Category: Electric utilities

Investing In Solar Energy: If Only I Was Younger

As I write this early in my 79th year I am aware not only of my mortality (although I don’t spend much time on that except for getting my bucket list and will in order) but also of the investment opportunity that is coming and that I can’t really take advantage of. It’s long term, longer than I likely have.

It is the realization that the solar revolution is finally unfolding and that we are in the early stages of a sea change that will change the energy picture in major ways for our children and grandchildren over the next few decades of the 21st century. It is an exciting time to be alive, with all the changes coming, but the transition will take time as history teaches. There will also be ups and downs along the way – e.g., the fact that some governments in Europe recently and retroactively cut subsidies and Introduced import tariffs on low cost Chinese solar panels. But the long-term trend is clear.

I say this after forty plus years in the clean energy field, going back to 1969, and being overwhelmed recently by the burgeoning literature on solar and other renewables that appears on my iPad every day – e.g., the following interesting and encoraging piece on ‘community solar’ that appeared recently in the journal Energy and Environment :

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“There’s a tense dynamic accompanying the rapid growth of solar in the United States—in which traditional utility companies, nervous about the spread of rooftop solar panels, are seeking ways to limit the revenues made by solar customers who earn credit for the extra electricity they provide to the grid.

This battle over so-called “net metering” has been often depicted as a zero sum conflict between an upstart and an incumbent — but new research out of the University of Texas at Austin suggests there could be a kind of “middle ground” in the conflict between some utilities and solar installers.

The potential “win-win,” as the researchers put it, involves so-called community solar — solar energy projects or panels that are in effect shared by a group of people, such as the inhabitants of an apartment building, rather than sitting on a single residential rooftop. The study, recently published in Energy Research & Social Science and led by Erik Funkhouser of the LBJ School of Public Affairs at the University of Texas at Austin and three university colleagues, found that at least some utility companies seem to like community solar programs, are already offering them, and plan to expand them.

One key reason? Customers clearly want access to solar, and some utility industry representatives find community solar to be a great way to give it to them — in a manner that allows the utility to continue to service these customers’ full electricity demand, that is.

“If you are a utility that is concerned with the rapid growth of residential solar — which means that a lot of the demand is moving away from your direct control — in that case you can imagine developing a competitive community solar program that is priced around what a residential system or residential lease might look like, and you might actually price it lower,” says Varun Rai, a professor of mechanical engineering at the University of Texas, Austin and one of the authors of the study.

The research also suggests yet another way — beyond getting directly into the business of installing rooftop solar, as Southern Company subsidiary Georgia Power is now doing — that traditional power companies seem to be finding their way into the hot solar market.

Community solar has certainly been getting a lot of attention lately — largely because of its vast potential to expand solar access.

Last month, the Obama administration announced an array of new initiatives to broaden access to solar energy to more Americans — since so far, solar has generally been the province of relatively wealthy homeowners. Solar City, the top U.S. solar installer, recently announced a massive project to install some 100 “solar gardens” in the Minneapolis-St. Paul area, with a particular focus on allowing renters to participate in solar energy. And GTM Research, which studies the clean energy industry, projects that community solar will be “the most significant solar growth market for the United States.”

[Many Americans still lack access to solar energy. Here’s how Obama plans to change that]

The new study adds to the theme, reporting on the results of seven utility industry interviews about community solar, as well as the responses to 57 surveys on the subject distributed to investor owned utilities, municipal utilities, and rural electric cooperatives. The researchers also analyzed 61 community solar projects. And they concluded that community solar has the potential for “stabilizing the customer-utility relationship with deeper solar penetration.”

In effect, this is happening because some utilities seem to realize that they’ve got to get involved in the solar wave, the sooner the better. Or as the study put it:

One utility reported that, even without significant penetration of residential solar PV in its territory, staving off potential attrition of its customer base partly drove its adoption of a [community solar] program. Another utility, a large [investor-owned utility], reported that it was motivated to pursue [community solar] for the same reason. The organization anticipates increases in the popularity of solar [distributed generation] going forward. By investing in [community solar] it hopes to satisfy customer demand for solar [distributed generation] as cost-effectively as possible.

The state of California has even mandated that its three main utilities — Pacific Gas and Electric, Southern California Edison, and San Diego Gas & Electric — begin to offer community solar programs, and on a large scale. The utilities are slated to set up 600 megawatts of community solar capacity by 2019.

PG&E’s community solar program, for instance, will allow customers to sign up to get either half or all of their electricity from solar projects that PG&E will “contract with,” or separately make an agreement with an outside solar installer to purchase some of that installer’s electricity gene
ation. Either way, the customers get billing credit from PG&E for not needing to use as much traditional electricity any longer. Initially there will be a premium to be in the program, but PG&E says that will “likely diminish over time if PG&E’s overall generation costs increase and solar costs fall.”

Other community solar programs offered by utilities include the Bright Tucson Community Solar program, offered by Tucson Electric Power, and the Sacramento Municipal Utility District’s SolarShares program.

Granted, for now only a relatively “small fraction” of utilities appear to be moving into the community solar space, according to lead study author Erik Funkhouser. And of course, not all community solar programs are offered by utilities. A group of individuals might start one of their own, of their own volition. A project might also be carried out on a nonprofit basis.

One major difference, notes Rai, is that when individuals set up a community solar program, they often do so with so-called “virtual net metering,” which allows participants in the program to get credit for the electricity generated and thereby reduce their electricity bills, in much the same way that residential solar owners do under current net metering schemes. The only difference is that they don’t actually own the equipment or have it on their own roofs — rather, their credit is divided up virtually among participants in the community solar program.

Rai thinks utilities won’t go for this arrangement, for the same reason that they’ve been so resistant to net metering in general. “For all practical purposes, the only difference between virtual net metering and net metering is, you don’t have the system on your roof,” he says. “But for the utility, you are exactly the same on your bill.”

The power company is still losing out on a portion of the individual’s electricity demand in this case — what has been termed “load defection” — so Rai thinks that utilities will try to offer community solar customers cost savings in a different way: through economies of scale. As prices for solar get lower and lower, community solar plans offered by utilities might simply become a good deal. “It just comes down to what the rate plan is,” Rai says. “If you give me a solar plan that has a benefit, then sure.”

Whether those in the solar camp will agree this is a “win-win” is not so clear, of course — virtual net metering could be the new sticking point.

So in sum, it’s far too early to know yet how this is going to play out — but it’s just another sign that we can expect major dynamism in the solar space, not only due to growth overall but as incumbent utilities try to compete with the upstart solar industry. For now, utility-offered community solar is just the latest indication of that.

“It’s a very early phase of a very interesting business model,” says Rai.”
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I could list many other articles that lead to the same conclusion, that some U.S. utilities have finally begun to come to grips with the reality that renewable energy (not just solar but also hydropower, wind, geothermal, biomass, ocean energy), when combined with a smart national grid and cost-effective energy storage, can eventually provide the vast majority of our electrical energy needs, including the anticipated demand growth from electrified transportation vehicles. Utitilities in Germany came to this conclusion earlier, largely due to Germany’s energy policy that encouraged installation of wind, solar, and other renewable energy technologies through provision of so-called feed-in tariffs (FiTs). FiTs is a policy mechanism that provides an extra fee (tariff) above the retail rate of electricity to provide long-term security to renewable energy producers, typically based on the cost of generation of each technology.

