| Background: |
The City purchases all of their power from BPA, with
the exception of about 2 million kWh's that is produced annually at the Reeder
Reservoir Hydro generator. The City receives this power from BPA via transmission
lines that are owned by PacifiCorp. This power is delivered under a General
Transfer Agreement (GTA) that BPA has with PacifiCorp that enables federal
power to travel on Pacific lines to the City. This agreement only allows
federally produced power to be delivered to Ashland. Our existing full
requirements contract does allows us to purchase renewable resources from
an entity other than BPA. This would require an agreement with PacifiCorp
to deliver this power and also we would be required to purchase transmission,
load shaping, load scheduling and load following at open access rates from
Pacific. This would dramatically increase the cost of this power.
A more reasonable option for the City is to purchase green power from
BPA. We currently purchased 1 aMW of BPA green power from the BPA. The premium
we pay on this power is $10.50 mWh or $91,980 per year. This purchase contract
runs through Sept 30, 2006.
One simple way to increase the use of green power is to increase the
amount we purchase from BPA. This could either be rate based or could be
sold on a voluntary subscription basis where customers would sign up for
a surcharge or buy blocks of green power at a higher rate. The surcharge
method was used for the Solar Pioneer Program. We had 260+ citizens and
businesses sign up for a minimum of $4.00 month for a 2 year period, generating
nearly $30,000. Using the same methodology, the City would need 1,916 accounts
to pay a $4.00 per month surcharge to generate enough revenue to purchase
an additional 1aMW of green power from BPA. Charging the actual extra cost
of $1.50 per 100 kWh for blocks of green power would require 5,110 monthly
blocks to be sold to cover the increased annual cost of $91,890 for an additional
1 aMW of green power. Purchasing green power using a rate based method across
all of our customers would result in about a 1% rate increase to all customers.
Purchasing more green power from BPA would increase the "use of renewable
resources" but would not meet the second portion of the goal "to reduce our
dependence on purchased wholesale power."
To accomplish this the City needs to increase the amount of renewable
resource that is produced locally. This can be accomplished by either the
City installing the generation or using various financed incentives or programs
to encourage customers to invest in direct application renewable
resources.
The City currently has two programs, which are aimed toward encouraging
customers to invest in renewable generation. The first, which we have been
offering since 1996, is "The bright way to heat water" which provides either
rebates or zero interest loans for solar water heaters. This is a program
we purchased from the Eugene Water and Electric Board (EWEB) which had spent
several years developing the program and had implemented it quite successfully
in Eugene. Initial response to the original program resulted in over 160
citizens who requested information on the program. Unfortunately, less than
10 systems have been installed under this program. After about 1 year of
program operation the City in conjunction with EWEB, tried to analyze why
the program response had been so disappointing. We concluded that lack of
a strong installer infrastructure, limited solar access for many residences,
gas water heater market share, and the cost and complexity of retrofitting
existing homes all contributed to the low number of installations under the
program. The Eugene program had a number of installations occurring in the
new construction market, but in Ashland virtually all new construction has
gas water heating so this market isn't really a viable option here.
The City has also tried to encourage grid connected solar electric
or photovoltaic systems. This effort started in 1996, when the Council approved
the Ashland Net Metering Resolution. This resolution was the first net metering
law in the Northwest and attempted to further encourage grid connected systems
by paying full retail rates for excess generation for up to 1,000 kWh's per
month. No systems were installed under this policy.
In 2000, the City launched the Solar Pioneer Program which installed
30 kW of total solar capacity at the Oregon Shakespeare Festival, Southern
Oregon University, City Council Chambers, and the City Police Station. Voluntary
customer contributions of nearly $30,000 is being used to purchase the output
of the 5kW systems at the SOU Library and OSF at @25 cents/kWh until the
$15,000 invested by each institution is paid back. This is estimated to take
about 8 years. Since the customer contributions were for 2 years, this surcharge
has collected its target amount and no longer is being paid by Solar Pioneer
participants. In July 2001, we started a solar electric rebate program of
$2/watt of solar capacity to see if this would entice more installations.
Four residential systems have been installed and taken advantage of this
rebate since it was initiated.
Other Energy Options
Wind
Wind generators need a constant supply of wind energy at 20- 40 mph's.
This kind of resource still only achieves 30% capacity factors. Wind regimes
with lower wind speeds do not warrant wind generation. BPA has mapped wind
resources in the northwest and has discounted the entire Rogue Valley as
being a viable wind site.
Fuel Cells
Fuel Cell technology uses a chemical reaction of hydrogen and oxygen
to generate electricity. There are a lot of prototypes and experimentation
but no commercial utility grade small-scale products are available at this
time. The source of hydrogen has typically been derived from fossil fuels
so until this hydrogen source becomes renewable, this technology technically
is not 'green'. Most emphasis on fuel cells has been in the transportation
sector as major Japanese and American car companies are beginning to offer
fuel cell powered vehicles on an experimental basis. One interesting idea
would be to utilize these vehicles to generate electricity for the grid while
they are not being driven. Amory Lovens discussed this at a conference back
in September of 2000. His assertion is that vehicles are only operated about
20% of the time and therefore could make up significant distributed generation
resource if the utility invested in the infrastructure that could allow grid
interconnection for generation purposes when these vehicles are parked. While
this is certainly an interesting idea, it seems to be years off before the
volume of these types of vehicles is sufficient to make this an available
alternative. While the issue of metering generation and purchasing it from
the generators are complex, they certainly can be worked out. The city needs
to keep abreast of these developments and make sure we can adapt as changes
occur in this area. Right now however, there appears little the City can
do to actually bring about the transition to a hydrogen based transportation
and generation system.
