Ninth Avenue Terminal Solar Feasibility Report

Ninth Avenue Terminal (NAT) Solar Photovoltaic (PV) Feasibility Study

Produced By: Sebastien Lounis Florent Martin Eric A. Zielke Submitted To: Dr. Dan Kammen, UC Berkeley Robert Broesler, Jr., Graduate Student Instructor Jimmy Nelson, Graduate Student Instructor

Last Revision: February 23, 2009 Document prepared as part of the requirements of the University of California Berkeley MSE/ER 226: Photovoltaic Materials December 11, 2008

Executive Summary As public and political support for renewable energy grow, developers are looking for ways to “green their properties. An increasingly popular method for sustainable development is the use of roofmounted solar photovoltaic (PV) power to generate electricity. This study evaluates the economic feasibility of installing solar panels atop the proposed vintner’s hall at the Ninth Avenue Terminal (NAT), a warehouse located along the City of Oakland’s historic waterfront. A systematic method was used to determine our final recommendation. We began with a detailed review of relevant background information including a load analysis and a review of existing incentives and potential future policy measures. The following incentives are available to NAT at the state and local level: net metering provided by Pacific Gas & Electric (PG&E), the California Solar Initiative Performance Based Incentive and the California Feed-in-Tariff (FIT) of approximately US$0.135/kWh. In addition, a 30% Federal Investment Tax Credit (ITC) is available to renewable energy investors and Renewable Energy Credits (RECs) are available to producers and purchasers of renewable energy. We also considered the potential increase of the FIT to US$0.35/kWh and US$0.60/kWh and the possibility that, as is already being done by Southern California Edision, PG&E will begin leasing warehouse roof space to install solar panels. Based on the assessment of incentives, a list of existing and future incentive alternatives was developed. Several alternatives were excluded because of high cost and/or because they were beyond the scale of NATs power generation potential. These initial exclusions left a total of six alternatives considered for this project; three existing and three future incentive alternatives. The existing incentive alternatives were: (1) an electrical load-matching system financed by a tax equity investor, (2) a net-producing system financed by a tax equity investor with a FIT of US$0.135/kWh, and (3) a load-matching system financed through a Power Purchase Agreement (PPA) with a Solar Power Provider. The future incentive alternatives were: (1) a net-producing system financed by a tax equity investor with a FIT of US$0.35/kWh, (2) a net-producing system financed by a tax equity investor with a FIT of US$0.60/kWh, and (3) a PG&E lease agreement. Setting aside the PPA and the PG&E lease agreement due to lack of available economic data, the remaining existing and future alternatives were compared using the Delphi method to determine the best solutions. With input from the URS Corporation, NAT Partners and our group, the Delphi method determined that a load-matching system financed by a tax equity investor is the best presently available solution for the use of solar energy at NAT. However, our economic analysis shows that in order to achieve parity with the price of grid-purchased electricity over the lifetime of the system, a loan rate of 5 to 6% must be negotiated with the tax equity investor. Thus, depending on negotiated rates, a PPA is also an attractive financing option that should be considered for a load-matching system. In both cases, the remaining roof space is available in the likely case of a future PG&E lease agreement. Moreover, both options allow for flexibility in the event of a future increase in the State of California’s FIT to approximately US$0.60/kWh, the winning and profitable future incentive alternative in our Delphi method. Multiple European countries already have FITs of similar magnitude and several state legislatures are currently discussing raising their FITs, thus US$0.35/kWh to US$0.60/kWh are reasonable values used in this study. We recommend the installation of a 250 kW solar PV system to match the operating load of NAT’s future facilities. The feasibility of our recommendation under current solar energy policy

structures depends on the successful negotiation of favorable financing rates through either a tax equity investor or a PPA. While also considering the relative value of the public relations credit garnered by having solar panels installed at NAT, NAT Partners should pursue both financing options using the Federal ITC, “green” publicity, and perhaps even RECs as negotiating tools.

Acknowledgments Acknowledgments and thanks to the following people for their invaluable contributions of information pertaining to the Ninth Avenue Terminal (NAT) Solar Photovoltaic (PV) Feasibility Study. A special thank you to those that were not mentioned but also contributed their much appreciated efforts.

University of California Berkeley Dr. Dan Kammen, Faculty Advisor Robert Broesler, Jr., Graduate Student Instructor Jimmy Nelson, Graduate Student Instructor

URS Corporation Dustin Jolley, Engineer

Ninth Avenue Terminal Partners Ramsey Wright, Chabot Properties Developer Crissy Tsai, Placeworks, LLC Developer

Pacific Gas & Electric Carlos Abreu, Renewable Resource Developer

SunPower Julia Davis, Project Manager

Disclaimer The mention of commercial products, their source, or use reported within this document is not to be construed as an actual or implied endorsement of the product

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Contents 1 Introduction

1

2 Background

1

2.1

Area Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

2.1.1

Location and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

2.1.2

Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Project Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

2.2.1

“Oak to 9th” Project

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

2.2.2

Ninth Avenue Terminal (NAT) . . . . . . . . . . . . . . . . . . . . . . . . . .

3

2.2.3

General Building Description . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

2.3

Electrical Demand Loads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

2.4

Photovoltaic (PV) Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

2.4.1

System Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

2.4.2

Types of PV Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

2.4.3

New PV System Inverter Technology: Micro-inverters . . . . . . . . . . . . .

7

2.4.4

Generation Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

2.4.5

Analysis Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Incentives and Financing Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

2.2

2.5

2.6

2.5.1

Pacific Gas & Electric (PG&E) Utility . . . . . . . . . . . . . . . . . . . . . . 10

2.5.2

Feed-In-Tariffs (FITs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2.5.3

Power Purchase Agreements (PPAs) . . . . . . . . . . . . . . . . . . . . . . . 13

2.5.4

Photovoltaic Federal Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . 14

2.5.5

Renewable Energy Certificates (RECs) . . . . . . . . . . . . . . . . . . . . . . 14

Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.6.1

Hewlett-Packard Printing Technology Research and Development Facility 1.1 MW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

2.6.2

Frog’s Leap Winery - 168 kW . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2.6.3

Prologis Kaiser Distribution Center - 2 MW . . . . . . . . . . . . . . . . . . . 16

3 Alternative Solutions 3.1

v

17

Criteria Evaluated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.1.1

Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3.1.2

Public Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.1.3

Branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.1.4

Potential Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.1.5

Ease of Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.2

Initial Screening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.3

Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.3.1

Existing Incentive Alternative 1: NM (Tax Equity Investor) . . . . . . . . . . 20

3.3.2

Existing Incentive Alternative 2: Feed-In-Tariff (Tax Equity Investor) . . . . 22

3.3.3

Existing Incentive Alternative 3: NM with PPA . . . . . . . . . . . . . . . . . 22

3.3.4

Future Incentive Alternative 1: 35 Cent Feed-In-Tariff (Tax Equity Investor)

23

3.3.5

Future Incentive Alternative 2: 60 Cent Feed-In-Tariff (Tax Equity Investor)

23

3.3.6

Future Incentive Alternative 3: PG&E Lease agreement . . . . . . . . . . . . 24

4 Alternative Analysis 4.1

Preferred Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

5 Specifications of Recommended Solutions 5.1

5.2

24

26

Design Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 5.1.1

Building Roof Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

5.1.2

Potential Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Economic Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 5.2.1

NM (Tax Equity Investor) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

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5.2.2 5.3

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60 Cent Feed-In-Tariff (Tax Equity Investor) . . . . . . . . . . . . . . . . . . 30

System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.3.1

Panel Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

5.3.2

Inverter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

5.3.3

Racking System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

5.3.4

Wiring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

6 Conclusion and Final Recommendations

32

6.1

NM (Tax Equity Investor) with Option for Future Scale-Up . . . . . . . . . . . . . . 33

6.2

Power Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

6.3

Power Purchase Agreement with Future System Buyback and Scale-Up . . . . . . . 33

6.4

Final Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

References

38

7 Appendix - Current US State Solar PV Feed-In-Tarrif Bills and Laws (Rickerson et al., 2008) 39 8 Appendix - Load Analysis Results from HOMER

42

9 Appendix - Monthly Energy Demand and Energy Generation (Net Metering) Results from HOMER 44 10 Appendix - Daily Weather Variation Examples of Demand and Energy Generation (Net Metering) Results from HOMER 46 11 Appendix - Cost Estimate of Alternative Solutions

48

12 Appendix - Delphi Method

50

13 Appendix - Parameters Used in Economic Analysis for Recommended Solutions 51 14 Appendix - Cost Estimate For Net Metering Recommended Solution

53

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15 Appendix - Cost Estimate For Feed-In-Tariff (FIT) Recommended Solution

57

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Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

List of Tables 1

Solar Panel Details - Power Density, Efficiency and Price . . . . . . . . . . . . . . . .

7

2

Existing Incentive-Based Alternatives Analyzed for Initial Screening . . . . . . . . . 19

3

Future Incentive-Based Alternatives Analyzed for Initial Screening . . . . . . . . . . 19

4

System Parameters for the Existing Incentive Alternative 1 . . . . . . . . . . . . . . 21

5

Economic Parameters for the Existing Incentive Alternative 1

6

System Parameters for the Existing Incentive Alternative 2 . . . . . . . . . . . . . . 22

7

Economic Parameters for the Existing Incentive Alternative 2

8

System Parameters for the Future Incentive Alternative 1 . . . . . . . . . . . . . . . 23

9

Economic Parameters for the Future Incentive Alternative 1

10

System Parameters for the Future Incentive Alternative 2 . . . . . . . . . . . . . . . 23

11

Economic Parameters and Results for the Future Incentive Alternative 2

12

Delphi Decision Matrix Weighting Values . . . . . . . . . . . . . . . . . . . . . . . . 24

13

Delphi Decision Matrix Total Values for Existing Incentive Alternatives . . . . . . . 25

14

Delphi Decision Matrix Total Values for Future Incentive Alternatives . . . . . . . . 25

. . . . . . . . . . . . 21

. . . . . . . . . . . . 22

. . . . . . . . . . . . . 23

. . . . . . 24

List of Figures 1

Components of a PV system (CEC, 2001) . . . . . . . . . . . . . . . . . . . . . . . .

5

2

Calculation of Annual Energy Generation as a Function of Array Rating (CEC, 2001)

8

3

Illustration of California’s Incentive Programs based on Generating Capacity (Kammen, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4

Example of the Current German Feed-In-Tariffs (Wind-Works, 2008)

5

Example of the Feed-In-Tariffs Adjusted for Inflation (Wind-Works, 2008)

6

Advantages and Disadvantages of Price Adjustments for Feed-In-Tariffs (note: footnotes are from the original document by the CEC(a) (2008)) . . . . . . . . . . . . . 13

7

Side View Schematic of the NAT Warehouse as Depicted on the NAT Website (NAT Partners, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

. . . . . . . . 12 . . . . . 12

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8

Illustration of the NAT Warehouse utilizing 15,000 ft2 of Roof Space for the Net Metering Alternative (Google, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

9

Illustration of the NAT Warehouse utilizing 90,000 ft2 of Roof Space for the FeedIn-Tariff Alternative (Google, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

10

Representation of the the Levelized Cost of Energy (LCOE) versus the Nominal Interest Rate of a Loan by utilizing Net Metering . . . . . . . . . . . . . . . . . . . 28

11

Representation of the the Nominal Interest Rate of a Loan versus the Nominal Escalation Rate of Electricity by utilizing Net Metering . . . . . . . . . . . . . . . . . 29

12

Representation of the the Levelized Cost of Energy (LCOE) versus the Nominal Interest Rate of a Loan for three different Feed-In-Tariff Values . . . . . . . . . . . . 30

13

Representation of the the Payback Period versus the Nominal Interest Rate of a Loan for three different Feed-In-Tariff Values . . . . . . . . . . . . . . . . . . . . . . 31

14

Proposed Restaurant Operation Hours 7am to 11pm . . . . . . . . . . . . . . . . . . 42

15

Weekday Crush Period - Proposed Winery Operation Hours 8am to 5pm; Retail Store Hours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours 7am to 9pm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

16

Weekday Crush Period - Proposed Winery Operation Hours 8am to 5pm; Retail Store Hours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours 7am to 9pm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

