Ninth Avenue Terminal Solar Feasibility Report

Ninth Avenue Terminal (NAT)

Solar Photovoltaic (PV) Feasibility Study

Produced By:Sebastien LounisFlorent MartinEric A. Zielke

Submitted To:Dr. Dan Kammen, UC Berkeley

Robert Broesler, Jr., Graduate Student InstructorJimmy Nelson, Graduate Student Instructor

Last Revision: February 23, 2009

Document prepared as part of the requirements of theUniversity of California Berkeley

MSE/ER 226: Photovoltaic MaterialsDecember 11, 2008

i

Executive Summary

As public and political support for renewable energy grow, developers are looking for ways to “greentheir properties. An increasingly popular method for sustainable development is the use of roof-mounted solar photovoltaic (PV) power to generate electricity. This study evaluates the economicfeasibility 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 detailedreview of relevant background information including a load analysis and a review of existing incen-tives and potential future policy measures. The following incentives are available to NAT at thestate and local level: net metering provided by Pacific Gas & Electric (PG&E), the California SolarInitiative Performance Based Incentive and the California Feed-in-Tariff (FIT) of approximatelyUS$0.135/kWh. In addition, a 30% Federal Investment Tax Credit (ITC) is available to renewableenergy investors and Renewable Energy Credits (RECs) are available to producers and purchasersof renewable energy. We also considered the potential increase of the FIT to US$0.35/kWh andUS$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 de-veloped. Several alternatives were excluded because of high cost and/or because they were beyondthe scale of NATs power generation potential. These initial exclusions left a total of six alternativesconsidered for this project; three existing and three future incentive alternatives. The existing in-centive 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 SolarPower Provider. The future incentive alternatives were: (1) a net-producing system financed bya tax equity investor with a FIT of US$0.35/kWh, (2) a net-producing system financed by a taxequity investor with a FIT of US$0.60/kWh, and (3) a PG&E lease agreement. Setting aside thePPA and the PG&E lease agreement due to lack of available economic data, the remaining exist-ing 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 deter-mined that a load-matching system financed by a tax equity investor is the best presently availablesolution for the use of solar energy at NAT. However, our economic analysis shows that in orderto achieve parity with the price of grid-purchased electricity over the lifetime of the system, a loanrate of 5 to 6% must be negotiated with the tax equity investor. Thus, depending on negotiatedrates, a PPA is also an attractive financing option that should be considered for a load-matchingsystem. In both cases, the remaining roof space is available in the likely case of a future PG&Elease agreement. Moreover, both options allow for flexibility in the event of a future increase inthe State of California’s FIT to approximately US$0.60/kWh, the winning and profitable futureincentive alternative in our Delphi method. Multiple European countries already have FITs ofsimilar magnitude and several state legislatures are currently discussing raising their FITs, thusUS$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 ofNAT’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 taxequity investor or a PPA. While also considering the relative value of the public relations creditgarnered by having solar panels installed at NAT, NAT Partners should pursue both financingoptions 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 informa-tion pertaining to the Ninth Avenue Terminal (NAT) Solar Photovoltaic (PV) Feasibility Study. Aspecial thank you to those that were not mentioned but also contributed their much appreciatedefforts.

University of California Berkeley

Dr. Dan Kammen, Faculty AdvisorRobert Broesler, Jr., Graduate Student InstructorJimmy Nelson, Graduate Student Instructor

URS Corporation

Dustin Jolley, Engineer

Ninth Avenue Terminal Partners

Ramsey Wright, Chabot Properties DeveloperCrissy 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 tobe construed as an actual or implied endorsement of the product

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study iv

Contents

1 Introduction 1

2 Background 1

2.1 Area Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.1.1 Location and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.1.2 Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.2 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

2.5 Incentives and Financing Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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

2.6 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 v

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

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

3 Alternative Solutions 17

3.1 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 24

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

5 Specifications of Recommended Solutions 26

5.1 Design Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

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

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

5.2 Economic Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

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

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study vi

5.2.2 60 Cent Feed-In-Tariff (Tax Equity Investor) . . . . . . . . . . . . . . . . . . 30

