NewEnergyNews: TODAY’S STUDY: WHERE THE COSTS ARE IN SOLAR

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge: To make every day Earth Day.

YESTERDAY

  • Weekend Video: John Oliver On Visiting Antarctica
  • Weekend Video: Warmest May And June Ever And Non-Stop Record Heat
  • Weekend Video: Meet The Microgrid
  • THE DAY BEFORE

  • FRIDAY WORLD HEADLINE- STAR WARS PLANET TATOOINE’S CLIMATE CHANGE
  • FRIDAY WORLD HEADLINE-BIG NEW THREAT TO CLIMATE FROM COAL-TO-GAS IN CHINA
  • FRIDAY WORLD HEADLINE-INDIA VILLAGE OF 2,400 GOES 100% SOLAR WITH BATTERIES, MICROGRID
  • FRIDAY WORLD HEADLINE-GERMANY IS WORLD’S MOST EFFICIENT MAJOR ECONOMY
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    GET THE DAILY HEADLINES EMAIL: CLICK HERE TO SUBMIT YOUR EMAIL ADDRESS OR SEND YOUR EMAIL ADDRESS TO: herman@NewEnergyNews.net

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    THE DAY BEFORE THE DAY BEFORE

    THINGS-TO-THINK-ABOUT THURSDAY, July 24:

  • TTTA Thursday-CLIMATE FACTS VERSUS CLIMATE CULTURE
  • TTTA Thursday-MONEY IN WIND UP FOR QUARTER, DOWN FROM 2013
  • TTTA Thursday-MIDWEST BIOFUELS CAN BE NEW ENERGY – UCS STUDY
  • TTTA Thursday-TESLA CHAMPIONS THE PLUG AND THE CAR
  • THE DAY BEFORE THAT

  • THE STUDY: EUROPE’S OFFSHORE WIND PROGRESS THIS YEAR
  • QUICK NEWS, July 23: NEW ENERGY WAS 55% OF 1H 2014 U.S. NEW BUILD; EV SALES LEAP; OCEAN ENERGY’S FINANCES UNDER SCRUTINY
  • AND THE DAY BEFORE THAT

  • THE STUDY: WHY THE OIL & GAS INDUSTRY BACKS AN ALL-OF-THE-ABOVE ENERGY POLICY
  • QUICK NEWS, July 22: U.S. DOE FORESEES NEW ENERGY; THE BEST CITIES FOR NEW ENERGY; ENERGY STORAGE TO BE $50BIL MRKT
  • THE LAST DAY UP HERE

  • THE STUDY: THE COST OF ADDING SOLAR TO A UTILITY’S OPERATIONS
  • QUICK NEWS, 7-21: U.S. WIND, SOLAR TO GROW THROUGH 2020; NEW GEOTHERMAL RISING; CHINESE HAVE RIGHTS IN OREGON WIND BUY
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    Anne B. Butterfield of Daily Camera and Huffington Post, is a biweekly contributor to NewEnergyNews

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT)

    November 26, 2013 (Huffington Post via NewEnergyNews)

    Everywhere we turn, environmental news is filled with horrid developments and glimpses of irreversible tipping points.

    Just a handful of examples are breathtaking: Scientists have dared to pinpoint the years at which locations around the world may reach runaway heat, and in the northern hemisphere it's well in sight for our children: 2047. Survivors of Superstorm Sandy are packing up as costs of repair and insurance go out of reach, one threat that climate science has long predicted. Or we could simply talk about the plight of bees and the potential impact on food supplies. Surprising no one who explores the Pacific Ocean, sailor Ivan MacFadyen described long a journey dubbed The Ocean is Broken, in which he saw vast expanses of trash and almost no wildlife save for a whale struggling a with giant tumor on its head, evoking the tons of radioactive water coming daily from Fukushima's lamed nuclear power center. Rampaging fishing methods and ocean acidification are now reported as causing the overpopulation of jellyfish that have jammed the intakes of nuclear plants around the world. Yet the shutting down of nuclear plants is a trifling setback compared with the doom that can result in coming days at Fukushima in the delicate job to extract bent and spent fuel rods from a ruined storage tank, a project dubbed "radioactive pick up sticks."