At this point in time solar energy is the fastest growing energy source in the world today, having recently passed wind energy for this distinction. Of course solar starts from a small base and has a long way to go to provide a significant share of the world’s electrical energy. Nevertheless, when one looks at recent trends in various countries such as the UK, China, India, Australia, and others, let alone the U.S., it is clear that large parts of the world have accepted the inevitability of a renewable energy future, with a large part of that future being based on solar energy. In addition, African nations are beginning to expand their economies and take advantage of their extensive renewable energy resources, particularly solar, and the related investment opportunities are huge.

All this leads me to believe that the transition to renewables is well underway and offers not only investment opportunities for those with insight and patience, but also a response to the challenge presented by global climate change. With care being paid to where the investments are made, the financial returns should be quite impressive in the decades ahead. If only I were younger.

Does It Make Sense to Add Storage to a Home Solar System?

A topic that is receiving increasing interest of late is the possibility of adding electrical energy storage to a home solar power system. This latest tweak on use of solar energy for powering homes and businesses was stimulated by Elon Musk’s recent announcement that Tesla, his electric vehicle automobile company, will be marketing 7 kWh and 10 kWh Li-ion battery Powerwall storage units at lower-than-anticipated costs ($429/kWh and $350/kWh, respectively) in the near future.

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Shortly thereafter, Daimler, another automobile manufacturer (Mercedes Benz), announced that they would be doing the same come this September, and the Australian utility AGL Energy announced that they will be offering 7.2 kWh systems at under $10,000 each. These announcements opened the analytic floodgates and numerous articles have appeared since on the costs-benefits of adding storage to solar systems.

The general consensus seems to be that adding storage systems to solar systems on individual homes today is still a bit dicey – payback times at current prices can be a decade or longer (see chart below for Victoria, Australia) – but that large scale use by utilities can offer significant operational and cost advantages. Of course payback depends on the size of the storage system, storage costs now and in the future, size and cost of the associated solar PV array, the structure of electricity tariffs and incentives, the regulatory environment, and the size of the solar resource.

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This blog post was stimulated by a sense that, with recent progress, things solar are getting complicated, and a specific question from a colleague who asked if it made economic sense to add storage to a home PV system. In my desire to get a better handle on this question I’ve read quite a bit of the available literature but still wanted to do some simple calculations for myself to feel comfortable with the more detailed answers now becoming available. I hope this simplified approach helps others as well as myself understand the pros and cons of this transformative change in our energy system.

After thinking briefly about how to do this ‘back-of-the-envelope’ calcution I thought it best to start with an even more basic question: Does it even make economic sense to put a solar array on my roof? While the cost of PV systems has decreased dramatically in recent years, mostly due to economies of scale in manufacturing, electricity costs in the U.S. are still pretty low compared to prices in much of the rest of the world, and cost-sensitive consumers may be skeptical of the solar economics. Of course there are other reasons for going solar even if the kWh costs are more than utilities are currently charging. These include a desire for backup daytime power during power outages, which stimulated significant demand for solar in California when the state experienced brownouts/blackouts in the 1990s. Storage obviously helps here as well.

Other reasons are cost if one is far off the grid (power line extensions are expensive), a desire to get fully off the grid, a hedge against future increases in the costs of utility power, or to reduce one’s environmental impact by reducing demand for fossil fuel generated electricity. In the case of utilities solar may be part of a program to meet mandated environmental constraints and renewable portfolio standards (e.g., 20% renewables by 2020), while recognizing that solar may reduce cost uncertainties associated with dependence on often volatile fossil fuels and provide other ancillary benefits for grid control and stability.

For purposes of calculation I will make the following assumptions:
– solar insolation numbers for the U.S. will be derived from maps produced by the National Renewable Energy Laboratory (NREL). For my home in Virginia I will use an average insolation of 4 kWh per square meter per day and a solar-to-electricity conversion efficiency of 20%.

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– the solar array will consist of fourteen 250 peak watt panels, for an array total of 3.5 kW peak. Each panel will have a surface area of 1.65 square meters. (Note: these numbers are taken from vendor offers on the web). Installed cost will be $3.50 per peak watt.
– total daily consumption is 30 kWh (10,950 kWh per year)
– average electricity costs are 12 cents per kWh
– no incentives from federal or state governments (note: these can make a difference in required investment and can be easily included in these calculations)
– a 10 kWh storage unit will be installed at a total cost of $5,000

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(Note: the reader can use his/her own assumptions in redoing these transparent calculations.)

At 10,950 kWh annual consumption at an average cost of $0.12/kWh, the annual electricity bill, pre-solar, is $1,314. Total solar panel area is (14)x(1.65) = 23.1 square meters. At an average insolation value of 4 kWh per square meter per day the 14 panels intercept (4)x(23.1) = 92.4 kWh per day or 33,726 kWh per year. At a PV panel conversion efficiency of 20% this creates 6,745 kWh of electricity that offsets (6,745)/(10,950) = 62% of the demand from the utility. The resultant annual cost saving is (0.62)x($1,314) = $815. This is to be compared to the installation cost of
(3.5 kW)x($3.50 per watt) = $12,250. Thus, a simple payback period would be (12,250)/(815) = 15.0 years. With federal and state incentives that offset 30% of the installation cost the simple payback period would be reduced to 10.5 years. Since solar panel performance is now routinely guaranteed for 25 years, there would be many years of reduced energy bills after the payback period.

The problem for many people who wish to install solar on their roofs is the required upfront investment. Several solutions that reduce the upfront cost to zero or near zero have been proposed to address this barrier – e.g., leasing of the panels (often with the option to buy) from a vendor who installs the panels on your house, power purchase agreements (PPAs) where you agree to purchase the electricity produced by the panels at a set price for a set number of years, solar loans, and even putting the initial cost of installation into one’s property taxes and paying off the amount over many years as you pay your taxes. See, e.g., “Your financing options for your solar panel system: solar loans, solar leases and PPAs” at www.energysage.com/solar/financing/your-financing-options. Often these options provide electricity at costs lower than utility-provided power. Attractive financing options are the new holy grail in solar now that we have more experience with solar and panel costs have come way down.

Now let’s do a calculation that looks at the economic viability of installing a storage unit in a house with solar panels. Again, one must be clear about the reasons for adding storage – is it anticipated cost savings, backup power during grid outages, or the necessity of storage if one wishes to disconnect from the grid? With a large enough solar array and storage system an off-grid house can supply all its electrical energy needs day and night, but at a cost. This cost arises from the requirement of a larger solar array to power both the house during the day and generate enough spare electricity during the day to charge the storage unit and meet night-time needs. It also involves the cost of a storage unit, which at 7 or 10 kWh should be enough to meet most people’s night-time needs. This latter case (let’s assume a 20-panel array (5 kW peak) and the Tesla 10 kWh Powerwall) leads to an upfront cost of (5 kW)x($3.50/watt) + $5,000 = $22,500. (Note: financing options such as those for solar arrays are not routinely available yet for Li-ion battery storage units that are just beginning to hit the market. However, one can reasonably expect that they will become available in the not-so-distant future. The Australian Renewable Energy Agency (arena.gov.au) has just released a report which predicts a 40-60 per cent price plunge for certain battery technologies by 2020.)

Total available energy would be (33 square meters)x(5 kWh/day per square meter)x(20%) = 33 kWh per day. This should be adequate for most days of the year, including fully charging the storage unit, except for unusual extended periods of little sunlight. To cover that possibility a backup generator may be required.

Let’s compare this off grid situation cost-wise with our earlier solar panel example where 62% of annual electricity consumption was offset by solar generation, leading to an annual utility electricity bill of (38%)x($1,314) = $499, or $41.6 per month. This would increase to $45.8 per month if the size of the solar array was increased to provide 33 kWh per day.

