https://ilsr.org/solar-surprise-small-scale-better-deal/
[images and links in on-line article
Solar Surprise: Small-Scale Solar a Better Deal than Big
by John Farrell | Date: 9 Mar 2018
Just over a year ago, ILSR released a report questioning whether bigger
was better in renewable energy. We examined the relative costs of big,
remote wind and solar compared to near, distributed renewable power. The
conclusion was that renewable energy is competitive at all sizes. But
our solar comparison was lacking a key element: what do grid customers
actually pay for distributed solar, when taking into account the cost of
delivery and the portion of energy that solar owners use for themselves?
What is the value of local spending on distributed solar projects?
It’s a result that may surprise many in the energy industry.
Comparing Traditional Economies of Scale
For comparison, here’s the original chart comparing levelized costs (the
cost of a solar project averaged over 20 years), showing that the
conventional wisdom that bigger is better. But because it doesn’t
include delivery costs nor the value of power used on-site, it’s not a
very accurate comparison. We’ll call this the apples-to-bananas comparison.
This next chart incorporates delivery costs, and large-scale solar loses
much of its cost advantage. Delivery costs were taken from a recent
study by Crossborder, comparing actual transmission costs for
utility-scale solar projects in California and Arizona. This is a more
accurate comparison, but is still lacking all the appropriate pieces, so
we’ll call it the apples-to-oranges comparison.
The final iteration of this chart incorporate a key element, the amount
of power utility customers actually have to buy. On average, about half
of electricity produced by a rooftop solar array is consumed by the home
or business that hosts it. The other half is exported to neighbors. It’s
only the second half that is “purchased” by the grid and other
customers, which means an apples-to-apples comparison of purchasing
costs must accurately only bill the grid’s other customers for half that
power. The following chart illustrates, replacing the cost of producing
energy for distributed solar (which isn’t reflected in the cost to buy
exported power) with the estimated price for the grid to buy that power.
It uses the U.S. average retail price for electricity of 12 cents per
kilowatt-hour for residential customers and 10 cents per kilowatt-hour
for commercial customers. Since the grid only buys half the power, it
pays half the price for each kilowatt-hour produced.
More Than Price
There’s a final element often ignored by energy wonks or utility
regulators but of much concern to communities: the economic impact. In
the study by Crossborder, researchers noted that about one-quarter of
residential solar project costs—for customer acquisition, installation
labor, permitting and interconnection, and permit fees—are spent
locally. Large commercial projects spend about 6% of their costs
locally. The following chart illustrates the financial value of
distributed solar projects to the community that hosts them:
Two Takeaways
If you’re a Public Utilities Commission eyeing the least cost solar
energy, it’s clear that electric customers benefit regardless of the
scale of the solar build, but there’s definitely not a benefit to
building bigger than about 10 to 20 megawatts. In other words, you may
need to consider different factors, such as who earns the return on
investment from the solar project. If solar projects are comparable
cost, a Public Utilities Commission ought to favor project development
with maximum public economic benefit, as opposed to utility shareholder
benefit.
If you’re a city or community looking to maximize the value of your
solar investment, smaller is best. There’s every reason to favor
distributed solar because the economic multipliers far outweigh any
benefit from building solar bigger. The final chart shows the
combination of purchase price less local spending value:
Small is beautiful, wrote E. F. Schumacher, but when it comes to solar,
it’s also an economic smash-hit.
