More Related Content
Featured
Featured (20)
0447 witmer
- 1. THE ACTUAL VALUE OF SOLAR ELECTRICITY (PHOTOVOLTAICS) IN URBAN SETTINGS: REAL-TIME PRICING, SRECS, AND TAX CREDITS Lucas Witmer Mesude Bayrakci Babatunde Idrisu Jeffrey R. S. Brownson Seth Blumsack
- 2. Lucas Witmer - LWitmer@psu.edu 5/17/2012 2
- 3. Tax Incentives Lucas Witmer - LWitmer@psu.edu 5/17/2012 3
- 4. Tax Incentives Lucas Witmer - LWitmer@psu.edu 5/17/2012 4
- 5. 2011 PA SREC Price Lucas Witmer - LWitmer@psu.edu 5/17/2012 5
- 6. Lucas Witmer - LWitmer@psu.edu 5/17/2012 6
- 7. Lucas Witmer - LWitmer@psu.edu 5/17/2012 7
- 8. Lucas Witmer - LWitmer@psu.edu 5/17/2012 8
- 9. Lucas Witmer - LWitmer@psu.edu 5/17/2012 9
- 10. Lucas Witmer - LWitmer@psu.edu 5/17/2012 10 Graphic courtesy of detourstouring.net
- 11. Lucas Witmer - LWitmer@psu.edu 5/17/2012 11
- 12. Lucas Witmer - LWitmer@psu.edu 5/17/2012 12
- 13. Lucas Witmer - LWitmer@psu.edu 5/17/2012 13
- 14. Lucas Witmer - LWitmer@psu.edu 5/17/2012 14
- 15. Lucas Witmer - LWitmer@psu.edu 5/17/2012 15
- 16. Lucas Witmer - LWitmer@psu.edu 5/17/2012 16
- 17. Lucas Witmer - LWitmer@psu.edu 5/17/2012 17
- 18. Lucas Witmer - LWitmer@psu.edu 5/17/2012 18
- 19. Lucas Witmer - LWitmer@psu.edu 5/17/2012 19
- 20. Thank You! Lucas Witmer LWitmer@psu.edu Graphic courtesy of syndicatedsolar.com
Editor's Notes
- Thank you for joining us today. I am presenting research done at Penn State in collaboration with the Greater Philadelphia Innovation Cluster for Energy Efficient Buildings on the actual value of solar electricity in urban settings, focusing on real-time pricing, SRECs, and tax incentives.
- We developed a payback period model for PV systems that includes each of these various incentives. A year ago, paybacks were generally less than ten years, and for businesses they were very close to 5 years. This is dependent on incentives. Tax Incentives come in all shapes and sizes based on your local governments.
- We are all familiar with the 30% Federal Tax Credit that is currently in effect until 2016. In Pennsylvania we have the PA Sunshine Solar Program that started as a 35% capital cost rebate and has been stepped down over the years and is currently in a waiting list phase.
- Additionally, if a business installs a PV system, the business was able to claim 100% depreciation in the first year. This has since been stepped down to 50% depreciation the first year followed by standard accelerated depreciation after that.
- Another significant factor in the payback period model is the Solar Renewable Energy Certificate price. For the 2011 compliance year, SREC prices started at $300 and dropped to $12 by the time of this research. Currently, for the 2012 compliance year in PA, the SREC price is $20/MWh.
- Here is a plot showing the sensitivity of payback period to SREC price. The rapid decrease in SREC price has extended the payback period for a system from 9 years to 21 years, showing that SREC price can be a very significant incentive that influences decisions.
- Many people made quick decisions to install systems based on the high SREC price. This sense of urgency led to more system installations than was anticipated by Pennsylvania’s Renewable Portfolio Standard, leading to more SRECs on the market than anticipated.
- That is what caused the rapid decrease in SREC price. It’s a simple matter of the supply, shown on the right in red, exceeding the demand, shown in blue. Demand is defined by the renewable portfolio standard (RPS) that was set by the state government.
- We project that supply for the next few years will continue to exceed demand based on PV generation that is expected to come online. So, it’s just a waiting game for either Demand to catch back up to supply or for the legislation to change the RPS.
- Besides SRECs, another key impact on payback models is the pricing method for the electricity that is generated by PV systems on the grid. There is a high level of congestion on the electric grid in urban settings at peak periods, so we examined the correlation between peak prices and peak pv production.
- This is a graphic portraying 2011 Solar Irradiation data from the Philadelphia region. It represents 8760 data points for hourly data. The first hour of the year is in the top left, proceeding down through the 24 hours of the first day on the left axis and through the year on the bottom axis.
- This graphic is made up the same way, comprising 8760 data points for hourly pricing data on the real-time spot market. The middle of the day during the summer is in the middle of these graphics. There are some peaks in the evenings as well as during the summer, but the highest prices are in the summer.
- So, let’s highlight this middle region. You can see that the highest electricity prices occur during the early-mid afternoon on summer days. This correlates with the peak solar irradiation times of the summer during the day. The anti-correlation during the evenings does impact the model as well.
- It’s not a perfect correlation, but the fact that these high prices match up with the high irradiation led us to develop a weighted averaging scheme for determining the value of electricity produced by a PV system based on the load and price during that exact same hour.
- The result is a difference in value based on the time at which the PV system produces electricity. The difference between these two lines is the value of electricity for PV systems that is not paid to a PV system owner who is not selling into the real-time market.
- The resulting difference is an average of $0.01/kWh across the year, or an 18% devaluation of the electricity generated by PV systems, purely based on the fact that PV generation correlates with peak prices. So, the question is, if the PV system owner is not seeing this money, then who is?
- So, with this information, we’ve taken the $0.01/kWh number as a conservative value and we’ve taken the 18% number as a high estimate, and we’ve applied this difference to residential retail pricing data from 2011. You can see that the value of PV electricity is higher in the summer, and on average, than regular electricity.
- This reduces payback period from the 21 years mentioned earlier to 18 years for the conservative estimate to as much as 16 years based on the 18% increase in value. So, the impact of real-time pricing has significant potential if the benefits are passed along to system owners.
- In conclusion, Tax incentives, SRECs, and real-time pricing all play a critical role in determining the value of electricity from a PV system. There are benefits of solar electricity that are not easily captured financially, so governments have stepped in to create valuing structures that do impact the market.
- Thank you very much for listening. If you have any questions, I can take them now.