Another number we might consider is the monthly cost if tariffs were higher, as they are in some parts of the U.S and many other parts of the world. For example, at a utility rate of $0.20 per KWh monthly electricity costs for the 3.5 kW system case would be $69.3 per month and $86.7 at $0.25 per KWh.

If one were to borrow the $5,000 cost of the storage unit as
a 30-year loan at 4% interest, a common situation in the U.S. today, the extra monthly payment would be $23.9.

Given these numbers, what might one conclude? Today, on a pure cost-saving basis it will take several years to recover the cost of a solar system, and even a bit longer for a system with storage. However, going the solar-only or solar + storage routes bring other benefits – the possibility of lower monthly electricity costs, protection against power outages and fossil fuel or nuclear power cost increases, reduced environmental impact by reducing demand on traditional fossil fuel-powered utility generators, and the possibility of leaving the grid, partially or fully. I also want to emphasize that these calculations will look quite different in future years as traditional power costs increase, costs of PV and storage systems decrease, financing options become more readily available and attractive, and people have more experience with solar and storage. In my opinion this trend toward solar is already happening and is inevitable, as is global movement toward an energy system based largely on renewable energy.

I know that these simple calculations have helped me get a clearer view of solar economics. I hope they do the same for others and provide some clarity about the key role solar energy and storage will play in the electricity supply of the future.
More sophisticated model results are available on the web.

The Yieldco and Its Impact on Solar Energy

The following important article was authored by Dr. Peter Varadi, a colleague, friend, and a true solar energy pioneer. It was published today (10 July 2015) in the e-journal energypost.eu, and is republished here with the author’s permission. An introduction was added by Karel Beckman, editor-in-chief of energy post.eu.

Solar Revolution Meets Wall Street
July 10, 2015 by Peter F Varadi

Introduction: The invention of the YieldCo is a gamechanger that will enable spectacular growth of solar PV, writes solar pioneer Peter F. Varadi. According to Varadi, the PV YieldCo offers significant advantages over investments in fossil fuel power: no fuel supply is needed, no long-term purchasing contracts for the generated electricity and less costly infrastructure. The solar revolution meets Wall Street.

Solar power in the US is still lagging behind China and Germany, but if solar pioneer Peter F. Varadi is right, America may well catch up pretty soon. The reason is the YieldCo. A typically American financial innovation that will act as a “solar breeder”, argues Varadi.

The YieldCo is essentially an independent power producing (IPP) corporation that operates renewable energy assets, such as wind, solar and hdyro. The company is publicly traded, “yields” a predictable cash flow, and distributes its income to its shareholders. Thus, it opens up the renewable energy (especially solar PV) sector to investment by small mutual funds and millions of private citizens. The far-reaching effects will become apparent over the next few years, says Varadi: the YieldCo will transform the US solar market.
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In 1982 at Solarex, a company I co-founded in 1973 which had by then become the largest PV producer in the world, we envisioned a “Solar Breeder”. The idea was that we would manufacture solar cells and modules which would be mounted on the roof of our production facility to produce electricity which would then be used to produce solar cells and modules, etcetera.

With the completion of Solarex’s new solar cell and module manufacturing facility in 1982, the realization of this idea was started.

The slanted roof of the Solarex building (see photo) was covered with a PV roof producing 200 kW of electricity. The produced DC electricity was stored in batteries and converted to AC. The system was used to power 24/7 the production control systems.

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The World’s first and at that time the largest (200 MW) rooftop PV system. Courtesy of Mr. Ramon Dominguez

The cost of PV modules in those days was quite high, but we were able to do this, because that was the time when we developed the multicrystalline wafer casting technique. We did not want to sell the early production before we had experience with PV modules produced from those wafers to ensure that the process worked well. So, the first 200 kW of modules were mounted on the roof of the facility.

The idea of the “solar breeder” was tested, but in those days to power the entire production of a solar cell and module production facility would have been prohibitively expensive. The idea went dormant.

The reincarnation of the “Solar Breeder” idea with an economic twist came about 30 years later. The Solarex idea was to produce solar cells and modules by utilizing the electricity generated by a PV system. The new “Solar Breeder” idea is to utilize the income generated by selling PV systems to finance the production of more solar cells and modules to build the next PV systems. The new “Solar Breeder” concept is called “YieldCo”. It is transforming the solar power sector.

The invention of the “YieldCo” system

The origin of the “YieldCo” idea in the USA goes back to 1960 when President Dwight D. Eisenhower signed the Real Estate Investment Trust (REIT) law. REITs are corporations which own and operate real estate properties and distribute their income to the shareholders. The REIT idea became so popular that at present REITs exist in 37 countries and in 2014 were listed globally on 456 stock exchanges.

21 years later the idea was extended to Master Limited Partnerships (MLP) pertaining first to “natural resources” such as petroleum and natural gas extraction and transportation. The first MLP was Apache Petroleum Company in 1981, based on oil and gas resources. The idea became so popular that it was adapted to a variety of industries.

In 2012, 52 years after the REIT financial program was started the “YieldCo” idea was initiated. YieldCo is basically the adaptation of the REIT program to Renewable Energy (RE), by forming an independent power producing (IPP) corporation to operate primarily RE (water, wind and solar) assets. The company is publicly traded, “yields” a predictable cash flow, and distributes its income to the shareholders.

The first YieldCo in the renewable energy field was Brookfield Asset Management’s subsidiary Brookfield Renewable Energy Partners. It was established – only 3 years ago – at the beginning of 2012 and is listed on the New York stock exchange (BEP). BEP’s assets are hydroelectric (80%) and wind plants (20%) scattered all over the world with a total installed capacity of about 7,000 MW.

The basis of the success of the YieldCos is manifold:

Because they are on the stock market the possibility of relatively small investment by mutual funds and small investment by private citizens opens the pocket book of millions.
Liquidity: one can get money out when needed.
Relatively stable cash flow: for example the electric yield of PV systems is predictable for at least 20 years and is not affected by political or financial crises which puts YieldCos, in terms of risk limitation, ahead of REITs or MLPs.
Result of the success of the first “YieldCo”

The stock market success of Brookfield opened up the floodgates to other RE YieldCos:

2013

April: Hannon Armstrong Sustainable Yield Infrastructure Capital Inc. (HASI) New York stock exchange (NYSE). [Financing energy efficiency projects also wind and solar]
July: NRG Yield Inc. (NYLD) New York stock exchange (NYSE) – [Wind, Natural gas, PV (12%)]
July: TransAlta Renewables (RNW) Toronto stock exchange. [wind 63% – Gas 31% and Hydro 6%]
September: Pattern Energy Group (PEGI) New York stock exchange (NASDAQ-NMS) – [Wind]
2014

June: Abengoa Yield (ABY) New York stock exchange (NASDAQ-NMS) – [50% concentrated solar thermal (not PV), 3% water, conventional power and Electric transmission].
June: NextEra Energy Partners (NEP) New York stock exchange (NYSE) – [77% Wind, and 23% PV]
July: TerraForm Power (TERP) New York stock exchange (NASDAQ-NMS) [Started with 100% PV, added recently some wind]. TerraForm Power was created by SunEdison, one of the biggest PV manufacturers in the USA.
2015

June 19th: 8point3 (CAFD) New York stock exchange (NASDAQ-NMS) First Solar and SunPower the other large PV manufacturers in the USA created a joint YieldCo by transferring to it PV systems.
2015 (planned)

TerraForm Global Inc.: SunEdison after its successful first experience filed an S-1 form with the U.S. Securities andExchange Commission (SEC) for this initial public offering to raise US $700 million.
NSP: Neo Solar Power Corporation at the moment the largest Taiwanese Solar cell and module manufacturer announced that it plans to announce Taiwan’s first YieldCo to be listed on the Hong Kong Stock exchange by the end of 2015.
YieldCos’ solar assets

As part of a YieldCo asset mixture the utilization of PV started in 2013 (e.g. NRG Yield Inc. – 12%).