5.3 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 (Rickersonet 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 Gener-ation (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

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study vii

15 Appendix - Cost Estimate For Feed-In-Tariff (FIT) Recommended Solution 57

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study viii

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

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

7 Economic Parameters for the Existing Incentive Alternative 2 . . . . . . . . . . . . 22

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

9 Economic Parameters for the Future Incentive Alternative 1 . . . . . . . . . . . . . 23

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

11 Economic Parameters and Results for the Future Incentive Alternative 2 . . . . . . 24

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

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 (Kam-men, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4 Example of the Current German Feed-In-Tariffs (Wind-Works, 2008) . . . . . . . . 12

5 Example of the Feed-In-Tariffs Adjusted for Inflation (Wind-Works, 2008) . . . . . 12

6 Advantages and Disadvantages of Price Adjustments for Feed-In-Tariffs (note: foot-notes 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

Ninth Avenue Terminal (NAT) - Solar Photovoltaic Feasibility Study ix

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

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

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

11 Representation of the the Nominal Interest Rate of a Loan versus the Nominal Es-calation Rate of Electricity by utilizing Net Metering . . . . . . . . . . . . . . . . . 29

12 Representation of the the Levelized Cost of Energy (LCOE) versus the NominalInterest 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 aLoan 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; RetailStore Hours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours7am to 9pm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42



18 Monthly Energy Demand from the Proposed Winery, Restaurant, Retail Store, Tast-ing 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) 46

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

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

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 USdollars. Many energy analysts agree that if the US does not make large investments into solar pho-tovoltaic (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 thealready damaged economy (Buonassisi, 2008). As part of the US’s energy investments, one newidea is the widespread placement of PV panels atop warehouses in major cities. Such large scaledevelopment was foreseen by the current California state governor, Arnold Schwarzenegger, whenhe stated at the 2008 Solar Power International conference, “I can envision going on a helicopterand seeing no more warehouses without solar panels (SPI, 2008).”

The City of Oakland’s Ninth Avenue Terminal (NAT) historic warehouse is located in AlamedaCounty, part of the San Francisco Bay Area. A large portion of Oakland’s waterfront in proximityto the NAT is composed of unused industrial infrastructure including many warehouses and resi-dents do not frequent the waterfront corridor due to a lack of pedestrian walkways and communityactivities. 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 toinvestigate the feasibility of both existing and future-based solar incentive programs and financingoptions in hopes of providing renewable electricity to the NAT which will house a prized vintnershall and promote community activities. The study includes background information, a descriptionof six alternatives and their analysis, specications of two preferred alternatives, and a conclusionwith some additional recommendations.

2 Background

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

2.1 Area Description

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


2.1.1 Location and History

The proposed project is situated within the historic Oak Street to 9th Avenue waterfront corri-dor that spans the shallow estuary between the cities of Oakland and Alameda. With having aconnection to the San Francisco bay, this waterfront served as a bustling center for shipping andwarehousing for many years. However, after World War II, the deeper waters of the Oakland portbecame the primary conduit for goods passing through the city. In the years since, usage of theestuary waterfront has waned significantly leading to high levels of vacancy in its warehouses andother buildings (OHP, 2008).

The NAT sits on the water at the far south-eastern end of the Oak Street to 9th Avenue cor-ridor. Designed in the Beaux Arts style by the Port of Oakland’s first Chief Engineer and AssistantPort Manager, Arthur H. Abel, the terminal was built in 1930 as part of the improvement ofOakland’s port facilities. The 500 ft “bulk-break” warehouse was further developed by the GreatDepression era Works Progress Administration and Public Works Administration work-relief pro-grams and served as an important hub for goods entering and leaving California. During WorldWar II, the terminal was used by the Pacific Naval Air Base Command for shipping in support ofthe war effort. An addition to the building in 1951 brought the total length of the building to 1004ft (CCG, 2008; NAT Partners, 2008).

