Archive for the ‘Solar Energy’ Category

PV System Derates Explained

During a recent 5MW project system model review with a finance entity that is relatively new to PV systems, a question came up about why the system DC nameplate (5,867kW) was higher than the system AC nameplate (5,000kW). My answer about derates was met with blank stares and shifting chair posture.

The PV industry and its financing partners rely on simulation modeling software, which provides a fairly accurate multiple year forecast of energy production and economics, including financial payback. These models are thorough, sophisticated software packages which take into account the many variables which affect a PV system’s performance including weather, environmental conditions, technology and product performance, government subsidies, and cost of money among others.  Providers include the NREL SAM Tool, PVSyst, and RETScreen among others.

Derates are a key variable addressed in these simulation programs. Derates are the various locations and instances in a PV system where power is lost from DC system nameplate to AC power. This includes inverter loss, resistive factors, environmental conditions and issues relating to maintenance.  A list of derates considered in a simulation model below shows that derates are both in front and after the inverter and occur throughout the system.

Solar energy PV derate

Derates look at a component and then attribute a known or estimated negative impact on that component.  For example, an inverter performance rating is given a value of 100% and then factors in a 2% loss for an estimated performance of 98% of actual. Derates can vary widely depending on array, location, environmental conditions, and product variances, to name a few.

A few explanations of the derates listed above:

  • PV Module mismatch – module mismatch is a result of slight manufacturing inconsistencies where modules of the same size are not identical. Current/voltage characteristics vary slightly from module to module.  This results in a module string (multiple models connected in series) which operates at the output level of the lowest performing module in the string.
  • DC Wiring – accounts for resistive loss between the modules and the inverter.
  • AC Wiring – accounts for the resistive loss between the inverter and meter.
  • Soiling – this is an issue that can be minimal or severe depending on location – dust, wildlife droppings, leaves etc.
  • Inverter/Transformer – losses due to power inversion from DC to AC.
  • Shading – due to structures or other nearby objects.
  • Availability – system availability takes into account system maintenance and utility outages, both of which result in down time. Industry standard is approximately 7 days per year.

The overall derate or Performance Ratio (actual AC power yield vs. target DC power yield), for most larger systems are usually in the 75% – 80% range.  Keep in mind that this modeling is based on Standard Test Conditions (STC), which is a laboratory standard of near perfect insolation (incoming solar radiation) and environmental conditions, which rarely occurs. While the model takes into account the derate factors and a detailed weather history for a given location, its important to note that annual fluctuations in weather conditions is an important variable which can be significantly different year to year. Overall, simulation models are quite accurate and are a fairly good gauge for finance companies to make an informed investment decision.

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2010 – Global PV Solar Energy Market Grew 130%, U.S. Market grows 67%

The U.S. PV industry continues to show strength throughout the deep recession with 2010 coming in with exceptionally strong numbers. A recent report from SEIA/GTM tilted, “Solar Market Insight: Year in Review 2010” shows that the U.S. PV solar energy market doubled in volume, growing 67% from $3.6 billion in 2009 to $6.0 billion in 2010.

As strong as the U.S. PV market growth was in 2010, the global markets grew at 130% with over 17 GW installed, mostly in EU countries. The report points out that U.S. market share on a global basis fell slightly to 5%, but since 2005 this market has consistently been 5% to 6.5% of the global total.


PV industry solar energy

Source: SEIA/Greentech Media

Compared to many countries where subsidies and location variables drive a certain segment more than others, activity in PV solar energy market segments in the U.S. is spread out evenly which leads to market growth stability. Utility, Residential and Commercial (non-residential) segments account for approximately 1/3 each broadly speaking. As we have seen in Germany, Italy and France, countries with large solar energy subsidy programs tend to have emphasis on particular market segments and have provisions which can overheat installation activity leading to boom and bust cycles and sometimes a complete market collapse.

PV industry Solar Energy

Source: SEIA/Greentech Media

Combined with steady federal and state subsidies, strong incoming solar radiation, large number of roofs and available land, rising cost of fossil fuel generation and strong electricity demand, most industry observers believe the U.S. solar energy market will double again in 2011.

When viewing the rising cost of coal and natural gas prices as a result of increasing economic activity combined with growing cooperation on Capitol Hill regarding energy policy and rapidly decreasing PV system cost, this author believes that 2011 and 2012 will see a U.S. PV market that may well triple in volume. More on this prediction in a future post.

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PV Industry Supply and Demand Update

This is clearly the topic of the day for many of my readers who follow publicly traded solar energy stocks.