In 2014 “Abengoa Yield” (ABY), a subsidiary of Abengoa S.A., a Spanish company, was the first YieldCo that had concentrated solar (thermal) systems (CSP not PV) as the majority of its asset mixture. Abengoa produces large scale CSP systems such as “Solana” (280 MW) located 70 miles southwest of Phoenix, AZ, and obviously had faith that their operation will be satisfactory. “Abengoa Yield” was created by assembling several CSP Assets in Spain and in South Africa and raised US $828 million.

But the most remarkable YieldCo in 2014 was SunEdison’s because it was the first PV manufacturing company which created a YieldCo [TerraForm Power (TERP)] consisting entirely of PV systems (utility scale PV 848 MW and distributed PV 283 MW). In 2015 SunEdison is planning to establish its second YieldCo (TerraForm Global Inc.). SunEdison was the first PV manufacturer to reincarnate the “Solar Breeder” ide a. SunEdison manufactured PV systems, transferred them to a newly created YieldCo and received cash which it can use to produce new PV systems.

Following SunEdison two major US manufacturers, First Solar and SunPower, formed a joint YieldCo, 8point3, the assets of which are 100% PV and which went public on June 19, 2015. This is also a good example of the Solar Breeder system: they manufactured PV systems, transferred them to a newly created YieldCo, and received US $420 million cash which they can use to produce new PV systems. The strange name, 8point3, derives from the fact that it takes 8.3 minutes for the sun’s radiation to reach the earth.

Thus, in 2014/2015 all of the three major US PV manufacturers established their first YieldCo.

The announcement by Neo Solar Power Corporation (NSP) of Taiwan that it is planning to establish a YieldCo in 2015 indicates that the YieldCo idea has spread to the Asian PV manufacturers. It is now only a matter of time before the many Chinese, Korean and Indian PV manufacturers will see the light and establish YieldCos as well. The money to be raised for PV systems b y this approach will dwarf Warren Buffett’s US $2.5 billion which his company invested in the Antelope Valley Solar Projects in California.

Why PV assets will be preferred in YieldCos

As we saw, at the outset the assets of YieldCos were primarily hydro and wind systems. Now they are turning more and more to PV. The three US PV manufacturers started their YieldCo’s with 100% PV assets. There are two main reasons why PV in future will dominate the assets assembled to create YieldCos.

Location: In order to establish a RE YieldCo one needs to build or acquire RE electric power generating system(s). These systems could be hydro, wind, concentrating solar and solar PV. Of these systems hydro, wind and concentrating solar can only be established where there is water, sufficient wind or direct, unscattered sunshine available. These are only available in a limited number of places on earth. PV systems on the other hand can be established in most parts of the Earth where people live. An example is Germany which is not the sunniest part of our planet. It is located quite far north and it has lots of cloudy days but at this time there is more PV capacity installed in Germany than in any other country. This means, that YieldCos utilizing PV assets could be anywhere. The other RE assets are more limited and soon only a limited number will be available for YieldCo.
ROFO: For tax reasons YieldCos have to invest constantly in new assets to assure the growth of income for distribution to shareholders. It is therefore extremely important that the YieldCo has a contract with the technology “sponsor” (originator) to be able to obtain assets that the “sponsor” is developing. This ensures a pipeline for future assets and a “right to first offer” (ROFO) for the assets. This strange wording is a remnant of REIT, the ancestor of YieldCo, and means “Right of First Negotiation”, so that the “sponsor” should have good faith negotiations with the YieldCo before negotiating with other parties. The idea behind this is that the YieldCo should have an assured path to new assets. To assure a pipeline in hydro or wind is complicated as they have to be found at a proper location and may not be always available. However, if a PV manufacturer is the “sponsor” it can assure the continuation of new PV assets in any size and location at any time when needed, because the PV manufacturer’s business is to produce them continuously. PV applications are ubiquitous and can be installed quickly.
The advantage of the YieldCo system for PV manufacturers

PV YieldCo is the perfect solar breeder. A YieldCo’s shares when sold can be used as a source of low cost money for producing more PV systems. The beauty for the manufacturer is, that by establishing a YieldCo based on the PV manufacturer’s need of cash it can sell
all the shares or
as many shares for as much money as the PV manufacturer needs, and enjoy the income from the unsold shares and
may retain management and maintenance contracts, which provides additional income.
PV manufacturers for a long time will not have to face overcapacity and unsold inventory, because it can be used to produce YieldCos.
PV manufacturers do not have to find single investors like Warren Buffett’s company which can afford to invest lots of money to buy a large utility size PV system. People can buy the YieldCo shares in any quantity and it has been shown that it was not a problem for PV YieldCos to generate many hundreds of millions of dollars of investment capital.
Finally, a PV YieldCo offers significant advantages over an investment in a fossil fuel power generating system. Fossil fuel power plant needs three things to be economically successful: a long term agreement for fuel supply at reasonable cost; capital investment to build the plant; and a long term guaranteed customer base.

For a PV YieldCo these issues are vastly simplified: one does not have to secure a long term contract for the fuel, because the nuclear reactor in the sun provides it free of charge; raising money on the stock market for a YieldCo turns out to be much easier than convincing lenders to provide the large amount of money to build a fossil fuel plant; and there is no need to look for customers who would sign a long term contract, as PV systems can be built anywhere and can reach customers easily: through the utilities by the existing grid or by a mini-grid; or directly when they are off-grid.

YieldCos’ influence on the future

For all these reasons, I have come to the conclusion that the effect of global implementation of the PV YieldCo system will radically increase the growth of the utilization of PV and accelerate the expansion of PV companies. More than that: it will also affect the solar PV distribution system, influencing other industries at the same time, for example reshaping the business model of utilities. Financial revolutions can be no less important than technological revolutions.

© Peter F. Varadi. All rights reserved

Peter F. Varadi wrote a history of the early years of the solar industry, Sun Above the Horizon, published last year by Pan Stanford Publishing, and reviewed here on Energy Post.

The Exciting Changes Taking Place in Scotland’s Energy System

I returned recently from a two-week visit to Scotland, my wife’s home country. She and I are now the owners of a flat (apartment in Americanese) in East Kilbride, near Glasgow, that makes visiting with her family much easier.  Another exciting feature is that on all clear days (it happens occasionally in Scotland) we can see, from the flat’s bedroom windows, wind turbines spinning in the nearby Whitelee wind farm, currently the largest operating onshore wind farm in Europe (just under 600MWp). The wind farm is several miles away from the flat.

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The purpose of this blog post is to discuss the exciting developments taking place in Scotland’s energy system, where the stated national goal is to go 100% renewables for electricity supply by 2020. Achieving this goal, whether in 2020 or sometime in the decade afterwards, will rely heavily on Scotland’s large wind resources, both onshore and offshore. As a sparsely populated country (total population is 5.4 million ) with significant renewable energy resources, Scotland “..is in a unique position to demonstrate how the transition to a low-carbon, widely distributed energy economy may be undertaken.”

What is Scotland’s current energy situation?  In Late November 2014 it was announced by the independent trade body Scottish Renewables that “.. with numbers from the first half of 2014, ..renewable energy was Scotland’s largest source of (electrical) power.” Specifically, for the first half of 2014, renewables provided 10.3 TWh of electrical energy, while nuclear power, previously Scotland’s main sources of electricity, provided 7.8 TWh. Coal was third with 5.6 TWh with natural gas at 1.4 TWh.

