Bringing local power to the people

Chris Greacen, Islands Energy Coalition

The islands are making impressive gains in food that is locally produced. Working together, we can do the same with electricity, building clean renewable energy generation that is distributed across islanders’ homes, business, and farmlands on the islands. By doing so, we take local, practical steps to increase our energy independence, alleviate global climate change, and lessen the need for nuclear power as well as demands on our region’s limited hydropower resources.

Since 1998, OPALCO members have opted in to the Green Power program, paying a little bit more each month on their power bills to support renewable energy development that mostly came from off-island – mostly windpower from the Columbia Gorge. OPALCO’s supplier, the Bonneville Power Administration no longer offers this off-island renewable energy. OPALCO is proud to unveil a new generation of green power: Member Owned Renewable Energy, or MORE. The MORE Program collects member donations for green power, as before, but now 100% of all donations will go toward supporting local members who are generating renewable energy and are interconnected to OPALCO’s system.

Here’s how it works: if you’ve got a sunny roof, a windy field or a mountain stream, you can invest in solar, wind, or a micro-hydropower generator on your property. At the end of each year you will receive a check from OPALCO reflecting a premium payment for every kilowatt hour of electricity you produced that year.

All of the funds for this program come from OPALCO customers who opt to make a voluntary monetary contribution on their monthly power bill to support local energy production by MORE generators. If you chose to participate, your MORE contributions help those who invest in local renewable energy to leverage state and federal incentives that make investing in renewable energy cost-effective. The program is set up so that your MORE contributions are guaranteed to have an impact: the MORE program distributes funds when electricity is actually generated, incentivizing efficient, effective renewable energy installations.

OPALCO board member Winnie Adams said of the MORE program, “We have the culmination of a great policy from a really thoughtful committee that did a very sound community process, and is a bold continuation of OPALCO’s long-running support of local renewable energy generators. “

How can I join? If you’re already part of OPALCO’s Green Power program, you don’t need to do anything. You will be rolled into the program automatically, unless you opt out by July 31^st. If you’re not part of Green Power program and would like to be, please contact OPALCO to sign up. MORE “Superheroes” can opt into full participation by signing up for a four-cent premium per kilowatt hour for all energy

consumed on their monthly bills. Or you may sign up for 1, 2, 4, 8 or 10 participation blocks per month ($4/block). The more people that sign up, the more local generation we can support. 100% of MORE local power contributions collected by OPALCO are passed to the MORE program.

“My wife and I have been 100% Green Power subscribers for the past 5 years -- and I've been happy to pay the additional amount since I'd like to see this program be stronger,” said Bruce Crebs, a Lopez island woodworker, “but I really think really everyone should pay more for green power because clean energy benefits everybody. The cheapest power for today is not the cheapest power 10-20 years from now. The utilities are looking out for the long-term interest of the public, and with that in mind I think they – and all of us -- should be strong supporters of clean energy.”

For those interested in generating renewable electricity on the San Juans, this is perhaps the best time in history to do so. OPALCO makes it easy to interconnect and ‘spin your meter backwards’ by using renewable energy produced at your home or business to offset electricity consumption. In addition, the MORE program and a separate Washington State solar Production incentive provide payments for every unit of electricity you generate until at least 2020. An investment tax credit can lower your federal income tax by 30% of the cost of a solar electric system. And purchases of renewable energy equipment in Washington enjoy sales taxes exemption. All told, a solar installation in a sunny location can earn a return better than a money market fund – not counting the effect of higher home resale value with solar.

According to Adams, “'Since this is a new program, the MORE committee will welcome any OPALCO members who would like spread the word to introduce this program to other members of the coop.” These members will form “green teams” on each of the islands to help spread the word. If you are interested, please get in touch with the author (Chris -- 468-3189).

Whether you choose to be a MORE local power supporter or a producer or both, we all can help move our energy system towards self-sufficiency. Let’s bring local power to the people!

Below: Timelapse video of 33.8 kW solar PV installation at Common Ground, Lopez Island. Video by Eric Youngren

Incentive Discussion presentation

Hello mi a-MOREs,

Thanks for the fruitful discussion at the meeting in Friday Harbor yesterday.

Click here for the presentation.

Or if that doesn't work, paste the following in your browser:
https://docs.google.com/fileview?id=0B094IEvU4XNPNDMyODczYWQtZTJmMy00NWZjLTk4YzMtNzJmYWFhNjM3Yjhl&hl=en

Re: What feed-in is 'equivalent' to the old Opalco incentive?

(Response from Chris G.)

Hi John,

Thanks for your thoughts.

Foremost, I intended this as a tool -- so that people can play around
with the implications of different assumptions.

Here's some responses -- that have a lot to do with the particular
assumptions I chose. But I certainly welcome other ideas!

I should preface these comments with my thoughts on the big picture. I see conservation the lowest hanging fruit, as the most important resource for OPALCO to seek out and develop, and as the most important thing that the MORE committee should help with. But the MORE committee received the word that it was important to resolve the renewable energy program question quickly.