    With all these horrors to ponder you wouldn't expect to hear that you should also worry about the United States running out of coal. But you would be wrong, says Leslie Glustrom, founder and research director for Clean Energy Action. Her contention is that we've passed the peak in our nation's legendary supply of coal that powers over one-third of our grid capacity. This grim news is faithfully spelled out in three reports, with the complete story told in Warning: Faulty Reporting of US Coal Reserves (pdf). (Disclosure: I serve on CEA's board and have known the author for years.)

    Glustrom's research presents a sea change in how we should understand our energy challenges, or experience grim consequences. It's not only about toxic and heat-trapping emissions anymore; it's also about having enough energy generation to run big cities and regions that now rely on coal. Glustrom worries openly about how commerce will go on in many regions in 2025 if they don't plan their energy futures right.

    2013-11-05-FigureES4_FULL.jpgclick to enlarge

    Scrutinizing data for prices on delivered coal nationwide, Glustrom's new report establishes that coal's price has risen nearly 8 percent annually for eight years, roughly doubling, due mostly to thinner, deeper coal seams plus costlier diesel transport expenses. Higher coal prices in a time of "cheap" natural gas and affordable renewables means coal companies are lamed by low or no profits, as they hold debt levels that dwarf their market value and carry very high interest rates.

    2013-11-05-Table_ES2_FULL.jpgclick to enlarge

    2013-11-05-Figure_ES2_FULL.jpg

    One leading coal company, Patriot, filed for bankruptcy last year; many others are also struggling under bankruptcy watch and not eager to upgrade equipment for the tougher mining ahead. Add to this the bizarre event this fall of a coal lease failing to sell in Wyoming's Powder River Basin, the "Fort Knox" of the nation's coal supply, with some pundits agreeing this portends a tightening of the nation's coal supply, not to mention the array of researchers cited in the report. Indeed, at the mid point of 2013, only 488 millions tons of coal were produced in the U.S.; unless a major catch up happens by year-end, 2013 may be as low in production as 1993.

    Coal may exist in large quantities geologically, but economically, it's getting out of reach, as confirmed by US Geological Survey in studies indicating that less than 20 percent of US coal formations are economically recoverable, as explored in the CEA report. To Glustrom, that number plus others translate to 10 to 20 years more of burning coal in the US. It takes capital, accessible coal with good heat content and favorable market conditions to assure that mining companies will stay in business. She has observed a classic disconnect between camps of professionals in which geologists tend to assume money is "infinite" and financial analysts tend to assume that available coal is "infinite." Both biases are faulty and together they court disaster, and "it is only by combining thoughtful estimates of available coal and available money that our country can come to a realistic estimate of the amount of US coal that can be mined at a profit." This brings us back to her main and rather simple point: "If the companies cannot make a profit by mining coal they won't be mining for long."

    No one is more emphatic than Glustrom herself that she cannot predict the future, but she presents trend lines that are robust and confirmed assertively by the editorial board at West Virginia Gazette:

    Although Clean Energy Action is a "green" nonprofit opposed to fossil fuels, this study contains many hard economic facts. As we've said before, West Virginia's leaders should lower their protests about pollution controls, and instead launch intelligent planning for the profound shift that is occurring in the Mountain State's economy.

    The report "Warning, Faulty Reporting of US Coal Reserves" and its companion reports belong in the hands of energy and climate policy makers, investors, bankers, and rate payer watchdog groups, so that states can plan for, rather than react to, a future with sea change risk factors.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    It bears mentioning that even China is enacting a "peak coal" mentality, with Shanghai declaring that it will completely ban coal burning in 2017 with intent to close down hundreds of coal burning boilers and industrial furnaces, or shifting them to clean energy by 2015. And Citi Research, in "The Unimaginable: Peak Coal in China," took a look at all forms of energy production in China and figured that demand for coal will flatten or peak by 2020 and those "coal exporting countries that have been counting on strong future coal demand could be most at risk." Include US coal producers in that group of exporters.

    Our world is undergoing many sorts of change and upheaval. We in the industrialized world have spent about a century dismissing ocean trash, overfishing, pesticides, nuclear hazard, and oil and coal burning with a shrug of, "Hey it's fine, nature can manage it." Now we're surrounded by impacts of industrial-grade consumption, including depletion of critical resources and tipping points of many kinds. It is not enough to think of only ourselves and plan for strictly our own survival or convenience. The threat to animals everywhere, indeed to whole systems of the living, is the grief-filled backdrop of our times. It's "all hands on deck" at this point of human voyaging, and in our nation's capital, we certainly don't have that. Towns, states and regions need to plan fiercely and follow through. And a fine example is Boulder Colorado's recent victory to keep on track for clean energy by separating from its electric utility that makes 59 percent of its power from coal.

