Palo Alto Weekly

News - August 12, 2011

Palo Alto looks to tap into solar panels for green power

City's newest programs seeks to turn local businesses into renewable-energy providers

by Gennady Sheyner

After years of relying on wind farms and methane-burning landfills for "green" energy, Palo Alto officials are now targeting a source much closer to home solar panels on the roofs of local businesses.

The City Council approved a new program last week that will allow small businesses with solar panels to sell electricity directly to the city. The program, known by the vague and obscure name of "feed-in tariff," will enable businesses to sign 20-year contracts with the city to provide electricity at a fixed rate, according to Jon Abendschein, a resource planner in the Utilities Department.

The program creates a new avenue for the city in its quest to draw a third of its electricity from renewable sources by 2015. So far, the city has been tackling the challenge by issuing requests for proposal to established energy companies, soliciting bids, negotiating a price and signing long-term agreements. The new program takes a more grass-roots approach to going green. Just about any business with solar panels will be able to sign up and become the city's newest electricity vendor, according to a report from Abendschein.

"A FIT (feed-in tariff) program will reduce costs and provide local renewable project developers certainty because of the fixed long-term rate, the standard contract, and the fact that it is open to any developer rather than only those who are selected through an RFP (requests for proposal) process," he wrote.

At its Aug. 1 meeting, council members unanimously and enthusiastically approved the new program, characterizing it as a good way to promote both local electricity generation and green energy. Eligible technologies will include solar, wind and biogas-fueled generators, Abendschein wrote in the report.

Solar, however, remains the most promising option. The city had 420 residential customers and 27 non-residential customers with photovoltaic systems as of late June, according to Lindsay Joye, a marketing engineer in the Utilities Department. The new program would only apply to the commercial customers.

Abendschein told the council Monday that the new program will focus on "commercial rooftops."

"Owner of a building, or in partnership with a third party, could put solar panels on rooftops and receive a 20-year contract at a fixed rate to sell that power back to the city and participate in fulfilling our renewable portfolio standard," Abendschein told the council.

The council's Finance Committee and the city's Utilities Advisory Commission had vetted the proposed program earlier this year and endorsed the staff proposal. Last week, the full council happily gave the program its official approval.

Councilman Larry Klein said he was "very enthusiastic" about the program and proposed expanding it even after the city meets its renewable-energy goal. Councilwoman Nancy Shepherd said the program "keeps the progression of alternative energies in place" in Palo Alto, while Vice Mayor Yiaway Yeh praised it for potentially improving the reliability of the city's electricity network.

The city is currently projected to draw about 30.8 percent of its annual electric energy needs from renewable sources by 2015. Officials hope the new program will push that number to 33 percent.

Feed-in tariff programs are already in effect in dozens of nations worldwide and are particularly common in Europe. Councilman Pat Burt said Monday that more than half of the installed solar power in the world has been achieved through such programs. He called the new program a "win-win situation for a lot of different elements."

"This puts us in position of providing another opportunity for community entities who are choosing to do this to do something that's in their value structure and is of benefit to the city," Burt said.

The council did, however, find one flaw in the staff proposal its name. Though nations have traditionally referred to such energy-purchasing programs as "feed-in tariffs," Klein called this "one of the world's worst names."

"'Feed-in tariff' doesn't in any way describe what's going on to the average person," Klein said.

Staff agreed to consider a more "accessible" name for the program as it unfolds in the coming months.

Staff Writer Gennady Sheyner can be emailed at gsheyner@paweekly.com.

Comments

Posted by free for all, a resident of Crescent Park
on Aug 14, 2011 at 7:50 am

Just wondering why this isn't offered to residential customers as well?


