0.7 kw off-grid 7 kw Grid-Connected Solar PV from Dreamer s Paradise to Everyday Electricity www.ucalgary.ca/ees 2009 March 16 Gordon Howell, P.Eng. 6,000 kw 11,000 kw Edmonton 2006-2009
Intro: My Goals To update you to what is happening to the costs of solar photovoltaic (PV) electricity generating systems; and how this is affecting the economics of this technology 4 kw PV systems Premier Gardens, California 2
Intro: Me We are PV system project developers We design, supply and commission PV systems We participate in provincial, national and international standards writing committees We have no vested interests in any one technology 36 PV modules 2.3 kw 1995 Edmonton 3
Focus of Presentation Context What is solar electricity? Alberta s solar energy resource Quick overview of the technology Market growth PV system cost and energy production The price of solar PV electrical energy What factors affect the price Government policies needed 4
Grid-Connect Solar Electricity What is it? Solar electricity: electricity produced directly from the energy in sunlight For what applications can it be used? Any use and application Off-grid water pumping, electric fencing, signalling, remote electricity, houses Grid-connected On house and buildings Connected to electrical distribution systems Central generating stations Grid-connected solar electricity: When the solar-electric generating system feeds the electric grid directly, or feeds a building at the same time as the grid feeds it 5
Context: Merchant Power Generators Connection: Energy sales: Distribution or transmission grid AESO s wholesale electricity market Export kwh AC Any electricity generator Only sells to the grid. Services it can sell: electrical energy, generating capacity, spinning reserve, voltage support, power quality (power factor, etc) 6
Context: Load-Offset Electricity Generators Connection: Electric Wires Company s distribution grid Energy sales: Energy Retailer (or electricity market if you are big enough) Import Used to enhance site electrical security (only if a battery bank or fuel-based generator is included). Export kwh kwh Any electricity generator AC This type of generator can be considered as a backup to the grid. Sell to the grid when there is excess. Buy from the grid when there is a deficit. Building electrical circuits 7
Alberta: The Solar Province Our Most Abundant Energy Resource 14 hours of sunshine = all our fossil energy resources in 2001! Alberta's solar radiation is over 300 times more than our annual fossil fuel energy production. 8
Solar Electricity The technology is called "photovoltaics" photovoltaics", but we only call it "PV". Solar PV Cell Solar PV Module PV can generate any amount of electricity. Large PV systems = more PV modules. Solar PV Array 5,000 modules 1000 kw 55,000 modules (200 W ea.) 11,000 kw PV array PV Terms 30,000 modules, 6000 kw 9
Context: PV Modules Module manufacturers and countries: Evergreen (America) Schott (America) Uni-Solar (America) SunPower (America) BP Solar (Britain) Day4Energy (Canada) Suntech (China) Photowatt (France) Kyocera (Japan) Sharp (Japan) Sanyo (Japan) Sharp (Japan) Shell (Netherlands) Isofoton (Spain) and many more Single crystal Technologies: single-crystal multi-crystalline thin-film, amorphous Multicrystalline 10
Context: DC to AC Inverters Each: 1 kw to 7 kw, 1 phase Each: 100 kw to 250 kw, 3 phase 11
Electric Wires Company s electrical distribution grid Import meter Export meter kwh kwh 1 2 Solar electric array DC How can you generate solar electricity into a house and also back into the grid? All electrical circuits in a house or building 3 4 Inverter AC Sells to the grid when there is a site surplus. Buys from the grid when there is a site shortage. 1995-2009 12
Energy Retailer, Electric Wires Company Electricity paid in full 13.7 /kwh Import How does net billing work? 1 kwh 1 kwh 1 kwh 1 2 kwh Electricity is delivered to your neighbours by your Electric Wires Company for their normal delivery fee. Electrical energy credit ~10.5 /kwh Export 3 Electricity paid in full 13.7 /kwh 4 kwh Electricity distribution wires Energy Retailer sells your energy to your neighbour for full retail price. Ordinary kwh meter Bidirectional kwh meter Net billing allows exported electricity to be valued at any price, such as: -a discounted wholesale price, - a price equal to the import price, or Neighbour PV system owner -a premium feed-in (green) price. 1 kwh supplied, 1 kwh paid for 1995-2009 13