    Clean Energy Action is disseminating "Warning: Faulty Reporting of US Coal Reserves" for free to all manner of relevant professionals who should be concerned about long range trends which now include the supply risks of coal, and is supporting that outreach through a fundraising campaign.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    Author's note: Want to support my work? Please "fan" me at Huffpost Denver, here (http://www.huffingtonpost.com/anne-butterfield). Thanks.

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    Anne's previous NewEnergyNews columns:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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    Your intrepid reporter

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

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  • Tuesday, January 22, 2013

    TODAY’S STUDY: WHERE THE COSTS ARE IN SOLAR

    Benchmarking Non-Hardware Balance of System (Soft) Costs for U.S. Photovoltaic Systems Using a Data-Driven Analysis from PV Installer Survey Results

    Kristen Ardani, Galen Barbose, Robert Margolis, Ryan Wiser. David Feldman, and Sean Ong, November 2012 (National Renewable Energy Laboratory and Lawrence Berkeley National Laboratory)

    Executive Summary

    This report presents results from the first U.S. Department of Energy (DOE) sponsored, bottomup data-collection and analysis of non-hardware balance-of-system costs—often referred to as “business process” or “soft” costs—for residential and commercial photovoltaic (PV) systems. Annual expenditure and labor-hour-productivity data are analyzed to benchmark 2010 soft costs related to the DOE priority areas of (1) customer acquisition; (2) permitting, inspection, and interconnection; (3) installation labor; and (4) installer labor for arranging third-party financing. Annual expenditure and labor-hour data were collected from 87 PV installers. After eliminating outliers, the survey sample consists of 75 installers, representing approximately 13% of all residential PV installations and 4% of all commercial installations added in 2010.

    Including assumed permitting fees, in 2010 the average soft costs benchmarked in this analysis total $1.50/W for residential systems (ranging from $0.66/W to $1.66/W between the 20th and 80th percentiles). For commercial systems, the median 2010 benchmarked soft costs including assumed permitting fees) are $0.99/W for systems smaller than 250 kW (ranging from 0.51/W to $1.45/W between the 20th and 80th percentiles) and $0.25/W for systems larger than 250 kW (ranging from $0.17/W to $0.78/W between the 20th and 80th percentiles). Additional soft costs not benchmarked in the present analysis (e.g., installer profit, overhead, financing, and contracting) are significant and would add to these figures. The survey results provide a benchmark for measuring—and helping to accelerate—progress over the next decade toward achieving the DOE SunShot Initiative’s soft-cost-reduction targets.

    We conclude that the selected non-hardware business processes add considerable cost to U.S. PV systems, constituting 23% of residential PV system price, 17% of small commercial system price, and 5% of large commercial system price (in 2010). These processes present significant opportunities for further cost reductions and labor-productivity gains.

    Introduction

    The global average wholesale price for photovoltaic (PV) modules fell from $4.04 per watt (W) in 2005 to $2.40/W in 2010, while the capacity-weighted average of residential and commercial U.S. PV system prices declined from $7.90/W to $6.20/W over the same period (Barbose et al. 2011). Thus, the reduction in module price accounted for the vast majority of the total decline in average installed PV system price from 2005 to 2010. Consequently, non-module hardware and non-hardware costs have accounted for a significant, and increasing, portion of average installed PV system prices in the United States (Barbose et al. 2011). To track and analyze the rapidly evolving price structures of PV systems, a thorough understanding of non-module cost components is needed.

    To date, a number of analyses have examined non-module PV system hardware costs, including the costs of power electronics and other balance-of-system (BOS) hardware elements. Several other analysts have examined non-hardware BOS costs—often referred to as “business process” or “soft” costs—which include permitting and commissioning, profit, overhead, installation labor, customer acquisition, and financing. Goodrich et al. (2012), for example, estimate that total soft costs constituted, on average, 47% of U.S. installed residential PV system price and 33% of installed commercial system price in 2010, with variation around this average based on system size, location, and other factors. Some analysts have published details about individual soft-cost elements, and others have produced results that are available by subscription only.

