Bipartisan U.S. Senators Push for Distributed Wind

Bipartisan U.S. Senators Push for Distributed Wind | December 29th, 2014
by Nick Blitterswyk, CEO, UGE International

A group of Senators recently urged the US Department of Energy to continue funding programs for the domestic distributed wind energy industry. The bipartisan group, led by Sen. Al Franken, wrote a letter highlighting the clear potential for distributed wind power to “contribute many gigawatts of electricity similar to other renewable technologies.”

Reactions have been mixed, and that’s understandable. The distributed wind industry has faced a good deal of critique (some of which is warranted).

Nevertheless, the Senators are correct: Distributed wind is a useful technology, with useful applications, and stands to benefit from the increasingly attractive economic conditions for distributed generation.

Choppy beginnings

When distributed energy took off over the last five years, small wind got caught flat-footed. The reason was primarily because it hadn’t reached a level of maturity where it could take advantage of the changing tide. As a result, there were several cases of companies manipulating incentives and hawking shoddy products on unsuspecting customers (and lest this become an anti-China argument, virtually all such products came from US and European companies).

One of the better known examples was DyoCore, which made lofty claims about the power of its SolAir turbine in order to game California’s Emerging Renewables Program. California actually received so many complaints about the company that it cancelled the entire program.

Early failures like these were possible because standards and certifications hadn’t yet been established in the distributed wind industry. And though the DyoCores of the world eventually failed, these early companies and their stories damaged the reputation of even the best small wind products on the market, greatly holding back the industry.

2011 was when the wind started to come out of the industry’s sails (and yes, pun intended). The economy had tanked, and solar prices were gaining economies of scale, making small wind expensive by comparison in a market where customers were holding their wallets more tightly.

But just like with solar, distributed wind has continued to evolve and innovate

The technology and business models have continued to advance, the industry has consolidated, and as the senators noted in their letter, the distributed wind power industry is at the threshold of rapid commercialization.

The future of small wind: Worth investing in

Vertical axis wind turbines on a Hilton Hotel in Ft. Lauderdale, FL. Hilton 11_0
Vertical axis wind turbines on a Hilton Hotel in Ft. Lauderdale, FL. | A note about Florida; Some $50 billion dollars leave the state every year to pay for electricity produced by coal-fired or natural gas-fired generation in other states and for transportation fuels. For states like Florida, the transition to renewable energy can’t happen soon enough.

Economic conditions are increasingly attractive for all distributed generation. In just a few short years, distributed wind has changed dramatically. There are fewer players, and the standards are much tougher as the SWCC, in the US, and comparable certification programs around the world, have reached maturation.

The technology has advanced — and has a wide variety of applications. You’re not going to find distributed wind atop 20% of rooftops, like you will already with solar in Australia, but you will find that the modern technologies from the companies that remain in the industry — the strongest, best run ones with the best technology, and with better economies of scale — will start gaining a resurgence.

Distributed wind has particularly great potential in applications such as:

  • Farms: A 10kW or larger turbine can be installed in windy locations and produce energy at a rate less than that available from the grid, or in farms in remote regions with difficulty accessing the grid.
  • Northern and Southern regions, from Scandinavia to Patagonia: There are limitations to solar resources during the winter months at the poles, but wind is a great resource in most of these areas.
  • Hybrid installations: Particularly in off-grid situations, a mix of energy sources adds resiliency and lowers the cost of energy.

This list also doesn’t include the many forward-thinking businesses and consumers who want to support and benefit from the technological advancements in the industry, and who have also been a key customer base for distributed wind turbines.

Many of these projects, from Lincoln Financial Field in Philadelphia to Whole Foods in Brooklyn, inspire greater interest in sustainability and emerging technologies that shouldn’t be overlooked.

SunEdison solar installation with vertical axis wind turbines on a commercial rooftop in Walpole, MI.
SunEdison solar installation with vertical axis wind turbines on a commercial building rooftop in Walpole, MA.

The importance of investment

The small wind industry began its life far too dependent on incentives and government funding. But limiting or eliminating development of the industry would be a huge mistake. R&D has developed the technology significantly in the past several years, and with certifications and standards in place, as well as new business models that remove financial barriers and mitigate performance risks, there’s additional efficiencies to explore.