Context: World-Wide Solar PV Market MW of rated capacity 8,000 7,000 6,000 5,000 4,000 3,000 2,000 Annual World-wide PV Market Total PV Capacity Installed World-Wide 37% growth per year over the last 15 years Equivalent of 1,000,000 homes added in 2007 Total equivalent of 5,000,000 homes in 2008 USD 17 billion in 20 IEA countries in 2007 100,000 jobs 18% reduction in price per doubling of market 1,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 14
Context: Canadian Solar PV Market 30 Annual Canadian PV Market Total PV Capacity Installed in Canada MW of rated capacity 25 20 15 10 23% growth per year over the last 15 years Est. 400 to 600 grid-connected PV systems Est. 100 grid-connected PV systems in Alberta plus thousands of off-grid systems 1370 jobs 5 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 15
System Cost Proportions For large systems 60% for PV modules 20% installation 10% module mounting 5% to 7% inverter 4% design, regulatory approvals, commissioning and project management fees 1% miscellaneous For smaller systems 60% to 65% typical for PV modules Differing portions of Balance of Systems (BOS) depending on building mounting 16
PV System Costs Installed cost: $10k-$100M depending on its size For houses: typically between $15 000 to $60 000 Installed cost: Typically expressed as a $/W figure e.g., $25,000 for a 2500 W system = $10/W Typically:$10 to $11/W for smaller systems < 1.5 kw $8.5 to $10/W for house-sized systems, 1.6 to 6 kw down to $6 for very large ground-mount systems Variances in cost depend on declining portion of fixed costs, plus complexity of mounting system (roof, building-integrated, ground) 17
Value of PV Energy Typical house-sized 2.5 kw PV system for $25,000 at optimum roof angle, generates 2700 kwh per year (Edmonton) 3000 kwh per year (Calgary) at the delivered consumer price of electricity (all kwh-based fees), this is worth $324 per year (based on 2008 annual average EPCOR RRO rates of 12 /kwh in Edmonton) $411 per year (based on 2008 annual average ENMAX RRO rates of 13.70 /kwh in Calgary) 18
PV Economics At $10/W, system installed cost = $25,000 Simple payback (cost/annual savings) = 77 years (Edmonton), 61 years (Calgary) 1.3 to 1.6% return on purchase costs But only if you ignore: Costs of financing Increases in grid-electricity prices Benefits to the environment, infrastructure and society 19
Cold Climate Solar House, Edmonton 2.3 kw of generating capacity, installed in 1995, 1 st one west of Toronto, 12 th one in Canada connected to the grid In 1995: $28,000 installed cost or $12/W (plus $12,000 research costs) Annual savings: $130 Generated 40% of my electricity then, 100% now (because I then reduced my consumption through energy efficiency) Simple payback: 215 years In 2009: Likely $19,000 installed cost or $8.30/W Annual savings: $275 Simple payback: 69 years 20
Economics Indicators Payback easy to calculate a bit of a red herring number though everyone loves to have that number skews peoples understanding of economics cannot compare against much else Return on Investment can compare with stock market and bank interest rates our preference Energy price ( /kwh) easiest to understand and use easiest to compare with other values complex to calculate 21
Consumer Price of Electricity Edmonton 15 14 California electricity issues 13 12 11 10 9 /kwh 8 7 6 5 4 3 2 1 0 rising at 4.8% per year though there are increases of 5% to 20% in the last few years as the government weans us off the regulated rate option (RRO) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 22
Wholesale Module Prices in Canada $/W $12 $10 $8 declining at 11% per year 60% of the value of the PV system $6 $4 $2 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 23