As the last “bulk-break” terminal in Oakland, the NAT was nominated as an Oakland Land-mark by the Landmarks Preservation Board in 2003. The building should also be eligible for theNational 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 averagetemperatures between 52◦ F and 67◦ F. Oakland receives 22 in of annual precipitation, mostof which falls between October and March (City-Data, 2008; Weather, 2008). According to theWestern Regional Climate Center Oakland has an average of 147 clear days each year (WRCC,2008).


2.2 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 andrevitalization of Oakland’s waterfront. Under the California constitution, land owned by the PublicTrust cannot be used for private housing. About 75% of the Oak to 9th district that is controlledby the Port of Oakland is owned by the Public Trust. Thus, the Estuary Plan recommended thatthe Oak to 9th corridor be converted into a large grouping of public open spaces and recreationalfacilities 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, acollaboration between developers Signature Properties and Reynolds and Brown, to be the masterdeveloper of the Oak to 9th Project (Oakland, 2001). Oakland Harbor Partners’ controversial “Oakto 9th” plan involves developing the 64 acre property to include 3,100 residential units, 200,000sq ft of ground-floor commercial space, 3,500 structured parking spaces, approximately 27 acres ofpublic open space, two renovated marinas and a wetlands restoration area (WA, 2008). Most of thenew 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 inorder to allow residential development. The project has thus been accompanied by outspoken pub-lic disapproval and lengthy political discourse since the inception of the project. Despite receivingfinal 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 ofthe historic NAT. Under the original plan, the majority of the structure was to be demolishedand replaced with a pedestrian promenade and park space. However, in response to pressure fromhistorical preservationist groups, the Oakland City Council asked for new proposals for usage ofthe terminal (WA, 2008; RMG et al., 2005).

NAT Partners LLC, a collaboration between Placeworks, LLC and Chabot Properties, have pro-


posed reuse of the original half of the terminal as a vintners hall, allowing preservation of thebuilding and development of the remaining half of the property as park space. The vintner’s hallwill include a winery, tasting room, snack bar, retail shop, and restaurant and will fit into thegreater “Oak to 9th” development (NAT Partners, 2008). At the time of this study, the project iscurrently 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 enthusi-asts and citizens interested in reducing their environmental impact and carbon footprint (NAT Part-ners, 2007). In addition to the carbon-offset benefits of producing wine for local consumption andthe building’s minimal heating, cooling and lighting needs, the developers are interested in usingthe 90,000 ft2 of roof space for a photovoltaic (PV) system. The PV array would support the elec-trical load of the winery while, potentially, providing extra power to other surrounding buildingsand/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 thelate 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 thisarchitectural 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 between47 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 modu-lated by the consistent temperature of the Bay. The building is cooled in the summer and warmedin the winter, maintaining an ideal temperature for winemaking and reducing heating and coolingneeds. In addition, large windows run the length of the building providing ample, natural light fordaytime usage.

2.3 Electrical Demand Loads

As disussed in Section 2.2.2, the NAT project includes the following facilities: a winery, a tastingroom, a retail shop, and a restaurant. Typical electrical needs for a winery include lighting, motorsand refrigeration. Already discussed in Section 2.2.3, the NAT is built on pylons over the bay waterwhich 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


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 oflarge amounts of liquids. A preliminary load assessment concluded that the electrical demand forthe 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 andsome common analysis tools.

2.4.1 System Components

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

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


2.4.2 Types of PV Systems

The two most common types of PV systems include crystalline silicon solar cells, and thin-filmsolar cells. Crystalline modules can be further categorized as polycrystalline or monocrystalline,with monocrystalline modules being the more efficient product. Thin-film modules can be furthercategorized as CdTe, CIGS, or 3rd generation.