With CO2 at highest levels in 650,000 years and no more prospects of big dams in the Pacific Northwest, I think it's incumbent on us as humans, as OPALCO customers, and as MORE committee members step up to the plate and make both conservation (especially!) and local renewable energy attractive enough to foster significant deployments. We've got long path ahead to turn the tide.

1. I disagree with the concept of a floor in the incentive formula that will be guaranteed by co-op members for several reasons: disincentive for contributions / unfair to tax members for individuals solar/wind installations / long term financial burden on OPALCO and its members.

I can see that perspective. Another argument against a floor is that
guaranteeing payment for solar PV is not be the most cost-effective --
conservation measures would generally cost a lot lower than the floor
assumption I was using.

A counter argument is that this is what OPALCO members want. In the 2009
"Orcas Power & Light Cooperative Residential Member Satisfaction Survey
Results" conducted by NRECA (emailed to us all on 8/5/2010), in the "How
OPALCO should purchase power" section on page 46, more people (37%)
chose "pay higher rates for renewable energy" than said (35%) "purchase
least expensive power available". Note, this wasn't framed as a
question about how members should purchase power from OPALCO, it was how
OPALCO should purchase power. OPALCO, as cooperative with, by
definition, all rate payers chipping in. Comments in the MORE meetings
indicate that even more customers are interested in renewable energy if
it is local.

Voluntary payments creates a free-rider problem -- we all benefit from
clean air, salmon, etc. So if only those willing to voluntarily pay for
these things pay for the cost, economic theory says there's going to be
underinvestment in clean options that provide these benefits.

In the last MORE meeting, there was a motion to put in place a program
with a cap and a floor... Those present felt that a floor and a cap is a
way that OPALCO could help share risk that voluntary contributions to
the program would be small. It would incentivize OPALCO to market the
program as effectively as possible.

2. I do agree with the cap to keep reserve funds to smooth incentive payments over the years.
3. I believe a "buy all, sell all" approach is appropriate rather than a net metering arrangement as your spreadsheet implies ( retail offset contribution) . Reasons ... OPALCO's customer charge covers only 1/3 of the cost of service to members, the rest being embedded in the energy charge. If the producer 'offsets the retail energy charge with self generated energy then the rest of the membership is paying for his/her cost of service. Buy-all sell-all , gives the producer the benefit of the incentive for all kWh produced and an additional wholesale rate for the energy put into the grid.

* By your argument, people who implement conservation measures and
therefore consume less kWh are also being subsidized by rest of the
membership. This may be true (since a home that conserves pays the same
$25.50 a month base charge as a profligate home, and as you point out
the base charge only covers 1/3 the cost of service) but I don't think
you would want to charge more per kWh for homes that conserve.

* You can model the results in the spreadsheet by changing from retail
to an avoided cost rate. This will, all things being equal, lower the
payback period for any given system.

* Net metering makes intuitive sense to people. Folks with renewable
energy systems in their homes feel that they should be able to use the
kWh they're producing, at parity. Net metering is consistent with that.

* Net Metering is widely used -- 43 states have net metering programs, and most are mandated by state laws.

* It's the law. The Washington State Net Metering Law requires all
utilities, including cooperatives, to offer net metering for
renewables. See:
http://www.energy.wsu.edu/documents/renewables/netmeteringlaw.pdf

* I'd like to see Net Metering go further -- in which OPALCO does net metering and has to purchase net power generated over the course of a year. Our home will produce more electricity this year than we consume. Under existing arrangements, we will give our net excess production to OPALCO with no compensation. This doesn't seem very fair, and certainly doesn't incentivize conservation in homes that have renewable energy systems.

4.I think the installed cost for a solar system is low ... my research indicates about $9-10 per watt. Also the production figure seems high ... 1200 kwh annually per kw installed implies the optimum conditions (no shading, correct angle to the sun at all times, clean panels, etc.)

The $7 was somewhat of a guess, but one that Eric Youngren felt was reasonable. The PV system at my home -- Common Ground (11 systems,
each 3.07 kW) cost $5.85 per watt, installed in 2009. But being big it had some economies of scale, and we got a good deal, and used quite a bit of volunteer labor. I do know that PV panel prices are quite a bit lower than what they were two years ago. For example, you can buy new panels now at $1.55/watt or even $1/watt: see: http://www.ecobusinesslinks.com/solar_panels.htm

Production -- based on my personal experience, I think 1200 kWh is reasonable for systems here. Our 3.07 kW system produced 3709 kWh of AC power in calendar year from 1 July 2009 to 30 June 2010. This is 1208 kWh per kW. My neighbors' made 1264 kWh per kWh. Actually, they all produced a bit more than that according to the inverter's datalogger, but I'm quoting the figure from the OPALCO electro-mechanical meter which reads a bit low. But -- we do have a good site, and the solar panels were clean when they were installed. They are fixed mount
with no seasonal angle adjustment.

Cheers,
Chris

Re: What feed-in is 'equivalent' to the old Opalco incentive?

From John Bogert

Chris,

Thanks for your analysis of tariffs and paybacks, excellent work!.  I have a
couple of comments as an individual member of the co-op, not as a Board member.

