Designing a Local In-basin Solar Program for Los Angeles

J.R. DeShazo, Director, UCLA Luskin Center for Innovation & Ryan Matulka, Lead Researcher

Outline

1. What is a Feed-in Tariff (FIT)? 2. Why does Los Angeles need a FIT program?3. LABC/UCLA Solar FiT proposal for Los Angeles4. Does Los Angeles have the rooftop capacity to

support this program?5. Is this program cost effective for rate-payers and

DWP?6. Who supports it?

2

•A solar FiT allows homeowners and businesses with solar installations to sell the excess electricity they generate back to the utility for a guaranteed price. •Used in Europe and several jurisdictions in the U.S. to spur local solar development.

Feed in Tariff Basics

Feed-in Tariff Diagram

4

FiT transaction

Utility ElectricitySales

Utility

Site Host

FiT vs. Net metering

Insert image of partially covered rooftop

Net metering does not provide any financial incentive to maximize rooftop solar potential.

FiT would be more efficient. Roof top installations would be built to provide the maximum power rather than to only power the buildings below.

Outline

1. What is a Feed-in Tariff? 2. Why does Los Angeles need a FiT program? 3. LABC/UCLA Solar FIT for Los Angeles4. Does Los Angeles have the capacity to support this

program?5. Is this program cost effective for rate-payers and

DWP?6. Who supports it?

6

Public benefits of a local in-basin solar feed-in tariff

Spurs economic growth by producing in-basin high wage jobs (particularly in economically depressed areas)

Signals a commitment to attract clean tech businesses to LA.

Creates billions in clean energy investment Allows community to generate local energy for all

Angelinos Quickly generates energy to meet RPS Reduces utility’s out-of-basin transmission

requirements and costs Well-designed program will save rate payers money

over its lifetime

7

LA Needs Renewable Energy1. Los Angeles has ambitious renewable energy goals

– Eliminate coal by 2020 (currently, LA gets 40% of energy from coal, mostly out of state)

– 20% by 2010 (DWP audit underway) – 33% (DWP) or 40% (Mayor) by 2020

2. Los Angeles has looming energy generation deficit– Sever cuts this year in DWP future renewable energy

capacity– State laws will cut our future use of coal

8

Local Solar Development Creates Jobs

9

What types of employment?a. Equipment manufacturers &

assembly: Manufacturing of system components, inverters, solar cells, panels

b. Professional services: Financing of projects, small business loans, debt and equity services, legal services.

c. Installation: system construction and integration

d. System monitoring: Performance monitoring, reporting, operations and maintenance

Outline

1. What is a Feed-in Tariff? 2. Why does Los Angeles need a FiT program? 3. LABC/UCLA Solar FIT proposal for Los Angeles4. Does Los Angeles have the capacity to support this

program?5. Is this program cost effective for rate-payers and

DWP?6. Who supports it?

10

The LABC/UCLA Solar FiT Proposal

At least 600 MW phased over at least 10 years- Cost neutral; long term savings over time.

• 50 mw Residential and Small Commercial• 350 mw Multi-family and large Commercial Industrial• 200 mw Small scale in-basin utility

Tariffs (contract rates paid by the DWP) re-evaluated every 1-2 years

Easy and low cost application. DWP acts in timely, fair & transparent fashion.

UCLA estimates 11,000 direct and 7,000 indirect jobs created in Los Angeles.

11

Structure For 600 MW Program

CategoryEligible

Systems Typical ParticipantsInitial Tariff

per kWhCapacity Allocation

Small-scale Rooftops

Less than 50 kW

Single family homes, small office & retail, apartment buildings

$0.34 50 MW

Large-scale Rooftops

50 kW and Greater

Warehouses, distribution facilities, light manufacturing, industrial

$0.22 350 MW

All Ground Mounted

Ground-mounted systems

Large commercial and industrial parcels.

$0.16 200 MW

Why target large-scale residential, commercial and industrial rooftop?

• Federal tax incentives lower installation costs.

• Larger roof-tops enjoy economies of scale: produce energy more cheaply.

• Jobs are created more cost-effectively.

• Allows DWP to pay lower tariffs thus lower impacts on rate payers.

13

Outline

1. What is a Feed-in Tariff (FIT)? 2. Why does Los Angeles need a FIT program?3. LABC/UCLA Solar FIT for Los Angeles4. Does Los Angeles have the rooftop capacity to

support this program?5. Is this program cost effective for rate-payers and

DWP?6. Who supports it?

14

Where is the greatest physical solar potential?