The US has a strong advantage in the field, and the DOE’s support will be essential for distributed wind to “cross the chasm” and find its footing amidst Cleantech 2.0 — an era with much promise for new business models and advanced distributed generation. A group of senators understands this — I hope the rest of the industry will follow suit.

About the Author: Nick Blitterswyk is the CEO and founder of UGE International, a leading developer of distributed renewable energy solutions for business and government, with projects in over 90 countries, including several for Fortune 1,000 companies.

This article first appeared on CleanTechnica.com

Introduction to the ‘Business side’ of Solar: Securitization

by Guest Contributor Travis Lowder.

Originally published on NREL.

The U.S. solar industry is an $11.5 billion market with over 360,000 systems in place [1]. Since 2008, solar capacity additions have exhibited a compound annual growth rate of over 50%, with strong gains anticipated in the coming years.

As the industry grows, it is exploring alternative financing options outside of its traditional funding sources (namely debt, tax equity, and cash equity). Securitization—the process of structuring an illiquid asset into a liquid and tradable one (i.e., a security)—represents an emerging opportunity for the distributed solar market in particular. Access to the capital markets through security issuance can assist the solar market in achieving greater liquidity among investors and an advantageous cost of capital relative to traditional funding sources (namely debt, tax equity, and sponsor equity). Liquidity and lower financing rates have both proven somewhat elusive given solar’s current reliance on project financing and tax equity structures.

A new report from the National Renewable Energy Laboratory, The Potential of Securitization in Solar PV Finance, explores this capital market finance option for PV assets. The report provides a general overview of the securitization process (see Figure 1), the actors involved, the benefits (and risks), and the rationale for pursuing this kind of funding strategy.

The report also offers a high-level analysis of the volumes of solar deployment that could be supported given a single securities offering [2]. It posits that a single $100 million securitization transaction (not accounting for fees, overcollateralization, and other structuring/transactional costs) could potentially support 72 MW of residential solar assets, or 100 MW of commercial, or 133 MW of large commercial and industrial (C&I) projects [2]. See Table 1.

Solar projects will likely be pooled into different types of securities based on several factors, including: project size; the type of cash flows securitized; and the entity that will issue the securities. The report broadly identifies three classes of securities that, upon preliminary analysis, would be applicable to the solar industry: asset-backed securities (ABS), collateralized loan obligations (CLOs), and project bonds. ABS instruments are typically used in the securitization of cash flows in the consumer finance sector (e.g., credit cards, auto loans, and student loans); CLOs are securitizations of loan payments and are commonly used to alleviate banks’ balance sheets; and project bonds are debt instruments that have been issued against project-level cash flows [2].

While there are several nuances that would determine which instrument would be applicable in a given solar project or portfolio of projects (such as a tax equity fund for residential assets), the report offers the following general classification:

  • ABS securitizations will be widely applicable to the residential solar sector, as the metrics for evaluating these instruments (e.g., FICO scores) are similar to those for evaluating the credit quality of residential solar assets.
  • CLO securitizations will be more applicable to the commercial sector. This is because the cash-flow pools will require fewer underlying systems to reach the same dollar volume as a residential. Fewer systems mean fewer offtakers, which in turn mean less portfolio diversity. And, without a diversity of offtakers behind the cash flows in the pool, there is greater focus on the creditworthiness of each offtaker. Typically, CLOs are the appropriate securitization structure to manage this kind of corporate risk.
  • Project bonds are debt securities issued against project-level cash flows and have been used to finance utility-scale projects. A bond obligation can look similar to a non-recourse loan on a balance sheet, though it has the distinct advantage of tapping into funding sources outside of the commercial lending market and at larger sums. In the last two years, project bonds have been issued to finance both the construction (MidAmerican’s Topaz and Solar Star projects) and takeout (NextEra’s St. Clair) of large-scale solar projects [2].

Looking Forward

Institutional investors, such as pension and insurance funds, will typically allocate about 5% of their assets for “alternative investments,” such as a renewable energy project investment. Courting these entities will therefore require solar to transcend the “alternative” category and offer itself as a bankable, standardized, and transparent investment product. Institutional investors allocate as much as 40% of their assets to these types of investments, which, by some estimates, could amount to some $37 trillion at the outset of 2014 [3,4].