Clearly the rush is on to install before subsidies decrease! /Source: Glasstec

The basic facts:

  • The recent government subsidy scheme reduction announcement in Germany and a likely reduction for the overheated Italian market by mid-summer, combined with reductions and subsidy caps in France and other smaller EU programs, have created a rush to initiate and complete projects in 2011—before the new solar subsidy schemes kick in later this year.  Consequently, the PV supply chain is currently in hyper-drive, and there has been a temporary increase in c-Si wafer and cell selling price.
  • Recent manufacturing capacity addition announcements from the top 20 c-Si and thin-film solar energy producers will add another 6GW – 10GW of production capacity in 2011.
  • With global demand seemingly dropping by as much as 50% due to the EU country’s government subsidy reductions, and rapid increases in manufacturing capacity, oversupply is a looming problem in Q4 2011 and into 2012.
  • Demand in 2011 may reach approximately 22 GW, and manufacturing capacity is climbing to approximately 32GW (all module providers). For any industry, this is not a good supply/demand picture.

As I wrote in a previous piece, this situation has many unknowns, is highly fluid and can change rapidly. The three main unknowns are 1) when and how fast does that new PV solar energy manufacturing capacity come on line, 2) how quickly will the overcapacity drive down prices to the point that solar grid parity is achieved in many markets (creating a true market demand signal) and 3) whether countries such as the US, China and India can increase demand sufficiently to reduce the severity of the oversupply.

Solar grid parity looming /Source: Deutsche Bank

There is also much talk about developing nations in Africa and Asia increasing demand. But my recent experience consulting to a few companies targeting these regions doesn’t instill confidence. Aside from the ever-present finance barrier (especially in under-performing economies), the utility grid in most of these locations is incredibly weak or non-existent.  It’s well understood that transmission grids are the PV industry growth limitation in the US but developing nations have an even direr situation with energy infrastructure.

While it is likely that 2012 will see significant industry realignment in price, demand and competitors at the module manufacturing level, this is an industry that has defied doom and gloom predictions many times over the last 10 years. A change in any one of the many PV market variables can have significant positive impact on the supply/demand picture.

For instance, one nation with a significant new subsidy program can change the global supply situation in one quarter or a spike in fossil fuel energy cost can lead to a massive uptake of solar energy in a given locale.

Stay tuned, it should be an interesting 18 months.

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It’s Official – They Dominate the PV Industry

As I wrote previously here, here and here, Asian, and particularly Chinese, companies have rapidly dominated the PV solar energy industry in a mere 8 years.

A new report from IMS market intelligence group shows just how large that dominance has become.  Chinese crystalline

solar panel, solar energy

Going, going . . . .

module companies dominate the global market with 55% market share. Chinese wafer and cell manufactures also dominate their segment with over 80% market share.

China manufacturing dominance is not about cheap labor. Crystalline PV module and components production is a highly automated process. It’s a story of strong government support with a long-term focus, low cost capital, low cost real estate, and other government supports. With assistance of European and U.S automated production machine companies, Asian based PV product is high quality. We can file all the WTO actions we want, and there may be validity to the WTO violations claims, but the real issue is that the U.S. has not supported clean energy in any meaningful, sustained manner.  And by the time a WTO action has been arbitrated, their competitive advantage will be even greater.

The current budget debate on Capitol Hill doesn’t inspire confidence that this situation will change for the better.  While President Obama has vision of clean energy growth, the “slash and burn the budget with no regard to loss of jobs” extremists in the House of Representatives will make it difficult to change this devolving clean energy job situation. At a time when jobs are the number one political and economic issue, we have and continue to let the greatest new economic opportunity of our lifetime go overseas.

This is not idle speculation. The U.S. is on track to lose 2 million clean energy related jobs by the end of 2011. A successful demonstration of how to employ people in clean energy can be seen in California, where over 200,000 jobs have been created in the last 10 years as a result of strong state government support of implementation of clean energy projects.

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DOE’s Solar Energy Sunshot Program – Right Focus?

DOE Solar Energy Program SunshotOn February 4th, U.S. Department of Energy’s (DOE) Dr. Steven Chu announced the Sunshot Program funding which has the goal of reaching $1/W installed cost for PV systems before 2020. The program goal is to reduce PV system installed costs by up to 75%. $1/W is a benchmark for some industry participants where utility scale systems compete with wholesale cost energy and loosely equates to $0.5kWh system output cost. Nine technology development companies received a portion of $27M Sunshot funding.