Crystalline silicon (c-Si) were the first technologies developed for commercial PV systems andare still dominate the world market with more than 94% market penetration. Commercial c-Sisolar modules yield efficiencies of about 15 to 20% and modules are typically sold with a 20 year to25 year warranty. Companies manufacturing crystalline silicon modules include Q-Cells, Suntech,Sharp, Sunpower, Sanyo, GE Energy Solar (monocrystalline) and Evergreen Solar (String ribbonSi). (ENF, 2008). These are just a few of the manufacturers, as the complete list could total morethan 50 companies.

Thin-film solar modules are made of materials that absorb a wider spectrum of light. This re-sults in a higher energy output (kWh) per kW than c-SI modules. Typically, the materials aredeposited on the substrate via a vapor deposition process that is similar to the techniques used inthe semiconductor industry. The efficiency of thin-film modules is lower than crystalline modulesand require more modules and installation area to achieve the equivalent energy production of itscrystalline counterpart. The most common materials for thin-film solar modules are amorphoussilicon, cadmium telluride (CdTe) and copper indium (gallium) diselenide (CIGS). Companies man-ufacturing 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 Solyn-dra . (ENF, 2008).

Concentrating photovoltaics systems (CPV) are a promising emerging technology that use lensesand mirrors to concentrate light on a small area of high efficiency solar cells. CPV systems aretypically mounted on a single or two-axis tracking device allowing the system to receive maximumillumination throughout the day. CPV technologies are generally used for solar cell based powerplants, but with some that is not to say that CPVs may one day be seen on rooftops. Companiesmanufacturing 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 summarizedin Table 1. It should be noted that module pricing is highly speculative and any prices beyond 6months cannot be relied upon. This is especially true as more thin-fim manufacturers approachcommercialization and improvements are made in the manufacturing processes for crystalline mod-ules.


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

Product PV type L (ft) W (ft) Nominal Wp Cell ModuleWp /SqFt Eff. Eff.

Sharp c-Si 5.2 2.7 175.0 12.4 N/A 0.175NT-S5E1U1

Sharp Poly 5.2 2.7 157.0 11.1 N/A 0.146NE-Q5E2U c-SiEvergreen String 5.4 3.1 205.0 12.2 0.150 0.130NE-Q5E2U2 Rib SiSanyo Poly 3.8 3.3 200.0 16.0 0.197 0.172HIT Power c-Si2003

SunPower c-Si 5.1 3.3 305.0 18.1 0.224 0.187NE-Q5E2U4

Uni-Solar a-Si 8.0 2.5 64.0 3.2 0.120 0.08 toUS 1165 0.09

1www.sharpusa.com/files/sol dow PRODUCTPROFILE.PDF2www.evergreensolar.com/upload/010908%20WEB%20LITERATURE/Datasheets/ES-A 200 205

210 EN 010908 L.pdf3us.sanyo.com/solar/downloads/HIT%20Power%20200%20Data%20Sheet%20RZ.pdf4www.sunpowercorp.com5www.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 invertercontains a Maximum Power Point (MPP) tracker that tunes the voltage and intensity of the arrayto maximize the system performance. An alternative solution is to use micro-inverters that convertthe DC power from individual solar modules to AC power. Micro-inverters allow increased systemefficiency because each module is tuned to the MPP. In a fully optimized system, each cell wouldhave a different (I-V) set of values for current (I) and voltage (V) to reach the maximum powerpoint. In a micro-inverter system, I-V values are calculated for each module while single inverterssystem set a value for the whole array, or at best, for a module string. Micro-inverters thus pre-vent losses due to shaded, dusty or damaged modules that typically reduce the performance of thesystem.

Enphase Energy is the first company to commercialize the micro-inverter. According to EnphaseEnergy, the technology can increase efficiency up to 25% with an average gain of 7% to 10%. Micro-inverters cost around US$200 (Enphase 200 W) each while a commercial inverter such as the 125kW Sunny Central 125 from SMA America costs about US$70 K. According to the NREL Solar


Energy Technology Program, the inverter cost to the end user for a 150kW system is $0.60/Wpwith 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 inves-tigate 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, micro-inverters have been designed to work with crystalline as opposed to thin-film modules and theircost 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-Solarpanel, the potential would average 500 kWp (Table 1). With monocrystalline silicon SunPowermodules, the potential could reach 1.63 MWp. An intermediate solution such as Sharp Poly-Sipanels would yield 1 MWp potential.