Even if the PV industry posts half of the annual growth rate that it has from 2008 – 2013, this would amount to about 20 GW of capacity additions by the time the 30% investment tax credit expires in 2017. At an average of $3/W across market segments, 20 GW of solar PV represents $60 billion worth of assets, a third to a half of which would likely have securitizable cash streams flowing through them. A $20 –30 billion base of long-dated assets, made liquid through securitization and investment grade through continued understanding of the credit risk, would be a strong draw for many of the investors in that conventional category.

References

[1] Renewable Energy Finance, Solar Securitization: A Status Report (Fact Sheet). (2013). Golden, CO: National Renewable Energy Laboratory. Accessed January 31, 2014: http://www.nrel.gov/docs/fy14osti/60553.pdf.

[2] Lowder, T.; Mendelsohn, M. (2013). The Potential of Securitization in Solar PV Finance. Golden, CO: National Renewable Energy Laboratory. Accessed January 23, 2014: http://www.nrel.gov/docs/fy14osti/60230.pdf.

[3] Turner, G.; et al. (2013). Profiling the Risks in Solar and Wind: A Case for New Risk Management Approaches in the Renewable Energy Sector. Swiss Re and Bloomberg New Energy Finance. Accessed January 23, 2014: http://media.swissre.com/documents/Profiling-the-risks-in-solar-and-windv2.pdf.

[4] TheCityUK. (September 2013). Fund Management 2013. TheCityUK. Accessed January 23, 2014: http://www.thecityuk.com/research/our-work/reports-list/fund-management-2013/.

This article, Solar Securitization Intro, is syndicated from Clean Technica and is posted here with permission.

Indian Govt replacing 26 Mn Diesel Water Pumps with Solar Pumps

by Guest Contributor Jeff Spross.

Renewable Energy pumps water. The Indian government is aiming to swap out 26 million fossil-fuel-powered groundwater pumps for solar-powered ones.
Renewable Energy pumps water. The Indian government is aiming to swap out 26 million fossil-fuel-powered groundwater pumps for solar-powered ones. Image by Shutterstock

Originally published on ThinkProgress.

The pumps are used by farmers throughout the country to pull in water for irrigation, and currently rely on diesel generators or India’s fossil-fuel-reliant electrical grid for power.

Pashupathy Gopalan, the regional head of SunEdison, told Bloomberg that 8 million diesel pumps already in use could be replaced right now. And India’s Ministry of New and Renewable Energy estimates another 700,000 diesel pumps that could be replaced are bought in India every year.

“The potential is huge,” said Tarun Kapoor, the joint secretary at the ministry. “Irrigation pumps may be the single largest application for solar in the country.”

The program works by subsidizing the swap, and operates in different capacities in India’s various states, sometimes subsidizing the solar pumps up to 86 percent. Thanks to that aid, and the dramatic collapse in prices for solar power, the pumps pay themselves off in one to four years, according to Ajay Goel, the chief executive officer of Tata Power Solar Systems Ltd., a panel maker and contractor. And Stephan Grinzinger, the head of sales for a German solar water pump maker, told Bloomberg the economics will only get better: diesel prices will rise and spike during farming season, and economies of scale will help the swap program.

Two-thirds of India’s electricity is generated by coal, with natural gas and hydroelectric making up most of the rest. But the monsoon season is growing more erratic — likely due to climate change — making power from the hydroelectric dams less reliable as well. Coal is growing in economic cost for India, so power plants often sit idle, and the coal that is easy to reach would require displacing major population centers.

The national grid that relies on those fuels has seen few updates since it was constructed in they 1960s. It’s also under growing stress from India’s rising middle class, which is adopting air conditioning and running water in massive numbers — all in a country prone to heat waves, again thanks in part to climate change. As backup, many Indian residents and businesses rely on diesel generators, which leaves them vulnerable to the fuel market and contributes to fossil fuel emissions.

Even when the grid is working, around 300 million of India’s 1.2 billion inhabitants don’t have access to it. When it’s not, rolling blackouts are common. Many farmers are able to draw only four hours of power a day from the grid, and that often at night. Heat waves in 2013 were accompanied by widespread blackouts, and a two-day grid failure in 2012 left over 600 million Indians without power.

