Barriers to Distributed  Renewable Energy  efficient | economical | equitable                             John Farrell, Sen...
Total Installed Capacity                        47,000 MW     4,034 MWTogether = 3.3% of U.S. sales
How Much Community-Owned?                       47,000 MW   5%? 10%?     25%?     4,034 MW
Community-Owned    just 1%
Why Community-Owned?                                               2 Community-Owned = distributed(distributed generation)...
Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
Tradition    Utility Perspective                                                        Reality   Centralized Power       ...
Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
Capital           ...buy this?How can they...
Rules for Raising Capital• Full registration• Regulation D• Regulation A• Intra-State• Private
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs       5%      ...
Type of      Upfront Compliance                                  Restrictionsregistration    Cost     Costs               ...
Capital is HARD• Full = EXPENSIVE• Regulation D = RICH FOLKS• Regulation A = SIZE/COST• Intra-State = COSTLY• Private = LI...
Hope: Crowdfunding    • 2012 federal JOBS Act    • $1 million limit    • Minimal compliance    • Lower upfront cost: $10-15k
Example          Private	  Placement
Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
complex...
Minnesota Commercial Solar Project Cash Flow       30%         25%         25%         20% 0%          25%         50%    ...
Germany/Ontario Commercial Solar Project Cash Flow                       100%    0%       25%       50%           75%   10...
Feed-In Tariff• Long-term, fixed price contract• Guaranteed, simple grid connection• Price sufficient for small profit
Policy Shapes Cost    High                                           U.S.Return                 Ontario           Germany ...
Policy Shapes Participation                               80%of German solar is on small rooftops
U.S. Exception      University Park community solar
Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
Which Makes Sense for Community Solar?A.NonprofitB.CityC. CountyD.CooperativeE. All of the Above
Which Makes Sense for Community Solar?A.NonprofitB.CityC. CountyD.CooperativeE.All of the Above
Which One Works?A.NonprofitB.CityC. CountyD.CooperativeE. All of the Above
Which One Works?A.NonprofitB.CityC. CountyD.CooperativeE. All of the AboveF.None of the Above
Minnesota Nonprofit Solar Project Cash Flow     15%   15%     25%         25%         20%0%         25%           50%     ...
Exception     Mt. Pleasant Solar Cooperative          Group purchase, no legal entity
Exception       South Dakota Wind Partners7 turbines, 600 owners, 1 expired cash grant
Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
True or false?In 2012, most utilities measure how muchelectricity is used during peak periods andduring minimum use period...
True or false?In 2012, most utilities measure how muchelectricity is used during peak periods andduring minimum use period...
How Local Solar Gets Capped≤    1. A Limit on Local Power Generation    Utilities always want local power generation to be...
How States Can Raise the Cap (Hawaii)                                                         Hawaii’s Update (2011)    1....
How States Can Raise the Cap (California)     1. A Measured Daytime Minimum                               California’s Upd...
Utilities also Want Limits on Total Net Metering                                                  LEGEND                  ...
Exception    Replicable community solar!
Distributed Generation     Barriers             Exceptions    • Tradition   •   Mt. Pleasant Solar Coop                  •...
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Barriers to Distributed Renewable Energy

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A presentation by ILSR Senior Researcher John Farrell on the barriers to distributed generation in the United States and the few community distributed renewable energy projects that have overcome them.

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Barriers to Distributed Renewable Energy

  1. 1. Barriers to Distributed Renewable Energy efficient | economical | equitable John Farrell, Senior Researcher
  2. 2. Total Installed Capacity 47,000 MW 4,034 MWTogether = 3.3% of U.S. sales
  3. 3. How Much Community-Owned? 47,000 MW 5%? 10%? 25%? 4,034 MW
  4. 4. Community-Owned just 1%
  5. 5. Why Community-Owned? 2 Community-Owned = distributed(distributed generation) x (distributed ownership)
  6. 6. Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
  7. 7. Tradition Utility Perspective Reality Centralized Power Clean, local power Solar PV power plant Storage Storage Transmission network Storage Storage House Local CHP plant Distribution network House with domestic CHP Wind power Factory Commercial plant building
  8. 8. Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
  9. 9. Capital ...buy this?How can they...