17

Weekday Crush Period - Proposed Winery Operation Hours 8am to 5pm; Retail Store Hours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours 7am to 9pm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

18

Monthly Energy Demand from the Proposed Winery, Restaurant, Retail Store, Tasting Room, and Site Lighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

19

Monthly Energy Generation from the Proposed 250 kW PV System . . . . . . . . . 45

20

Example Cloudy Day During Non-Crush Season (AC Load vs. 250 kW PV Power)

21

Example Partly-Cloudy Day During Non-Crush Season (AC Load vs. 250 kW PV Power) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

22

Example Sunny Day During Crush Season (AC Load vs. PV Power) . . . . . . . . . 47

46

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

1

1

Introduction

Since the 1970s, the United States (US) has been purchasing imported energy at billions of US dollars. Many energy analysts agree that if the US does not make large investments into solar photovoltaic (PV) power soon, other countries may overtake the solar market. If the US falls behind, it may need to start purchasing imported energy at trillions of US dollars, further worsening the already damaged economy (Buonassisi, 2008). As part of the US’s energy investments, one new idea is the widespread placement of PV panels atop warehouses in major cities. Such large scale development was foreseen by the current California state governor, Arnold Schwarzenegger, when he stated at the 2008 Solar Power International conference, “I can envision going on a helicopter and seeing no more warehouses without solar panels (SPI, 2008).” The City of Oakland’s Ninth Avenue Terminal (NAT) historic warehouse is located in Alameda County, part of the San Francisco Bay Area. A large portion of Oakland’s waterfront in proximity to the NAT is composed of unused industrial infrastructure including many warehouses and residents do not frequent the waterfront corridor due to a lack of pedestrian walkways and community activities. In addition, many of the warehouses and buildings in the area are reliant on Pacific Gas & Electric’s (PG&E’s) energy to meet their electricity needs. The objective of our project is to investigate the feasibility of both existing and future-based solar incentive programs and financing options in hopes of providing renewable electricity to the NAT which will house a prized vintners hall and promote community activities. The study includes background information, a description of six alternatives and their analysis, specications of two preferred alternatives, and a conclusion with some additional recommendations.

2

Background

This section describes pertinent background information useful in the NAT Solar Photovoltaic Feasibility Study. The components include: area description including history and climate, project description, electricity demand loads, photovoltaic power, incentives and financing options, and case studies.

2.1

Area Description

This particular section details the location and history of the proposed project, along with the climate surrounding the City of Oakland.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

2.1.1

2

Location and History

The proposed project is situated within the historic Oak Street to 9th Avenue waterfront corridor that spans the shallow estuary between the cities of Oakland and Alameda. With having a connection to the San Francisco bay, this waterfront served as a bustling center for shipping and warehousing for many years. However, after World War II, the deeper waters of the Oakland port became the primary conduit for goods passing through the city. In the years since, usage of the estuary waterfront has waned significantly leading to high levels of vacancy in its warehouses and other buildings (OHP, 2008). The NAT sits on the water at the far south-eastern end of the Oak Street to 9th Avenue corridor. Designed in the Beaux Arts style by the Port of Oakland’s first Chief Engineer and Assistant Port Manager, Arthur H. Abel, the terminal was built in 1930 as part of the improvement of Oakland’s port facilities. The 500 ft “bulk-break” warehouse was further developed by the Great Depression era Works Progress Administration and Public Works Administration work-relief programs and served as an important hub for goods entering and leaving California. During World War II, the terminal was used by the Pacific Naval Air Base Command for shipping in support of the war effort. An addition to the building in 1951 brought the total length of the building to 1004 ft (CCG, 2008; NAT Partners, 2008). As the last “bulk-break” terminal in Oakland, the NAT was nominated as an Oakland Landmark by the Landmarks Preservation Board in 2003. The building should also be eligible for the National Register of Historic Places and the California Register of Historic Resources (CCG, 2008; NAT Partners, 2008). Today, the terminal continues to be used as a cotton storage warehouse (Wright, 2008).

2.1.2

Climate

The City of Oakland boasts a temperate, semi-arid, Mediterranean climate with yearly average temperatures between 52◦ F and 67◦ F. Oakland receives 22 in of annual precipitation, most of which falls between October and March (City-Data, 2008; Weather, 2008). According to the Western Regional Climate Center Oakland has an average of 147 clear days each year (WRCC, 2008).

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

2.2

3

Project Description

This section details the larger “Oak to 9th” Project. It includes a description of the “Oak to 9th” Project, the NAT Project, and the NAT building.

2.2.1

“Oak to 9th” Project

The Estuary Plan, approved in 1999 by the Oakland City Council, called for the redevelopment and revitalization of Oakland’s waterfront. Under the California constitution, land owned by the Public Trust cannot be used for private housing. About 75% of the Oak to 9th district that is controlled by the Port of Oakland is owned by the Public Trust. Thus, the Estuary Plan recommended that the Oak to 9th corridor be converted into a large grouping of public open spaces and recreational facilities integrated into the greater city parks system (WA, 2008; Oakland, 1999). Two years later, in September of 2001, the Port of Oakland approved Oakland Harbor Partners, a collaboration between developers Signature Properties and Reynolds and Brown, to be the master developer of the Oak to 9th Project (Oakland, 2001). Oakland Harbor Partners’ controversial “Oak to 9th” plan involves developing the 64 acre property to include 3,100 residential units, 200,000 sq ft of ground-floor commercial space, 3,500 structured parking spaces, approximately 27 acres of public open space, two renovated marinas and a wetlands restoration area (WA, 2008). Most of the new buildings will be around 8 stories, though some high-rises will be as tall as 24 stories. “Oak to 9th” has required amendment of the Estuary Plan and the trading of Public Trust lands in order to allow residential development. The project has thus been accompanied by outspoken public disapproval and lengthy political discourse since the inception of the project. Despite receiving final approval from the City Council in 2006, “Oak to 9th” continues to be a point of contention (WA, 2008).

2.2.2

Ninth Avenue Terminal (NAT)

Part of the controversy surrounding the “Oak to 9th” development revolves around the fate of the historic NAT. Under the original plan, the majority of the structure was to be demolished and replaced with a pedestrian promenade and park space. However, in response to pressure from historical preservationist groups, the Oakland City Council asked for new proposals for usage of the terminal (WA, 2008; RMG et al., 2005). NAT Partners LLC, a collaboration between Placeworks, LLC and Chabot Properties, have pro-

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4

posed reuse of the original half of the terminal as a vintners hall, allowing preservation of the building and development of the remaining half of the property as park space. The vintner’s hall will include a winery, tasting room, snack bar, retail shop, and restaurant and will fit into the greater “Oak to 9th” development (NAT Partners, 2008). At the time of this study, the project is currently seeking approval from the Oakland City Council. As part of the proposal, the NAT vintner’s hall is being hailed as a “green” option for wine enthusiasts and citizens interested in reducing their environmental impact and carbon footprint (NAT Partners, 2007). In addition to the carbon-offset benefits of producing wine for local consumption and the building’s minimal heating, cooling and lighting needs, the developers are interested in using the 90,000 ft2 of roof space for a photovoltaic (PV) system. The PV array would support the electrical load of the winery while, potentially, providing extra power to other surrounding buildings and/or feeding electricity into the utility grid.

2.2.3

General Building Description

The NAT was originally built in the Beaux Arts style that was popular in the United States in the late 19th and early 20th centuries (NAT Partners, 2008). Beaux Arts is characterized by symmetry, hierarchical spaces, eclectic styles and precise detailing. The 1951 addition loosely followed this architectural style, though there is clear discontinuity between the original and added structures. The original portion of the terminal that will be redeveloped is 504 ft long 180 ft wide and between 47 and 57 ft tall. It encloses 90,000 ft2 of floor space (CCG, 2008; NAT Partners, 2008). The warehouse sits atop a pier supported by over 200 pylons and the interior climate is modulated by the consistent temperature of the Bay. The building is cooled in the summer and warmed in the winter, maintaining an ideal temperature for winemaking and reducing heating and cooling needs. In addition, large windows run the length of the building providing ample, natural light for daytime usage.

2.3

Electrical Demand Loads

As disussed in Section 2.2.2, the NAT project includes the following facilities: a winery, a tasting room, a retail shop, and a restaurant. Typical electrical needs for a winery include lighting, motors and refrigeration. Already discussed in Section 2.2.3, the NAT is built on pylons over the bay water which fluctuates between 50◦ F and 60◦ F, the temperature range with the building is between 45◦ F and 65◦ F throughout the year. Due to the location of the building, the refrigeration requirements

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are lower than that for an ordinary winery. The crush season for wine-making is during September, October and November. During this period, the power needs are higher; mainly due to pumping of large amounts of liquids. A preliminary load assessment concluded that the electrical demand for the facilities would reach 400000 kWh a year, more than half due to the restaurant’s load. (Wright, 2008).

2.4

Photovoltaic (PV) Power

This sections details the specific PV components, types of PV systems, generation potential and some common analysis tools.

2.4.1

System Components

A PV system consists of several components such as modules, inverters, and the balance of system components. The solar modules convert the solar energy into DC power. A module is typically 5 to 25 ft2 and weighs 3 to 4 lbs/ft2 . Modules are assembled into solar panels. PV arrays can be mounted on a tracking system to receive maximal illumination throughout the day. The balance of system (BOS) includes the wiring system that connects panels and integrates them into the electrical system of the building through a DC-AC inverter. The panel mounting system is also part of the BOS, as well as switches, ground fault protection and over-current protection for the modules. The DC-AC inverter converts the DC power from the PV array into standard AC power used by commercial appliances. In addition, an optional meter can provide real time information about the performance of the system and the building energy usage.

Figure 1: Components of a PV system (CEC, 2001)

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

2.4.2

6

Types of PV Systems

The two most common types of PV systems include crystalline silicon solar cells, and thin-film solar cells. Crystalline modules can be further categorized as polycrystalline or monocrystalline, with monocrystalline modules being the more efficient product. Thin-film modules can be further categorized as CdTe, CIGS, or 3rd generation. Crystalline silicon (c-Si) were the first technologies developed for commercial PV systems and are still dominate the world market with more than 94% market penetration. Commercial c-Si solar modules yield efficiencies of about 15 to 20% and modules are typically sold with a 20 year to 25 year warranty. Companies manufacturing crystalline silicon modules include Q-Cells, Suntech, Sharp, Sunpower, Sanyo, GE Energy Solar (monocrystalline) and Evergreen Solar (String ribbon Si). (ENF, 2008). These are just a few of the manufacturers, as the complete list could total more than 50 companies. Thin-film solar modules are made of materials that absorb a wider spectrum of light. This results in a higher energy output (kWh) per kW than c-SI modules. Typically, the materials are deposited on the substrate via a vapor deposition process that is similar to the techniques used in the semiconductor industry. The efficiency of thin-film modules is lower than crystalline modules and require more modules and installation area to achieve the equivalent energy production of its crystalline counterpart. The most common materials for thin-film solar modules are amorphous silicon, cadmium telluride (CdTe) and copper indium (gallium) diselenide (CIGS). Companies manufacturing thin-film solar modules include First Solar (CdTe) and Uni-Solar (amorphous silicon, a-Si). Companies entering the thin-film market include Nanosolar, Optisolar, HelioVolot and Solyndra . (ENF, 2008). Concentrating photovoltaics systems (CPV) are a promising emerging technology that use lenses and mirrors to concentrate light on a small area of high efficiency solar cells. CPV systems are typically mounted on a single or two-axis tracking device allowing the system to receive maximum illumination throughout the day. CPV technologies are generally used for solar cell based power plants, but with some that is not to say that CPVs may one day be seen on rooftops. Companies manufacturing CPV systems include Boeing, Amonix, SolFocus and Emcore Photovoltaics. (ENF, 2008). Commercialization of the CPV technology can be expected after 2010. Solar modules parameters manufactured by several of the main solar companies are summarized in Table 1. It should be noted that module pricing is highly speculative and any prices beyond 6 months cannot be relied upon. This is especially true as more thin-fim manufacturers approach commercialization and improvements are made in the manufacturing processes for crystalline modules.