Corresponding kWh/yr production would range from 712 MWh/yr for Uni-Solar modules to 1660MWh/yr for SunPower modules (Figure 2). The loss due to the partial shading of the north part ofthe rooftop has yet to be assessed. A portion of the rooftop also has to be retrieved for maintenancepurposes.

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


2.4.5 Analysis Tools

There exist two common software packages used in optimizing a system PV system: (1) HOMERdesigned by the US Department of Energy’s National Renewable Energy Laboratory (NREL) and(2) RETScreen managed by Natural Resources Canadas CANMET Energy Technology Centre. Inaddition 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 providedby the user. Based on technology options, component costs and resource availability, HOMERsimulates a system’s energy production and costs component-by-component for each of the 8,760hours in a year. The simulation then determines the feasibility of a system and allows comparisonsbased on several variables, giving the user the ability to interpret the optimization in terms of thefactors most relevant to the specific project. (NREL, 2005).

Developed by a collaboration of partners in government and industry as well as 162 Universi-ties 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 energymodel is determined and, (2) cost, (3) emission, (4) financial and (5) sensitivity and risk analysesare provided. (RetSCREEN, 2005).

2.5 Incentives and Financing Options

This section details both the existing incentives and financing options, along with the options thatmay exist in California in the future. In general, there exists an abundant wealth of options forrenewable energy projects, including photovoltaics (DSIRE, 2008). These incentives are availableat the federal, state, and regional levels. These types of public policy incentives can be described inthe form of tax credits and rebates from governmental agencies or rebate programs and incentivesfrom regional utilities. Due to the amount of tax credit and rebate programs available, this sectionwill only cover the financing incentives pertaining to this study. In general, many of the solarincentives 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 thealready existing FIT illustrated in Figure 3. FITs are further discussed in Section 2.5.2.


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 withand 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 governedby the California Public Utilities Commission (CPUC). On a commercial scale (> 50kW), the Per-formance Based Incentive (PBI), as part of the CSI program, allows a customer to obtain a rebatebased 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 inconjunction with the rebate program. These first two programs allow the costumer to obtain creditin lieu of selling their electricity to PG&E in addition to retaining ownership of every RenewableEnergy 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, theexisting solar FIT cannot be used with any other state incentive program and PG&E would have


ownership of the RECs (PG&E(b), 2008). This FIT was created with Assembly Bill 1969, andreadjusted in 2007, to set a tariff for the price of renewably generated electricity for systems limitedto 1.5 MWs. The price available for this electricity is based on Market Price Referents (MPRs) ofa specific 10, 15, or 20 year contract and accounted for in the following formula (CPUC, 2008),

Pt = At ×B × Ct

WherePt = 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 typicalwinter weekday US$0.12/kWh. However, many analysts agree that the amount offered from thisFIT is not a large enough amount to be considered an incentive developed for rapid deployment ofrenewable 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 contractover 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 solarPV (CEC(a), 2008). In general, many believe that the FIT, when structured correctly, is the mostsuccessful incentive to rapidly deploy renewable energy (Wind-Works, 2008; Hayes, 2008). This isseen with the success that many countries, namely, Spain and Germany, have had with this typeof incentive program (Wind-Works, 2008).

A particular FIT can differentiate between the application, size, location, resource intensity, in-flation index, and length of contract (Wind-Works, 2008). For this particular study, we examinedboth existing FIT structures, such as what Germany is currently utilizing, and proposed FIT struc-tures, that many states such as Minnesota, Illinois, Michigan, and Rhode Island are currentlycontemplating (Figure 4, Appendix, Section 7). In addition, Randy Hayes, founder of the Rain-forest Action Network and Climate Policy Officer of the World Future Council, suggested thatwe exam values ranging from US$0.35/kWh to US$0.60/kWh since many people in California arepushing for FIT values within this magnitude (Hayes, 2008).

