An Assessment of the Feasibility and Impacts of an In-basin Solar Feed-in Tariff Program
Prepared by J.R. DeShazo and Ryan Matulka, Luskin Center for Innovation Commissioned by the Los Angeles Business Council
Solar Working Group Members Allen Matkins AECOM Arden Realty Inc. Bank of America CB Richard Ellis Cedars-Sinai Energy Choice Inc. G&C Equipment Corp Global Green USA Holland & Knight Jones Lang LaSalle
JP Morgan Kahn Solar KYOCERA Solar Inc. Los Angeles County LACCD LAWA Latham & Watkins LAUSD Macerich Parsons Brinckerhoff Psomas
Siemens Sierra Club SolarWorld SunCal Companies Trammell Crow Company Turner Construction UCLA School of Law UCLA School of Public Affairs Union Roofing Contractors Assoc Watt Companies Westfield
Critical Features of the Program At least 600 MW phased over at least 10 years. Program targets: 17% Residential and Small Commercial 50% Multi-family and large Commercial Industrial 33% Ground-mounted and small scale utility Tariffs reduced annually or based on market participation Easy and low cost application. LADWP acts in timely, fair & transparent fashion.
Tariff Structure For 600 MW Program
Category Small-scale Rooftops
Eligible Systems
Typical Participants Single family homes, small office &
Less than 50 kW retail, apartment buildings
Warehouses, distribution facilities, light
Large-scale Rooftops 50 kW and Greater manufacturing, industrial Ground-mounted Ground-mounted on Commercial & All Ground Mounted Industrial, Infrastructure, Brownfields systems
Initial Tariff per kWh Capacity Allocation $0.34
100 MW
$0.22
300 MW
$0.16
200 MW
Outline 1. Why does Los Angeles need this program? 2. Does Los Angeles have the capacity to support this program? 3. Is this program cost effective for rate-payers and LADWP? 4. What are the economic development benefits?
Los Angeles’ Clean Energy Goals • 20% by 2010 (DWP audit underway) • 33% (DWP) or 40% (Mayor) by 2020 • Eliminate coal by 2020
Programs meets 3% of City’s Annual Energy Needs and Offers GHG Benefits 2,000
40,000
1,800
35,000
1,600
30,000
1,400 1,200
25,000
1,000
20,000
800
15,000
600
10,000
400
5,000
200 0
0 1
2
3
4
5
6
7
8
9
10
11
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Program Year
Annual Avoided GHG - Coal Scenario
Annual Avoided GHG - NG Scenario
Total Program GHG Benefits Coal Scenario
Total Program GHG Benefits NG Scenario
28 29
Total Program GHG Benefits (MM lbs CO2E)
Annual Avoided GHG (MM lbs CO2E)
Feed-in Tariff Program GHG Benefits
Outline 1. Why does Los Angeles need this program? 2. Does Los Angeles have the capacity to support this program? 3. Is this program cost effective for rate-payers and LADWP? 4. What are the economic development benefits? 8
Physical Rooftop Potential LA County 19.13 Gigawatts 14,000
Physical Solar Potential (Megawatts)
12,278 12,000 10,000 8,000 6,000
5,536
4,000 2,000 307
278
245
197
169
104
0 SoCal LA Dept of Vernon Edison Water & Light & Power Power
Glendale Burbank Pasadena Cerritos Water & Water & Water & Electric Power Power Power Utility Utility Service Area
Azusa Light & Power
800 700 600 500 400
60,000 670 50,000 524 436 432 422 412 391
40,000 357 356
300
324
30,000 283 278 256
200
210 186
20,000 10,000
100 0
0
Los Angeles City Council Districts Megawatts
Parcels ≼ 1 kW
Parcels with Potential Greater than 1 kilowatt
Physical Solar Potential (Megawatts)
Megawatts of Physical Rooftop Solar Potential by City Council District
Where is the Greatest Physical Solar Potential? Market Segment
Megawatts
1. Commercial & Industrial 2,218 2. Single family homes 1,752 3. Multi-family homes 1,411 4. Government & Non-profit 156
How Much is Economically Available? $0.70
Tariff per Kilowatt-hour
$0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 0
500
1,000
1,500
2,000
Megawatts Available Gov & Non-Profit
Multi-family
Single Family
Comm & Industrial
Physical Potential
2,500
Outline 1. Why does Los Angeles need this program? 2. Does Los Angeles have the capacity to support this program? 3. Is this program cost effective for ratepayers and LADWP? 4. What are the economic development benefits?
