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Does Community Solar Have aFuture in New England?Cost Benefit Analysis of Community Solar in Three New England StatesStephanie Coffey and Sharon KleinUniversity of Maine School of Economics1
Why Community Solar? Expand access to solar Only ¼ of U.S. residential buildings suitable for solar (NREL) Capacity in the United States projected to increase by 1.8 GW through2020 (Green Tech Media)Source: https://ilsr.org2
Defining Community Solar Provides power or financial or other benefits to a group of people Common local geographic area (town level or smaller) Common set of interests Some costs and/or benefits shared by the groupCoughlin et. al, 2012Walker & Devine-Wright, 20083
Community Solar Database 5143 Community solar projects nationwideNumber of ProjectsProjects per 100,000 51015204
Common Project TypologiesSolar Farms or GardensMultiple people or businesses own or purchase electricity from a single solarPV arrayBenefits of economies of scaleThis 150 kW communitysolar garden in BrattleboroVT provides energy to sixlocal residences and rce: http://energy.gov5
Common Project TypologiesSolar projects at Community Serving Institutions:Solar at K-12 Schools (public and private)Solar on other Municipal Property (libraries, communitycenters, landfills)Solar at Non-Profit Organizations (places of worship,charities)An 8.4 kW solar array at UnitarianUniversalist Church West inBrookfield, WISolar at Colleges and UniversitiesSource: http://www.uucw.org/6
Common Project TypologiesSolarize or Bulk Purchase CampaignsIndividuals in a common geographic area purchaseindividual residential systems as a groupLimited time to participateTiered pricing structure: the more people sign up, thegreater the discount on installed costSource: http://energy.gov7
Median Project Capacity by TypeMedian Project Capacity (kW)120010008006004002000Solar FarmsMunicipalSolarizeUniversity Solar Schools Non-ProfitSolarSolarMassachusettsVermontMaine8
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Why is Discounting Important?Time Value of Money: money in the future is not worth as much as thesame amount of money in the present Inflation Opportunity cost r 5%Now or in 10 years?Simple payback period does not take into account the time value ofmoney, tends to overestimate the cost-competitiveness of solar10
Important Solar Incentives (All 3 States)30% Federal Tax Credit (FTC) – Tax deductionof 30% of system costReduces the upfront cost of solar11
Important Solar Incentives (All 3 States)Renewable Energy Credits (RECs) 1 MWh Can be sold between New Englandstates Price set by supply and demand 40/ MWh 50 kWSource: http://apps3.eere.energy.gov/12
Important Solar Incentives (Massachusetts)Solar Renewable Energy Credits (SRECs) Similar to RECs, but solar PV only Can only be generated within MA Price set by policy 285/ MWh in 2015 (decreases to 180 by 2025)State Tax Credit – Personal Tax Deduction of 15% ofpurchase price13
Important Solar Incentives (Vermont)Solar Adder Price guarantee for solar electricity .20/ kWh for systems up to 15 kW .19/ kWh for systems over 15 kW First 10 years of system operation14
State Level AssumptionsVariableCWATT 25 kW25 CWATT 500 kW500 CWATTPRETAILSolarize DiscountUnits /W /W /W /kWh%1.2.Maine 3.591 3.201 2.031 0.15772NADefault ValueMassachusetts 4.441 4.141 2.621 0.1767225%Vermont 4.44 1 3.891 2.471 0.177527%Lawrence Berkeley National LaboratoryEnergy Information Administration15
Results: NPV at 25 YearsDiscount rate 5%Net Present Value ( /W)No Incentives1.000.500.00-0.50-1.00-1.50Solar Farms husettsVermontMaineNon-Profit IndividualSolarResidential16
Key Takeaways (No Incentives) Only large scale ( 500 kw) solar PV projects are cost competitive withretail electricity Lower installed cost of PV in Maine means projects in the state farebetter than comparable ones in Massachusetts and Vermont17
IncentiveResults: NPV at 25 YearsNet Present Value ( /W)Current IncentivesMA VTFTC STC RECs SRECs ME Solar Adder5.004.003.002.001.000.00-1.00-2.00Solar FarmsSolarizeMunicipal Individual rSchoolsNon-ProfitSolarMaine18