Posted by Wayne Martin, a resident of Fairmeadow
on Aug 14, 2011 at 11:12 am

> Councilman Larry Klein said he was "very enthusiastic" about
> the program

Wonder if Council Member Klein has considered the following:

Number of small businesses in PA that at own their own buildings?
Average length of time a small business survives that owns its own building survives in PA?
Total Area available on candidate rooftops?
Cost/square foot for solar panels, mountings and electrical interface equipment?
Initial cost to install solar panels and electrical interface equipment per 1000 sq. ft. of panels.
Break even point for (in months) for solar system costing $100K? (200 years=240 months).
Yearly ROI per $100K investment?
Yearly profit for 20-year contract per $100K installed equipment?
Possible De-installation costs?
Contract transfer issues?
Number of small businesses owning roof space that have shown interest to date?
Number of small businesses willing to invest 100+K for 20+years for low return in PA?
Loss of investment when business sold, or closed?
Government subsidies for initial equipment purchase?
Increase in property tax associated with Solar equipment.
Increase in income tax associated with sales of electricity to PAU.
Loss of opportunity costs associated with investing $100+K in this venture.

According to the PAU's web-site, the City government is purchasing/using about 1B GWhs of electric power yearly. So, how many "small businesses" are there in Palo Alto, that own their own building, that think that they will be at that location for at least 20 years, with somewhere in the order of $100K (more or less) to invest in helping the City make an arbitrary "green power" quota in the future?

Looking at Palo Alto, there are a couple business districts on Middlefield, all of the University Avenue area, and most, if not all, of El Camino Real. On Middlefield, the Charleston Shopping contains, maybe ten "small businesses", but the buildings are owned by a SF-based property management company. Not certain about the Midtown "complexes", but probably Safeway is the only company with any roof area worth talking about that might be considered a good "candidate" for such a program. A lot of downtown is owned by a small number of property owners, even though there might be as many as 800 "small businesses" operating in that area. And then there is El Camino Real. Who knows how owns all of that property, but it's a pretty good bet it's not the owners of the businesses that operate in those buildings. We also have to consider Stanford Plaza, but again, all of those businesses lease from Simon Properties--a very "large business".

The questions above are intended to point out just how many issues a "small business" would need to consider before signing on the "dotted line" with an outfit that does not take much responsibility for its actions.

If Council Member Klein thought like a small business man, he would likely want all of these questions asked, and answered by the PAU, before even considering such a venture, much less being "enthusiastic" about it. Well, if the Council Member is as excited as he claims, let's see how long it takes for him to get his business "signed up".

It's really hard to believe that this program will be of interest to too many property owners, who are the ones that will have to do business with the City (and possibly lose money on this venture). It's also hard to believe that a few dozen solar panels will generate enough power to decrease the external purchases by any significant percentage of the 1BGWhs purchased by the City.


Posted by Henry, a resident of Duveneck/St. Francis
on Aug 14, 2011 at 1:48 pm

Wayne Martin makes some good points.

Larry Klein works at a building on Hamilton Ave. That building has about 2000 square yards of space for solar panels (rough estimate from Google Earth). Each square yard receives about one (1) kilowatt of solar energy at peak hours (high noon, generally). Since the peak period is very short, let me estimate that the actual solar power during the daylight period is one half this amount, thus Larry's roof will receive 1000 kilowats of exposure (again a rough estimate). Now, the efficiency of the solar panels will be no better than 20% (and that is for the very expensive models). OK, so now we are down to 200 kilowatts, during the daylight hours (zero at night). 200 kilowatts is enough to light 2000 100-watt light bulbs.

So, the city is going to purchase this power, at a given price, then sell energy to Larry's building at a different price. My question is: Will the city be subsidizing those light bulbs for Larry? It all depends on the price points, of course. My canary is chirping away, and she seems to be telling me that Larry will get his lights paid for by the city. Neat trick!


Posted by first solar house in the 70s, a resident of Another Palo Alto neighborhood
on Aug 14, 2011 at 6:09 pm

Answer to free for all ( correct me if I'm wrong) :

Businesses CAN choose to do this if they wish to guarantee a certain fixed-rate price for 20 years. I'm guessing it must be a good price or people wouldn't choose to do this. The utility can afford to pay a higher rate for the power because the business (after the rebates) has paid for the cost of the "power plant".