Cost-Effectiveness of a Solar FiT $500
Dollars per Megawatt-hour
$450 $400 $350 $300 $250 $200 $150 $100 $50 $0 1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Program Year
Utility Avoided Costs (Program Benefits) at 3% Annual Escalation Utility Avoided Costs (Program Benefits) at 4% Annual Escalation Utility Avoided Costs (Program Benefits) at 5% Annual Escalation Weighted Average Tariffs Paid Out
*Future Avoided Costs: 2009 MPR for 20 Yr Contract ($0.09674/kWh) with 1.23 TOU weighting
Rate Payer Impacts of 600MW for Different Avoided Costs Escalations Avoided Cost Monthly Rate Monthly Rate Escalation Impact Yr. 1 Impact Yr. 10 3% Annually $0.31 $0.45 4% Annually* $0.31 $0.24 5% Annually $0.31 $0.01
Net Cost ($ MM) $123 -$67 -$288
Long-Term Rate Impacts Monthly Rate Impact on a Typical Los Angeles Household 1
2
3
4
5
6
7
8
Program Year 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
$0.80 $0.60 $0.40 $0.20 $0.00 -$0.20 -$0.40 -$0.60 -$0.80 -$1.00 -$1.20
Average Impacts During Implementation: $0.48* Average Impacts After Implementation: -$0.63* *Assumes 510 kWh monthly consumption
Cost-Effectiveness of FIT vs. Peak Natural Gas
FiT Program Size (MWs)
Year 10 RPS Contribution
100 250 600 750 1,000
0.5% 1.2% 2.9% 3.6% 4.8%
Net Cost ($ MM) 3 Year Implementation
5 Year Implementation
10 Year Implementation
$87 $185 $413 $510 $673
$60 $117 $251 $309 $404
$7 -$15 -$67 -$89 -$127
Why target large-scale residential, commercial and industrial rooftop? • Federal tax incentives lower installation costs. • Larger roof-tops enjoy economies of scale: produce energy more cheaply. • Jobs are created more cost-effectively. • Allows LADWP to pay lower tariffs thus lower impacts on rate payers.
Outline 1. Why does Los Angeles need this program? 2. Does Los Angeles have the capacity to support this program? 3. Is this program cost effective for rate-payers and DWP? 4. What are the economic development benefits?
Economic Development Benefits 1. ~ 11,000 Jobs created in Los Angeles 2. Adds value to existing real estate; rooftops & parking lots generate revenues. 3. Creates a new solar-focused value chain in basin: a. Equipment manufacturers & assembly: Manufacturing of system components, inverters, solar cells, panels b. Professional services: Financing of projects, small business loans, debt and equity services, legal services. c. Installation: system construction and integration d. System monitoring: Performance monitoring, reporting, operations and maintenance
Job Creation Impacts FiT Program Size (MWs) 100 250 600 750 1,000
Exclusive Single Family Program
Exclusive Comm & Industrial Program
Jobs Created Cost Per Job 3,130 $44,438 7,825 $40,236 18,780 $38,602 23,475 $38,369 31,300 $38,135
Jobs Created Cost Per Job 1,930 $5,656 4,825 -$1,158 11,580 -$3,808 14,475 -$4,186 19,300 -$4,565
Public Benefits of in-basin Solar FiT Spurs economic growth by producing in-basin high wage jobs Quickly generates energy to meet RPS Reduces utility’s out-of-basin transmission requirements and costs Signals a commitment to attract clean tech businesses to LA. Well-designed program will save rate payers money over its lifetime
Summary A solar Feed-in Tariff for Los Angeles can be: 1. 2. 3.
Meaningful Inclusive Cost-effective
If it is well-designed: 1. 2. 3. 4. 5. 6.
Large (at least 600 MW) Long-term (at least 10 years) Focuses primarily on large, C&I solar projects Allows all segments of the market to participate Takes advantage of abundant solar potential in the region Administered to increase certainty & reduce barriers to entry
Contact Los Angeles Business Council www.labusinesscouncil.org (310) 226-7460
Ryan Matulka UCLA School of Public Affairs, Luskin Center for Innovation http://www.publicaffairs.ucla.edu/content/luskin-center-innovation rmatulka@ucla.edu (310) 622-5155