While any government funding support is good for the PV industry, $27M (part of a total solar program fund of $200M which supports President Obama’s broader “investment for the future” strategy) is a miniscule amount (compared to the billions in government support for renewable energy in China) and begs a number of questions.

First, why spend a relatively small amount, publicizing it widely, when the PV industry has made enormous progress in reducing installed system costs on our own over the last 5 years? The announcement does nothing but reinforce the erroneous mindset on Capitol Hill and elsewhere that solar is 10X more expensive than brown fuel energy and is a far cry from being competitive. It directly contradicts the impressive progress and the fact that solar energy is at retail grid parity in many markets, as the cost of fossil fuel generated energy is going ever higher.

Second, the nine Sunshot recipient companies are all technology developers. At some point, we need to recognize that solar energy technology is working now, and is improving every year, so it might be better to focus future funding on solving the real cost issues of streamlining permitting and interconnection in the project development cycle (among other downstream issues). These costs are as much as 25% of the total PV project development cost for small and large projects alike.

Third, DOE’s leadership must begin to see the big picture and the need for pushing a long-term energy policy that includes phasing out the enormous subsidies for fossil fuel.  It continues to frustrate me that the PV industry, with small and inconsistent government support, is continually asked to compete with embedded, highly subsidized fossil fuel generation which receives 12X more government support than renewables.

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California’s RAM – Better than a Fixed Price FIT for Solar?

Which Scheme Will Build These Faster?

California has been the largest PV market in the U.S., and the 4th largest in the world, until recently.  But as the state’s solar energy incentive programs have been following a planned reduction schedule, and large centralized systems to meet the state’s Renewable Portfolio Standard (33% by 2020) are not being built (due to transmission access, permitting challenges, etc.), growth in 2009 was less than 10%.  For 2010, growth will likely come in at 11%.  This is in a solar energy market that has been growing at a rate of over 20% for many years.

The new Renewable Auction Mechanism (RAM), which has been in development by the California Public Utilities Corporation for the past 2 years, focuses on the ever-popular idea of projects in the 5MW to 20MW size to stimulate activity and increase growth. Commonly referred to as distributed generation (DG), PV solar energy projects of this size are located closer to distribution lines, have fewer permitting challenges, and find financing to be less daunting.

RAM is a 2 year program that has a 1GW cap which is designed to speed up putting DG projects into operation while reduce costs on the front end process. The program functions like an auction where California’s 3 large investor-owned utilities (SCE, PG&E, SDG&E) are directed to put out request for proposals twice a year.

Differing from a fixed price feed in tarrif (FIT) where the price is set, the RAM is market-driven based on lowest

RAM - Putting People to Work

price.  RAM is well designed to avoid many of the problems of a lowest price auction as bid responders are required put a non-refundable $60/kW application fee, show that they have real estate site control, and indicate that a grid interconnection application has been entered with the utility. Key to solving a major problem in the past, RAM stipulates a standard contract format for utilities and developers, which will go a long way to reducing transaction costs and process complexity. A project developer submitting a bid must also show prior expertise with solar projects, and the awarded project must be in operation within 18 months of the award.

RAM is designed to reduce the problem of many solar energy projects being announced, but few actually being built. Not surprisingly, the large solar Independent Power Producers are cheering this program as it sets the qualification bar high and reduces competition.  Proponents of a pure FIT scheme believe it will not result in a rapid adoption of PV and see competitive issues as well. Given the size, many observers in the state don’t see this program contributing significantly to meet the RPS goals in 2020.

Designing renewable energy subsidy programs is still a relatively new art and the regulatory, economic and technological complexity is challenging.  Setting a lowest cost bid program without controls is fraught with potential problems. These include receiving bids so low that the system will never be built and the quality of an operational system is so poor that value is never delivered. A recent example is India’s Nehru Solar Mission program with a lowest price mechanism which accepts bids from any and all responders. This has lead to irrationally low bids from cobbled together groups with little or no experience in solar projects. It also led to experienced developers not submitting on the program as the accepted bids are below acceptable profit margin thresholds. The RAM seems to strike a balance on this issue but at the cost of competition. Hopefully this aspect can be addressed in further iterations of what is otherwise a strong new program.

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The “Clean Energy Standard” – Whatever it Takes

"Clean Coal" Included in a CES?

In his recent State of the Union address, President Obama outlined an energy plan that included a clean energy standard (CES).  His target – 80% of the nation’s electricity coming from clean energy sources by 2035.