Capacity (MW) 1.Commercial and Industrial 2,2182.Single family homes 1,7523.Multi-family homes 1,4114.Government/non-profit 156

15

Physical Potential LA County (19.13 GWs)

16

12,282

5,536

307 278 197 245 169 1040

2,000

4,000

6,000

8,000

10,000

12,000

14,000

SoCal Edison

LA Dept of Water & Power

Vernon Light & Power

Glendale Water & Power

Pasadena Water & Power

Burbank Water & Power

Cerritos Electric Utility

Azusa Light & Power

Rooftop Solar Potential - Utility Service Area in Los Angeles County

17

LA County Solar Map

Megawatts of Physical Rooftop Solar Potential by City Council District

18

670

524

436 432 422 412 391357 356

324283 278 256

210 186

0

10,000

20,000

30,000

40,000

50,000

60,000

0

100

200

300

400

500

600

700

800

Los Angeles City Council Districts

Megawatts Parcels

Outline

1. What is a Feed-in Tariff (FIT)? 2. Why does Los Angeles need a FIT program?3. LABC/UCLA Solar FIT for Los Angeles4. Does Los Angeles have the rooftop capacity to

support this program?5. Is this program cost effective for rate-payers and

DWP?6. Who supports it?

19

Avg Tariff Paid Out

Year 1 2 3 4 5 6 7 8 9 10

Avg. Tariff

$0.21 $0.20 $0.20 $0.19 $0.19 $0.18 $0.18 $0.17 $0.17 $0.17

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Program Year

Utility Avoided Costs (Program Benefits) at 3% Annual Escalation

Utility Avoided Costs (Program Benefits) at 4% Annual Escalation

Utility Avoided Costs (Program Benefits) at 5% Annual Escalation

Weighted Average Tariffs Paid Out

21

Projected Percentage Increase in DWP Energy Price Increases Over Six Years Needed to Meet its CostsPrice Per MWh for Each Customer Class

2008 2009 2010 2011 2012 2013 2014Residenital 107$ 118$ 10% 126$ 7% 143$ 13% 150$ 5% 157$ 5% 165$ 5%Small Business 119$ 131$ 10% 140$ 7% 157$ 12% 165$ 5% 174$ 5% 183$ 5%Med. Business 109$ 120$ 10% 129$ 8% 145$ 12% 153$ 6% 161$ 5% 170$ 6%Large Business 93$ 104$ 12% 113$ 9% 129$ 14% 136$ 5% 143$ 5% 150$ 5%System Average 102$ 112$ 10% 122$ 9% 138$ 13% 146$ 6% 153$ 5% 160$ 5%

Cumulative Increase 57%Avg Annual Increase 8%

Source: Department of Water and Power presentation, Energy Adjustment Cost Factor, 2010

Market Sector Case Studies with Layered Solar Incentives

Case studies evaluated:1) 200kW Commercial System2) 36kW Small Commercial System3) 4kW Residential

Layering incentives used:» 30% Federal Tax Credit» State Tax Credit (Enterprise Zone)» Feed In Tariff (after tax)» Depreciation: Fed and Net State

22

200 kW Commercial System

•Contract Price $(1,197,071)•State Tax Credit(Enterprise Zone) $62,248•30% Federal Tax Credit $359,121•Depreciation: Fed and Net State $424,912•Feed In Tariff (after tax) $840,269•Net Profit (20 Years) $489,479

Assumes $.22/kWh Feed-In Tariff

200kW Commercial System

36kW Small Commercial

• Contract Price $(244,804)

• State Tax Credit(Enterprise Zone) $14,321• 30% Federal Tax Credit

$73,441• Depreciation: Fed and Net State $84,896• Feed In Tariff (after tax)

$227,303• Net Profit (20 Years) $157,157

• Assumes $.34/kWh Feed-In Tariff

36kw Small Commercial System

• Contract Price $(19,120)

• 30% Federal Tax Credit $5736• Feed In Tariff (after tax revenue)

$27,608• Net Profit (20 Years) $14,224

• Assumes $.34/kWh Feed-In Tariff. • Modeled by UCLA on a 4kw DC system at ($4.78 per Watt installed) by

Martifer Solar USA.

4kW Residential System

Outline

1. What is a Feed-in Tariff (FIT)? 2. Why does Los Angeles need a FIT program?3. LABC/UCLA Solar FIT for Los Angeles4. Does Los Angeles have the rooftop capacity to

support this program?5. Is this program cost effective for rate-payers and

DWP?6. Who supports it?

28

Coalition endorsing 600MW Solar FIT for LA

29

AECOM Allen Matkins Arden Realty, incBank of AmericaCBRE Cedar Sinai Medical CenterEnergy Choice, Inc.G and C Equipment Corporation Global Green Holland & KnightJones Lang LaSalleJP MorganKahn SolarKYOCERA Solar, Inc. LA CountyLACCD Latham & Watkins Los Angeles Area Chamber of CommerceLos Angeles World AirportsMacerich

Parsons Parsons BrinckerhoffPsomasFMGSheppard Mullin Siemens Sierra Club SolarWorld Trammell CrowTurner Construction UCLA School of Law UCLA School of Public Affairs Union Roofing Contractors Assn.Suncal Companies WattWestfield