Results: Discounted Payback PeriodPayback Period (years)Current Incentives4035302520151050SolarizeSolar Farms sachusettsVermontMaineUniversityNon-ProfitSolar19
Results: Simple Payback PeriodCurrent IncentivesPayback Period (years)2520151050SolarizeSolar Farms Municipal Individual Solar Schools eNon-ProfitSolar20
Key Takeaways (Current Incentives) Massachusetts most profitable for all typologies Projects at Community Serving Institutions, in Maine and Vermont arenot cost competitive In reality, projects at tax exempt organizations may be structured as PPAs Significant income from SREC sales means even projects at tax exemptorganizations in Massachusetts achieve positive NPVs21
Key Takeaways Solar Farms are the most profitable typology in all three states Combine economies of scale with utilization of FTC Solarize campaigns in MA nearly as profitable as Solar Farms Combine 30% FTC with 15% STC and discounted purchase price Individual Residential systems in ME and VT achieve positive NPVs,but only just ( .12/W and .13/W, respectively)22
Sensitivity AnalysisMassachusetts Solar FarmsImpact by InputDiscount Rate (A2)Base Purchase Price (A15)Elec. Escalation Rate (A5)Capacity Factor (F10)Inverter Cost (A13)System Degredation (A9)REC Price (F2) 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00Base Value 3.8166Value of Solar Farms23
Sensitivity AnalysisMaine Solar FarmsImpact by InputDiscount Rate (A2)Base Purchase Price (A15)Capacity Factor (H10)Elec. Escalation Rate (A5)Capacity for REC Income (A14)Inverter Cost (A13)System Degredation (A9)REC Price (F2) 3.50 3.00 2.50 2.00 1.50 1.00 0.50 -- 0.50- 1.00Base Value 0.7223Value of Solar Farms24
Changes to Maine Solar Policy Recent stakeholder meeting proposed changes to ME Net Meteringwhich have the potential to influence these results if enacted Replaces traditional net metering with alternative model – solar PVowners compensated a flat, agreed upon rate per kWh rather thanretail electric rate Eliminates the 10 customer cap on group net metered systems Sets a goal of 45 MW of installed community solar25
Conclusions Community solar dependent financial incentives to make it cost competitive Current incentives make MA most profitable state for all typologies Alternatives to tax credits (or alternative financial structures) are needed tomake non-profit typologies cost competitive Solar Farms or Gardens are the most profitable typology in all three states Individual Residential profitable in all three states26
Questions27
Extra Slides28
General AssumptionsSymbolCINVdUnits %Default Value9.5% of CSYS10.50%2NonePRECDescriptionCost of inverter replacementAnnual system degradationAnnual electricity priceescalationREC price in year t% /MWh1.6%3 40rTDiscount RateSystem lifetime%years5%25 years1. Swift and Kenton, 20122. SAM3. Energy Information Administration29
NPV at 30 Years: No IncentivesNo IncentivesNet Present Value ( /W)1.501.000.500.00-0.50Solar Farms tMaineNon-Profit 0
NPV at 40 Years: No IncentivesNo IncentivesNet Present Value ( /W)1.501.000.500.00-0.50Solar Farms husettsVermontMaineIndividual Non-ProfitResidentialSolar-1.0031
NPV at 30 Years: Current IncentivesCurrent IncentivesNet Present Vlaue ( /W)5.004.003.002.001.000.00-1.00-2.00Solar FarmsSolarizeMunicipal Individual rSchoolsNon-ProfitSolarMaine32
NPV at 40 Years: Current IncentivesCurrent IncentivesNet Present Vlaue ( /W)5.004.003.002.001.000.00-1.00-2.00Solar FarmsSolarizeMunicipal Individual rSchoolsNon-ProfitSolarMaine33
How Can We Evaluate the Cost-Competitiveness ofSolar?Net Present Value 𝐶𝑡𝑇𝑡 1 (1 𝑟)𝑡- 𝐶0𝐶𝑡 net cash flow in year t𝐶0 initial project costr discount rateT project lifetimet year tSource: http://solarpowerrocks.com34
Solar projects at Community Serving Institutions: Solar at K-12 Schools (public and private) Solar on other Municipal Property (libraries, community centers, landfills) Solar at Non-Profit Organizations (places of worship, charities) Solar at Colleges and Universities An 8.4 kW solar arra