Residents and businesses ordinarily have, by law, net metering, which means the utility has to pay them at least what they pay for power -- or, effectively, they get to run their meters backward when they produce. (Before the law, PG&E would require people to have two meters so they could pay producers substantially less than they charged them.) Over time, typically small residential systems end up using power, it's not the norm for residences to be net producers.

If a business would like to generate more power than they consume and actually make money, running the meter backward isn't the right setup, there the two meter buy-and-sell system is necessary. It makes sense to offer people a long-term contract to buy their power so people can decide whether they want to do it. It also makes sense to consider a fixed rate so the utility knows what it will be paying and there won't be any financially unsustainable surprises. Long-term power contracts are the norm for producers anyway.

I think the other reason to exclude residences is just the limitations of the technology -- right now, I suppose, larger than typical residential systems would use more roof space and possibly other space than would be acceptable in residential neighborhoods, and maybe there are even codes that make this a moot argument (it might not be possible to have a large enough system for most residences to be net producers). However, if this is the reason, I think the city would do well to put in a clause to allow for early residential adopters of new technology to be eligible, so that if far more efficient panels become available or new technology like affordable solar roofing material becomes practical, residential customers could also become producers.


Posted by firststep, a resident of Midtown
on Aug 14, 2011 at 6:51 pm

Can you see the initial set up or cost are so high that is unbearable.


Posted by Henry, a resident of Duveneck/St. Francis
on Aug 14, 2011 at 8:31 pm

"If a business would like to generate more power than they consume"

Please provide a single example of this in Palo Alto, now or in the future. Assume 20% efficiency of the solar panel (which s very high).


Posted by Dan, a resident of Southgate
on Aug 15, 2011 at 12:49 pm

This is a good idea.

Feed-In Tariff (FIT) is the way most of the sensible world (non-US) subsidizes solar power. It provides a predicable, stable revenue stream for the anticipated life of a solar system. This makes financing easier.

In the US, instead of FIT, we have a hodge-podge of random tax credits that come and go at the whim of Congress and State legislatures. You get paid in the year your system comes online, but subsidies vary by State, City, size of project, whether its a business or residence, and when you happen to do the installation. This is not common sense.

Another reason I like Palo Alto's FIT proposal is this: PG&E is required by law to buy your surplus solar electricity, but they only pay wholesale, ~$0.06/kwh, and when the sun goes down, they sell your electricity back to you at the retail rate of ~$0.12/kwh. That never made sense to me, because home-grown solar electricity doesn't have to travel hundreds of miles along high-voltage power lines. This proposal sort of cuts out the middleman.

Like "FreeForAll", I wonder why residences would be excluded. As described, residential solar power would be reimbursed at half the rate of the same solar panel on the roof of a business next door. Sounds like a Republican plan to me.


Posted by Albert K Henning, a resident of Duveneck/St. Francis
on Aug 15, 2011 at 1:02 pm

For Wayne Martin and others:

Any small business owner, capable of running a small business, will also be capable of performing the relatively simple cost-benefit analysis, to determine whether to take CPAU up on its FIT offer, or not.

Mr. Martin so frequently criticizes governmental intrusion on private property and business owners; why should he then, here, argue for *more* government intervention/cost?

It's up to CPA and CPAU to make an offer to buy energy/power at a particular rate. The market will then decide whether to provide energy/power at that rate; or, perhaps, at another rate. The market will decide.

CPAU residential electric power rates are so low, that it is not yet cost-effective for me to install solar PV on my home roof. However, if CPAU/CPA would buy my power at an increased rate (from what they are already obligated to pay me, if I hook my system up to the grid), then it may become cost-effective for me to form my own small power-supply business, and install panels and sell the power to the City.

It all depends on the details.


Posted by Albert K Henning, a resident of Duveneck/St. Francis
on Aug 15, 2011 at 1:11 pm

Another comment regarding rudimentary calculations of solar PV efficiency, cost, and such:

Solar PV can never be intended for base power. In sunny climes like ours, it should be the first source for peak power, because: peak power load in CA occurs during midday (air conditioning); and, solar PV is usually generated very close to the consumption point, minimizing transmission line losses.