CITY COUNCIL LEADERSHIPEric Garcetti, Council President, City of LAJan Perry, Council President Pro Tempore, City of LAPaul Koretz, Councilmember, City of LA

FOUNDING SOLAR WORKING GROUP MEMBERS

BUSINESS, NON-PROFIT, ENERGY INDUSTRY, AND UNION LEADERSHIPGary Toebben, President, LA Area Chamber of CommerceMichelle Dennis, President, BOMABill Corcoran, Western Director, Beyond Coal Campaign, Sierra Club Susan Kateley, Executive Director, Cal SEIAMary Luevano, Director, Policy & Legislative Affairs, Global Green USA Stephanie Klasky-Gamer, President & CEO, L.A. Family HousingRonald Johnston, PhD, Executive Director, Union Roofing Contractors Assn.Nicci Solomons, Executive Director, AIA|LAAndy Lipkis, Executive Director, TreePeopleLance Williams, Executive Director, USGBC-LA

LA’s Solar FIT Timeline• November 2008: Mayor Villaraigosa introduces LA City’s Solar Plan:150

MW proposed under program

• September 2009: LABC and UCLA created a Solar Working Group of leaders in the private, environmental and educational sectors to investigate the promise of a Feed-in Tariff (FiT) policy in Los Angeles.

• November 2009: LADWP proposed a limited, fixed and floating FiT program to its Board of Commissioners

• August 2009: LADWP Solar Development Group proposes Solar FIT as part of Renewable Portfolio Standard

• March2010: Mayor introduces Renewable Energy and Efficiency Trust Fund that is expected to generate 18,000 jobs over ten years and establish a local green economy. The Trust Fund will specifically invest in two types of programs: energy efficiency and a solar feed-in tariff.

• April 2010: the City Council adopted a motion affirming its position that the modification of the energy cost adjustment factor should include a renewable fund for the sole use of energy efficiency and renewable energy procurement programs.

30

LA’s Solar FIT Timeline• April 2010: In an earth day press release the LADWP announces its intent

to enact a Solar FIT: “LADWP also expects to launch a feed-in tariff program this year, enabling third-party solar providers to sell energy to LADWP at a set price.”

• June 2010: LADWP presents Strategic Plan Presentation to Business Customers which includes provisions for a Solar Feed-in Tariff

• June 2010: LABC with the UCLA Luskin Center for Innovation, AIA|LA, BOMA of Greater Los Angeles, California Solar Cal SEIA, Global Green USA, Los Angeles Area Chamber of Commerce, Los Angeles Family Housing, Sierra Club, Union Roofing Contractors Association send letter to City Council urging them to support a 600 MW Solar FIT program.

• July 2010: LABC/UCLA present 600MW Solar Feed-in Tariff policy proposal to the City Council Energy and Environment (E2) Committee. Chairwoman Jan Perry instructs Chief Legislative Analyst (CLA) to evaluate the merits of the study and provide recommendations back to E2 on September 21st.

• September 2010: Chief Legislative Analyst reports back to E2 with analyses of LABC/UCLA 600 MW Feed in Tariff policy proposal

31

Next steps:

• Continue to gather community input and support for the LABC/UCLA Feed-in Tariff proposal•UCLA produces policy implementation recommendations for phase three of solar FIT study• City Council votes on solar FIT proposal

Background & supporting Slides

33

LABC/UCLA 600 MW Solar FiT Study Author

34

J.R. DeShAzo, Primary AuthorJ.R. DeShazo is Professor of Public Policy at the University of California at Los Angeles where he is an expert in economics, public finance and organizational governance. He is the Director of UCLA Luskin Center for Innovation, a cross-campus center focused on environmental sustainability. He also directors the Ralph and Goldy Lewis Center on Regional Policy, the largest endowed center within the UCLA School of Public Affairs. He previously served as a Research Associated at the Harvard Institute for International Development. He received a Ph.D. from Harvard University and a Master from Oxford University where he was a Rhodes Scholar.

DeShazo’s recent research has focused on local public finance, regulatory reform, climate change policy, and valuing the health impacts of environmental policy. He has lead research and policy reform initiatives funded by the National Science Foundation, Environmental Protection Agency, Health Canada, the World Bank, Global Environmental Fund and several state agencies. He has advised the US Environmental Protection Agency, the National Science Foundation, the World Bank, United Nations, the Ford Foundation, the McArthur Foundation and various international organizations.

Programs meets 3% of DWP RPS Goaland Offers GHG Benefits

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Program Year

Feed -in Tariff Program GHG Benefits

Annual Avoided GHG - Coal Scenario Annual Avoided GHG - NG Scenario

Total Program GHG Benefits Coal Scenario Total Program GHG Benefits NG Scenario

Solar PV Module Prices:2.8% Annual Decline since 2001

Source: Solarbuzz.com

U.S. Natural Gas Wellhead Prices: 8% Annual Escalation Since 1970

Source: U.S. Energy Information Administration