  10. 10. Rules for Raising Capital• Full registration• Regulation D• Regulation A• Intra-State• Private
  11. 11. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None $30,000 Accredited investors;Regulation D -50,000 $10,000/yr prior relationship $50,000Regulation A -75,000 $10,000/yr $5 million offering $50,000Intra-State -75,000 $10,000/yr (MN) In-state only Prior relationship; no Private Minimal Minimal advertising
  12. 12. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None $30,000 Accredited investors;Regulation D -50,000 $10,000/yr prior relationship 9% 3% $50,000Regulation A -75,000 $10,000/yr $5 million offering Project Cost $50,000 UpfrontIntra-State -75,000 $10,000/yr (MN) In-state only Compliance Prior relationship; no Private Minimal Minimal advertising
  13. 13. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None $30,000 Accredited investors;Regulation D -50,000 $10,000/yr prior relationship $50,000Regulation A -75,000 $10,000/yr $5 million offering59%Intra-State 19%$50,000 $10,000/yr (MN) In-state only -75,000 Project Cost Prior relationship; no Private Upfront Minimal Minimal advertising Compliance Too costly for small projects
  14. 14. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None Accredited $30,000 investors; priorRegulation D -50,000 $10,000/yr relationship w/ investors $50,000Regulation A -75,000 $10,000/yr $5 million offering $50,000Intra-State -75,000 $10,000/yr (MN) In-state only Prior relationship; no Private Minimal Minimal advertising
  15. 15. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None Accredited $30,000Regulation D -50,000 $10,000/yr investors; prior relationship $50,000Regulation A -75,000 $10,000/yr $5 million offering $50,000Intra-State -75,000 $10,000/yr (MN) In-state only Prior relationship; no Private Minimal Minimal advertising
  16. 16. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None Accredited $30,000Regulation D -50,000 $10,000/yr investors; prior relationship $50,000Regulation A -75,000 $10,000/yr $5 million offeringIntra-State $50,000 -75,000 ≤ 2 turbines $10,000/yr (MN) In-state only Prior relationship; no Private Minimal Minimal advertising
  17. 17. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None Accredited $30,000 5%Regulation D -50,000 $10,000/yr investors; prior relationship27% $50,000Regulation A -75,000 $10,000/yr $5 million offering $50,000 Intra-State Project Cost -75,000 $10,000/yr (MN) In-state only Upfront Compliance Prior relationship; no Private Minimal Minimal advertising Still costly for small projects
  18. 18. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None Accredited $30,000Regulation D -50,000 $10,000/yr investors; prior relationship $50,000Regulation A -75,000 $10,000/yr $5 million offering $50,000Intra-State -75,000 $10,000/yr (MN) In-state only Prior relationship; no Private Minimal Minimal advertising
  19. 19. Type of Upfront Compliance Restrictionsregistration Cost Costs 5% $100,000- 27% SEC Full 125,000 Over $400,000/yr None Accredited Project Cost $30,000Regulation D -50,000 $10,000/yr investors; prior Upfront relationship Compliance $50,000Regulation A -75,000 $10,000/yr $5 million offering $50,000 Intra-State -75,000 $10,000/yr (MN) In-state only Prior relationship; no Private Minimal Minimal advertising Still costly for small projects
  20. 20. Type of Upfront Compliance Restrictionsregistration Cost Costs $100,000- Full SEC 125,000 Over $400,000/yr None Accredited $30,000Regulation D -50,000 $10,000/yr investors; prior relationship $50,000Regulation A -75,000 $10,000/yr $5 million offering $50,000Intra-State -75,000 $10,000/yr (MN) In-state only Prior relationship; Private Minimal Minimal no advertising
  21. 21. Capital is HARD• Full = EXPENSIVE• Regulation D = RICH FOLKS• Regulation A = SIZE/COST• Intra-State = COSTLY• Private = LIMITED
  22. 22. Hope: Crowdfunding • 2012 federal JOBS Act • $1 million limit • Minimal compliance • Lower upfront cost: $10-15k
  23. 23. Example Private  Placement
  24. 24. Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
  25. 25. complex...