In examining these differing FIT structures, the differentiation of most interest was the adjustmentfor inflation. As can be seen in Figure 5, many countries have different policies with incorporating


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 anddisadvantages of adjusting the FIT for inflation (Figure 6).

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


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Table 5: Price Adjustment Pros and Cons

Approach Description Example Pros Cons Notes

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

amendment.#$

Stable framework. 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.

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%.

Provides for increases in operating costs.

Fails to account for changes, or push cost reductions.

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Figure 6: Advantages and Disadvantages of Price Adjustments for Feed-In-Tariffs (note: footnotesare 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 whichcostumers would prefer to not own the system. Under a PPA, NAT Partners would have to finda Solar Service Provider (SSP) to finance, design, install, monitor and maintain the photovoltaicsystem. Though the system is owned by an investor secured by the SSP, or by the SSP itself, NATPartners would then purchase the power produced by the solar panels from the investor at fixedguaranteed price over the life of the contract, usually 10-25 years. Many PPAs also include a clauseallowing purchase of the system at market price after a fixed amount of time; sometimes as shortas six years (Rahus, 2008).

The PPA involves no initial capital or operation and maintenance costs and the guaranteed, con-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 andany excess power can be applied as net metering toward NAT’s electrical bill (Rahus, 2008). Theinvestor will benefit from the usual 30% federal tax credit as well as from the PBI.


The recent popularity of PPAs, growing from 10% to 50% of commercial and industrial sectorinstallations from 2006 to 2007, reflects the advantages detailed above; however, there are somedrawbacks (Cory et al., 2008). The PPA will likely involve complex initial negotiations and highertransaction costs than an outright purchase in order to determine rate pricing and the distributionof incentives among the parties involved (e.g. NAT, SPP, investor, installers, utility, etc.). Thenegotiated rate for purchase of electricity will almost certainly be higher than the going rate forgrid power, thus making the PPA more expensive in the short term and making its financial bene-fits dependent on future electricity rates. Furthermore, contract stipulations may create limits toNAT’s ability to make changes to the property that would otherwise not exist. Finally, additionaladministrative costs and complications may be involved in ensuring access to the building by out-side maintenance personnel and because NAT will have to pay two separate electrical bills (i.e. toPG&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 FederalInvestment 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 fewyears; however, the Emergency Economic Stabilization Act of 2008, signed on October 3rd, addedan 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 thatthe owner purchased or produced one MWh of renewable energy of a given type. RECs have alsobeen 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 Stan-dards or on voluntary markets to individuals wishing to purchase green power. Prices of RECs varyfrom 0.4¢/kWh to 5.6¢/kWh depending on the technology used to produce energy, the location ofthe 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.


2.6 Case Studies

Several PV installations of similar scale to this study have recently been installed or proposed inthe US that serve as good examples of potential options for the NAT project. This section detailsthree 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, CADate Completed: October, 2008Size of Array: 1.1 MWSolar Panel Provider: SunPower Corp., San Jose, CAFinancing: SunPower Access PPA through General Electric Financial ServicesNotes: 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 ata competitive retail price from GE Financial, who owns the solar array. In doing so, HP has avoidedthe startup cost of purchasing the system while still keeping the RECs, environmental benefits andcompetitive pricing that were part of the agreement. However, the PPA also means that HP is notin control of the energy produced at the facility eliminating the possibility of selling power back tothe PG&E electrical grid (GE, 2008; Solarbuzz, 2008).