7

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

Table 1: Solar Panel Details - Power Density, Efficiency and Price Product

PV type

L (ft)

W (ft) 2.7

Nominal Wp 175.0

Wp /SqFt 12.4

Cell Eff. N/A

Module Eff. 0.175

Sharp NT-S5E1U1 Sharp NE-Q5E2U Evergreen NE-Q5E2U2 Sanyo HIT Power 2003 SunPower NE-Q5E2U4 Uni-Solar US 1165

c-Si

5.2

Poly c-Si String Rib Si Poly c-Si

5.2

2.7

157.0

11.1

N/A

0.146

5.4

3.1

205.0

12.2

0.150

0.130

3.8

3.3

200.0

16.0

0.197

0.172

c-Si

5.1

3.3

305.0

18.1

0.224

0.187

a-Si

8.0

2.5

64.0

3.2

0.120

0.08 to 0.09

1 www.sharpusa.com/files/sol

dow PRODUCTPROFILE.PDF

2 www.evergreensolar.com/upload/010908%20WEB%20LITERATURE/Datasheets/ES-A

200 205

210 EN 010908 L.pdf 3 us.sanyo.com/solar/downloads/HIT%20Power%20200%20Data%20Sheet%20RZ.pdf 4 www.sunpowercorp.com 5 www.uni-solar.com/interior.asp?id=87

2.4.3

New PV System Inverter Technology: Micro-inverters

A typical PV system includes a single inverter converting DC power to AC power. This inverter contains a Maximum Power Point (MPP) tracker that tunes the voltage and intensity of the array to maximize the system performance. An alternative solution is to use micro-inverters that convert the DC power from individual solar modules to AC power. Micro-inverters allow increased system efficiency because each module is tuned to the MPP. In a fully optimized system, each cell would have a different (I-V) set of values for current (I) and voltage (V) to reach the maximum power point. In a micro-inverter system, I-V values are calculated for each module while single inverters system set a value for the whole array, or at best, for a module string. Micro-inverters thus prevent losses due to shaded, dusty or damaged modules that typically reduce the performance of the system. Enphase Energy is the first company to commercialize the micro-inverter. According to Enphase Energy, the technology can increase efficiency up to 25% with an average gain of 7% to 10%. Microinverters cost around US$200 (Enphase 200 W) each while a commercial inverter such as the 125 kW Sunny Central 125 from SMA America costs about US$70 K. According to the NREL Solar

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8

Energy Technology Program, the inverter cost to the end user for a 150kW system is $0.60/Wp with a projected value of $0.51/ Wp in 2011. (Nichols, 2008). When considering the use of a micro-inverter versus a central inverter, one must thoroughly investigate total costs to compare the two technologies, as well as consider the location of the project. If there are no shading issues, then this could to be removed as a factor. Additionally, microinverters have been designed to work with crystalline as opposed to thin-film modules and their cost comparisons are based on crystalline modules. (Jolley, 2008; Thomas, 2008)

2.4.4

Generation Potential

The generation potential of 90000 sq ft depends of the solar cell technology. With an a-Si Uni-Solar panel, the potential would average 500 kWp (Table 1). With monocrystalline silicon SunPower modules, the potential could reach 1.63 MWp. An intermediate solution such as Sharp Poly-Si panels would yield 1 MWp potential. Corresponding kWh/yr production would range from 712 MWh/yr for Uni-Solar modules to 1660 MWh/yr for SunPower modules (Figure 2). The loss due to the partial shading of the north part of the rooftop has yet to be assessed. A portion of the rooftop also has to be retrieved for maintenance purposes.

Figure 2: Calculation of Annual Energy Generation as a Function of Array Rating (CEC, 2001)

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

2.4.5

9

Analysis Tools

There exist two common software packages used in optimizing a system PV system: (1) HOMER designed by the US Department of Energy’s National Renewable Energy Laboratory (NREL) and (2) RETScreen managed by Natural Resources Canadas CANMET Energy Technology Centre. In addition to these programs, an “online” program called PVWATTS can also be used for a basic, preliminary analysis (NREL(a), 2008). HOMER optimizes a micro-power system according to several relevant input parameters provided by the user. Based on technology options, component costs and resource availability, HOMER simulates a system’s energy production and costs component-by-component for each of the 8,760 hours in a year. The simulation then determines the feasibility of a system and allows comparisons based on several variables, giving the user the ability to interpret the optimization in terms of the factors most relevant to the specific project. (NREL, 2005). Developed by a collaboration of partners in government and industry as well as 162 Universities worldwide, RETScreen evaluates energy production and savings, costs, emission reductions, financial viability and risk for various types of Renewable-energy and Energy-efficient Technologies (RETs) based on a 5 step analysis. After site conditions are input into the system, (1) an energy model is determined and, (2) cost, (3) emission, (4) financial and (5) sensitivity and risk analyses are provided. (RetSCREEN, 2005).

2.5

Incentives and Financing Options

This section details both the existing incentives and financing options, along with the options that may exist in California in the future. In general, there exists an abundant wealth of options for renewable energy projects, including photovoltaics (DSIRE, 2008). These incentives are available at the federal, state, and regional levels. These types of public policy incentives can be described in the form of tax credits and rebates from governmental agencies or rebate programs and incentives from regional utilities. Due to the amount of tax credit and rebate programs available, this section will only cover the financing incentives pertaining to this study. In general, many of the solar incentives can be illustrated based on the size of a given project (Figure 3). Interestingly, there exists a “gap” of no incentive programs for systems 1 to 10 and 20 MW in size (Figure 3). One idea of filling this gap is to introduce a Feed-In-Tariff (FIT) different from the already existing FIT illustrated in Figure 3. FITs are further discussed in Section 2.5.2.

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Figure 3: Illustration of California’s Incentive Programs based on Generating Capacity (Kammen, 2008) 2.5.1

Pacific Gas & Electric (PG&E) Utility

The Pacific Gas & Electric (PG&E) Utility is the utility that NAT will need to interconnect with and consult with to pursue three existing incentives applicable to commercial scale solar projects. The incentive programs are in the form of (DSIRE, 2008),

1. California Solar Initiative (CSI) Rebate/Performance Based Incentive 2. Solar Net Metering Tariff 3. California Solar Feed-In-Tariff (FIT)

PG&E’s rebate program is part of the California Solar Initiative (CSI) program that is governed by the California Public Utilities Commission (CPUC). On a commercial scale (> 50kW), the Performance Based Incentive (PBI), as part of the CSI program, allows a customer to obtain a rebate based on the amount of annual energy they produce throughout a five year time period (DSIRE, 2008). The net metering program offered by PG&E is governed by California Law and can be used in conjunction with the rebate program. These first two programs allow the costumer to obtain credit in lieu of selling their electricity to PG&E in addition to retaining ownership of every Renewable Energy Certificate that they produce (PG&E(a), 2008). While the PG&E rebate and solar net metering can be used in conjunction with each other, the existing solar FIT cannot be used with any other state incentive program and PG&E would have

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11

ownership of the RECs (PG&E(b), 2008). This FIT was created with Assembly Bill 1969, and readjusted in 2007, to set a tariff for the price of renewably generated electricity for systems limited to 1.5 MWs. The price available for this electricity is based on Market Price Referents (MPRs) of a specific 10, 15, or 20 year contract and accounted for in the following formula (CPUC, 2008), Pt = At × B × Ct Where Pt = the price paid (US$/kWh) At = energy distributed onto the utility grid at time “t” (kWh) B = MPR fixed at time of actual commercial operation (US$) Ct = TOD adjustment factor for time “t” According to the CPUC, a typical summer weekday will generate US$0.15/kWh and a typical winter weekday US$0.12/kWh. However, many analysts agree that the amount offered from this FIT is not a large enough amount to be considered an incentive developed for rapid deployment of renewable energy (Kammen, 2008).

2.5.2

Feed-In-Tariffs (FITs)

As mentioned in Section 2.5.1, a FIT sets a fixed-price for renewable energy electricity via a contract over a specified time period, and although California already offers a FIT for solar PV projects, many analysts agree that California will need to raise the value of the FIT specifically for solar PV (CEC(a), 2008). In general, many believe that the FIT, when structured correctly, is the most successful incentive to rapidly deploy renewable energy (Wind-Works, 2008; Hayes, 2008). This is seen with the success that many countries, namely, Spain and Germany, have had with this type of incentive program (Wind-Works, 2008). A particular FIT can differentiate between the application, size, location, resource intensity, inflation index, and length of contract (Wind-Works, 2008). For this particular study, we examined both existing FIT structures, such as what Germany is currently utilizing, and proposed FIT structures, that many states such as Minnesota, Illinois, Michigan, and Rhode Island are currently contemplating (Figure 4, Appendix, Section 7). In addition, Randy Hayes, founder of the Rainforest Action Network and Climate Policy Officer of the World Future Council, suggested that we exam values ranging from US$0.35/kWh to US$0.60/kWh since many people in California are pushing for FIT values within this magnitude (Hayes, 2008). In examining these differing FIT structures, the differentiation of most interest was the adjustment for inflation. As can be seen in Figure 5, many countries have different policies with incorporating

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12

Figure 4: Example of the Current German Feed-In-Tariffs (Wind-Works, 2008) inflation. A report produced for the California Energy Commission tabulated both advantages and disadvantages of adjusting the FIT for inflation (Figure 6).

Figure 5: Example of the Feed-In-Tariffs Adjusted for Inflation (Wind-Works, 2008)

13

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

Table 5: Price Adjustment Pros and Cons

Approach

Description

Example

No Adjustment

Tariff set and left at specified level indefinitely.

Under the 2000 German feed-in tariff law, hydropower, geothermal, and landfill gas did not adjust; they were assigned digression rates in the 2004

Cons

Notes

Stable framework.

Pros

Fails to account for changes or to push cost reductions.

Tariff may be one rate over full duration, or have multiple ‘steps’, for example, $/MWh for first 10 years, different $/MWh for remainder of contract.

Provides for increases in operating costs.

Fails to account for changes, or push cost reductions.

amendment.#$ Fixed with Inflation Adjustment

Tariff level is periodically adjusted for new and operating plants.

Greece, Ireland, and Brazil correct 100% for inflation. Portugal corrects for existing plants annually. France corrects for inflation by 60%-100%, depending on the resource type#". Ontario corrects by 20%.

Figure 6: Advantages and Disadvantages of Price Adjustments for Feed-In-Tariffs (note: footnotes are from the original document by the CEC(a) (2008)) 2.5.3

Power Purchase Agreements (PPAs)

PPAs are an increasingly popular arrangement for implementing photovoltaic installations in which costumers would prefer to not own the system. Under a PPA, NAT Partners would have to find a Solar Service Provider (SSP) to finance, design, install, monitor and maintain the photovoltaic system. Though the system is owned by an investor secured by the SSP, or by the SSP itself, NAT Partners would then purchase the power produced by the solar panels from the investor at fixed guaranteed price over the life of the contract, usually 10-25 years. Many PPAs also include a clause !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

allowing purchase of the system at market price after a fixed amount of time; sometimes as short !%&'&()*!+,-,./(0!12(!/3&!4-5,(2-6&-/7!8)/9(&!:2-.&(5)/,2-7!)-'!89;*&)(!<)1&/0!=>??@AB!!!"!#! as six years (Rahus, 2008). #$

$%&!'&(&)*+,&!!(&-./!012-3&4!5367!$%&!4233&44!461-/!18!4246*9(*+,&!:1,939&4!81-!"&-;*(/
The PPA involves no initial capital or operation and maintenance costs and the guaranteed, con#"!EF,'B!G*&,-!&/!)*B7!HB!>?I!.&&!)*.2!,F,'B!D,H&!=>??JAB! tracted price of electricity protects against volatility and escalation in electricity costs over time. Moreover, the system design and operation would !"! be optimized to provide power for NAT and any excess power can be applied as net metering toward NAT’s electrical bill (Rahus, 2008). The investor will benefit from the usual 30% federal tax credit as well as from the PBI.