Solar Energy
Solar electric generation had its birth in the space race, and has
experienced a rebirth recently with deregulation, the west coat energy crises,
a desire to reduce our dependence on fossil fuel, global warming and a general
desire by customers to own their own generation. Even with the existence
of state tax credit, the city's solar electric rebate of $2.00/watt, the
economics of solar electric generation are still a very hard sell when costs
and simple paybacks are calculated.
Solar Electric Economics
The solar electric systems purchased as a part of the Solar Pioneer
program, cost about $10/watt of capacity and prices have declined a little
since then, but this reduction has not been as dramatic as expected. If you
take an aggressive approach and buy thin film collector in bulk amounts,
you might be able to achieve $8.00/watt systems. The payback for 1kW residential
system would be follows:
System costs $8,000
Less City Rebate $1,500
Less State Tax Credit $1,500
Final System Cost $5,000
Simple payback (1kW system) 2,000 kWh's @ 5.6/kWh = $112.
Simple payback =$5,000/$112 = 44.6 years.
Customer investments are much more attractive if directed to energy
efficiency improvements and appliances, than investing in a solar electric
generation system. Therefore, the payback must be improved considerably before
we can expect more installations in Ashland. One way this might be accomplished
would be if the City could intercede in the marketplace and actually help
citizens procure the necessary hardware at lower cost.
A good example was conducted by the Sacramento Municipal Utility District
(SMUD) which has promoted grid connected PV systems since 1993. In 1999,
they started the Pioneer II program, which through a combination of incentive
and a guarnteed bulk purchase of 10mW of thin film collectors, SMUD hoped
to get costs down to $3.00/Watt to the customer. However, in September SMUD
announced that "industry costs for producing photovoltaic panels have not
declined as expected and there have been some internal budget and state funding
shortfalls." They suspended approving installations of any new systems until
the program can be reevaluated. Even with all of the resources that SMUD
had, coupled with their desire to get PV installed, utility intervention
of the market place still hasn't gotten prices which result in paybacks that
would likely attract many customers in Ashland. It is doubtful that Ashland
could be more successful than SMUD and therefore trying to influence the
price of PV by City action seems at best futile.
Another idea would be to partner with a private sector company that
makes and/or sells PV, and let them market and sell systems on our behalf.
The systems would be standardized and purchased at bulk prices. The existing
rebate could be paid directly to the private sector partner and they could
handle installation, maintenance and warranty work for the systems installed.
The city of Medford, Massachusetts tried this approach in 1999.
Residential customers were offered grid connected PV systems for their home
at subsidized prices. The project was a joint effort between the Massachusetts
Electric, Ascension Technology, and the United States Department of Energy
(USDOE). Utility and government subsidies, standardization of the system
and having a partnership with a private sector company resulted in system
costs to the installing customer of approximately $5/watt for a 750 watt
system. This program was originally offered only in Medford, MA a town of
57,000. Only 8 systems were installed in Medford, so in February 2000 the
program was expanded to all of Massachusetts Electric's service territory.
From February 1999, through October 2000, 60 resident systems were installed
representing about 25 kW of capacity. This project demonstrates the economics
of PV even at heavily subsided prices will only be attractive to a very small
number of prospective households.
Conclusion
To make a major impact on the amount of wholesale power displaced
by renewable generation, a significant effort and large sums of funds would
be required. The city currently purchases about 160,000,000 kWh's of electricity
from BPA. To displace 1% of this purchase would require 160,000 kWh's of
locally generated renewable resources. Based on the metered production of
the systems in the Ashland Solar Pioneer program, the City would require
80 kW of installed PV. The best case cost of doing this would be as
follows:
80 kW @ $8/watt = $ 640,000
If these entire costs were born by the electric utility and paid
for by electric rates, this would result in about a 7.3% rate increase. If
customers could be persuaded to cover half the costs, rates would still have
to be raised by about 3.7%. As you are aware, electric rates have been increased
significantly over the last 2 years due to increased wholesale costs from
BPA. The city electric infrastructure is also in need of a constant source
of capital to maintain reliability and staff anticipates increased capital
costs as parts of the system continue to age. To invest additional money
in subsiding more renewable resources at this time of increased rate and
capital needs seems ill advised. Our current subsidy of $2/watts will continue
to attract and help early adopters and citizens that want to invest in solar.
Therefore, our recommendation would be continue to monitor progress in fuel
cells, reductions in cost for PV and successful public/private partnership
but leave our existing program in place until there is a major change in
costs or technology. |