2.6.2 Frog’s Leap Winery - 168 kW


Project: Frog’s Leap WineryLocation: Rutherford, CADate Completed: February, 2005Size of Array: 168 kWSolar Panel Provider: Sunlight ElectricFinancing: 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 arrayfor NAT and covers approximately 20,000 ft2. Frog’s Leap only uses 65 kW in its daily operationsand takes advantage of California’s net metering program to earn credit for future electric bills with


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

2.6.3 Prologis Kaiser Distribution Center - 2 MW


Location: Fontana, CADate Completed: August, 2008Size of Array: 2 MWSolar Panel Provider: First SolarFinancing: Southern California Edison (SCE) owns and operates the system and is leasing thewarehouse roof from Prologis.Notes: The Fontana rooftop installation is the first installation of SCE’s groundbreaking solargeneration project which focuses on leasing rooftops. The project aims to install approximately250 MW of photovoltaic panels on 65 million sq ft of roof space within the next 5 years. Dividedamong warehouse rooftops throughout southern California, each installation is expected to be inthe 1 - 2 MW range and will feed directly into local electrical grids. The solar panels will eventu-ally power the equivalent of 162,000 homes while helping SCE meet the 20% Renewable PortfolioStandard (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 thescale (i.e. when completed, the project will be one of the largest solar installations in the US) andbecause of the leasing and bidding arrangements put in place to finance and develop the installa-tions. In an arrangement without precedent in the State of California, SCE is leasing the rooftopsit will use for solar power generation. The property owner incurs no capital costs and gains revenuefrom 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 powergenerated 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 likeNAT (Markets, 2008). However, as in the case of Prologis, it is likely that NAT would have to bepart of a much larger scale project organized by PG&E in order to be economically favorable formeeting their RPS goals (SCE, 2008).

SCE also implemented a competitive bidding process for solar panel providers to determine theoptimum technology choice. First Solar, a thin film photovoltaic company, won the bid for the ini-


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

3 Alternative Solutions

This section includes criteria, an initial screening process, and the alternative solutions consideredin the NAT Solar Photovoltaic Feasibility Study. Descriptions of the criteria utilized for evaluatingeach alternative solution are detailed in Section 3.1. Section 3.2 provides information about theinitial screening process used to delineate the feasible alternatives. Section 3.3 provides a discussionof 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 aphotovoltaic system. Input from the URS Corporation and the NAT Partners is utilized to weighthe relative importance of each criterion.

3.1.1 Economics

The economic criterion consists of a quantitative assessment of the capital cost, the operation andmaintenance cost, and the price of electricity produced by the system. Capital cost is the totalamount 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 andmaintain the project.


3.1.2 Public Relations

The public relations criterion refers to the ability to promote NAT as an environmentally-friendlyfacility 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 primaryimportance 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 forthe 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 dependdirectly on whether or not NAT owns the REC associated with the system. As “green” productshave 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 willproduce. Peak power is calculated based on a load analysis using HOMER and is given in units ofkilowatts (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 makearrangements, and the placement of infrastructure. Permitting and licensing was excluded fromthis phase of analysis, as each alternative should have the same requirements and a CaliforniaEnvironmental 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 incentive-based 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


the purchase of the photovoltaic system without the use of a loan were eliminated because thecapital cost far exceeds the monetary resources available according to NAT Partners. Whetherload-matching or net producing, a complete system would total in the millions of dollars; tooexpensive for the budget of the project. For this reason, the relevant excluded alternatives includea net metering alternative “NM (NAT Partners),” an existing FIT alternative ‘Feed-in-Tariff (NATPartners)” and the “Future Feed-in-Tariff (NAT Partners)” alternative. In addition, alternativesthat typically involve much larger scale deployments of solar energy than what would be possibleat the NAT were excluded. Bidding processes for purchase of renewable energy by utilities arepopular for large scale installations on the order of tens of megawatts. NAT is capable of producing1.5 MW of peak solar power; therefore, the alternatives, “Bidding Process (NAT Partners)” and“Bidding Process (Tax Equity Investor),” involving bidding processes have been excluded. Resultsare summarized in Tables 2 and 3.