    A survey data-driven, bottom-up examination of soft costs for residential and commercial PV systems, with granularity into multiple individual cost components, has not been published to date. The purpose of this analysis, therefore, is to provide further granularity to total soft-cost estimates and quantify specific and previously unmeasured soft costs for residential and commercial PV systems. Unlike PV hardware costs, which can be readily benchmarked with data collected from equipment manufacturers and purchasers (and for which a variety of available indexes already exist), quantifying soft costs requires detailed tracking of the time and resources required to complete the various stages of a PV system sale and installation. To quantify key soft costs, we fielded a survey of U.S. PV installers that collected data on the labor hours required, per installation, to complete discrete stages of the PV business process, along with data on annual expenditures for customer acquisition. Similar to Goodrich et al. (2012), we translate labor-hour requirements per installation into dollars per watt using system size, labor class and composition assumptions, and fully burdened wages.

    Our survey data and analysis focus on soft costs related to the U.S. Department of Energy (DOE) priority areas of (1) customer acquisition; (2) permitting, inspection, and interconnection (PII); (3) installation labor; and (4) installer labor for arranging third-party financing. Other soft costs and end-consumer price components not benchmarked by this analysis—including installer profit, overhead, financing, and contracting—contribute significantly to system prices and represent areas for further study.

    The average 2010 soft costs benchmarked in this analysis total $1.50/W for residential systems (ranging from $0.66/W to $1.66/W between the 20th and 80th percentiles). For commercial systems, the median 2010 benchmarked soft costs are $0.99/W for systems smaller than 250 kW (ranging from $0.51/W to $1.45/W between the 20th and 80th percentiles) and $0.25/W for systems larger than 250 kW (ranging from $0.17/W to 50.78/W between the 20th and 80th percentiles).

    The DOE SunShot Initiative aims to reduce the installed-system price contribution of all soft costs to approximately $0.65/W for residential systems and $0.44/W for commercial systems by 2020 (DOE 2012). Our results provide a partial benchmark for measuring progress over the next decade toward achieving these total soft-cost targets—and inform strategies for accelerating softcost reductions.

    The remainder of this report is structured as follows. Section 2 briefly describes the existing softcost literature. Section 3 describes the survey and analysis methodology we used. Section 4 describes the residential PV system data collection and results, and Section 5 does the same for commercial PV systems. Section 6 discusses the study’s limitations. Section 7 summarizes the results, and Section 8 draws conclusions and outlines areas for potential future work. Appendix A contains our installer survey instrument.

    Summary of Survey Results

    The results of the residential installer survey suggest that the surveyed soft costs constitute a significant portion of total residential PV soft costs (Figure 13); including assumed permitting fees, the surveyed costs total $1.50/W, equivalent to 45% of total system soft costs ($3.32/W) and 23% of total system price in 2010 ($6.60/W). Based on a 2010 installed PV system price of $6.60/W, the difference in total soft costs and soft costs captured by the survey totals $1.82/W. This residual cost of $1.82/W is the subject of future analysis aimed at refining the granularity of PV system price benchmarks. Customer-acquisition ($0.67/W) and installation-labor costs ($0.59/W) are the largest of the soft costs benchmarked in this analysis, suggesting considerable cost efficiency gains can be made in these areas. However, streamlining PII requirements ($0.13/W for select PII costs in this analysis) is also an important cost-reduction opportunity. PII costs account for an estimated 25%–35% of the price difference between U.S. and German residential PV prices. Finally, while the benchmarked installer labor costs for arranging thirdparty financing are negligible ($0.02/W), additional data on financing costs are needed to depict the cost of financing and contracting PV systems more completely and accurately.

    As shown in Figure 13, the surveyed soft costs also constitute a significant portion of total commercial PV soft costs, although their impact depends significantly on system size. For small commercial systems (smaller than 250 kW), the surveyed costs (including assumed permitting fees of $0.35/W) total $0.99/W, equivalent to roughly 37% of all soft costs ($2.64/W) and roughly 17% of the total average system price in 2010 for commercial systems in that size range ($5.96/W). In contrast, surveyed soft costs for large systems (larger than 250 kW) are just $0.25/W (including $0.03/W for assumed permitting fees), or 12% of all soft costs ($2.16/W) and 5% of the total average system price in 2010 ($5.33/W).