1.  I disagree with the concept of a floor in the incentive formula that will be
guaranteed by co-op members for several reasons: disincentive for contributions
/ unfair to tax members for individuals solar/wind installations / long term
financial burden on OPALCO and its members.

2. I do agree with the cap to keep reserve funds to smooth incentive payments
over the years.

3. I believe a "buy all, sell all" approach is appropriate rather than a net
metering arrangement as your spreadsheet implies ( retail offset contribution)
.  Reasons ... OPALCO's customer charge covers only 1/3 of the cost of service
to members, the rest being embedded in the energy charge.  If the producer
'offsets the retail energy charge with self  generated energy then the rest of
the membership is paying for his/her cost of service.  Buy-all sell-all , gives
the producer the benefit of the incentive for all kWh produced and an additional
wholesale rate for the energy put into the grid.

4.I think the installed cost for a solar system is low ... my research indicates
about $9-10 per watt.  Also the production figure seems high ... 1200 kwh
annually per kw installed  implies the optimum conditions (no shading, correct
angle to the sun at all times, clean panels, etc.)


Again, thanks for the analysis.  I'd be interested to hear your reasons for
including a 'floor' in the incentive and also the reasons for net-metering vs
buy-all sell-all

Cheers,

John




   po box 461
shaw island, wa
      98286
360-468-4642
  

What feed-in is 'equivalent' to the old Opalco incentive? Discounted cashflow tool

www.palangthai.org/docs/MORE opalco PV feedin cashflow5Aug10.xls

Above is a link to a discounted cash-flow spreadsheet tool I've put together to help
determine:

1. what the OPALCO production incentive cap should be ($/kWh)
2. what the floor should be ($/kWh)
3. what the duration of the incentive (years) should be

The spreadsheet includes consideration of federal tax credit, interest
rate on loan, inflation of OPALCO's retail rates, and time value of
money (discount rate). The graphs shows cumulative cashflow each year
after installation. One graph is in nominal dollars. The other is
discounted (reflecting the time value of money -- cash in your pocket
today is worth more than a cashflow in the future). An economist would
consider the discounted graph more reflective of reality...

While the spreadsheet calculates simple payback period and the IRR (10
year, 15 year, 20 year), I think it's most instructive to watch the cash
flow and look at the year in which it becomes positive. That is, the
year in which the system has 'paid for itself'. I think it's reasonable
to aim for financial break-even by year 2020. With the assumptions i
used (capital cost $7.00/watt installed cost, loan interest rate 5%,
discount rate of 4%) this implies an OPALCO production incentive of
about $0.40/kWh.

If the OPALCO incentive is lowered to lower than about $0.25/kWh then
the system only pays (using discounted cashflow) for itself in 2028.

I would suggest these two make for useful cap/floor:
Cap = $0.40/kWh
Floor = $0.25/kWh
Duration: 10 years from installation

Of course, all this changes as you adjust assumptions. In the
spreadsheet, assumptions are highlighted with color. Yellow color are
more general assumptions. Red highlit cells are specific to the
production incentive amount and duration.

It's worth remembering that this spreadsheet represents somewhat of an
optimistic case in which the PV is installed in year 2011. Installs
after this have fewer years of the $0.15/kWh WA Dept of Revenue
production incentive to recapture the initial investment.

I invite you to plug in your own assumptions and play with it.

Note - this assumes household PV system with non-Washington state
inverter/panels. Wind systems, biomass, hydro, community systems, and
systems with in-state components will be different.

Cheers,
Chris

revised suggestion for MORE structure

Here's a revised version of the possible structure of MORE. I've expanded implementers to include businesses, and added some rectangles that show allocation of basic responsibilities of 'design' 'approval', and 'implementation'.

Conservation as production, or renewables as conservation?

In my opinion we should NOT develop a program that compartmentalizes and separates conservation and efficiency upgrades from renewable generation systems. To me these are part of the same range of options available to homeowners and should be seen as complementary and related investments that should be considered together. i.e.: renewables should only be considered after all the good efficiency upgrades have been completed or at least carefully considered.

In this light I see that there are two ways to frame the discussion, conservation and efficiency as increased production of 'negaWatts' or renewable generation as a form of conservation. Its semantics, really, but framing the issue is half the battle it seems so its worth discussing now.

In the first case we would look at reduced consumption from efficiency upgrades as new sources of 'production', and reward those 'producers' for their actual (metered) or estimated savings based on kWh NOT consumed. This approach might work well for a 'green power producers co-op' structure that would allow aggregating many members' "production" and developing an incentive to reward based on performance. I like this way of framing the issue because people like to be 'producers', thats one of the exciting things for folks installing grid-tied PV systems. This might be more confusing for some folks to understand however, because its not really intuitive to think of kWh's saved as 'production' of something tangible. Still, in my mind efficiency upgrades that reduce consumption are a form of 'local green power'.

The other way to look at it would be to see renewables as investments in 'conservation appliances' - something that you buy and install to reduce the amount of electricity you consume from the grid. This approach might fit in better to the established paradigms of OPALCO and BPA.

Any thoughts or opinions from the group?