Ironically, thanks to the kind of distributed and sustainable generation the swap program represents, many of India’s rural poor actually faired much better during the blackout than the grid-dependent middle-class. It’s one of the strengths of solar in particular, even before climate change is considered: a more decentralized power system, based around “microgrids” and individual power generation, rather than a centralized system reliant on the good function of large, singular power providers. In India in particular, sunlight is most plentiful at the times when demand tends to peak. That leaves the power system more adaptable, less prone to central failures, and thus more hospitable to those still struggling to overcome poverty in particular.

Beyond India’s pump swap program, other efforts in south Asia and northern Africa are already underway to bypass grid expansion entirely, and bring solar power and microgrids directly to poor people.

Image Credit: solar water pump via Shutterstock

This article, Indian Government Aims For 26 Million Solar Water Pumps, is syndicated from Clean Technica and is posted here with permission.

WWF says India could reach 100% Renewables by 2050

by Guest Contributor Emma Fitzpatrick

Originally published on RenewEconomy

When the world thinks of countries that could go 100 percent renewable, the immediate thoughts go to islands with solar and storage, hydro and geothermal rich countries such as Iceland, or even wind and wave-rich countries like Scotland.

One of the last economies imagined going fully renewable would be India, the rising economic giant that is still yet to connect several hundred million people to its mostly coal-fired grid, and is expected to have the highest growth of electricity consumption. But according to environmental group WWF, India could reach a goal of 100 percent renewables by 2050.

The study examines the possibility of a near 100% Renewable Energy Scenario (REN) for India by the middle of the century against a reference scenario (REF) in which the economy is likely to be dependent primarily on fossil fuels – coal, oil and gas.

WWF says that to get there India must make some large-scale changes to get on the right track as soon as possible. According to the report, aggressive energy efficiency improvements alone can bring in savings of up to 59 percent (by both the supply and demand sides) by mid-century.

Biofuels are set to play a large role, especially in the transport sector accounting for nearly 90 percent of the industry’s requirements.  According to WWF the third-generation biofuels in question are currently still in R&D phase and for the plan to go accordingly they must become commercially viable within the next two decades.

Overall, biofuels account for 23 percent of the total commercial energy supply,  most of the transportation needs. Solar thermal accounts for much of industry’s heating needs, and the electricity supply increases nearly 8 fold, with wind contributing the largest component.

Electricity generation by resource - Renewable Energy Scenario (REN) for India
Electricity generation by resource – Renewable Energy Scenario (REN) for India

The report says the reference scenario depicts an unsustainable, polluting and relatively inefficient energy future in 2051. The renewable scenario, on the other hand, presents a modern, cleaner and highly efficient India and shows that it is, in principle, theoretically feasible to achieve close to 90 percent penetration of renewable energy sources in the energy mix by 2051.

“However, there are still many unresolved questions in the REN scenario related to resource potentials, availability, commercial viability of alternative options, policy and finance mobilization, barriers of cultural and technological lock-ins, etc,” it says.

“Several feasibility studies are, therefore, needed to lay the basis for moving toward the REN scenario; these have not yet been carried out. There are many interventions that would be necessary to remove various barriers and to achieve higher levels of renewable energy deployment in India.”

Concentrated solar thermal technologies, many of which are currently still in the research and development phase, will take on a large chunk of the nations electricity needs as well as meeting thermal demand in industries that require temperatures below 700°C.

Wind is also set to push India towards its 100 percent goal. Currently India has no estimates of its offshore wind potential but the WWF predicts that it could have up to 170 GW installed by 2051.

Rural households will be forced to change their cooking habits, meeting their needs through improved cook stoves while urban households switch to electrical based cooking.

In 2010, fossil fuels accounted for 74 percent of India’s total energy consumed as well as being the world’s third largest emitter of carbon dioxide. India’s greenhouse gas emissions have also steadily risen by 2.9 percent each year between 1994 and 2007.

Much of the rural population still relies on biomass (such as firewood and agro-residue) for much of its basic cooking needs (around 24.6 percent of the primary energy supply) as well as using kerosene for lighting purposes.