    Of the various commercial PV labor-related soft costs, installation labor is by far the most significant: $0.42/W for small systems and $0.18/W for large systems. This suggests that efforts to reduce commercial PV system costs ought to focus on this category. Customer acquisition adds $0.19/W to the cost of small commercial systems but only $0.03/W for large systems because large systems benefit from economies of scale and the ability to spread those (relatively) fixed costs over a larger number of installed watts. Labor costs associated with PII and arranging third-party financing are generally negligible ($0.02/W or less) for the surveyed commercial PV installers. Table 5 summarizes the soft costs considered in this analysis for residential and commercial systems.

    Conclusions and Future Work

    As PV system prices continue to decline owing to module and hardware cost reductions, accurately quantifying soft costs is increasingly important for explaining PV system price dynamics across various U.S. and international markets. This report presents results from a bottom-up, survey-data-driven analysis of soft costs in the DOE priority areas of customer acquisition, financing, PII, and installation. This work establishes benchmark soft costs for residential and commercial PV with the objectives of tracking costs over time, identifying opportunities for cost reductions, and informing the development of policies and practices aimed at reducing cost inefficiencies.

    The soft costs collected and analyzed in this report constitute a significant portion of total installed PV system prices. As Table 5 shows, including assumed permitting fees, the total surveyed soft costs are 23% of the total residential system price, 17% of the small commercial system price, and 5% of the large commercial system price (in 2010). Clearly, economies of scale help reduce these soft costs, particularly installation-labor and permitting costs, for large commercial systems compared with residential and small commercial systems. Among the individual surveyed soft-cost categories, customer acquisition and installation labor are the dominant contributors, while PII and labor for arranging third-party financing contribute relatively little cost. Thus, among the select costs analyzed in this report, customer acquisition and installation labor present the greatest potential for cost reductions for residential and commercial PV systems.

    The SunShot Initiative aims to reduce the installed-system price contribution of all soft costs to approximately $0.65/W for residential systems and $0.44/W for commercial systems by 2020 (DOE 2012). Our surveyed soft costs alone (including assumed permitting fees) contribute $1.50/W for residential systems, $0.99/W for small commercial systems, and $0.25/W for large commercial systems. Additional soft costs we did not survey (e.g., installer profit, overhead, financing, and contracting) are significant and would add to these figures. Thus, our survey results provide a partial benchmark for measuring progress over the next decade toward achieving the SunShot soft-cost-reduction targets.

    Our ongoing and future work will expand on both the comprehensiveness and accuracy of PV soft-cost analysis, thus enabling a more complete understanding of soft costs and providing dataderived metrics in support of private and public soft-cost-reduction efforts. For example, PV system financing is a poorly understood soft cost. As discussed in Sections 4.2.4 and 5.2.4, residential and commercial PV financing is complex and vital to enabling large-scale PV deployment. We are working to enable a better understanding of PV-financing strategies and their impacts on PV system prices and to develop benchmarks for tracking reductions in financing costs.

    As another example, customer-acquisition costs are increased by potential PV customers’ lack of access to credible, standardized PV performance data and by installers’ need to visit potential PV sites to develop preliminary system designs and prepare bids. Future work in these areas could include benchmarking the specific cost contributions of these barriers and estimating the costreduction potential of solutions such as web-based dissemination of third-party-verified PV consumer data and remote PV site assessment.

    As Germany’s experience has shown, streamlining the PII process for PV systems is also an important cost-reduction strategy. Analyzing the cost impacts of various PII reforms in U.S. jurisdictions—and disseminating information about effective strategies—could enable relatively rapid soft-cost reductions. In addition, strategies for reducing installation-labor costs are critically important, such as the development of “plug and play” PV systems and widespread implementation of PV installer training and certification programs. Developing more accurate, granular analysis of installation-labor costs would enable the effectiveness of such strategies to be evaluated and optimized.

    Finally, understanding the location-dependent variability of soft costs throughout the United States is important. Our future work will seek to expand both the geographic scope of our softcost analysis and the geographic specificity of the results.

    Soft costs are both a major challenge and a major opportunity for reducing PV system prices and stimulating SunShot-level PV deployment in the United States. The data and analysis in this report are a first step toward the more detailed understanding of PV soft costs required to track and accelerate these price reductions.

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