Declining PV Prices, Increasing Grid Prices 85 /kwh (PV using 5% bank money) Solar PV Price unsubsidized no environmental side-effects 25 /kwh 13.7 /kwh (2008 grid price in Calgary) (PV using your own money) Grid parity: Utility Solar Assessment Study www.cleanedge.com, www.solarcatalyst.org 2008 Grid Parity 2015 Grid-Electricity Price huge environmental effects highly subsidized fossil fuelled electricity does not pay for the damage it causes to the environment and to our health care budgets 24
Year x Year Economic Analysis Spreadsheet Calculates the amortised PV energy price ( /kwh) Takes into consideration Cost of system components PV performance (1 st year and declining ½% per year) Inflation rate, financing interest rate, amortisation period Maintenance costs Increase in grid-electricity prices Accelerated Capital Cost Allowance (50% per year) (for businesses) Feed-in Tariff (when applicable) Solar PV incentives (buy-down programmes, when applicable) Incentives for making the price of fossil fuels appear cheap: No payments for damage to health care system or the environment Extremely low coal royalty rates Very low GHG emission prices 25
Effect of Interest Rates on PV Energy Pricing Interest rates very significantly increase the price of PV electricity. 90 80 Low-interest green loans are required to reduce the price of PV energy. 5% interest rate: PV = 85 /kwh 74 85 70 65 /kwh 60 50 40 30 0% interest rate: PV = 25 /kwh 25 27 31 34 38 43 49 56 Grid = 13.7 /kwh 20 10 0 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% Interest Rate [% per year] 26
Effect of System Price on PV Energy Pricing 130 110 Ways to bring down the energy price: - Increase market size - feed-in tariff - buy-down programmes PV energy price [ /kwh] at 0% interest rate PV energy price [ /kwh] at 5% interest rate 120 /kwh PV Electricity Price /kwh Grid = 13.7 /kwh 90 70 50 30 10 14 /kwh -10 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00 $9.50 $10.00 $10.50 $11.00 $11.50 $12.00 Installed Cost $/W 27
Feed-in Tariffs /kwh (approx. equivalent) Region PV Wind Hydro Biomass Contract Length First Introduced Austria 96 12.5 13 1994 California 67 3 1983 France (formerly) 24 13.5 15 2000 (now) 88 2006 Germany 92 14 12 18.5 20 1992 Italy 80 29 1992 Spain 67 10 10 10 >25 1998 Portugal 46 12 1998 South Australia 44 2008 Ontario (now) 42 11 11 11 20 2006 (proposed, depends on size) 44 to 80 13 to 19 13 12 2009 28
Grid Parity Today, ROI 4% /kwh 70 60 Grid parity Price of Grid Electricity Price of PV Electricity 50 80 /kwh feed-in tariff with 70% PV export 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 29
Energy and Emissions Payback Solar PV is zero-emission electricity. Payback for emissions and energy used in its manufacture, transportation and installation: 1 to 4 years depending on its application. In contrast, what is the energy payback for a coal- or gas-fired electric generating station? (no-one seems to ask but it is just as important if you build them too fast then you increase your energy issues, not decrease them) 30
Sources of Alberta s electrical energy 74% coal 17% natural gas 4% hydro 2% wind 2% imports from BC and SK Reported on Page 31 of the 2007 AESO annual report (see reports at www.hme.ca/reports) Keephills Power Plant Wabamun Alberta 31
What are the real costs of electricity? The Ontario Ministry of Energy and the Ontario Medical Association says: the air pollution in Ontario caused by coal-fired electricity generation kills 688 people, causes 1100 emergency room visits, and more than 300,000 minor illnesses per year. The pollution includes mercury, NOx, SOx, acid rain, particulates They are saying that this is an epidemic. Our lakes are being closed to fishing because of mercury So who pays for this now? (see reports at www.hme.ca/reports) 32