This increase in renewable generation continues the trend shown in the following chart:

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Installed renewable capacity increased to 7,112 MW by the end of the 3d quarter of 2014 – mostly onshore wind and hydro – with another 441 MW of wind capacity (onshore) in construction, 7,720 MW (onshore and offshore) awaiting construction, and 3,765 MW (onshore) in planning. Small amounts of other renewable generation (biomass, landfill gas, hydro) are also in the pipeline.

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With wind power already generating enough electricity to supply more than total Scottish household demand, Niall Stuart, Chief Executive of Scottish Renewables, sees much more potential in the future: “Offshore wind and marine energy (wave, tidal, ocean current) are still in the early stages of development but could make a big contribution to our future energy needs if they get the right support from government. That support includes the delivery of grid connections to the islands, home to the UK’s very best wind, wave and tidal sites.”

Scottish enthusiasm for renewables was bolstered by a report issued  by WWF Scotland in January (‘Pathways to Power: Scotland’s route to clean, renewable, secure electricity by 2030’) which concluded that, with respect to electricity, a fossil fuel-free Scotland is not only technically feasible but “..could prove a less costly and safer option than pursuing fossil fuel- based development..” that assumes carbon capture and sequestration (CCS) technology will be operating at scale in 2030. With regard to the Scottish government’s stated goal of decarbonizing the electrical sector by 2030, Paul Gardner of DNV GL, lead author of the report, has stated that “There is no technical reason requiring conventional fossil and nuclear generation in Scotland.”  In addition, Gina Hanrahan, climate and energy officer at WWF Scotland, explained that “The report shows that not only is a renewable, fossil fuel-free electricity system perfectly feasible in Scotland by 2030, it’s actually the safe bet. Pursuing this pathway would allow Scotland to maintain and build on its position as the UK and Europe’s renewable powerhouse, cut climate emissions (electricity generation accounts for one-third of Scotland’s emissions) and continue to reap the jobs and investment opportunities offered by Scotland’s abundant renewable resources.”

What is Scotland’s natural resource base for renewables?  In addition to its existing installed capacity of hydropower (1.3 GW), it is estimated that wind, wave and tide make up more than 80% of Scotland’s  renewable energy potential – 36.5GW/wind (onshore and offshore), 7.5 GW/tidal power, 14 GW/wave power. This total, almost 60 GW, is considerable greater than Scotland’s existing electrical generating capacity from all fuel sources of 10.3 GW.

It is interesting to note that Scotland also has significant fossil fuel resources, including 62.4% of the European Union’s proven oil reserves, 12.5% of the EU’s proven natural gas reserves, and 69% of UK coal reserves.  Nonetheless, the Scottish Government, as discussed above, has set ambitious goals for renewable energy production. This is likely driven by concern for global climate change and the economic potential for Scotland as a major source of renewable energy.

 

 

Documenting the 1970s – Part 1 of 2

A theme that has emerged in some of my recent blog posts is that many useful thoughts on renewable energy policy were formulated in the late 1970s, but that the U.S. was slow to pick up on the opportunities (e.g., see ‘A Personal View’). In the course of reviewing materials long-stored in my basement files I have found quite a few documents that were published at that time that support this theme, and I will use this blog to make sure that some of them are easily available.

The first of two documents I will post is the June 20, 1979 message sent by President Carter to the U.S. Congress that outlined “..the major elements of a national solar strategy.” It was based on the DPR (Domestic Policy Review of Solar Energy) that had been delivered to the President six months earlier. It shows that President Carter understood the importance of committing “..to a society based largely on renewable sources of energy” way back when. He deserves great credit for this foresight, which unfortunately was not shared by his successor in the White House.

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The attached document is quite long, for which I apologize, but well worth reading. It demonstrates that U.S. thinking about energy was quite advanced more than three decades ago, and that it is only in recent years, under President Obama, that we have started to seriously implement those long-ago ideas and proposed policies. It is a shame and national disgrace that it has taken so long to do this, and dispiriting to comprehend what could have been accomplished but wasn’t. However, as we say, better late than never.

Further early discussion of these ideas will be presented in the follow-up post ‘Documenting the 1970s – Part 2 of 2′.

……………………………………,,,,,

FOR IMMEDIATE RELEASE

June 20, 1979

Office of the White House Press Secretary
THE WHITE HOUSE
TO THE CONGRESS OF THE UNITED STATES:
On Sun Day, May 3, 1978 we began a national mobilization in our country toward the time when our major source~ of
energy will be derived from the sun. On that day, I committed our Nation and our government to developing an aggressive
policy to harness solar and renewable sources of energy. I ordered a major government-wide review to determine how
best to marshal the tools of the government to hasten the day when solar and renewable sources of energy become our
primary energy resources. As a result of that study, we are now able to set an ambitious goal for the use of solar energy
and to make a long term commitment to a society based largely on renewable sources of energy. In this Message I will outline
the major elements of a national solar strategy. It relies not only on the Federal government, both Executive and Congress,
but also on State and local governments, and on private industry, entrepreneurs, and inventors who have already given us significant progress in the availability of solar technologies. Ultimately, this strategy depends on the strength of the American people’s commitment to finding and using substitutes for our diminishing supplies of traditional fossil fuels.

Events of the last year — the more than 30% increase in the price of oil we import and the supply shortage caused
by the interruption of oil production in Iran — have made the task of developing a national solar strategy all the more
urgent, and all the more imperative. More than ever before, we can see clearly the dangers of continued excessive reliance on oil for our long-term future security. Our energy problem demands that we act forcefully to diversify our energy supplies, to make maximum use of the resources we have, and to develop alternatives to conventional fuels. Past governmental policies to control the prices of oil and natural gas at levels below their real market value have impeded development and use of solar and renewable resource alternatives. Both price controls and direct subsidies that the government has provided to various existing energy technologies have made it much more difficult for solar and renewable resource technologies to compete. In April of this year I announced my decision to begin the process of decontrolling domestic oil prices. Last November, I signed into law the Natural Gas Policy Act which
will bring the price of that premium fuel to its true market level over the next five years. Together, these steps will
provide much-needed incentives to encourage maximum exploration and production of our domestic resources. They provide
strong incentives to curb waste of our precious energy resources. Equally important, these steps will help solar and renewable resource technologies compete as the prices of oil and natural gas begin to reflect their real market value.
Consumers will see more clearly the benerits of investing in energy systems for which fuel costs will not escalate each year. Industry can plan and invest with more certainty, knowing the market terms under which their products will compete.

We must further strengthen America’s commitment to conservation. We must learn to use energy more effiCiently and productively in our homes, our transportation systems and our industries. Sound conservation practices go hand in hand with a strong solar and renewable resource policy. For example, a well-designed and well-insulated home is better able to make use of solar power effectively than one which is energy inefficient. We must also find better ways to burn and use coal — a fossil fuel which we have in abundance. Coal must and will be a key part of a successful transition away from oil. We must and will do more to utilize that resource. Solar energy and an increased use of coal will help in the near and mid-term to accelerate our transition away from crude oil.