  26. 26. Minnesota Commercial Solar Project Cash Flow 30% 25% 25% 20% 0% 25% 50% 75% 100% Federal tax credit Depreciation State rebate Net metering
  27. 27. Germany/Ontario Commercial Solar Project Cash Flow 100% 0% 25% 50% 75% 100% Feed-In Tariff
  28. 28. Feed-In Tariff• Long-term, fixed price contract• Guaranteed, simple grid connection• Price sufficient for small profit
  29. 29. Policy Shapes Cost High U.S.Return Ontario Germany Low Low Risk High
  30. 30. Policy Shapes Participation 80%of German solar is on small rooftops
  31. 31. U.S. Exception University Park community solar
  32. 32. Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
  33. 33. Which Makes Sense for Community Solar?A.NonprofitB.CityC. CountyD.CooperativeE. All of the Above
  34. 34. Which Makes Sense for Community Solar?A.NonprofitB.CityC. CountyD.CooperativeE.All of the Above
  35. 35. Which One Works?A.NonprofitB.CityC. CountyD.CooperativeE. All of the Above
  36. 36. Which One Works?A.NonprofitB.CityC. CountyD.CooperativeE. All of the AboveF.None of the Above
  37. 37. Minnesota Nonprofit Solar Project Cash Flow 15% 15% 25% 25% 20%0% 25% 50% 75% 100% Federal tax credit Middleman Depreciation State rebate Net metering
  38. 38. Exception Mt. Pleasant Solar Cooperative Group purchase, no legal entity
  39. 39. Exception South Dakota Wind Partners7 turbines, 600 owners, 1 expired cash grant
  40. 40. Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility
  41. 41. True or false?In 2012, most utilities measure how muchelectricity is used during peak periods andduring minimum use periods on their owngrid.
  42. 42. True or false?In 2012, most utilities measure how muchelectricity is used during peak periods andduring minimum use periods on their owngrid. FALSE
  43. 43. How Local Solar Gets Capped≤ 1. A Limit on Local Power Generation Utilities always want local power generation to be less than local minimum electricity demand so that electricity will not flow out of neighborhoods and back onto the grid.*? 2. A Guesstimate of Minimum Demand Peak use Whoops! Utilities assume minimum demand is about 30% of peak demand, because they don’t measure minimum demand.÷2 3. An Arbitrary Safety Margin Utilities take this 30% threshold and divide by 2 to get a 15% cap on local solar. “Minimum”(30%) ÷2 Default cap of 15% *Also addressed with 2-way electrical equipment Percent of peak power allowed from local solar
  44. 44. How States Can Raise the Cap (Hawaii) Hawaii’s Update (2011) 1. A Daytime Minimum How much solar power is produced at 4 AM? Hawaii estimates the minimum None. But that’s the time of day utilities used demand during daytime. for their minimum demand calculation. Hawaii solar advocates negotiated a change: to estimate minimum demand when the sun is up (Sundays at noon). “Daytime min.” Even though utilities maintain the arbitrary “division by 2” safety margin, this change ÷2 could allow nearly twice as much local solar on the grid. Cap is raised to ~25% Percent of peak power allowed from local solar
  45. 45. How States Can Raise the Cap (California) 1. A Measured Daytime Minimum California’s Update (2012) Utilities must actually measure the minimum Measured daytime demand demand on a power line between 9 AM and 4 PM No “division by 2” and no longer use peak demand as a proxy.÷2 2. No “Division by 2” Utilities can’t arbitrarily divide the cap by 2, now that the power line capacity is actually measured. The result could nearly triple the original Daytime minimum 15% cap on local solar power. Cap is raised to ~50% Percent of peak power allowed from local solar
  46. 46. Utilities also Want Limits on Total Net Metering LEGEND no statutory net metering limit Lets  customers  pay   aggregate limit higher than 1%“net”  of  own  use  and   of peak demand aggregate limit 1% of peak own  generation demand or less
  47. 47. Exception Replicable community solar!
  48. 48. Distributed Generation Barriers Exceptions • Tradition • Mt. Pleasant Solar Coop • Clean Energy Collective • Capital • Maryland Solar LLC • Cash Flow • SD Wind Partners • Legal • Utility Learn more atEnergySelfReliantStates.org
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