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14

The recent popularity of PPAs, growing from 10% to 50% of commercial and industrial sector installations from 2006 to 2007, reflects the advantages detailed above; however, there are some drawbacks (Cory et al., 2008). The PPA will likely involve complex initial negotiations and higher transaction costs than an outright purchase in order to determine rate pricing and the distribution of incentives among the parties involved (e.g. NAT, SPP, investor, installers, utility, etc.). The negotiated rate for purchase of electricity will almost certainly be higher than the going rate for grid power, thus making the PPA more expensive in the short term and making its financial benefits dependent on future electricity rates. Furthermore, contract stipulations may create limits to NAT’s ability to make changes to the property that would otherwise not exist. Finally, additional administrative costs and complications may be involved in ensuring access to the building by outside maintenance personnel and because NAT will have to pay two separate electrical bills (i.e. to PG&E and to the SSP’s investor). (Rahus, 2008).

2.5.4

Photovoltaic Federal Tax Credits

The form of tax credit that is of most interest to this project is at the US federal level. The Federal Investment Tax Credit (ITC) will supply a commercial or residential photovoltaic system with 30% of project capital costs (Abreu, 2008). The ITC has been inconsistently renewed over the last few years; however, the Emergency Economic Stabilization Act of 2008, signed on October 3rd, added an 8-year extension. (SEIA, 2008).

2.5.5

Renewable Energy Certificates (RECs)

Within the United States, a Renewable Energy Certificate (REC) is a certificate that asserts that the owner purchased or produced one MWh of renewable energy of a given type. RECs have also been named “Green tags” or “Tradable Renewable Certificates” (TRCs) within the US Market (Green-e, 2008; AWEA, 2008) RECs can be sold either on compliance markets to utilities subjected to Renewable Portfolio Standards or on voluntary markets to individuals wishing to purchase green power. Prices of RECs vary from 0.4¢/kWh to 5.6¢/kWh depending on the technology used to produce energy, the location of the facility and whether the REC qualifies for RPS compliance (EERE, 2008). As stated previously, utilities own the corresponding RECs when they purchase energy through a FIT system.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

2.6

15

Case Studies

Several PV installations of similar scale to this study have recently been installed or proposed in the US that serve as good examples of potential options for the NAT project. This section details three case studies pertinent to this project.

2.6.1

Hewlett-Packard Printing Technology Research and Development Facility - 1.1 MW

The project specifics are as follows, Location: San Diego, CA Date Completed: October, 2008 Size of Array: 1.1 MW Solar Panel Provider: SunPower Corp., San Jose, CA Financing: SunPower Access PPA through General Electric Financial Services Notes: While the size and generation capacity of the project closely match the potential for NAT, the most relevant feature of this project is the financing agreement. HP is purchasing electricity at a competitive retail price from GE Financial, who owns the solar array. In doing so, HP has avoided the startup cost of purchasing the system while still keeping the RECs, environmental benefits and competitive pricing that were part of the agreement. However, the PPA also means that HP is not in control of the energy produced at the facility eliminating the possibility of selling power back to the PG&E electrical grid (GE, 2008; Solarbuzz, 2008).

2.6.2

Frog’s Leap Winery - 168 kW

The project specifics are as follows, Project: Frog’s Leap Winery Location: Rutherford, CA Date Completed: February, 2005 Size of Array: 168 kW Solar Panel Provider: Sunlight Electric Financing: Frog’s Leap received a 50% rebate on the total cost of US$1.2 million for the project. Notes: The size of the Frog’s Leap photovoltaic array is similar to that of a load-matching array for NAT and covers approximately 20,000 ft2 . Frog’s Leap only uses 65 kW in its daily operations and takes advantage of California’s net metering program to earn credit for future electric bills with

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

16

the additional power produced. PG&E provided a 50% rebate on the capital cost of the system through the Self Generation Incentive Program, a program that is only offered for wind and fuel cell projects as of January 1, 2008 (PG&E(c), 2008). The system is expected to pay back the initial investment by Frog’s Leap in six years (Sunlight, 2008; Leap, 2008).

2.6.3

Prologis Kaiser Distribution Center - 2 MW

The project specifics are as follows, Location: Fontana, CA Date Completed: August, 2008 Size of Array: 2 MW Solar Panel Provider: First Solar Financing: Southern California Edison (SCE) owns and operates the system and is leasing the warehouse roof from Prologis. Notes: The Fontana rooftop installation is the first installation of SCE’s groundbreaking solar generation project which focuses on leasing rooftops. The project aims to install approximately 250 MW of photovoltaic panels on 65 million sq ft of roof space within the next 5 years. Divided among warehouse rooftops throughout southern California, each installation is expected to be in the 1 - 2 MW range and will feed directly into local electrical grids. The solar panels will eventually power the equivalent of 162,000 homes while helping SCE meet the 20% Renewable Portfolio Standard (RPS) enforced by the State of California (SCE, 2008). SCE’s solar generation project is an important step for solar energy in California because of the scale (i.e. when completed, the project will be one of the largest solar installations in the US) and because of the leasing and bidding arrangements put in place to finance and develop the installations. In an arrangement without precedent in the State of California, SCE is leasing the rooftops it will use for solar power generation. The property owner incurs no capital costs and gains revenue from rent while also benefiting from public relations credit for having solar panels on the facility. SCE keeps the RECs associated with the system, bolsters RPS production and sells the power generated to their customers. PG&E does not yet have the framework for such an arrangement, but it is reasonable to assume that leasing will soon become a possibility for PG&E customers like NAT (Markets, 2008). However, as in the case of Prologis, it is likely that NAT would have to be part of a much larger scale project organized by PG&E in order to be economically favorable for meeting their RPS goals (SCE, 2008). SCE also implemented a competitive bidding process for solar panel providers to determine the optimum technology choice. First Solar, a thin film photovoltaic company, won the bid for the ini-

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

17

tial Fontana installation. As the project progresses and is mimicked by other utilities, the bidding process, and the sheer scale of manufacturing increase to meet demand, should spark competition between solar providers and bring down costs (SCE, 2008).

3

Alternative Solutions

This section includes criteria, an initial screening process, and the alternative solutions considered in the NAT Solar Photovoltaic Feasibility Study. Descriptions of the criteria utilized for evaluating each alternative solution are detailed in Section 3.1. Section 3.2 provides information about the initial screening process used to delineate the feasible alternatives. Section 3.3 provides a discussion of the individual alternatives considered.

3.1

Criteria Evaluated

Five criteria are used to evaluate our alternatives, • Economics • Public Relations • Branding • Potential Power • Ease of Implementation

These criteria are used in the evaluation of our alternatives to asses the feasibility of developing a photovoltaic system. Input from the URS Corporation and the NAT Partners is utilized to weigh the relative importance of each criterion.

3.1.1

Economics

The economic criterion consists of a quantitative assessment of the capital cost, the operation and maintenance cost, and the price of electricity produced by the system. Capital cost is the total amount of money required to implement the project; including costs for materials, construction, and labor. Operation and maintenance refers to the amount of money required to operate and maintain the project.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

3.1.2

18

Public Relations

The public relations criterion refers to the ability to promote NAT as an environmentally-friendly facility with one basis as usage of solar power. Many municipalities, including the City of Oakland, have recently become interested in being labeled “green” cities; therefore the criterion is of primary importance in bolstering NAT’s efforts to gain project approval from the Oakland City Council. In addition, “green” public relations credit may be useful in future promotions and advertising for the winery.

3.1.3

Branding

The branding criterion refers specifically to the ability to label products produced at NAT as “produced by renewable energy” or other similar statements. The ability to do so will depend directly on whether or not NAT owns the REC associated with the system. As “green” products have risen in popularity and demand, branding will undoubtedly have an effect on sales.

3.1.4

Potential Power

The potential power criterion refers to the total potential peak power that each alternative will produce. Peak power is calculated based on a load analysis using HOMER and is given in units of kilowatts (kW) or megawatts (MW).

3.1.5

Ease of Implementation

The ease of implementation criterion refers to the relative overall effort an alternative will require. This includes the number of organizations the NAT Partners will have to consult with and make arrangements, and the placement of infrastructure. Permitting and licensing was excluded from this phase of analysis, as each alternative should have the same requirements and a California Environmental Impact Report has already been administered on the NAT project (Jolley, 2008).

3.2

Initial Screening

An initial screening process was used to identify both existing and future preliminary incentivebased alternatives that include apparent flaws in the implementation of an alternative solution. Alternatives were excluded based on two primary criteria, cost and scale. All alternatives involving

19

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

the purchase of the photovoltaic system without the use of a loan were eliminated because the capital cost far exceeds the monetary resources available according to NAT Partners. Whether load-matching or net producing, a complete system would total in the millions of dollars; too expensive for the budget of the project. For this reason, the relevant excluded alternatives include a net metering alternative “NM (NAT Partners),” an existing FIT alternative ‘Feed-in-Tariff (NAT Partners)” and the “Future Feed-in-Tariff (NAT Partners)” alternative. In addition, alternatives that typically involve much larger scale deployments of solar energy than what would be possible at the NAT were excluded. Bidding processes for purchase of renewable energy by utilities are popular for large scale installations on the order of tens of megawatts. NAT is capable of producing 1.5 MW of peak solar power; therefore, the alternatives, “Bidding Process (NAT Partners)” and “Bidding Process (Tax Equity Investor),” involving bidding processes have been excluded. Results are summarized in Tables 2 and 3. Table 2: Existing Incentive-Based Alternatives Analyzed for Initial Screening

Existing Incentive-Based Alternative NM (NAT Partners) NM (Tax Equity Investor) NM with PPA Feed-In-Tariff (NAT Partners) Feed-In-Tariff (Tax Equity Investor) Bidding Process (NAT Partners) Bidding Process (Tax Equity Investor)

Relative Capital Cost of System Large Medium Small Very Large Large Very Large Large

Sized to Load or Net-Producer Load Load Load Net-Producer Net-Producer Net-Producer Net-Producer

Exclusion Criteria Expensive None None Expensive None Economy of Scale Economy of Scale

Table 3: Future Incentive-Based Alternatives Analyzed for Initial Screening

Future Incentive-Based Alternative Future Feed-In-Tariff (NAT Partners) 35 Cent Feed-In-Tariff (Tax Equity Investor) 60 Cent Feed-In-Tariff (Tax Equity Investor) PG&E Lease agreement

3.3

Relative Capital Cost of System Very Large Large Large Small

Sized to Load or Net-Producer Net-Producer Net-Producer Net-Producer Net-Producer

Exclusion Criteria Expensive None None None

Alternatives

In this section, we evaluate six alternatives total; three with existing incentives and three with “hypothetical” future-based policies or incentives. We give detailed economic evaluations of two alternatives with existing incentive programs. Both involve the use of a tax equity investor to finance the photovoltaic system to be installed on NAT, thereby mitigating the high initial capital cost.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

20

Under both schemes, the tax equity investor will benefit from the 30% ITC provided by the federal government for renewable energy investors. The first alternative is to install a load-matching PV array of approximately 250 kW to meet the electricity demand of NAT’s facilities. In addition to benefitting from net metering through PG&E, NAT will receive a PBI under the CSI. The second alternative is to fill the entire roof of NAT with solar panels, amounting to approximately 1.5 MW of peak generation potential. Electricity generated by the solar panels and not used by NAT will be sold back to the grid using California’s FIT as discussed in Section 2.5.1 and Section 2.5.2. A third, currently feasible and existing incentive, alternative is the arrangement of a PPA through a program like SunPower Access (Refer to Section 2.6.1). Under such an agreement, NAT does not own the system but has guaranteed competitive pricing over the lifetime of the contract. Since there are no initial capital or operations and maintenance costs, a detailed financial analysis is not necessary for the PPA. In addition to the existing options discussed above, we also considered potential future policy measures that could have a large impact on the feasibility and profitability of installing a PV system at NAT. We assessed the financial impact of an increase in California’s FIT ranging from US$0.35/kWh to US$0.60/kWh. Germany, currently at the global forefront of renewable energy policy, already has a FIT greater then US$0.60/kWh, making this a reasonable figure to evaluate as a potential future subsidy (Solarbuzz, 2008). Another future policy measure, that will likely be adopted by PG&E in the near future, is the leasing of commercial rooftops by the utility. Already being implemented by SCE (Refer to Section 2.6.3), leasing schemes benefit both the utility, which gains credit toward the RPS, and the owner of the building, who earns revenue from rent. All alternatives were analyzed using HOMER software, created by NREL, based on prices for an array of crystalline silicon panels provided by SunPower Corporation. Annualized costs were calculated for a 25 year system lifetime, taking into account the time-value of money with the current discount rate of 1.81% and a nominal loan interest rate of 10% with 3.66% inflation (FFC, 2008). For simplicity, the roof was assumed to be un-shaded. Daily load profiles were estimated for four scenarios: (1) winery, retail and tasting room load on weekdays during non-crush season; (2) Winery, retail and tasting room load on weekdays during the crush season; (3) Winery, retail and tasting room load on weekends; and (4) Restaurant load for the entire week. The load profile estimates can be seen in the Appendix, Section 8 and Section 9.

