January 10, 2011

Path to utility-scale PV in Arizona?

Incentives are the key, solar expert says

By Bart Taylor

Arizona’s solar industry sees more light ahead than one of the state’s energy academics.

Robert Hoskins, executive director of the Arizona Solar Power Society, recently responded to Planet-Profit’s summary of “Solar Energy’s Cloudy Future”, in which the University of Arizona’s Robert Glennon argues that utility-scale solar faces considerable challenges in becoming more than a marginal player on the nation’s electricity grid. (Here’sthe summary of Glennon’s arguments.)

Glennon is most skeptical of PV’s utility-scale potential, citing cost as the primary barrier: 

“The unfortunate reality is that most PV systems are not economically viable at utility scale when compared with other low-cost fuel options. It costs Tucson Electric Power Company (TEP), for instance, 3 ½ to 4 ½ cents per kilowatt-hour for energy produced in its coal-fired plants; PV systems cost 16 to 18 ½ cents per kilowatt-hour.92 Arizona Public Service (APS), Arizona‘s largest utility company, purchases power from the Palo Verde Nuclear Generating Station at a cost of 1.65 cents per kilowatt hour.93 In contrast, under APS‘s recently completed purchase agreement with the nearby Solana Generation Station, a PV facility still under construction, APS will buy 53 megawatts.”

 Hoskins offered an alternative view, and I asked him to summarize his thinking for Planet-Profit.  (More from Robert Hoskins next week.) 

Q:   You’re convinced an effective dynamic, incentive-laden, residential PV solar program in Arizona would have a huge macro-economic impact? How and how big?

Yes.  Investing in solar power is the best way for Arizona to solve its three biggest problems – unemployment, air pollution and water aquifers.

The average installation cost for a solar power photovoltaic array is around $4.50 per DC watt.  When utility companies provide a $2 per watt incentive to their ratepayers this motivates consumers and businesses to spend money on new solar systems, which, in turn, injects money back into the Arizona economy.  Motivating people to spend money is the key driving factor in turning Arizona’s economy around.  Instead of reducing solar incentive budgets, utility companies should be increasing them.

During 2009, more than 275 entrepreneurs created new solar installation companies, which created around 3,000 jobs.  Not just solar installation jobs, but sales, marketing, finance, clerical, legal and other positions needed to run an efficient solar installation operation. This provided a huge boost to Arizona’s unemployment problem and injected around $105 million worth of solar salaries back into the local economy.

At the same time, solar installation companies were actively buying fleets of installation trucks, equipping them with thousands of dollars of new tools and installation equipment, renting vacant office retail space, and spending money on office and electrical supplies at local retailers and distributors.

Electricity prices are rising all the time.  But when ratepayers pay more money into solar incentive funds it has a dramatic effect on their long term electricity prices.  People that actually install solar can reduce or completely eliminate their family’s threat of rising electricity prices by installing a solar power array, which is guaranteed to produce free electricity for their home or building for the next 25 years.

According to a research report conducted by APS, Arizona’s largest utility company, investing heavily in solar would save more than $3 billion over the next 15 years.  More than 30 percent of the power produced each year is generated solely to push electricity from the power generation station to the consumer’s premises due to line loss.  Solar photovoltaic systems generate electricity at the customer’s premises where the power is actually used.  This eliminates the need to transport large amounts of electricity to growing population centers.  Installing enough solar could reduce power bills by 30 percent.

In order to achieve these savings, APS would need to provide enough incentives to install 250,000 Megawatt Hours per year.  APS could provide an upfront incentive of $1.50 per watt for both residential and commercial customers.  This would allow the installation of 5,656 5-kilowatt residential and 1,291 100-kilowatt solar PV arrays for $236 million, which would generate $469 million worth of free electricity over the solar panel's guaranteed 25-year life cycle.

The trickledown effect from spending this much money on solar installations should be recognized by regulators, legislators and lobbyists as the best way to pull Arizona out of its economic slump. 

Spending $236 million on solar installations would generate the demand for 525 solar installation companies and would create approximately 5,246 jobs.  At an average salary of $35,000, this would generate nearly $184 million of new salaries.

At an installed cost of $4.50 per watt, this would generate more than $708 million of installation revenue, which would be reinvested in equipment, installation supplies, office space, office supplies and many other retail sales outlets which all collect sales taxes.

This economic scenario would create the purchase demand for 786,939 solar panels at 200-watts each.  Producing this type of demand in Arizona would encourage every single solar manufacturer in the world to open a manufacturing plant to meet this demand.

Multiply these figures by 15 years, and it is easy to see how Arizona could utilize solar incentive programs to generate a $10.6 billion solar industry.   No other state in America has as much opportunity as Arizona to harness our natural supply of sunshine and turn it into a lucrative gold mine for every person who lives and breathes in Arizona.