The CES he envisioned includes the renewable generation types you would expect including solar, wind, hydro, geothermal, biomass and marine generation. But the CES also includes “clean coal” and nuclear.  This odd mixture of generation type under the banner of clean energy was developed and promoted by Sen. Lindsey Graham (R-S.C.) in 2010, after it became clear that a highly partisan congress was not going pass climate change legislation with a CO2 cap and clean energy support.

The new CES includes coal and nuclear so that the states that have coal (16) and nuclear interests will vote for new legislation that includes actual clean energy like solar and wind.  Compromise is how it gets done on

Capitol Compromise

Capitol Hill and this type of CES is truly legislative sausage making.

Transitioning to generation types of any flavor in this CES will initially result in temporary rate increases from the electric utilities to their customers.  Based on the cost numbers presented by the coal industry, rate increases from “clean coal” will be exorbitant if that technology ever achieves reality. And coal generation needs ongoing fuel extraction meaning more mountain top removal, supply chain pollution and other environmental and health externalities.

Pouring money into “clean coal” would seem dubious as a long-term strategy compared to mature solar energy which has no ongoing fuel costs, rapid energy return on energy investment metrics, rapidly declining kWh cost and minuscule supply chain pollution. Nuclear energy’s exceptionally high kWh costs (even with exorbitant government subsidies), waste disposal and decommissioning costs as well as catastrophic risk potential is also difficult to view as a step in the right direction.

But energy demand is forecast to grow at 2% – 6% annually for the next 20 years and the cost of traditional

Will the U.S. Plan for this Demand Trend?

fossil fuel generation is escalating at well over 4% per year in various regions as the global economy recovers. The U.S. needs a long term, well thought out clean energy transition plan that addresses current demand with existing brown fuel generation while preparing for future growth and cost escalation.  A legislation that utilizes coal, nuclear and natural gas as a near term bridge while we transition to a true, low cost clean energy economy would be one way to achieve this goal.

A great piece yesterday by chairman of the Senate Energy and Natural Resources Committee, Senator Bingaman (D-NM), offers hope that Capitol Hill finally understands the need for comprehensive, long-term clean energy legislation.  Driven by two of my favorite subjects, economic competition and energy security, the senator’s plan is a step in the right direction.

In the end, this type of CES legislation that includes a “clean coal” bridge may be what it takes to start a rapid transition to renewable energy.

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Green vs. Green – Can’t We All Get Along?

How Could This Be Objectionable?

On the heels of recent large solar project development approvals on Bureau of Land Management (BLM) land and other large land tracts, strong opposition has sprung up from local communities based on environmental concerns.  The renewable energy industry has experienced this green vs. green before—remember the high profile example of opposition to the offshore Cape Wind project by the otherwise pro-environment Kennedy clan on Cape Cod?  It seems that the scale of opposition to solar energy projects on these seemingly benign desert lands has been surprising to the solar industry.

An excellent piece distributed by Reuters gives the reader a good overview of the forces that opposing each other that should otherwise be on the same side of the table.  Local communities are concerned that desert vegetation and small animals will be disturbed, among other concerns. CSP and other solar thermal technologies create water use issues. Other issues include the distortion of the “viewshed” – large transmission towers blocking views and disrupting the natural landscape. Most solar project developers went in with good environmental intentions built into their project plans, including large property set-asides for nature preserves, land access for grazing right under the arrays, and other nods to minimal impact.

Sometimes the opposition has a strong case for protecting endangered species and vegetation but many times they are simply playing up fears.  A recent op-ed piece in San Diego makes the statement that when the desert floor is disturbed it releases more C02 than the solar array can ever save. A quick bit of research shows the audacity and absurdity of that argument.

solar energy, solar panels, photovoltaics

This Type of Energy Generation Land Use?

Unfortunately, these objections increase costs to solar project developers due to legal fees, time delays, and additional impact studies to name a few. At some point the project becomes uneconomical and the solar project development team either folds, or sells it to another developer.  This is the outcome the environmental opposition is looking to achieve.  At the end of the day, our society is going to have to learn to balance the consequences of different types of energy production.  I would make the argument that solar on desert lands, if done properly,

solar energy vs coal burning

Or This?

has a minimal environmental footprint compared to blowing off the tops of mountains in West Virginia to mine coal or fracking large swaths of subterranean deposits for natural gas which permanently fouls the ground water.