3.3.1

Existing Incentive Alternative 1: NM (Tax Equity Investor)

The NM (Tax Equity Investor) existing incentive alternative consists of a 250 kW load-matching system financed by a tax equity investor. Under this alternative, NAT will secure financing for the PV system through a tax equity investor, whether it is a financing company like G.E. Financial, a

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21

bank or another type of investor interested in receiving a tax credit. As discussed in Section 2.5.4, the federal ITC was recently extended 8 years as part of H.R. 1424, the US government bailout bill passed on October 3, 2008. The ITC grants a cap-less tax credit at 30% the value of the net system cost and represents a significant incentive for a financial institution to invest in a PV system (CEC(b), 2008). Furthermore, the ITC could be useful in negotiating a favorable interest rate for payback of the investment by NAT. Once the photovoltaic system is installed and producing power it will provide most of the electricity used by NAT, displacing electricity that would otherwise have been purchased from PG&E. In addition, NAT will benefit from two financial incentives. Under the CSI, NAT will currently receive a PBI of US$0.22/kWh guaranteed over the first five years that the system is operational. The PBI will decrease over time based on the amount of PV systems installed within PG&E’s customer base in order to encourage more efficient implementation; therefore, the incentive received by NAT will depend on when the photovoltaic system is installed and brought on-line. NAT will also benefit from PG&E’s net metering program (CEC(b), 2008). Any power produced by the solar panels and not used by NAT will cause the electricity meter to run backwards, effectively giving NAT credit for the additional energy the PV system is providing to the grid (PG&E(b), 2008) By our calculations, a 250 kW solar array will best match the load for NAT and will take up approximately 15,000 of the 90,000 sq ft of roof space available. A summary of the system parameters and financial figures are given in Table 4 and Table 5, respectively. Formulas used in developing this data are available in the Appendix, Section 11 Table 4: System Parameters for the Existing Incentive Alternative 1 NM (Tax Equity Investor) Energy Production (kWh/yr) Energy Demand (kWh/yr) PV Project Lifetime (yrs) Roofspace (sq. ft.)

Value 410500 410600 25 15000

Table 5: Economic Parameters for the Existing Incentive Alternative 1 NM (Tax Equity Investor) Total Capital Cost (US$) Yearly Working Cost (US$/yr)

Value 1650000 5250

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

3.3.2

22

Existing Incentive Alternative 2: Feed-In-Tariff (Tax Equity Investor)

The Feed-In-Tariff (Tax Equity Investor) existing incentive alternative is composed of a 1.5 MW netproducing system financed by a tax equity investor with a US$0.135/kWh FIT. This alternative will be financed by an external tax equity investor benefiting from the 30% federal tax credit available under H.R. 1424. However, filling the roof of NAT with solar panels amounts to a generation potential of approximately 1.5 MW, large enough to preclude the system from taking advantage of either the CSI or net metering program. Instead, NAT will be able to benefit from California’s FIT to sell its additional electricity back to the PG&E at a guaranteed competitive price. The FIT rate is calculated according to several parameters (Refer to Section 2.5.1) but will vary between about US$0.12/kWh and US$0.15/kWh depending on the season. For this reason, we used an average value of US$0.135/kWh for our calculations. A summary of the system parameters and financial figures are given in Table 6 and Table 7, respectively. Formulas used in developing this data are available in the Appendix, Section 11 Table 6: System Parameters for the Existing Incentive Alternative 2 Feed-In-Tariff (Tax Equity Investor) Energy Production (kWh/yr) Energy Demand (kWh/yr) PV Project Lifetime (yr) Roofspace (sq. ft.)

Value 2463000 410600 25 90000

Table 7: Economic Parameters for the Existing Incentive Alternative 2 Feed-In-Tariff (Tax Equity Investor) Total Capital Cost (US$) Yearly Working Cost (US$/yr)

3.3.3

Value 8700000 21000

Existing Incentive Alternative 3: NM with PPA

The NM with PPA existing incentive alternative is composed of utilizing a Power Purchase Agreement (PPA) for a load matching system. As discussed in Section 2.5.3, NAT will find a Solar Service Provider (SSP) to finance, design, install, monitor and maintain the photovoltaic system. Though the system is owned by an investor secured by the SSP (or by the SSP itself), NAT will purchase the power produced by the solar panels from the investor at fixed guaranteed price over the life of the contract, usually 10-25 years. Though a PPA is an attractive option for NAT and some of the drawbacks are mitigated by the possibility of purchasing the system early in the contract, there are clearly many complex factors to consider in assessing this alternative.

23

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

3.3.4

Future Incentive Alternative 1: 35 Cent Feed-In-Tariff (Tax Equity Investor)

The 35 Cent Feed-In-Tariff (Tax Equity Investor) existing incentive alternative is composed of a 1.5 MW net-producing system financed by tax equity investor with a US$0.35/kWh FIT. This alternative is is exactly the same as Existing Incentive Alternative 2 but with the FIT rate increased to US$0.35/kWh rather than US$0.135/kWh. A summary of the system parameters and financial figures are given in Table 8 and Table 9, respectively. Formulas used in developing this data are available in the Appendix, Section 11 Table 8: System Parameters for the Future Incentive Alternative 1 35 Cent Feed-In-Tariff (Tax Equity Investor) Energy Production (kWh/yr) Energy Demand (kWh/yr) PV Project Lifetime (yr) Roofspace (sq. ft.)

Value 2463000 410600 25 90000

Table 9: Economic Parameters for the Future Incentive Alternative 1 0.35 - Feed-In-Tariff (Tax Equity Investor) Total Capital Cost (US$) Yearly Working Cost (US$/yr)

3.3.5

Value 8700000 21000

Future Incentive Alternative 2: 60 Cent Feed-In-Tariff (Tax Equity Investor)

The 60 Cent Feed-In-Tariff (Tax Equity Investor) existing incentive alternative is composed of a 1.5 MW net-producing system financed by tax equity investor with a US$0.60/kWh FIT. This alternative is is exactly the same as Future Incentive Alternative 1 but with the FIT rate increased to US$0.60/kWh rather than US$0.35/kWh. A summary of the system parameters and financial figures are given in Table 10 and Table 11, respectively. Formulas used in developing this data are available in the Appendix, Section 11 Table 10: System Parameters for the Future Incentive Alternative 2 60 Cent Feed-In-Tariff (Tax Equity Investor) Energy Production (kWh/yr) Energy Demand (kWh/yr) PV Project Lifetime (yr) Roofspace (sq. ft.)

Value 2463000 410600 25 90000

24

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

Table 11: Economic Parameters and Results for the Future Incentive Alternative 2 0.60 - Feed-In-Tariff (Tax Equity Investor) Total Capital Cost (US$) Yearly Working Cost (US$/yr)

3.3.6

Value 8700000 21000

Future Incentive Alternative 3: PG&E Lease agreement

Under this alternative, NAT would lease the rooftop to PG&E for the installation of solar panels. PG&E would use the solar electricity generated at NAT toward meeting the RPS. NAT would incur no capital or operations and maintenance costs and would receive monthly rent payments from PG&E for the use of the roof, providing a steady income over the course of the lease agreement. As with the PPA, complications would exist in negotiating the contract and in establishing access and alteration schemes for the building. A detailed description of the SCE plan for leasing warehouse rooftops is given an example described in Section 2.6.3.

4

Alternative Analysis

We used the Delphi method to compare the three alternatives with existing incentives and the three alternatives with incentives that may exist in the future. The Delphi method uses a process of weighing and scoring selected criteria to help select a preferred alternative. Each group member provided individual values for the weights before coming to a group consensus. Three sets of weights from URS and NAT Partners were given to us by Dustin Jolley, Ramsey Wright and Crissy Tsai (Jolley, 2008). Our combined group weight was averaged with the three URS and NAT Partner weight sets. As shown in Table 12, the values were then rounded to the nearest half point, based on our discretion. For this project, we scored the criteria based on our analysis and feedback from Table 12: Delphi Decision Matrix Weighting Values

Economics Public Relations Branding Potential Power Ease of Implementation

URS 3 4 2 2 1

Chabot 3 4 3 1 2

Placeworks 3 4 3 1 2

Our Weight 4 3 2 2 2

Average 3.25 3.75 2.5 1.5 1.75

Final 3.0 4.0 2.5 1.5 2.0

the URS Corp. and the NAT Partners. The score of the criteria were multiplied by the appropriate weights and totaled for each alternative, resulting in the total weighted score. Using the Delphi

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

25

method, the NM (Tax Equity Investor) existing incentive alternative and the 60 Cent Feed-In-Tariff (Tax Equity Investor) future incentive alternative scored the highest (See Table 13; Table 14; and Appendix, Section 12). Table 13: Delphi Decision Matrix Total Values for Existing Incentive Alternatives Existing Incentive Alternative NM (Tax Equity Investor) Feed-In-Tariff (Tax Equity Investor) NM with PPA

Total Weighted Score 38.5 23.5 N/A

Table 14: Delphi Decision Matrix Total Values for Future Incentive Alternatives Future Incentive Alternative 35 Cent Feed-In-Tariff (Tax Equity Investor) 60 Cent Feed-In-Tariff (Tax Equity Investor) PG&E Lease agreement

4.1

Total Weighted Score 26.5 32.5 N/A

Preferred Alternative

In determining the preferred alternative from the results of the Delphi method, the existing incentive alternative, NM with PPA, and future incentive alternative, PG&E Lease agreement, were excluded and not determined as the preferred alternative for two different reasons. In the case of the NM with PPA alternative, financial figures are not available until agreements of the contract have taken place. As for the PG&E Lease agreement, no current documentation of financial figures exist to perform a proper analysis. In addition, based on the large weights of the economics and public relation criteria, any alternative that minimized these criteria would be chosen as the best alternative by the Delphi method. Even though economic results for the “winning” existing incentive alternative, NM (Tax Equity Investor), are not favorable for a standard loan, we decided to perform further analysis for both this alternative and the “winning” future incentive alternative, 60 Cent Feed-InTariff (Tax Equity Investor). The analysis of these two preferred alternative solutions are discussed in Section 5.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

5

26

Specifications of Recommended Solutions

This section outlines pertinent background information specific to the preferred alternative solutions, an economic analysis, individual component designs.

5.1

Design Specifications

The Design Specifications include the building roof specifications and the calculated power output.

5.1.1

Building Roof Specifications

The NAT warehouse features 90,000 ft2 of roof space that is ideally suited for deployment of PV. The roof space can be divided into three segments, two wide lower tiers separated by one narrow upper tier (Figure 7). The space is largely unobstructed, save seven short ventilation chimneys on the upper tier, and the upper tier sits only 10 ft above the lower tiers, leading to minimal shading. In addition, the long side of the building faces south meaning that one of the wide lower tiers and the upper tier are optimally positioned for maximum insolation. This south side faces the water and thus shading by new high-rise developments will not be a concern (Figure 7).