Solar PV *panel* costs have already dropped dramatically, and will continue to drop more. However, the main detriment to widespread installation of solar PV today, is not *panel* cost, but *installation* cost. The Dept of Energy has a new program to fund R&D into many areas, including ways to decrease installation cost by 10X. Low City licensing fees, and much-lowered installation costs, would make solar PV cost-effective *now*, for both residential and small-business use. Without any FIT program.

Which, to me, suggests that the City should explore ways to encourage more cost-effective installation, as an essential part of the FIT program.


Posted by Henry, a resident of Duveneck/St. Francis
on Aug 15, 2011 at 2:06 pm

Albert,

You are knowledgable in this arena.

The FIT approach is just another name for a subsidy, above and beyond R&D subsidies.

You are right, solar will probably never be baseload, but it can be useful for peak power situations, especially air conditioning. The essential question is efficiency, both for the panels and the installation. Both of them are hard to make more efficient, but it will slowly occur.

However, there will never by more than about one (1) kilowatt of photons per square yard (considering the atmospheric effects). The theoretical limits of photolvoltaic cells is about 28-30%. The long and short of it is that solar cells will probably never produce net power for a given business, if only roof-top panels are used.

I see no reason to employ two meters (one for purchased power, and one for sold power) in Palo Alto...except that it is a naked subsidy. Businesses could simply do what residential owners are allowed to do: Inhibit the meter. Of couse, when this day comes, be prepared to pay even more per unit for electrical power, similar to what we are now doing with our garbage rates (due to recycling efforts). Conservation is NOT free!

The bottom line is that TIF is a subsidy, pure and simple. The city should just be honest about it.


Posted by Hot Button Issue, a resident of another community
on Aug 15, 2011 at 3:28 pm

This is yet another hot button Palo Alto issue. Thank goodness Wayne Martin has answered the trumpet call, but why haven't all the other usual hot button issue people set off their flares of outrage yet? pat, where are you? Diana?

Surely there is great opportunity on this issue to express a range of negative feelings!


Posted by Albert K Henning, a resident of Duveneck/St. Francis
on Aug 19, 2011 at 9:59 am

Henry,

Actually, it's not a subsidy.

CPAU has capital to invest. CPAU can invest in new power plants, here or somewhere else, generating base load. (Not likely 'here', given NIMBY and other environmental factors.) Or, it can invest in 'green' sources, here or elsewhere. Investing in sources 'here' helps efficiency by minimizing transmission line losses.

The question is an economic one: where is the capital 'best' invested? And, the argument was made long ago (first time, successfully, in the 1970s) that investment in conservation and efficiency was 'better' (more economical, better ROI) than investment in new plant.

Conservation and efficiency will only take us so far, of course: eventually, if the economy is growing, new power sources are required. But, investment in conservation, in efficiency, and in green, peak-load sources, forestalls the day when investment in more-expensive base-load sources must be made.


Posted by Henry, a resident of Duveneck/St. Francis
on Aug 19, 2011 at 10:30 am

Albert,

Yes it is an economic issue. And it is about subsidies.

If (to use Larry Klein as an example, again), Larry has solar panels put on his office building roof, that power can be used to inhibit his existing meter...there is no need to purchase power from Larry. Larry will simply use less (CPAU-charged)power during peak periods, thus saving him money, and preventing the need for CPAU to purchase additional power. It is the same with residences. Larry's solar power should not be given a special rate, other than general smart metering (peak power usage...a very good idea, btw).

Feed in tariffs are an incentive (subsidy) to entice business owners to install solar, even if that decision makes little sense to those owners. If solar makes sense, the owners will install it without such incentives.

Larry is very big on preventing greenhouse gases, thus it shouldn't take a subsidy for him to do the right thing (even if it doesn't make economic sense to him). CPAU is us! We don't need to be paying for Larry's solar installation - he should do that on his own.


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