Coal currently accounts for 42.4 percent of India’s total primary energy demand in 2010, with the national rail network being the largest coal consumer before 1975 – now overtaken by the power sector (87.7 per cent of total consumption).

Electricity alone plays a crucial role in improving levels of human development and the quality of modern life – with a strong positive link between human development, economic growth and growth in energy and infrastructure.

To sustain India’s own growth it requires large amounts of energy, with little oil reserves and much of its large coal reserves being inaccessible due to technological, social or geological factors, the country has many push factors to get its renewable base up and running. Due to the low oil reserves India has a high import dependence making it more economically vulnerable and well as supply issues.

India started its National Solar Mission in 2010 and is aiming to get 20 GW of grid connected solar power by 2020. As well as this, the Mission is promoting 2,000 MW of off-grid applications; including 20 million solar lighting systems and 20 million square metres of solar thermal collector area by 2022.

In general, India has a vast potential for solar power generation, with about 58 percent of the country’s total land area receiving an annual global insolation about 5 kWh/m2/day. These areas with 5 kWh/m2/day or above can generate at least 77 W/m2 at 16 per cent efficiency.

Rooftop PV is likely to play a major role in both rural and urban areas with residential, agricultural and industrial priorities reducing the amount of available land for solar programs.

It was estimated that almost 30 percent of industrial processes in India require heat below 250°C which can be supplied with heat from solar thermal concentrators. Temperatures below 80°C can be met through solar air heaters and solar water heaters. Industries – with the exception of iron, steel, cement and fertilizer – could in theory shift to CSP based heating.

Wind energy in India currently ranks second to hydro in renewable energy’s generating electricity. With 17,700 MW of installed capacity India’s rank in harnessing wind energy is fifth in the world after USA, China, Germany and Spain. Over the period of 1992-2010 the wind energy installed capacity in India witnesses an annual growth rate of 37 percent.

According to the Centre for Wind Energy Technology, most of India’s wind energy is concentrated in five states – Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra and Gujarat.

The WWF estimates that India’s total wind potential in megawatts stands at 49,130 at 50 metres, when taken up to 80 metres the reading more than doubles at 102,788 MW.

Hydropower is also being considered, with estimates around 148GW of energy potential. Two rivers, Brahmaputra and Indus, have the highest potential, with only 11 and 50 per cent respectively being utilized thus far.

India’s first tidal power project, with a 3.75 MW capacity, is being set up as well as the Kapasar project which involves building a 30 km-long dam. A recent study cited in the report suggested that also tidal power generation is feasible in certain areas it may not be commercially viable due to diesel costs. Currently, The Government plans to build 7 MW of grid-connected ocean tidal power plans in its 12thfive-year plan.

India’s geothermal potential is around 10,600 MW, distributed across various states and in 2009 the country’s geothermal power capacity stood at 10.7 GW. Although geothermal power development is restricted to tectonically active regions, and seeing as India lacks volcanic activity on its mainland, it also faces issues such as costs of drilling and transmission of energy.

Comparing the REF’s and REN’s final energy demands in 2050 highlights not only a stark mix of energy uses but also efficiency levels. In 2051 the REF is approximated to have increased the countries’ energy demand up to 2,545 Mtoe when compared to the REN sitting at 1,461 Mtoe – highlighting an overall energy savings of 43 percent.

Modeling done by the WWF has estimated that the total undiscounted technology investment cost for the renewables scenario is 42 per cent more than the reference (fossil-fuel) scenario, requiring 544 trillion Indian Rupees from 2011 to 2051. Although the figure sounds quite high it is only around 10 percent higher than if India was to stick to its reference scenario.

In the renewables scenario, India will have almost a quarter more electrical generation capacity (in GW) than if it continues along the reference scenario path. Furthermore, in 2051 the renewables scenario will yield less than one billion tonnes of carbon emissions, compared to the reference scenario with almost 12 billion tonnes.

WWF highlights that although the renewables scenario is preferred it will not be easy for government to get there, recommending various policy options available including; tax holidays for renewable energy uptake, creating incentives for new projects, enhancing R&D, increasing the budgetary allocation, pricing energy and technology for efficiency and strengthening policy and regulatory set-ups.

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This article, India Could Reach 100% Renewables By Mid-Century, is syndicated from Clean Technica and is posted here with permission.