Figure 7: Side View Schematic of the NAT Warehouse as Depicted on the NAT Website (NAT Partners, 2008)

5.1.2

Potential Power

In terms of the potential power that could be produced for the existing incentive alternative, NM (Tax Equity Investor) the solar array matches the demand load of NAT and has a peak power of

Existing and Future Incentive Alternatives 27

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

250 kW. The array corresponds to approximately 15,000 ft2 of filled roof space using SunPower Corp.’s Powerguard PV modules as a standard (Figure 8). Alternative Existing Incentive

1: CSI (Tax Equity Inve Advantages:

– Grid-bought power virtually entirely displaced – Keep RECs – Take advantage of CSI Rebate and Net Metering – Open to scale-up

Disadvantages:

– No sellback to grid. – Loan interest rate of 5.2% needed for grid-parity over year lifetime

Utilized Roof Space: ~15,000 Sq. Ft. Figure 8: Illustration of the NAT Warehouse utilizing 15,000 ft2 of Roof Space for the Net Metering Alternative (Google, 2008)

Existing and Future Incentive Alternatives

With regard to the the 60 Cent Feed-In-Tariff (Tax Equity Investor) future incentive alternative, the solar array fills the entire roof of NAT with panels (Figure 9). Again using Powerguard as a standard, this array will haveExisting a peak powerIncentive output of 1.5 MW. Alternative

2: FIT (Tax Equity Inve Advantages:

– Net Producing - Sellback to – Use of entire roof space – Keep RECs

Disadvantages:

– Disqualified from all other s incentive programs – Very high capital cost – Net loss over lifetime of sys

Utilized Roof Space: ~90,000 Sq. Ft. Figure 9: Illustration of the NAT Warehouse utilizing 90,000 ft2 of Roof Space for the Feed-In-Tariff Alternative (Google, 2008)

28

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

5.2

Economic Analysis

The economic analysis includes the financial figures representative of the two preferred alternative solutions, NM (Tax Equity Investor), and 60 Cent Feed-In-Tariff (Tax Equity Investor). For the economic analysis of the recommended alternative solutions, we used methods presented in “Renewable and Efficient Electric Power Systems” by Masters (2004). The formulas are shown in Appendix, Section 14 and Section 15.

5.2.1

NM (Tax Equity Investor)

For a net metering option, the key figures are the Levelized Cost of Energy (LCOE) produced by the system and the payback period. Figure 10 below illustrates a nearly linear relationship between the LCOE and different values of a particular loan rate.

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Figure 10: Representation of the the Levelized Cost of Energy (LCOE) versus the Nominal Interest Rate of a Loan by utilizing Net Metering

29

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

For this analysis, the loan interest rate is a critical parameter. Because the investor paying for the PV system is able to receive federal tax credits for up to 30% of the investment, and due to the publicity generated by investing in “green” technologies, there exists potential to receive nominal interest rates at values as low as 5 to 6%, or nearly an interest free loan. In addition, the electricity escalation rate plays a key role in savings projections. Figure ?? illustrates the relationship between the loan interest rate and electricity price escalation rate needed for a 25 yr payback period. A 4.7% nominal escalation rate is considered a conservative forecast since the rate is based on historical data and does not take into account recent movements in supply/demand balances (Kammen, 2008). Also, electricity prices could also be affected if a tax on carbon emissions or a carbon credit structure would be implemented.

!"#$%&"'($#)%*$+,-,.+%/#+,%012%

("#$% '"&$% '"#$% &"&

%$)&%*+,-%.,/0,12%.+-345%

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Figure 11: Representation of the the Nominal Interest Rate of a Loan versus the Nominal Escalation Rate of Electricity by utilizing Net Metering

30

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

!"'!$ !"'%$./01234$

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!"(%$./01234$ !"&%$

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Figure 12: Representation of the the Levelized Cost of Energy (LCOE) versus the Nominal Interest Rate of a Loan for three different Feed-In-Tariff Values 5.2.2

60 Cent Feed-In-Tariff (Tax Equity Investor)

For a FIT alternative, again the key figures are the Levelized Cost of Energy (LCOE) produced by the system and the payback period. Figure 12 below represents three different relationships between the LCOE and different values of a particular loan rate when analyzing Feed-InTariff values. The results in Figure 12 show a trend of increasing linearity from a FIT value of US$0.35/kWh to a FIT value of US$0.60/kWh. This trend should indicate to the NAT Partners that a FIT value of US$0.60/kWh or more would be most desirable when an interest rate on a loan is larger then 5 to 6%; however, please do not forget that there exists a small bit of leverage that the NAT Partners can offer to a potential investor in exchange for a more favorable loan as low as 5 to 6%. In calculating a payback period while taking into account a FIT structure, because the electricity produced is sold to PG&E, the building electrical power demand is met by purchasing electricity at the regular market price. Once the payback time is reached, the energy produced generates net revenues for the NAT. Payback period relationships to interest rates on particular loans are illustrated in Figure 13, again showing that a FIT value of US$0.60/kWh is most favorable.

31

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

%#" !'-#"./01234" !'&#"./01234"

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Figure 13: Representation of the the Payback Period versus the Nominal Interest Rate of a Loan for three different Feed-In-Tariff Values

5.3

System Design

The system design includes panel type, inverter, racking system and additional electrical components such as the control box and wiring. As an example, we give a recommended system design based on information provided by Julia Davis of SunPower Corporation. However, it should be noted that there are many other competitive photovoltaics manufacturers whose products should be considered alongside the design delineated below.

5.3.1

Panel Type

The recommended panel for NAT’s PV system is the SunPower 305 Solar Panel. As with all of SunPowers models, the 305 uses a back-contact design to deliver a high efficiency of 18.7% and peak wattage of 305 W/panel. The panel comes with a 25 year limited power warrantee and a 10 year limited product warrantee. (Davis, 2008).

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

5.3.2

32

Inverter

The recommended Inverter for NAT is the Xantrex GT250 inverter for the load-matching 250 kW system under the NM (Tax Equity Investor) alternative or three Satcon PowerGate Plus 500 kW inverters for the net-producing 1.5 MW system under the US$0.60/kWh FIT alternative. Both of these inverters offer a five year limited warranty with option to extend to 10 or 15 years. (Davis, 2008).

5.3.3

Racking System

The recommended racking system for NAT is the SunPower Powerguard Roof Tile or the SunPower T10 Solar Roof Tile. Both models offer high wind resistance and neither model involves roof penetration. The T10 tiles incorporate a 10 degree tilt which allows for a higher power conversion but lower coverage per unit roof area than the Powerguard tiles. The full system warrantee applies to both models. (Davis, 2008).

5.3.4

Wiring

The additional electrical components transferring DC power generated by the solar panels to the inverter and then transferring the converted AC power to NAT and the grid will include wiring, a control box, several switches and a transformer, among other items (Figure 1). The details of the electrical connections will be determined by the designer and installer based on the requirements of PG&E and the occupants of NAT. (Davis, 2008).

6

Conclusion and Final Recommendations

This study investigates the feasibility of installing a solar photovoltaic array on the rooftop of the proposed NAT vintner’s hall. Based on our analysis, the only potentially viable existing alternative for implementing solar power at NAT is the installation of a load-matching 250 kW photovoltaic system with initial costs financed either by a loan from an independent tax equity investor or by the arrangement of a PPA. Both of these options keep the remaining 75,000 ft2 of the roof available in the likely event that PG&E begins leasing large warehouse rooftops. Furthermore, each option must be assessed relative to the possibility of a future policy measure raising California’s FIT to a rate on the order of US$0.60/kWh as discussed in our winning future alternative. The best final alternative will depend on the degree to which favorable loans and contracts can be negotiated,

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

33

and thus both possibilities are worthy of pursuit.

6.1

NM (Tax Equity Investor) with Option for Future Scale-Up

Purchasing a load-matching system outright with a loan from a tax equity investor offers optimum flexibility as long as a favorable interest rate can be negotiated. It is clear from the economic analysis in Section 5.2 that even with the CSI rebate and net metering, the load-matching scenario financed by an independent tax equity investor is infeasible with a typical loan rate of 10%. However, if an interest rate of 5.5% or less could be negotiated, the annualized price of electricity with the incentives would be equal to, or cheaper than grid-purchased power. With such an interest rate, the system would be a good investment by NAT regardless of future solar-friendly policies. Furthermore, in the ideal scenario that a US$0.60/kWh or more FIT is passed, NAT has no constraints to scaling up the system to be a net-producer and reap the benefits of selling power back to the grid. Acknowledging the caveat of interest rate, a 250 kW load-matching system financed by a tax equity investor is the best option for NAT.

6.2

Power Purchase Agreement

In the event that an interest rate of 5.5% or less cannot be agreed upon with a tax equity investor, a PPA must be considered alongside outright purchase of the system with a loan. Few details are available on rates and pricing for existing PPA arrangements and the specifics of contracts vary from one project to another. Therefore, it is difficult to provide a numerical estimate for the economic benefits of a PPA. NAT would essentially be exchanging higher short term electricity prices for long term savings when future prices rise above the negotiated rate for power from the solar array. The uncertainty lies in the timeline for reaching this threshold within the terms of the contract, but the ever increasing popularity of PPAs is a good indication that many commercial solar customers find it to be an economically attractive option. If NAT Partners are able to negotiate a favorable price for electricity, a PPA will eliminate start-up costs and provide long-term savings while allowing NAT to retain the RECs and public relations credibility associated with the PV system.

6.3

Power Purchase Agreement with Future System Buyback and Scale-Up

As mentioned in Section 3.3.3, PPAs may include a clause allowing the host party to purchase the system at market price after a fixed amount of time, usually six or more years. Such a clause allows the host the opportunity to reassess the economic and political environment and decided whether it is favorable to purchasing the system outright, giving flexibility to adapt to new policy measures

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34

that may takes several years to appear. For example, if the ideal case that a FIT of US$0.60/kWh or more is passed five or six years after the signing of the PPA, NAT can decide to purchase the system and take advantage of the large revenue potential provided by the tariff by scaling up to a net-producing array size. Moreover, if no attractive new policy measures or incentives exist, NAT can carry on with the original PPA contract. However, in the event that a high FIT is passed in the near future, the PPA lacks the immediate scalability of an outright purchase and NAT would be hamstrung by the PPA contract, paying a fixed price for electricity for several years while it could be earning valuable income.

6.4

Final Recommendation

NAT Partners must approach the negotiating table knowing if they are willing to pay a higher price for electricity, whether in the short term or long term, than simply buying from PG&E. If so, NAT Partners must decide how much more they are willing to pay based on the value of having an environmentally friendly “green” facility. In order for the project to be feasible, NAT partners must use the incentives and public relations credibility available to the tax equity investor to argue for a favorable interest rate. In addition, the donation of RECs to the investor could also potentially serve as a negotiating tool. At the same time, NAT partners should also look into pricing for a PPA and weigh the two options to find the best solution.

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OHP (2008). “Oak to Ninth: A Brief History.” Report No. None Given, Oakland Harbor Partners. [Online] Available www.oakto9th.com/sustainable/, October 27, 2008. PG&E(a) (2008). “Standard Contracts for Purchase (Feed-in Tariffs).” Report No. None Given, Pacific Gas & Electric. [Online] Available http://www.pge.com/feedintariffs/, October 24, 2008. PG&E(b) (2008). “Standard Net Energy Metering (NEMS).” Report No. None Given, Pacific Gas & Electric. [Online] Available http://www.pge.com/b2b/newgenerator/solarwindgenerators/standardenet/, October 26, 2008. PG&E(c) (2008). “Self Generation Incentive Program.” Report No. None Given, Pacific Gas & Electric. [Online] Available http://www.pge.com/selfgen/, December 1, 2008. Rahus, I. (2008). “A Customer’s Guide to Solar Power Purchase Agreements.” Report No. None Given, Rahus Institute, CA. [Online] Available www.CaliforniaSolarCenter.org, December 1, 2008. RetSCREEN (2005). “RetSCREEN Help File.” Report No. None Given, Natural Resources Canada: RetSCREEN International. Rickerson, W., Bennhold, F., and Bradbury, J. (2008). “Feed-in Tariffs and Renewable Energy in the USA a Policy Update.” Report No. None Given, Prepared in conjunction with the North Carolina Solar Center, Heinrich Boll Foundation, and the World Future Council. RMG, MVE, M&N, and BFK (2005). “Brooklyn Basin - Oak to 9th Development Plan.” Report No. None Given, Roma Design Group, MVE Architects, Moffat & Nichol and BFK Engineers. Prepared for Signature Properties and Reynolds & Brown, September, 2005. SCE (2008). “Press Release: Southern California Edison Begins Construction of Worlds largest Solar Panel Installation Project.” Report No. None Given, Southern California Edison International. [Online] Available http://www.edison.com/pressroom/pr.asp?id¯7083, November 3, 2008. SEIA (2008). “The Investment Tax Credit (ITC).” Report No. None Given, Solar Energy Industries Association. [Online] Available http://www.seia.org/cs/federal issues/the investment tax credit itc, October 27, 2008. Solarbuzz (2008). “Portal to the World of Solar Energy.” Report No. None Given, Solarbuzz LLC, San Francisco. [Online] Available http://www.solarbuzz.com/, November 3, 2008. SPI (2008). “Solar Power International 2008 - Official Website.” Report No. None Given, Solar Power International. [Online] Available http://www.solarpowerconference.com/, November 3, 2008. Sunlight (2008). “Frog Leap.” Report No. None Given, Sunlight Electric. [Online] Available http://www.sunlightelectric.com/frogsleap.php, November 3, 2008. Thomas, O. (2008). Personal Communication [URS Corporation]. December 10, 2008, Oakland, CA. WA, I. (2008). “Plans & Projects.” Report No. None Given, Waterfront Action Inc. [Online] Available http://www.waterfrontaction.org/plans/oak9 project.htm#trust, October 27, 2008. Weather (2008). “Monthly Averages for Oakland, CA.” Report No. None Given, Weather.com. [Online] Available http://www.weather.com/outlook/travel/businesstraveler/wxclimatology/monthly/graph/ USCA0791?from=36hr bottomnav business, October 27, 2008. Wind-Works (2008). “Model Advanced Renewable Tariff Legislation.” Report No. None Given, Wind-Works.org by Paul Gipe. [Online] Available http://www.windworks.org/FeedLaws/USA/Model/ModelAdvancedRenewableTariffLegislation.html, December 1, 2008.

