partner who will buy it from him. This is usually done through power purchase agreements, but the financial risk of the agreement is entirely up to the investor. The attraction of the feed-in system is that every investor has, by law, a power purchase agreement with the utility and does not have to waste any time finding appropriate partners for an agreement. The experience from PBI in the first months has also proven that there is no stability in the kWh price. The price level is designed to slowly go down as the market catches on, but in fact, the PBI price has dropped rapidly. The original design foresaw a depreciation by one level per year, yet, with only six months into PBI, the price has already dropped to level four. Which investor should keep up with such a level of uncertainty?

On top of these legal complications, business just speaks for itself. The feed-in tariffs have unleashed an unprecedented boom in business growth - in Germany, not in the sunshine state. California with its CSI program hasn't seen anything comparable. The goal that was formulated for 2017 - to reach 3 gigawatt of installed capacity - is already reality in Germany today. Germany has long realized what California only dreams about. Just imagine what would happen if a truly ambitious program and abundant sunshine will eventually come together! That's going to be a pretty explosive mixture that nobody will be able to hold off anymore. However, some strong green muscles will be needed to put a feed-in law on the table in California. Yes, some real muscles - an image alone doesn't buy anything.

Discussion

Recent news on zoning rules preventing the installation of solar panels on private homes have brought forward the issue of public visibility of solar panels. One very prominent figure who was running into this problem was former vice president Al Gore. His upscale Tennessee neighborhood first did not allow the installation at all, but on April 1, 2007 has revised it's rule, however with strict limitations prohibiting the solar panels to be seen from the street or from adjoining properties.

Solar systems can stir up a lot of emotions. While most people would be happy if they could afford a solar system and be proud of it, others seem to be ashamed. Yet, how long will it take before solar systems become widely accepted? And wouldn't it be great to see a solar system on a house that enjoys outstanding visibility, such as the White House? The present situation at the White House is that a 9 kW PV system is installed on the roof of a maintenance shed. But what would the American people think if a solar system would be installed directly on the roof of the White House itself? Many examples of building integrated PV design have shown that PV can actually add to the attractiveness of a building and does not need to harm the visual appearance. Would do you think? Should the White House set an example and place a solar system directly on its own roof?

Discussion

The whole point of having a standard or reference condition is that we can talk to each other. We want to have a measure of module output independent of a particular weather situation. That's kind of tricky because the output of a PV module is always influenced by factors intrinsic to the module and by factors describing the environment. But as long as everybody refers to the same universal reference condition, modules are comparable. Otherwise we would only talk about the weather.

Standard Test Conditions (STC) are the common standard used in the PV industry and the numbers listed on the backside of a PV module refer to STC. In brief, standard test conditions are ideal conditions where PV modules achieve optimal performance, but they are not very realistic. Qualitatively, these ideal conditions can be summarized as "sunny and cold". That's what PV modules like: they like it sunny and cold. The only problem is that this particular combination does not really exist: it's either "sunny and warm" or "dark and cold".


Some people were unsatisfied that such artificial test conditions are called "standard" and created alternative standards called Standard Operating Condition (SOC) and Nominal Operating Condition (NOC). The main difference lies in the way how the temperature is defined. Both alternative standards (SOC and NOC) define the ambient temperature to be 20°C. That's very different from defining the module temperature as it is done in STC. The idea with these alternative standards is that the environmental conditions are set at reasonable values and the module temperature is then what it naturally is for a given level of illumination, ambient temperature, and wind speed. That's much more realistic. The only difference between SOC and NOC is in the level of illumination. SOC has the same illumination as STC, namely 1000 W/m2, and NOC has a slightly reduced illumination of 800 W/m2. Below is a short summary of the different reference conditions:

reference	STC	SOC	NOC
irradiance (W/m2)	1000	1000	800
module temperature (°C)	25	-	-
ambient temperature (°C)	-	20	20

With so many options available, which reference should the industry choose? Should we stick with STC or should we start to use a new standard?