But it is clear that in the years ahead we must increasingly rely on those sources of power which are renewable. The
transition to widespread use of solar energy has already begun. Our task is to speed it along. True energy security —
in both price and supply — can come only from the development of solar and renewable technologies. In addition to fundamental
security, solar and renewable sources of energy provide numerous social and environmental benefits. Energy from the sun is clean and safe. It will not pollute the air we breathe or the water we drink. It does not run the risk of an accident which may threaten the health or life of our citizens. There are no toxic wastes to cause disposal problems. Increased use of solar and renewable sources of energy is an important hedge against inflation in the long run. Unlike the costs of depletable resources, which rise exponentially as reserves are consumed, the cost of power from the sun will go down as we develop better and cheaper ways of applying it to everyday
needs. For everyone in our society — especially our low-income or fixed-income families — solar energy provides an important way to avoid rising fuel costs. No foreign cartel can set the price of sun power; no one can embargo it. Every solar collector in this country, every investment in using wind or biomass energy, every advance in making electricity directly from the sun decreases our reliance on uncertain sources of imported oil, bolsters our international trade position, and enhances the security of our Nation.

Solar energy can put hundreds of thousands of Americans to work. Because solar applications tend to be dispersed and decentralized, jobs created will be spread fairly evenly around the Nation. Job potentials span the ranges of our employment spectrum, from relatively unskilled labor to advanced engineers, from plumbers and metal workers to architects and contractors, from scientists and inventors to factory workers, from the small businessman to the large industrialist. Every investment in solar and renewable energy systems keeps American dollars working for us here at home, creating new jobs and opportunities, rather than sending precious funds to a foreign cartel.

Increased reliance on solar and renewable technologies can also increase the amount of control each one of us as individuals and each of our local communities has over our energy supplies. Instead of relying on large, centralized energy installations, many solar and renewable technologies are smaller and manageable by the homeowner, the farmer, or the individual factory or plant. By their very nature, renewable technologies are less likely to engage the kind of tension and conflict we have seen in other energy areas, such as the problems
posed by siting a very large energy facility, or trading off between surface uses of land and development of the energy minerals that might lie below that land.

Finally, solar and renewable technologies provide great international opportunities, both in foreign trade, and in the ability to work with developing nations to permit them to harness their own, indigenous resources rather than become dependent on fuels imported from other nations.
It is a mistake to think of solar energy as exotic or unconventional. Much of the technology for applying the sun’s power to everyday tasks has been in use for hundreds of years. There were windmills on our great plains long before there were high tension wires. There were factories in New England using waterpower long before the internal combustion engine was invented. In Florida, before World War II, there were more than 60,000 homes and buildings using solar hot water heaters. The Native Americans who built the great cliff dwellings of the West understood and applied solar heating principles that we have neglected in recent years, but which are available for us to use today.

These traditional and benign sources of energy fell into disuse because of a brief glut of cheap crude oil. These years are over. That inescapable fact is not a cause for despondency or a threat to our standard of living. On the contrary, it presents us with an opportunity to improve the quality of our lives, add dynamism to our economy and clean up our environment. We can meet this challenge by applying the time-tested technologies of solar power, and by developing and deploying new devices to harness the rays of the sun.

The government-wide survey I commissioned concluded that many solar technologies are available and economical today. These are here and now technologies ready for use in our homes, schools, factories, and farms. Solar hot water heating is competitive economically today against electric power in virtually every region of the country. Application of passive design principles that take into account energy efficiency
and make maximum use of the direct power of the sun in the intrinsic design of the structure is both good economics and good common sense.

Burning of wood, some uses of biomass for electricity generation, and low head hydropower have repeatedly been shown to be cost competitive.

Numerous other solar and renewable resources applications are close to economic competitiveness, among them solar space heating, solar industrial process heat, wind-generated electricity, many biomass conversion systems, and some photovoltaic applications. We have a great potential and a great opportunity to expand dramatically the contribution of solar energy between now and the end of this century. I am today establishing for our country an ambitious and very important goal for solar and renewable sources of energy. It is a challenge to our country and to our ingenuity. We should commit ourselves to a national goal of meeting one fifth – 20% – of our energy needs with solar and renewable resources by the end of this century. This goal sets a high standard against which we can collectively measure our progress
in reducing our dependence on oil imports and securing our country’s energy future. It will require that all of us examine carefully the potential solar and renewable technologies hold for our country and invest in these systems wherever we can.

In setting this goal, we must all recognize that the Federal government cannot achieve it alone. Nor is the Federal budget the only tool that should be considered in determining the courses we set to reach this goal. The extent to which solar and renewable technologies become more competitive will depend upon the cost of existing sources of energy, especially oil and natural gas. The degree to which existing solar technologies achieve widespread use in the near term will be as much if not more a function of the commitment on the part of energy users in this country to consider these technologies as it will be a function of the incentives the government is able to provide.

State and local governments must make an all-out effort to promote the use of solar and renewable resources if the
barriers now found at those levels are to be overcome. Zoning ordinances, laws governing access to the sun, housing codes,
and state public utility commission policies are not Federal responsibilities. Although the Federal government should
provide leadership, whether or not these tools are used to hinder or to help solar and renewable energy use Ultimately
depends upon decisions by each city, county and state. The potential for success in each of these areas is great; the
responsibility is likewise. I call on our Governors, our Mayors, and our county officials to join with me in helping
to make our goal a reality.

American industry must also be willing to make investments of its own if we are to reach our solar goal. We are setting
a goal for which industry can plan. We are providing strong and certain incentives that it can count on. Industry, in
turn, must accelerate and expand its research, development, demonstration, and promotional activities. The manufacturing,
construction, financing, marketing, and service skills of American business and labor are essential. Banks and financial
institutions will need to examine and strengthen their lending policies to assure that solar technologies are offered a fair
chance in the marketplace. Universities and the academic community must mobilize to find ways of bringing those solar
and renewable technologies that are still not ready for commercial introduction closer to the marketplace. Small
businesses and family farmers also have opportunities for significant use of solar and renewable resources. They, too,
must join in this effort.

Finally, each one of us in our daily lives needs to examine our own uses of energy and to learn how we can make solar
and renewable resources meet our own needs. What kind of house we buy, or whether we are willing to work in our own communities to accelerate the use of solar energy, will be essential in determining whether we reach our goal.

The Federal government also has a responsibility in providing incentives, information, and the impetus for meeting our 20%
solar goal by the year 2000. Almost every agency of the Federal government has responsibilities which touch in one way or another on solar energy. Government agencies helped finance over one million U.S. homes in 1978. By their lending policies and their willingness to assist solar investments, these agencies have significant leverage. The Tennessee Valley Authority is the Nation’s largest utility and producer of power. It has a far-reaching opportunity to become a solar showcase — to set an example for all utilities, whether public or privately owned, of how to accelerate the use of solar technologies. The Department of Defense (DOD) is a major consumer of energy and a major provider of housing. A multitude of opportunities exist for DOD to demonstrate the use of solar.

The Agency for International Development (AID) works full time in helping other countries to meet their essential needs, including energy. Solar and renewable resources hold significant potential for these countries and, through AID, we can assist in promoting the worldwide application
of these technologies.

The Department of Energy has a particularly significant responsibility in aiding the development and encouraging the use of solar energy technologies, in providing back-up information and training for users of solar, and, generally, in directing our government-funded research and development program to ensure that future solar and renewable technologies are given the resources and institutional support that they need.

As a government-wide study, the Domestic Policy Review of Solar Energy has provided a unique opportunity to draw together the disparate functions of government and determine how best to marshal all of the government’s tools to accelerate the use of solar and renewable resources. As a result of that study, the set of programs and funding recommendations that I have already made and am adding to today will provide more than $1 billion for solar energy in FY 1980, with a sustained Federal commitment to solar energy in the years beyond. The FY 1980 budget will be the highest ever recommended by any President for solar energy. It is a significant milestone for our country. This $1 billion of Federal expenditures — divided between incentives for current use of solar and renewable resources such as tax credits, loans and grants, support activities to develop standards, model building codes, and information programs, and longer term research and development — launches our Nation well on the way toward our solar goal. It is a commitment we will sustain in the years ahead.