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WRCC (2008). “Mean Number of Clear Days.” Report No. None Given, Western Regional Climate Center. [Online] Available http://www.wrcc.dri.edu/htmlfiles/westcomp.clr.html, October 27, 2008. Wright, R. (2008). Personal Communication [Gordon Commercial]. October 10, 2008, Oakland, CA.

Status

Referred to House Corporations 02/26/2008 Hydropower !"<2=$2">?"#22" kW) !"<2=2F#">#22"A4" to 10 MW) !"<2=2J#">$2"34" to 20 MW)

Rhode Island H 7616 (Sullivan)

!"<2=$2">?"#22" kW) !"<2=2F#">#22"A4" to 10 MW) !"<2=2J#">$2"34" to 20 MW)

Hydropower

Referred to Committee on Finance (2/28/2008)

Status

Bill

Minnesota HF 3537 (Bly)

Bill

20

No other state and federal incentives

Incentives

100% to utility

Electricity

20

Landfill Gas

10%-30%

None

100% to utility

PV !"<2=#K">*&&I6&."?"N2"A4E !"<2=$K#">?"$#2"A4E !"<2=#1">*&&I6&."N2"A4"6&" !"<2=$1#">$#2"A4"6&"#22" !"<2=$2">?"#22"A4E 100 kW) kW) !"<2=2F#">G"#22"A4E"""""""""""""""""""""""""""""""""""""""""""""" !"<2=KK">*&&I6&."$22"A4"6&"1" !"<2=$$#">#22"A4"6&"#"34E""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (or sewage treatment gas) MW) !"<2=$2#">#"34"6&"12"34E !"<2=KF">8*&7(9"C&7(6)9E"

Biomass or Biogas

!"12"34

Landfill Gas

10% or higher

Reasonable Profit

2 years

Review

Utility

Interconnection costs

!"<2=$2#">?"@22" A4,BC1B0)D*E"""""""!":-()D*" in between 700 to 1,100 kWh/m2/year) !"<2=2F">G"$;$22" kWh/m2/year) !"<2=1#">$222"+H="I6="+').t area)

Wind

Utility

Other

!"<2=$$#"">?"12"34E !"<2=$2#">12"34"6&"#2" MW)

and Laws (Rickerson et al., 2008)

!"<2=$O">?"#"34E !"<2=$F">#"34"6&"?"$2"34E All others: avoided cost x !"<2=$$#">$2"34"?"12"34E""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" 1.15 !"<2=2O">G"12"34E

Geothermal

2 years

PV Geothermal Other !"<2=@$">IDLD9)"M:D99-(8"?" 30 kW) !"<2=JF">IDLD9)"M:D99-(8"N2" !"<2=$K#">?"$#2"A4E kW to 100 kW) !"<2=$1#">$#2"A4"6&"#22" !"<2=$2">?"#22"A4E !"<2=J@">IDLD9)"M:D99-(8"G" kW) !"<2=2F#">G"#22"A4E"""""""""""""""""""""""""""""""""""""""""""""" 100 kW) None None !"<2=$$#">#22"34"6&""#"34E""""""""""""""""""""""""""""""""""" (60% or greater efficiency) !"<2=J#">*&&I6&."?"N0 kW) !"<2=$2#">#"34"6&"12"34E"""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (or sewage treatment gas) !"<2=J1">*&&I6&."N2"A4"6&" (60% or greater efficiency) 100 kW) !"<2=J$">*&&I6&."G"$22"A4E"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" !"<2=#2">8*&7(9"C&7(6)9E" Contract Reasonable Interconnection Project Cap length in Incentives Electricity Review Wind Profit costs years

!"#$%"&'()*+,-."/0" Minnesotans (residents, LLCs of residents, nonprofits, governments, tribal councils, electric cooperatives; see 216B.1612, subdivision 2, paragraph (c)) !"12"34"""""""""""""" !"5-+6*-/76-&("8*-9"&(:0;"'-6," option to extend to transmission if RPS not met Biomass or Biogas

Project Cap

!

7

Contract length in years

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

39

Appendix - Current US State Solar PV Feed-In-Tarrif Bills

Biomass or Biogas None

None

Status

Referred to EEP/WLH/TRN, CPC, FIN, 1/25/2008 Hydropower

None

Bill

Hawaii HB 3237 (Thielen)

!"#$"%&""""""""""""""""""""""""""""""" !"3<J)C(<+)"*
Project Cap

None

Carried over from 2007

Reduce rates to reflect any other incentives

Incentives

None

$0.45

Landfill Gas

20

None

Ineligible if claiming income tax credit PV

Incentives

Contract length in years

Reasonable Profit

N/A

None

$0.70

None

Landfill Gas

20

Contract length in years

100% to utility

Electricity

2 years

Review

Utility

Interconnection costs !"5$67$8"9:";$$" kWh/m2/year) !"(-3)<,"-3"0)+=))3"";$$"+2" 1,100 kWh/m2/year) !"5$6$>9?7@7$$" kWh/m2/year) !"5$6#8"97$$$"/A6"B+6"/=)C+" area) Other

Wind

None

Premium excess net metering

Electricity

None

N/A

Generator

Interconnection costs

Geothermal

Review

Other

None

Wind

PV Geothermal !"5$6;7"9B"9B !"5$67>"98"%&"+2"7$"%&G kW) !"5$6$>8"9?"8$$"D&G"""""""""""""""""""""""""""""""""""""""""""""" 100 kW) None !"5$6778"97$"%&"#$"%&G""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" !"5$6778"98$$"%&"+2""8"%&G""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (or sewage treatment gas) !"5$6E8"9,22B+2C":"I$"D&G !"5$6$K"9?"#$"%&G !"5$67$8"98"%&"+2"#$ MW) !"5$6E#"9,22B+2C"I$"D&"+2" 100 kW) !"5$6E7"9,22B+2C"?"7$$"D&G""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" !"5$68$"94,213."J213+).G" Contract Reasonable Interconnection Project Cap length in Incentives Electricity Review Wind Profit costs years Ineligible if !"#$"%&""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" Premium claiming !"3<J)C(<+)"*
Biomass or Biogas

Hawaii HB 1748 (Saiki), SB 1223 (Menor), SB 1609 (Hanabusa)

Hydropower

Reasonable Profit

!"#$"%&""""""""""""""""""""""""""""""""""" !"'()*+,-*".-/+,-01+-23"4,-." 10%-30% only

Project Cap

Status

!"5$67$"9:"8$$" kW) !"5$6$>8"98$$"D&" to 10 MW) !"5$6$E8"97$"%&" < 20 MW)

Hydropower

Referred to Energy and Technology Committee, 9/15/2007

Status

Bill

Michigan HB 5218 (Law)

Bill

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

40

California AB 1969 (2006) (Yee)

Bill

Illinois HB 5855 (May) Amendment Number 001 to 16107.5 of the Public Utilities Act

Bill

Illinois HB 5855 (May)

Bill

Incentives

Electricity

Landfill Gas

Reasonable Profit

None Contract length in years

Incentives

Electricity

PV All gross kWh generated through net metering at 200% of the retail price

!"#8$"%&"K,24,A?"*AK" (proportionate caps for each 100% or utility) RECs transfer N/A 10, 15, 20 net !"768"%&"/@/+)?"*AK""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" to utility metering !"&A+),"A3."PA/+)PA+)," facilities only

Project Cap

None

Landfill Gas

!"#"%&""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" Net N/A N/A N/A !"7M"2H"*1/+2?),N/"K,)O-21/" metering year's peak demand

None

Approved by Governor (9/29/2006)

Contract length in years

PV !"5$6;7"9HAçade cladding < 30 kW) !"5$6FC"9HAIA.)"*(A..-34"J$" !"5$67G8"9:"78$"<&B kW to 100 kW) !"5$67#8"978$"<&"+2"8$$" !"5$67$"9:"8$$"<&B !"5$6F;"9HAIA.)"*(A..-34"D" kW) !"5$6$C8"9D"8$$"<&B"""""""""""""""""""""""""""""""""""""""""""""" 100 kW) !"5$6778"98$$"%&"+2""8"%&B""""""""""""""""""" (or sewage treatment gas) !"5$6F8"9,22H+2K":"J$"<&B !"5$67$8"98"%&"+2"#$"%&B"""""""""""""""""""""""""""""""""""""""""""""""""""""""""" !"5$6F#"9,22H+2K"J$"<&"+2" 100 kW) !"5$6F7"9,22H+2K"D"100 kW) !"5$68$"94,213."?213+).B" Contract Reasonable Project Cap length in Incentives Electricity Profit years

Biomass or Biogas

Biomass or Biogas

Status

Reasonable Profit

Reduce rates !"#$"%&"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" to reflect any 100% to !"'()*+,-*".-/+,-01+-23"4,-." 10%-30% 20 other utility only incentives

Project Cap

Hydropower

Referred to Rules Committee 3/14/2004

Status

!"5$67$"9:"8$$" kW) !"5$6$C8"98$$"<&" to 10 MW) !"5$6$F8"97$"%&" < 20 MW)

Hydropower

Amended to PV net metering bill (see below), 3/12/2004

Status

Utility

Interconnection costs

Other

!"5$67$8"9:";$$" <&=>?#>@)A,B"""""""!"(-3)A," in between 700 to 1,100 kWh/m2/year) !"5$6$C"9D"7E7$$" kWh/m2/year) !"5$6#8"97$00 sq. ft. swept area)

Wind

N/A

Interconnection costs

N/A

Interconnection costs

None

Geothermal

Review

N/A

Review

!"5$6$L"9D"#$ MW)

TBD

Technology tariffs

None

Other

None

Wind

!"5$67L"9:"8"%&B !"5$67C"98"%&"+2"7$"%&B None !"5$6778"97$"%&"#$"%&B"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

Geothermal

2 years

Review

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

41

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

8

42

Appendix - Load Analysis Results from HOMER

Figure 14: Proposed Restaurant Operation Hours 7am to 11pm

Figure 15: Weekday Crush Period - Proposed Winery Operation Hours 8am to 5pm; Retail Store Hours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours 7am to 9pm

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43

Figure 16: Weekday Crush Period - Proposed Winery Operation Hours 8am to 5pm; Retail Store Hours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours 7am to 9pm

Figure 17: Weekday Crush Period - Proposed Winery Operation Hours 8am to 5pm; Retail Store Hours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours 7am to 9pm

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

9

44

Appendix - Monthly Energy Demand and Energy Generation (Net Metering) Results from HOMER

