Solar Risk: How Energy Storage Can Preserve Solar Savings in California Affordable Housing June 15, 2017
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Panelists • Seth Mullendore , Project Director, Clean Energy Group • Wayne Waite , Waite & Associates 6
Solar Risk: How Energy Storage Can Preserve Solar Savings in California Affordable Housing June 15, 2017 Seth Mullendore Project Director Clean Energy Group
Assessing Solar Risk • 50-unit affordable housing property in San Diego • Evaluate impact on solar bill savings due to changes in NEM policies and utility rates • Explore ability of energy storage to offset anticipated losses to solar value
Key Findings • Proposed policy and rate changes could erode bill savings from solar by 56 percent for affordable housing property owners. • Affordable housing tenants could see a 29 percent reduction in solar savings. • Adding energy storage to solar can unlock additional bill savings, reversing solar losses. • By increasing savings, energy storage could improve project financing feasibility, boosting project cost coverage by as much as 60 percent.
Shifting Solar Landscape 3 changes to solar policy and utility rates will significantly impact solar bill savings: 1. Shifting Time-of-Use (TOU) peak pricing periods later in the day 2. Introducing Non-Bypassable Charges for exported solar energy 3. Increasing utility Demand Charges
Shifting TOU Periods San Diego Gas & Electric Current TOU solar production: 46% peak 54% semi-peak Proposed TOU solar production: 23% peak 77% off-peak
Changes = 56% Savings Loss
Adding Energy Storage Adding storage to solar can unlock additional value streams: • Solar time-shifting • Demand charge management • Utility rate tariff switching
Storage Can Reverse Solar Losses
Rate Switching = 8x Solar-Only Savings
For Tenants, Changes = 29% Loss
California Policy Implications? Results raise questions regarding policies to incentive solar for affordable housing: • How many affordable housing properties will be impacted? How many can storage help? • What are the barriers to deploying storage with solar for affordable housing? • Should solar programs include incentives for storage technologies?
National Policy Implications? Source: North Carolina Clean Energy Technology Center, “The 50 States of Solar Report: 2016 Annual Review and Q4 Update”
13 Contact Information Seth Mullendore Project Director Clean Energy Group Email: seth@cleanegroup.org Phone: (802) 223-2554
Project and Tenant Economics: How do changing utility costs and energy savings affect project feasibility and tenant benefits? Wayne Waite Waite & Associates Energy Foundation Grant waynewaite@solarplusolutions.net
FOCUS COSTS CASH FLOW COVERAGE • Is solar PV a reliable hedge against changing utility policies/costs for property owners? • Can solar PV systems generate net positive economic benefits for tenants? • What strategies are needed to protect investment value?
LANDSCAPE New� TOU� Periods� Current� TOU� Periods� TIME� TIME� January February March April May June� July August September October November December January February March April May June� July August September October November December PERIOD PERIOD 0:00:00 1:00 0:00:00 1:00 1:00 2:00 1:00 2:00 2:00 3:00 2:00 3:00 SUPER� OFF� PEAK OFF� PEAK 3:00 4:00 3:00 4:00 4:00 5:00 4:00 5:00 5:00 6:00 5:00 6:00 6:00 7:00 6:00 7:00 7:00 8:00 7:00 8:00 8:00 9:00 8:00 9:00 9:00 10:00 9:00 10:00 10:00 11:00 10:00 11:00 OFF� PEAK 11:00 12:00 11:00 12:00 12:00 13:00 12:00 13:00 13:00 14:00 13:00 14:00 14:00 15:00 PEAK 14:00 15:00 15:00 16:00 15:00 16:00 16:00 17:00 16:00 17:00 17:00 18:00 17:00 18:00 PEAK 18:00 19:00 18:00 19:00 19:00 20:00 19:00 20:00 SEMI-PEAK 20:00 21:00 20:00 21:00 21:00 22:00 21:00 22:00 OFF� PEAK 22:00 23:00 22:00 23:00 OFF� PEAK 23:00 24:00:00 23:00 24:00:00 Property Cash Flow Change: - (15% to 25%) Tenant Cash Flow Change: - (10% to 15%) Added Twist: Conversion to mandatory TOU rates may increase cost burdens for almost 30% of low-income tenants - (31.6%)
LANDSCAPE California� Peak� Demand� Charge� Rates:� 2015� – � 2015 Southern� Pacific� Gas� and� San� Diego� Gas� &� Year California� Edison Electric Electric 2005 23.3 16.1 16.19 2006 26.62 22.07 18.65 2007 25.43 22.13 15.42 2008 26.11 18.28 21.31 2009 28.16 21.13 25.38 2010 29.22 21.43 24.75 2011 27.4 21.31 28.02 2012 28.1 26.19 30.68 2013 33.14 28.4 35.68 2014 38.14 30.96 41.87 2015 43.14 36.46 45.75 Average� Year-to- 7.70% 11.50% 16.60% Year� Increase Source: Sage Renewables (https://www.sagerenew.com) Source: Sage Renewables (https://www.sagerenew.com) Average annual increase to demand change rates has outpaced increase to electricity use charges
COMMON AREA SYSTEM COVERAGE 60% Costs) Assumptions: Capital� 50% • 6.5% interest Non-Bypassable� 40% • 20 year financing of� Charges (Percent� � Devalua5on� from� • 1.2 DSCR TOU� period� changes� � 30% Added� out-year� • No ITC demand� charges 20% 10% Implications: • Potential out year financial risks • Diminished value proposition and project feasibility • Need for new revenue streams and strategies to avoid utility costs
TENANT SYSTEM COVERAGE 60% Costs) Assumptions: Capital� 50% • 6.5% interest • 20 year financing of� 40% (Percent� • 1.2 DSCR 30% • 80% tenant benefit 20% 10% Implications: • Steep financial gap to scale solar to tenant units & deliver benefits • Need for added program resources to reach tenants • Potential for higher tenant cost burdens without benefit protections
FACTORS AFFECTING TENANT BENEFITS Modeled� Tenant� Benefits� -� PV� System� Offsetting� 70%� of� Tenant� Electricity � Reductions� to� Tenant� Solar� Value� (PV� System� Offsets� 70%� of� Tenant� kWhs)� � $� � � � � � � � � � � 400.00� � � � � � � $� 400� � � New� TOU� Rates� TENANT� ENERGY� � � � � Changes� � Year) � � � � SAVINGS� ARE� IN� � � � � of� per� � Non-Bypassable� JEOPARDY Value� Charges� Credits (Dollars� � $� 300� Annual� Solar� � Adjustments� to� � � Benefits� Baseline� Utility� Estimated� Tenant� Allowance� Levels� � $� 200� Tenant� Recapture� of� Tenant� Solar� Credits of� � $� 100� Level� � Pre-Solar� CARE� Level� $120.00� Benefits� � $� � � � � � � 39.00� � $� � � � � -� � � � Value� Adjustments� from� Utility� � Potential� Rent� Increase� from� � � � � � � Solar� Value � Residual� Benefits� of� � � � Tariff� Changes� Solar� Installation� � Stand-Alone� PV� � CARE� DL� TOU� � New� TOU� Periods� � NBCs� (Utility� Allowance� Adjustments) PV� Project� Providing� 70%� kWh� Offset ADJUSTMENT� TO� TENANT� SOLAR� VALUE
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