I am today proposing the establishment of a national Solar Bank as a government corporation to be located within the Department of Housing and Urban Development (HUD). It will provide a major impetus toward use of today’s solar technologies by increasing the availability of financing at reasonable terms for solar investments in residential and commercial buildings. The Solar Bank will be funded at $100 million annually out of the Energy Security Trust Fund from revenues generated by the windfall profits tax. The Bank will be authorized to provide interest subsidies for home improvement loans and mortgages for residential and commercial buildings. It will pay up front subsidies to banks and other lending institutions Which, in turn, will offer loans and mortgages for solar investments at interest rates below the prevailing market rate. Ceilings on the amount of the loan or portion of a loan which can be subsidized will be set.

The Solar Bank will be governed by a Board of Directors including the Secretary of HUD, the Secretary of Energy, and the Secretary of the Treasury. The Board of Directors will be empowered to set the specific level of interest subsidy at rates which will best serve the purposes of accelerating the use of solar systems in residential and commercial buildings. Standards of eligibility for systems receiving Solar Bank
assistance will be set by the Secretary of HUD in consultation with the Secretary of Energy. The Solar Bank I have proposed is similar in many respects to that introduced by Congressman Stephen Neal of North Carolina. A companion bill has been introduced in the Senate by Senator Robert Morgan of North Carolina. To them. and to the co-sponsors of this legislation, we owe our gratitude for the hard work and sound conceptual thinking that has-been done on how a Solar Bank should be designed. The Solar Bank will complement the residential and commercial tax credits that I originally proposed in April 1977 and that were signed into law with the National Energy Act last November.

To provide full and effective coverage for all solar and renewable resource technologies which can be used in residential and commercial buildings, I have recently proposed two additional tax credits, to be funded out of the Energy Security Trust Fund. I am directing the Department of the Treasury to send to the Congress legislation which will provide a 20% tax credit up to a total of $2,000 for passive
solar systems in new homes. Credits will also be proposed for passive solar in commercial buildings. Passive solar applications are competitive today, but we need to provide incentives to owners, builders, architects, and contractors to ensure early and widespread use.

I am also directing the Treasury to prepare and transmit
legislation to provide a tax credit for purchasers of airtight
woodburning stoves for use in principal residences. This
credit would equal 15% of the cost of the stove, and will
be available through December 1982. There is a great potential
to expand significantly the use of wood for home heating. It
can help lower residential fuel bills, particularly as oil
and natural gas prices increase.

With these levels of assistance, hot water heating can
be made fully competitive with electricity. In many instances,
complete passive solar home designs, including solar heating
and cooling, will be economically attractive alternatives.

A strong Federal program to provide accurate and up-to-
date solar information to homeowners, builders, architects
and contractors will be coupled with these financial incentives. The Department of Energy has established a National Solar User Information Program to collect, evaluate and publish
information on the performance of solar systems throughout
the country. Expanding the government’s information dissemina-
tion systems through seminars, technical journals, state energy
offices, and the Solar Energy Research Institute will be a
major thrust of DOE’s program in 1980. The four Regional
Solar Energy Centers will become fully operational in 1980,
providing information to the general public and to groups
such as builders, contractors, and architects who will play
key roles in the acceleration of solar technologies.
To be fully effective, however, these incentives must
be combined with a determined effort by the architects,
engineers, and builders who design and construct our homes
and offices, schools, hotels, restaurants, and other buildings
we live and work in. I am calling upon thE deans of our
schools of architecture and engineering to do their part by
making the teaching of solar energy principles an essential
part or their curricula. The young men and women being
trained today must learn to regard the solar energy and overall
energy efficiency of the buildings they design as no less
important than their structural integrity. I call as well
on America’s builders to build and market homes which offer
the buyer freedom from escalating utility bills.

In the end, it will be consumers of this country who
will make the purchasing decisions that will dictate the
future of this industry_ They must have confidence in
the industry and in the products which it produces before
they will be willing to make necessary investments. To
this end. both industry and government must be ever vigilant
to assure that consumers are well protected from fraud and
abuse.
* * * * *
Significant opportunities for use of existing solar
technologies are also available in the agricultural and
industrial sectors of our economy. Industrial process heat
can be generated using solar technologies. Critical agricultural activities — fueling tractors, running irriga:ion pumps and drying crops — provide numerous opportunities for the use
of solar and other renewable resources. Biomass, gasohol, wind energy, low head hydro, and various direct solar technologies hold significant promise in the agricultural and industrial sectors. I will soon be
forwarding legislation to the Congress which will:
Provide a 25 investment tax credit for agricultural and industrial process heat uses of solar energy. This is a 15% addition to the existing investment tax credit and it will remain available through 1989. This responds directly
to the concern expressed in the Domestic Policy
Review that the tax credit currently provided in
the National Eoergy Act is set at too low a level
and expires too early to provide needed incentives.
These uses now account for about 25% of our energy
demand. Substitution of solar and it her renewable
resources for a portion of this energy would
significantly reduce our dependence on foreign oil.
Permanently exempt gasohol from the Federal gasoline
excise tax. More and more Americans are learning
that a gasohol blend of 90 gasoline and 10 alcohol
which is made from various agricultural products
or wastes — is an efficient octane-boosting fuel
for automobiles and other gasoline engines.
The existing tax incentives of the National Energy Act
will continue to stimulate the uses of these teohnologies
in the industrial and agricultural sectors.
The Department of Agriculture will have a significant
responsibility for informing farmers and other agricultural
users of energy about how solar and other renewable sources
can begin to help meet their needs. The Farmers Home Adminis-
tration and other agencies within the Agriculture Department
will continue to provide financial and technical assistance
to farmers in using solar and other renewable technologies.
The TVA is demonstrating what can be done by utilities
in helping private industries, farmers, and residential
customers apply existing solar technologies. The goal of
the TVA’s “Solar Memphis” program is to install 1,000 solar
water heaters this year by offering long-term, low-interest
loans, by inspecting solar installations, and by backing
manufacturers’ warranties. In addition, the TVA’s 1.75 million
square foot passive solar office complex in Chattanooga, Tennessee will be designed to be completely energy self-sufficient and will be a model for the nation in the use of renewable technologies in office buildings.

The Small Business Administration is now operating a
solar loan program for small manufacturers and purchasers
of solar technologies. Next year, the SBA aims to triple
the amount of funds available to small businesses under this
program over the amount originally appropriated. We will
also marshal the efforts of agencies such as the Economic
Development Administration to include solar and other renewable
resources within their assistance programs.
These activities, along with the basic information
dissemination programs of the Department of Energy, will help
increase the use of solar and other renewable resource technologies in residential, commercial, agricultural, and industrial buildings.

Finally, we will strive to increase use of solar energy
by the Federal government itself. An estimated 350 solar
systems will be placed in government facilities and buildings
over the next fifteen months. Energy audits of all large
federal buildings will be completed in 1979. DOE will con-
tinue to develop guidelines which take into account the
lifetime energy costs of various systems. The Department
of Defense, which accounts for about 72% of all government-
owned buildings, 1s playing a major role in the federal solar
buildings program. To date, DOD has over 100 solar projects
in various stages of completion, ranging in size from solar
hot water heaters in residences to solar heating and air
conditioning of Naval, Air Force and Army base facilities.
When all of the presently planned solar projeots are complete,
DOD estimates that they will be providing more than 20 billion
Btu’s of energy. The Federal government must set an example,
and I call upon the states to do likewise.
* * * *
The Domestic Policy Review recommended several important
changes in the direction and nature of the Federal research
and development program for future solar and renewable resource
technologies. It found that solar demonstration programs
for active hot water systems and high-cost centralized solar
electric technologies had been overemphasized at the expense
of those systems which hold wider potential to displace the
use of oil and natural gas.

