WINDY CITY TO BUILD BIG SUN

South Side solar power could draw on stimulus funds
Kellen M. Henry, April 22, 2009 (Medill Reports)
and
Exelon plans to build solar power plant on Chicago's South Side; Company would rely on Energy Department loan guarantees for $60 million project
Joshua Boak, April 22, 2009 (Chicago Tribune)

SUMMARY
Exelon Corp. will put stimulus funds to work by building the biggest urban solar power plant in the U.S., a 10-megawatt, $60 million solar photovoltaic (PV) installation on Chicago's South Side.

SunPower Corp. will supply the PV panels and handle the installation for Exelon. To maximize productivity, the panels will be mounted on a frame that allows an automated tracking system to rotate them each day along the sun’s path, keeping them fully exposed to the sun.

Unlike a nuclear, natural gas or coal plant, a solar power plant occupies a larger, more landscape-integrated space. It requires little in the way of resources (like water) from the environment, produces virtually no pollution and generates zero climate change-aggravating greenhouse gas emissions.

The Exelon installation will have 32,800 PV panels spread over a 39-acre former industrial “brownfield” site in the West Pullman Industrial Redevelopment Area to be leased from the City of Chicago. Other brownfield sites are being studied for future development.

Constructed image of the planned solar power plant in the renewed brownfield. (click to enlarge)

Exelon hopes to obtain American Recovery and Reinvestment Act stimulus fund resources in the form of U.S. Department of Energy (DOE) loan guarantees designated for New Energy projects, part the incentive program through which President Obama intends to double U.S. New Energy capacity in the next 3 years. Such guarantees of 80% of the project costs are not available to Exelon subsidiary Commonwealth Edison Co., a major Chicago utility, for expanding its fleet of 17 nuclear reactors.

The remaining 20% of the project cost will come from project equity.

The project will also be eligible for a 30% federal investment tax credit, an Illinois enterprise zone investment tax credit and reduced sales and property tax rates.

Why are New Energy projects given stimulus funding preference? If funding is approved, construction at the West Pullman site is expected to begin this summer and the installation will likely come online by the end of the year. A nuclear plant would require 3-to-6 years of planning and 10 or more years of construction.

Construction will create 200 jobs for the local workforce.

The project will help Commonwealth Edison meet the Illinois Renewable Electricity Standard (RES) that requires the state’s utilities to obtain 25% of their power by 2025.

The Exelon project is small compared to a single traditional power source project but its advantages (clean energy, relief from fossil fuel cost fluctuations, relief from imported energy sources, short-term planning and construction, shovel-ready jobs) can be applied repeatedly at many brownfield and open space locales. This project, by itself, represents peak demand relief for the local grid because it generates most at the hottest part of the summer day when consumers put the most stress on the power system.

Some continue to be reluctant about solar energy because of cost and intermittency issues.

click to enlarge

COMMENTARY
Less than 1% of U.S. power comes from solar energy but Al Gore told a House of Representatives subcommittee last week that enough sun falls on the land masses of the earth in 45 minutes to provide a year of electricity to the world. Conclusion: Growth opportunity in the sector is humongous.

Solar energy’s biggest obstacle to growth is the cost of generating electricity from solar panels. Estimates vary according to the type of solar energy system being evaluated.

A recent Moody's Investor Service analysis reportedly concluded solar PV-generated electricity is 3 times more expensive than nuclear energy-generated electricity and 4 times the cost of electricity from natural gas. But it is important to remember that one of the causes of the recent financial downturn is the rigged "ratings" of investment vehicles by “qualified experts.” Estimates of power costs vary according to who is paying for the estimate.

Another reported estimate: Capital costs for coal are $1-to-$3 billion/1,000 megawatts; natural gas costs are $1-to-$2 billion/1,000 megawatts; Solar PV power costs may be $5-to-$7 billion/1,000 megawatts.

Costs for coal and natural gas are significantly higher for NEW deployment and can be expected to rise over time, especially after a price is placed on greenhouse gas emissions.

A more recent evaluation of prices from investment bank Credit Suisse. (click to enlarge)

Proponents of solar PV energy contend it is approaching “grid parity,” the point at which solar energy-generated electricity costs the same as electricity from any other source feeding the grid. Industry-leading First Solar recently announced it had reached a large enough volume of output to reap economies of scale benefits. The cost of generating electricity using First Solar's thin-film photovoltaic solar panels is at present reportedly no more than $1/watt.

Indicative of the success of the Obama stimulus plan at increasing New Energy capacity, utilities are aggressively investing in solar power plants. Florida Power & Light Co. (FPL) recently indicated interest in a $350 million PV project for a Florida urban development. Pacific Gas and Electric Co. (PG&E) is developing 500 megawatts of solar PV in California. New Jersey’s Public Service Electric and Gas Co. (PSE&G) is planning a $773 million installation of PV panels across its cities’ urban environment from streetlights to public school roofs. Due to federal tax credits and state incentives, the average PSE&G residential bill of $1,270 a year will increase ~$4/year if the project is approved.

Such increased activity is driving PV manufacturing growth. Economies of scale will inevitably drive prices down and make the predictions about reaching grid parity come true. Ken Zweibel, director of the Institute for Analysis of Solar Energy at George Washington University, says the cost of solar energy-generated electricity drops 20% whenever solar panel production volume doubles and such doubling has been taking place approximately every 30 months.

SunPower Corp. was the solar developer for the 14-megawatt project at Nellis Air Force Base, currently North America’s biggest PV solar power plant.

The biggest PV solar power plant in North America, installed at Nellis Air Force base in Nevada by SunPower. (click to enlarge)

QUOTES
- Tom O'Neill, senior vice president, Exelon: "It's a way to start participating in renewable energy…Ultimately, we are putting 10 megawatts of electricity on the grid. It's not much. But you've got to start somewhere…We're a nuclear company…But we know which way the wind blows, no pun intended. Nothing is off the table."
- Julia Hamm, executive director, Solar Electric Power Association (SEPA): "As the size of market increases, manufacturers can ramp up production and drive down cost…"
- Julie Blunden, vice president of public policy, SunPower: "Chicago has better sun than Germany…And Germany is the largest solar market in the world today."

click to enlarge

- Paul Elsberg, spokesman, Exelon: “We believe that low carbon energy is the future…There will be a price on carbon and a cost to pollute. For us it’s a strategic business decision.”
- Jonathan Feipel, energy division manager, Illinois State Energy Office: “…Exelon would put us on the map in confirming that Illinois is a major player in the energy market…[Solar energy is] more expensive, but once the solar panels go up… they’re free to operate…Instead of having to use that high-priced fuel, we can swap out for solar energy…When we really need it is when it’s at its best – when the sun is the hottest.”