ORIGINAL REPORTING: HOW CALIFORNIA IS INCENTIVIZING SOLAR TO SOLVE THE DUCK CURVE

How California is incentivizing solar to solve the Duck Curve; South-facing systems produce more solar, but west-facing panels may produce more valuable solar to the grid.

Herman K. Trabish | October 13, 2014 (Utility Dive)

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The California Energy Commission wants to turn rooftop solar in a whole new direction. Discovering where and when west-facing rooftop solar has a value proposition as good or better than traditional south-facing rooftop systems could alter who wants to be in the business.

A predictive analysis of 1,000 typical homes with 4 kilowatt west-facing rooftop solar systems over the course of a typical year in Fresno, California, found that facing panels towards the West could be appealing to both customers and electricity providers. Houses with west-facing panels saw a 20% total energy reduction (about 1,100 megawatt-hours) in comparison to the same homes with south-facing systems, according to CEC Commissioner David Hochschild. But the analysis also showed a 56% total energy increase (about 700 megawatt-hours) in the critical 2:00 pm to 8:00 pm peak demand period.

This projection is confirmed by new real-world research.

“We have now looked at a full year. West-facing panels are out-producing south-facing panels between 3:00 pm and 7:00 pm," CEO Brewster McCracken said of a Pecan Street Research Institute study of 50 Austin, Texas, homes with rooftop solar. "In the winter, it was 25% more generation during those hours. In the summer, it was almost 70% more.”

“South-facing panels are out-producing west-facing panels in all but two months when you look at the total daylight hours,” he added, confirming the thrust of the CEC analysis. “In the peak hours, west out-produces south all year long. In total production, south produces more.”

Important news for utilities, grid operators, and home builders

With utilities and grid operators increasingly concerned about meeting big peak demand ramps in metropolitan load centers, rooftop solar’s potential coincident electricity supply has become more valuable.

“When you have production in the late afternoon hours, it helps keep peaker plants offline and those are the most polluting, most expensive, and least efficient natural gas generation,” Hochschild explained. “Even if those systems produce fewer kilowatt-hours per year, their output is at a very valuable time so they are worth providing an incentive for.”

Hochschild took over the commission’s New Solar Homes Partnership (NSHP)last fall when its administration was transferred from the state’s IOUs—Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. With administrative consolidation, program costs came down, Hochschild said. “Those savings are going into solar incentives.”

The other commissioners, aware of California’s demand shift toward a later afternoon peak and of the economic and environmental disadvantages of gas peakers, approved Hochschild’s proposal for a new solar incentive.

For installing west-facing solar on new homes, developers can now get a 15% premium—up to $500—over the NSHP incentive that has supported 12,500-plus new home solar installs since it was added to the California Solar Initiative (CSI) in 2008.

“We want more west-facing PV but this is not a mandate, it’s an option,” Hochschild explained. “It doesn’t take away anything. It just provides an incremental incentive for builders.”

Real estate market surveys have shown solar adds property value, but it is not yet clear that developers will respond.

“Anything, including efficiency or solar, that adds cost, raises the price,” Hochschild acknowledged. “You have to really sharpen your pencil to make it work for these guys. Every builder I have talked to has said they would not be doing solar at all were it not for the NSHP program.”

Support from the California Building Industry Association (CBIA) and individual home developers may be because the incentive goes to the builder and not the homeowner impacted by the orientation change, Hochschild acknowledged. But building cycles are long term and the incentive has only been in place five weeks, he added. The CEC will publish the first data at the end of this year.

Rate design

Both Hochschild and McCracken noted that regulatory debates over rate design around the country could also drive the market toward west-facing solar.

“If you have peak demand pricing, west might be more valuable than south,” McCracken said.

Time-of-use (TOU) rates, even without net energy metering, could change the value proposition in places like California and Texas because solar output is “so in line with peak pricing, especially during those late afternoon summer hours,” he said.

In the absence of a new rate design, with solar growth driven exclusively by total output, “south is the way to go,” McCracken said. “But west-facing panels will be grid-friendlier and provide more utility system benefit.”

TOU rates could be a way for utilities to provide a bigger incentive than the CEC NSHP premium for the west-facing solar they need, he added.

“It is a complex question but it is possible with time of use pricing and certain rate designs," McCracken said. "West facing would be more valuable just because the difference in the summer months is nearly 70% during peak hours. It is possible that would narrow, if not overcome, the gap for west-facing systems.”

And, he added, “research shows the differences are not that big. If prices come down a little more, west-facing roofs, even without rate design changes, are suddenly going to become viable.”

“$500 isnt a decision maker but there are other considerations,” said K Kaufmann, communications manager for the Solar Electric Power Association (SEPA), the solar industry-utility alliance.

Two trends SEPA has noted echo Hochschild and McCracken:

People who might not have considered putting solar on a west-facing roof might decide to do it

Rate structures that link compensation for solar to the time of day it is generated could be an incremental incentive

“It's impossible to say without more data if utilities would like this,” Kaufmann noted, “but as you get more solar on the grid, anything that provides more control for utilities could be attractive.”

Arizona Public Service jumps in

Value to the grid was a factor when Arizona Public Service asked regulators in August to approve a plan for the utility to fund, install, own, and maintain 3,000 rooftop solar systems.

The utility proposes to reimburse each customer who hosts part of the cumulative 20 megawatts of solar with a monthly $30 bill credit for the entire 20 year program. The rate based program would be very similar to the third party ownership (TPO) lease contracts offered by private sector companies like SolarCity, Clean Power Finance, and SunPower, because the APS hosts will pay no upfront fees and have no ownership responsibilities.

Rate-basing will allow APS to “maximize the potential system benefits,” according to APS Renewables Manager Marc Romito. “Every opportunity we can, we will be facing these systems west or southwest.”

Anything but total production compromises a leasing company’s business model, Romito said. “But if rooftop solar is going to be deployed, we want tomaximize overall system performance.”

“It is not about peak production versus total production but what makes sense for a particular customer,” SolarCity's Bass countered.

In dealing with California’s growing peak demand challenge, “solar is a big part of the solution," Hochshild said, "but it can be a bigger part still if production matches the peak.”

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