As a result of the Domestic Policy Review, the FY 1980
budget for DOE’s research and development program for solar
and renewable energy sources was redirected toward technologies
such as photovoltaics, biomass, wind energy, and systems for
generation of process heat. To respond to these new priorities,
over $130 million in increased funding was provided in the
R&D program, an increase of 40% over FY 1979 levels.

While solar heating and cooling units are already being
used to meet the energy requirements of buildings throughout
the country, the DOE is supporting continued advances in these
products, by providing funds to industry, small business,
Federal laboratories, and the research community to reduce
the cost of solar systems and to improve performance. Improved
system design, analysis, and system-integration activities
are being carried out for active heating and cooling systems,
passive systems, and agricultural and industrial process
heating systems. The program also supports product improve-
ments for such key components as solar collectors, energy
storage units, and controls.
Photovoltaics, which permit the direct conversion of
sunlight into electriCity, hold significant promise as a solar
technology for the future. Research and development efforts
are directed at reducing the cost of photovoltaic systems.
In addition, new systems which produce hydrogen through
an electrochemical reaction can be used to produce electricity.
There is no question about our technical ability to use photo-
voltaics to generate electricity. These systems are already
used extensively to meet remote energy needs in our space
program. The main issue now is how to reduce the costs of
photovoltaics for grid-related applications such as providing
electricity to residential buildings over the next five to
ten years. The photovoltaic program involves all aspects
of research and development, from hardware components to
materials, marketing and distribution systems. The Federal
government has already made commitments to purchase $30 million
of photovoltaic systems at a specified cost per watt as a
means of stimulating private efforts to reduce the cost of
this technology.

DOE’s research and development program has also emphasized
wind energy. Our objective is the development of wind systems
which will compete cost-effectively with conventional technologies. There will also be efforts to develop wind technologies for small units suitable for farm and rural use and for large utility units.

Biomass conversion holds significant promise as a major
source of renewable energy over the coming decades. Liquid
and gaseous fuels produced from organic wastes and crops can
displace oil and natural gas both as direct combustion fuels
and as chemical feedstocks. Some biomass fuels, such as gasohol, are in use today. Others, such as liquid fuels from organic wastes, require additional research and development.

In the coming fiscal year, DOE will complete construction
of the solar power tower in Barstow, California. Such systems
could potentially displace some oil- and gas-fired generators.
The DOE solar thermal program is also concentrating on reducing
to near commercial levels the costs of distributed receiver
systems by 1983 and similarly reducing the future costs of
central receiver systems. This program supports R&D efforts
in advanced space heating and cooling, photovoltaic concen-
tration, and high temperature industrial heat applications.

The oceans are another potential source of solar energy.
We will pursue research and development efforts directed toward
ocean thermal energy conversion, and other concepts such as
the use of salinity gradients, waves, and ocean currents.
DOE is working with the National Aeronautics and Space
Administration to evaluate the concept of a solar power
satellite system (SPS) which would capture solar energy in
space for transmission to earth. A determination will be
made in January 1981 on whether this system should proceed
to the exploratory research stage.

DOE will undertake intensified efforts involving solar
energy storage and basic solar energy research. In the basic
research area, emphasis is being placed on the development
of new materials to better use or convert the sun’s energy,
solar photochemistry (including the possibility of using
electrochemical cells to convert the energy of sunlight into
electricity and/or fuels) and research on artificial photo-
synthesis.

In Fiscal Year 1980 we will begin building a new 300-acre solar research facility for the Solar Energy Research Institute at Golden, Colorado. This institute, along with
four regional solar centers established across the country,
will help provide a focus for research and development
activities and will become information centers for individuals
and firms who market or install solar equipment.

In addition to DOE’s research and development activities,
several other agencies will continue to support commercial
introduction of solar technologies as they become available.
AID, TVA and the Department of Agriculture now have and will
continue to have significant responsibilities in the demon-
stration of new solar and renewable resource systems.

The Domestic Policy Review identified numerous specific
program suggestions, many of which I believe can and should
be implemented. Over the course of the coming weeks, I will
be issuing a series of detailed directives to the appropriate
agencies to implement or consider recommendations in
accordance with my instrUctions.

Some of these suggestions involve detailed budget issues
which should be taken up in our normal budget planning
process. In order to provide much-needed flexibility to DOE
to respond to these — and other — suggestions, I am directing
the Office of Management and Budget to provide an additional
$100 million to DOE for use on solar programs beyond that
which had previously been identified for the FY 1981 base
program.

…………..

An essential element of a successful national solar
strategy must be a clear central means of coordinating the
many programs administered by the numerous agencies of
government which have a role in accelerating the development
and use of these energy sources. I am today directing that
the Secretary of Energy establish a permanent, standing
Subcommittee of the Energy Coordinating Committee (ECC) to
monitor and direct the implementation of our national solar
program. The ECC membership includes the major agencies
which have responsibilities for solar and renewable resource
use. By using this existing mechanism, but strengthening
its focus on solar and renewable activities, we can provide
an immediate and direct means to coordinate the Federal solar
effort. The Subcommittee will report on a regular basis to
the ECC, and through it directly to me, on the progress of
our many and varied solar activities. The Subcommittee will
be able to identify quickly any problems that arise and the
ECC will provide a forum to resolve them. Since the member-
ship of the ECC includes key agencies of the Executive Office
of the President, especially the Office of Management and
Budget, the Special Assistant to the President for Consumer
Affairs, the Council on Environmental Quality, and the
Domestic Policy Staff, direct and easy access to my staff
and Members of the Cabinet is assured.

The Standing Subcommittee of the ECC has an extremely
important responsibility. I am expecting it to provide
the leadership and the day-to-day coordinating function
which will be essential as we strive to meet our national
solar goal.
…………

We are today taking an historic step. We are making a
commitment to as important a goal as we can set for our
Nation — the provision of 20% of our energy needs from solar
and renewable sources of energy by the year 2000.

We are launching a major program — one which requires
and has received a significant commitment from the Federal
government to accelerate the development and use of solar
technologies.

We are marshalling the best that the agencies of government
can provide and asking for the commitment of each of them,
in their diverse and numerous functions, to assist our country
in meeting our solar goal.

The stakes for which we are playing are very high. When
we speak of energy security, we are in fact talking-about
how we can assure the future economic and military security
of our country — how we can maintain the liberties and freedoms which make our Nation great.

In developing and implementing a national solar strategy
we are taking yet another critical step toward a future which
will not be plagued by the kinds of energy problems we are
now experiencing, and which will increase the prospects of
avoiding worse difficulties.

We have set a challenge for ourselves. I have set a
challenge for my Presidency. It will require the best that
American ingenuity can offer, and all the determination which
our society can muster. Although government will lead, inspire,
and encourage, our goal can be achieved only if each American
citizen, each business, and each community takes our solar
goal to heart.

Whether our energy future will be bright — with the
power of the sun — or whether it will be dim, as our fossil
resources decline, is the choice that is now before us. We
must take the path I have outlined today.~
JIMMY CARTER
THE WHITE HOUSE,
June 20, 1979.