What are the real costs of electricity? Average consumer price of electrical energy in Calgary in 2008: 13.7 /kwh. Ontario Ministry of Energy says that the medical care damage caused by coal electricity is around 13 /kwh equivalent to 9.6 /kwh pro-rated for Alberta we need to double our electrical energy prices to pay for this! Cost of damage to our medical care caused by an average homeowner s electricity consumption in Calgary is $722 per year! So who pays for this now? Ontario Ministry of Energy. Cost Benefit Analysis: Replacing Ontario's Coal- Fired Electricity Generation. 93 pp. See pdf file pages 3, 49, and 59. Prepared by DSS Management Consultants, RWDI Air. 2005 April. download from www.hme.ca/reports 33
Grid Parity in 2022 /kwh 50 45 40 Price of Grid Electricity Price of PV Electricity no PV subsidies continuing fossil-fuel subsidies 35 30 Grid parity 25 20 15 10 5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 34
Grid Parity in 2016 /kwh 50 45 40 35 Price of Grid Electricity Price of PV Electricity no PV subsidies continuing fossil-fuel subsidies large drop in installed cost in 2011 due to giant PV factories coming on stream 30 25 Grid parity 20 15 10 5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 35
Grid Parity in 2016 /kwh 50 Price of Grid Electricity Price of PV Electricity 45 40 35 Grid parity 30 25 20 15 10 5 no PV subsidies grid electricity paying for its health care damage no price drop due to giant factories 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 36
Grid Parity in 2019 /kwh 50 Price of Grid Electricity Price of PV Electricity 45 40 35 Grid parity 30 25 20 15 10 5 no PV subsidies grid electricity paying $15 /T GHG fees increasing at $5/T per year 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 37
Grid Parity in 2014 /kwh 40 Price of Grid Electricity Price of PV Electricity 35 30 25 Grid parity 20 15 10 5 0 no PV subsidies no environmental payments from grid electricity using your own money at 0% interest 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 38
Grid Parity in 2011 /kwh 40 35 $15/T GHG levy 20 /kwh feed-in-tariff $1/W drop in 2011 due to giant factories 1% green loan interest rates Price of Grid Electricity Price of PV Electricity 30 25 Grid parity 20 15 10 5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 39
Organisational Questions How do we change policies of governments and corporations so that solar energy can take its right-full place in society s mix of electricity generation? Policies are answers to organisation questions The changes to achieve this relate to how we want to organise ourselves, they are not technical. How do we want to organise ourselves as a society? Do we want to continue to subsidise fossil fuels with our health care budgets? Do we want to value the environment, and thus put a money value on it? Do we want to encourage massive amounts of personal distributed generation? 40
Challenges with Solar Energy At this time: Purchase costs are very high though typically decreasing by 10% per year Not a lot of broad-based experience in Canada supply and installation chain is growing in its experience and depth much training needed for design professionals, financiers, and installers Has to compete with highly subsidized coal- and natural gas-fired utility electricity fossil fuel industries know how to lobby the government to obtain favourable policies Previously little interest by Canada s and Alberta s governments in developing policies to facilitate solar Regulatory barriers slowly being resolved. Alberta s new microgeneration policy is a great step forward, with many others needed 41
Government Policies where policies need to facilitate change instead of blocking change Value the environment Allow full cost recovery of all electricity fed into the grid Value increasing Canada s solar industrial capacity Mandate full-cost accounting for all energy sources Remove fossil fuel subsidies Require fossil fuels to pay for their environmental damage Provide ultra-low interest green loans for renewable energy and energy efficiency projects 42
we hold the future in our hands Download this presentation and others from www.hme.ca /presentations We welcome any feedback, questions, suggestions, comments and challenges to anything we present. Photo credits: Gordon Howell and several others Gordon Howell, P.Eng. Howell-Mayhew Engineering Edmonton Phone: +1 780 484 0476 E-mail: ghowell@hme.ca 43 1995-2009