Figure 18: Monthly Energy Demand from the Proposed Winery, Restaurant, Retail Store, Tasting Room, and Site Lighting

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

Figure 19: Monthly Energy Generation from the Proposed 250 kW PV System

45

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

10

46

Appendix - Daily Weather Variation Examples of Demand and Energy Generation (Net Metering) Results from HOMER

Figure 20: Example Cloudy Day During Non-Crush Season (AC Load vs. 250 kW PV Power)

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47

Figure 21: Example Partly-Cloudy Day During Non-Crush Season (AC Load vs. 250 kW PV Power)

Figure 22: Example Sunny Day During Crush Season (AC Load vs. PV Power)

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

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48

Appendix - Cost Estimate of Alternative Solutions

Note: The techniques used to develop the following formulas are described by Masters (2004),

Net Metering In calculating the cost per kilowatt hour for purchasing a system with a loan while utilizing net metering, we first calculated the annual cashflow of the entire system using a cash flow analysis as follows, A = [ C × CRF(i, nl ) ] + M Where A = Annual Cost (US$/yr) C = Capital Cost, including inverter replacement (US$) i = Interest Rate of Loan (%) nl = Loan Lifetime (yr) M = Operation & Maintenance (US$/yr)

Note: We used a capital cost based on a quote from SunPower at US$6.60/W for a system sized at around 250 kW and an operation and maintenance cost based on data from NREL at US$5250/yr for a 250 kW system (Davis, 2008; NREL(b), 2008). We then calculated the cost per kilowatt hour by dividing the annual cost of the entire system by the generation rate as follows, P=

A G

Where P = PV System Cost of Electricity (US$/kWh) A = Annual Cost (US$/yr) G = Energy Generation (kWh/yr)

Note: at a 7% interest rate, the cost of PV electricity is US$0.34/kWh (US$0.12/kWh for the first five years with the PBI).

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Feed-In-Tariff (FIT) In calculating the cost per kilowatt hour for the alternatives utilizing the FIT, we first calculated the annual cost of the entire system as follows, A = [ C × CRF(i, nl ) ] + M Where A = Annual Cost (US$/yr) C = Capital Cost, including inverter replacement (US$) CRF = Capital Recovery Function (1/yr) i = Interest Rate of Loan (%) nl = Loan Lifetime (yr)

Note: We used a capital cost based on a quote from SunPower at US$5.80/W for a system sized at around 1 MW and an operation and maintenance cost based on data from NREL at US$21000/yr for a 1.5 MW system (Davis, 2008; NREL(b), 2008). We then calculated the cost per kilowatt hour by dividing the annual cost of the entire system by the generation rate as follows, P=

A G

Where P = PV System Price Cost of Electricty (US$/kWh) A = Annual Cost (US$/yr) G = Energy Generation (kWh/yr)

Note: at a 7% interest rate, the cost of PV electricity is US$0.36/kWh.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

12

Appendix - Delphi Method

50

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

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51

Appendix - Parameters Used in Economic Analysis for Recommended Solutions

The economic analysis was done using real interest rates in order to account for inflation. Note, real interest rates can be obtained from nominal interest rates by the following calculation, real rate =

nominal rate + 1 −1 1 + inflation rate

The parameters used in the following calculations are itemized as follows, • The interest rate, i, is used to calculate the interest of the loan contracted from the tax equity investor to acquire the PV system. • The discount rate, d, was used to calculate the present value of savings and costs (including loan payments) occurring on an annual basis during the system lifetime. Due to the financial crisis affecting the economy, nominal discount rates are currently in the order of 2%. However, given the lifetime of the system, the nominal discount rate was set to 5% and the real discount rate to 1.3%. • The real discount rate, d, was modified when the progression of annual costs of savings do not follow inflation. For example, according to the EIA and Kammen, the escalation rate of electricity, e, from 2003 to 2008 was 4.7%, 1.2 points higher than inflation on this period (Kammen, 2008). Assuming an escalation rate of electricity, e, over the lifetime of the system, a modified discount rate can be calculated as follows (Masters, 2004), de =

d−e 1+e

• In addition, depending on the type of FIT policy that California may implement in the future, the FIT rate may, or may not, be adjusted for inflation. In the latter case, the FIT rate would effectively depreciate during the system lifetime. A depreciation rate rd derived from the inflation rate ri is used to correct the discount rate and obtain the modified discount rate df it for FIT savings. Also, the CSI Performance Based Incentive (PBI) is not adjusted for inflation and is effectively depreciating. The discount was modified in the same manner and both can be calculated as follows (Masters, 2004), df it = dpbi =

d − rd 1 + rd

• Other parameters include the system lifetime ns and the loan lifetime nl .

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Overall, the parameters playing a critical role in the feasibility of the net metering alternative are the real interest rate i and the electricity escalation rate e. The FIT rate is critical for the FIT alternative. Since the discount rate applies in the same manner to the annual loan payments and savings, it does not greatly affect the feasibility of the system when the savings and costs are nearly balanced.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

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53

Appendix - Cost Estimate For Net Metering Recommended Solution

Note: The techniques used to develop the following formulas are described by Masters (2004). Also, all the cumulative values mentioned below have been converted to present values by using the Present Value Function (PVF). In calculating the levelized cost of energy, we first need to calculate the net present value of the total life cycle cost. We start this series of calculations by calculating the present value of the loan with interest as follows, Ploan = [ C × CRF(i, nl ) ] × PVF(d, nl ) Where Ploan = Present Value of the Loan (US$) C = Capital Cost (US$) CRF = Capital Recovery Function (1/yr) i = Interest Rate of Loan, “real” (%) nl = Loan Lifetime (yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%)

And we need to calculate the cumulative present value of the operation and maintenance costs. The inverter lifetime was estimated to be one-half of the lifetime of the system and approximated to 13 years. Although an additional loan may have to be contracted to cover the cost of a new inverter, we considered the simplest option in which the new inverter is paid at once. The cost of the inverter was assumed to follow inflation. The calculation is as follows, I Po&m = M × PVF(d, ns ) + (1 + d)13 Where Po&m = Present Value of the Operation & Maintenance (US$) M = Operation & Maintenance (US$/yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%) ns = System Lifetime (yr) I = Inverter (US$)

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

We then need to calculate the present value of the system savings via the PBI as follows, Ppbi = PBI × G × PVF(d, rd , npbi ) Where Ppbi = Present value of the PBI Savings (US$) PBI = Performance Based Incentive, not adjusted f or inf lation (US$/kWh) G = Energy Generation (kWh/yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%) rd = Depreciation Rate (%) =

1 1+ri

−1

ri = Inflation Rate (%) npbi = Performance Based Incentive Lifetime (yr)

We then calculate the net present value of costs less the present value of the PBI savings as follows, NPV1 = Ploan + Po&m - Ppbi Where NPV1 = Net Present Value for the Net Metering Recommended Solution (US$) Ploan = Present Value of the Loan (US$) Po&m = Present Value of the Operation & Maintenance (US$) Ppbi = Present Value of the PBI Savings (US$)

We then calculate the levelized cost of energy as follows, LCOE1 =

NPV1 G × ns

Where LCOE1 = Levelized Cost of Energy for the Net Metering Recommended Solution (US$) NPV1 = Net Present Value for the Net Metering Recommended Solution (US$) G = Energy Generation (kWh/yr) ns = System Lifetime (yr)

54

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

55

In calculating the loan and system payback period, we need to recalculate the present value of the operation and maintenance costs only throughout the lifetime of the loan as follows, I Po&m(2) = M × PVF(d, nl ) + (1 + d)13 Where Po&m(2) = Present Value of the Operation & Maintenance (US$) M = Operation & Maintenance (US$/yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%) nl = Loan Lifetime (yr) I = Inverter (US$)

The savings from the cost of electricity can be calculated as follows, Pelec = E × G × PVF(d, e, nl ) Where Pelec = Present Value of the Electricity Savings (US$) E = Cost of Electricity (kWh/yr) G = Energy Generation (kWh/yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%) e = Electricity Escalation Rate, “real” (%) nl = Loan Lifetime (yr) We can then calculate a balance of the present value costs less the present value savings as follows, Balance1 = Ploan + Po&m(2) - Ppbi - Pelec Where Balance1 = Balance of the Net Metering Recommended Solution (US$) Ploan = Present Value of the Loan (US$) Po&m(2) = Present Value of the Operation & Maintenance (US$) Ppbi = Present Value of the PBI Savings (US$) Pelec = Present Value of the Electricity Savings (US$)

A payback period for the loan can then be calculated by solving for nl for when the “Balance” is equal to zero (i.e. when the cumulative cost of the system equals the cumulative savings). This

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

56

calculation can be done with numerical methods by using SOLVER or GOAL SEEK in a spreadsheet program such as Microsoft Excel or OpenOffice.org Calc. The value calculated for nl is the payback period for the loan and the system.

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

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57

Appendix - Cost Estimate For Feed-In-Tariff (FIT) Recommended Solution

In the case of a FIT, it makes sense to sell all of the electricity to the utility at the FIT rate and simply buy conventional electricity at the current, conventional rate. Perhaps, even Renewable Energy Credits (RECs) could be purchased to offset the facility’s carbon footprint. In calculating the levelized cost of energy, we first need to calculate the net present value of the total life cycle cost. We start this series of calculations by calculating the present value of the loan with interest as follows, Ploan = [ C × CRF(i, nl ) ] × PVF(d, nl ) Where Ploan = Present Value of the Loan (US$) C = Capital Cost (US$) CRF = Capital Recovery Function (1/yr) i = Interest Rate of Loan, “real” (%) nl = Loan Lifetime (yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%)

And we need to calculate the cumulative present value of the operation and maintenance costs as follows, I Po&m = M × PVF(d, ns ) + (1 + d)13 Where Po&m = Present Value of the Operation & Maintenance (US$) M = Operation & Maintenance (US$/yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%) ns = System Lifetime (yr) I = Inverter (US$)

We then calculate the net present value of costs as follows, NPV2 = Ploan + Po&m

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study

Where NPV2 = Net Present Value of the Feed-In-Tariff Recommended Solution (US$) Ploan = Present Value of the Loan (US$) Po&m = Present Value of the Operation & Maintenance (US$)

We then calculate the levelized cost of energy as follows, LCOE2 =

NPV2 G × ns

Where LCOE2 = Levelized Cost of Energy of the Feed-In-Tariff Recommended Solution (US$) NPV2 = Net Present Value of the Feed-In-Tariff Recommended Solution (US$) G = Energy Generation (kWh/yr) ns = System Lifetime (yr)

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In calculating the loan and system payback period, we need to recalculate the present value of the operation and maintenance costs only throughout the lifetime of the loan as follows, I Po&m(2) = M × PVF(d, nl ) + (1 + d)13 Where Po&m(2) = Present Value of the Operation & Maintenance (US$) M = Operation & Maintenance (US$/yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%) nl = Loan Lifetime (yr) I = Inverter (US$)

We then need to calculate system revenue as the money generated from the FIT as follows, Pfit = FIT × G × PVF(d, rd , nl ) Where Pfit = Present Value of the FIT Savings (US$) FIT = Feed In Tariff, not adjusted f or inf lation (US$/kWh) G = Energy Generation (kWh/yr) PVF = Present Value Function (yr) d = Discount Rate, “real” (%) rd = Depreciation Rate (%) =

1 1+ri

−1

ri = Inflation Rate (%) nl = Loan Lifetime (yr) We can then calculate a balance as the present value costs less the present value savings as follows, Balance2 = Ploan + Po&m(2) - Pfit Where Balance2 = Balance of the Feed-In-Tariff Recommended Solution (US$) Ploan = Present Value of the Loan (US$) Po&m(2) = Present Value of the Operation & Maintenance (US$) Pfit = Present Value of the FIT Savings (US$)

A payback period for the loan can then be calculated by solving for nl for when the “Balance” is

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equal to zero (i.e. when the cumulative cost of the system equals the cumulative savings). This calculation can be done with numerical methods by using SOLVER or GOAL SEEK in a spreadsheet program such as Microsoft Excel or OpenOffice.org Calc. The value calculated for nl is the payback period for the loan and the system.