Barriers to Distributed Renewable Energy

Barriers to Distributed Renewable Energy efﬁcient | economical | equitable John Farrell, Senior Researcher

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) x (distributed ownership)

Barriers to Distributed Generation• Tradition• Capital• Cash Flow• Legal• Utility

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

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 $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

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

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

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

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

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

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

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

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

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

Capital is HARD• Full = EXPENSIVE• Regulation D = RICH FOLKS• Regulation A = SIZE/COST• Intra-State = COSTLY• Private = LIMITED

Hope: Crowdfunding • 2012 federal JOBS Act • $1 million limit • Minimal compliance • Lower upfront cost: $10-15k

Example Private Placement

complex...

Minnesota Commercial Solar Project Cash Flow 30% 25% 25% 20% 0% 25% 50% 75% 100% Federal tax credit Depreciation State rebate Net metering

Germany/Ontario Commercial Solar Project Cash Flow 100% 0% 25% 50% 75% 100% Feed-In Tariff

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 Low Low Risk High

Policy Shapes Participation 80%of German solar is on small rooftops

U.S. Exception University Park community solar

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% 75% 100% Federal tax credit Middleman Depreciation State rebate Net metering

Exception Mt. Pleasant Solar Cooperative Group purchase, no legal entity

Exception South Dakota Wind Partners7 turbines, 600 owners, 1 expired cash grant

True or false?In 2012, most utilities measure how muchelectricity is used during peak periods andduring minimum use periods on their owngrid.

True or false?In 2012, most utilities measure how muchelectricity is used during peak periods andduring minimum use periods on their owngrid. FALSE

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

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

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

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

Exception Replicable community solar!

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

http://www.renewableenergyworld.com	3382
http://www.ilsr.org	416
http://s-cntp-infrastructure.posterous.com	115
http://grist.org	104
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Barriers to Distributed Renewable Energy

by John Farrell on Sep 20, 2012

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