Among many people in the solar PV industry, there has been a persistent debate about whether PV should be deployed widely on roofs, over parking lots, or on brownfields in urban and suburban regions rather than in large utility scale deployments far away from the grid and the energy consumer.  This type of distributed solar generation is unique to modular PV and enables placement of generation close to the point of use with minimal transmission loss.  But while both utility scale and distributed PV deployment types have significant and high-value applications, both have tradeoffs in cost and economics. More on these tradeoffs in a subsequent post.

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Happy New Solar Year

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Beware of the military clean energy industrial complex . . .

In President Eisenhower’s landmark speech, he warned about the unchecked power of the military-industrial complex.

Nellis Air Force Base 14MW PV Installation

But the U.S. military along with the clean energy industry is providing the type of leadership that is sorely lacking from our civilian national leaders – a complete and urgent

recognition that a long term clean energy plan is the only path to pursue to achieve security, lower cost and less vulnerability to climate change.

While the fossil fuel industry has large monetary profit motives, the military has a more pressing motive: kill or be killed. Less dependance on foreign oil, less harmful emissions and less energy supply vulnerability are the drivers for their motive.

A good summary from a speech by DoD given to the Senate Homeland Security and Governmental Affairs Committee provides a quick read on their clean energy efforts.

A great piece out Sunday by Tom Friedman titled, “The S.S. Prius” talks about the Navy’s efforts in bio-fuels. A short piece on solar and micro grid initiatives by the U.S. Army can be found here. A review of U.S. federal government and military agency mandates found here.

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Continuing the Job Benefits of the Stimulus Bill

The U.S. PV industry was breathing again after a likely last minute extension of the highly successful Solar ITC as grant legislation (contained in the original ARRA bill) via inclusion in the tax extenders bill currently being debated on Capitol Hill. Known as the Solar Treasury Grant Program (STGP), it was due to expire at the end of December 2010. While the tax extenders bill still needs to be passed by Congress, the outcome looks positive.

Some history: the solar investment tax credit allowed entities with tax burdens to finance solar installations and receive a 30% tax deduction. This program was successful with banks and other entities with tax appetites until the recession and banking crisis set in during late 2008. With no tax burdens, all financing of solar projects came to a grinding halt. The ARRA bill’s STGP allowed solar project developers and their finance partners to receive the 30% as a cash grant – an enormous benefit – especially for loosening up hard to find construction financing from local bank providers.

The benefits to solar industry and the nation are substantial as noted by Rhone Resch, Executive Director of SEIA:

Solar Treasury Grant Program

STGP - Employment with Minimal Investment

“The 1603 tax credit has created flexibility for funding renewable energy projects and is fundamental for keeping the solar industry growing in America. To date, the program has facilitated the construction of more than 1,100 solar projects in 42 states. At a minimal cost to the tax payer, the 1603 program has supported $18 billion in investment in new renewable energy projects throughout the country and has created tens of thousands of jobs. Plain and simple, this program provides the greatest return on taxpayer dollars. The program has allowed the solar industry to grow by over 100 percent in 2010, create enough new solar capacity to power 200,000 homes and double domestic solar employment to more than 93,000 Americans. This program has created new opportunity for electricians, plumbers, and construction workers during the worst economic climate since the great depression.”

Of course, anytime we have talk of government subsidies for renewable energy, the free-market fundamentalists weigh in with their standard “clean energy should be able to compete on its economic merits without subsidies”.  When governments end exorbitant fossil fuel subsidies, I am all for ending clean energy subsidies.

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China Announces Enlargement of Domestic Solar Program

China Makes Solar News at Climate Talks

Right after I posted the preceding blog about the difficulties in forecasting the global PV industry, China announced a large solar deployment plan at the COP 16 climate talks in Cancun, Mexico. While not on the scale of Germany over the last five years, this latest announcement from China will clearly have a positive impact on the supply demand situation if in fact Beijing follows though and is not just hand waving.

The December 3rd announcement outlines China’s plan to install a minimum of 1,000 megawatts (MW) of solar energy capacity per year starting in 2013.  For comparison, one average coal burning plant has about 500MW capacity.

The announcement went on to describe 13 industry zones and that Beijing will pay up to half the price of equipment for solar PV projects. In addition, a subsidy of 4 to 6 yuan (60 to 90 U.S. cents) per watt of generating capacity will be rewarded to project owners.

As I noted in my 10/15/10 blog piece, this will almost certainly increase WTO violation allegations from the U.S. government and others.  But it will be a very long time before a WTO court can rule on these assertions.  Meanwhile, our U.S. government continues to dither on long-term PV manufacturing and project support while we concede further clean tech competitiveness and leadership.

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