Table 2: Existing Incentive-Based Alternatives Analyzed for Initial Screening

Relative Capital Sized to Load ExclusionExisting Incentive-Based Alternative Cost of System or Net-Producer CriteriaNM (NAT Partners) Large Load ExpensiveNM (Tax Equity Investor) Medium Load NoneNM with PPA Small Load NoneFeed-In-Tariff (NAT Partners) Very Large Net-Producer ExpensiveFeed-In-Tariff (Tax Equity Investor) Large Net-Producer NoneBidding Process (NAT Partners) Very Large Net-Producer Economy of ScaleBidding Process (Tax Equity Investor) Large Net-Producer Economy of Scale

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

Relative Capital Sized to Load ExclusionFuture Incentive-Based Alternative Cost of System or Net-Producer CriteriaFuture Feed-In-Tariff (NAT Partners) Very Large Net-Producer Expensive35 Cent Feed-In-Tariff (Tax Equity Investor) Large Net-Producer None60 Cent Feed-In-Tariff (Tax Equity Investor) Large Net-Producer NonePG&E Lease agreement Small Net-Producer None

3.3 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 al-ternatives with existing incentive programs. Both involve the use of a tax equity investor to financethe photovoltaic system to be installed on NAT, thereby mitigating the high initial capital cost.


Under both schemes, the tax equity investor will benefit from the 30% ITC provided by the federalgovernment for renewable energy investors. The first alternative is to install a load-matching PVarray of approximately 250 kW to meet the electricity demand of NAT’s facilities. In addition tobenefitting from net metering through PG&E, NAT will receive a PBI under the CSI. The secondalternative is to fill the entire roof of NAT with solar panels, amounting to approximately 1.5 MWof peak generation potential. Electricity generated by the solar panels and not used by NAT willbe sold back to the grid using California’s FIT as discussed in Section 2.5.1 and Section 2.5.2. Athird, currently feasible and existing incentive, alternative is the arrangement of a PPA through aprogram like SunPower Access (Refer to Section 2.6.1). Under such an agreement, NAT does notown the system but has guaranteed competitive pricing over the lifetime of the contract. Sincethere are no initial capital or operations and maintenance costs, a detailed financial analysis is notnecessary for the PPA.

In addition to the existing options discussed above, we also considered potential future policymeasures that could have a large impact on the feasibility and profitability of installing a PVsystem at NAT. We assessed the financial impact of an increase in California’s FIT ranging fromUS$0.35/kWh to US$0.60/kWh. Germany, currently at the global forefront of renewable energypolicy, already has a FIT greater then US$0.60/kWh, making this a reasonable figure to evaluateas a potential future subsidy (Solarbuzz, 2008). Another future policy measure, that will likelybe 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 util-ity, 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 foran array of crystalline silicon panels provided by SunPower Corporation. Annualized costs werecalculated for a 25 year system lifetime, taking into account the time-value of money with thecurrent 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 estimatedfor 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, retailand tasting room load on weekends; and (4) Restaurant load for the entire week. The load profileestimates 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-matchingsystem financed by a tax equity investor. Under this alternative, NAT will secure financing for thePV system through a tax equity investor, whether it is a financing company like G.E. Financial, a


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 bailoutbill passed on October 3, 2008. The ITC grants a cap-less tax credit at 30% the value of the netsystem 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 forpayback of the investment by NAT.

Once the photovoltaic system is installed and producing power it will provide most of the elec-tricity 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 currentlyreceive 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’scustomer base in order to encourage more efficient implementation; therefore, the incentive re-ceived by NAT will depend on when the photovoltaic system is installed and brought on-line. NATwill also benefit from PG&E’s net metering program (CEC(b), 2008). Any power produced bythe solar panels and not used by NAT will cause the electricity meter to run backwards, effectivelygiving 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 upapproximately 15,000 of the 90,000 sq ft of roof space available. A summary of the system pa-rameters and financial figures are given in Table 4 and Table 5, respectively. Formulas used indeveloping this data are available in the Appendix, Section 11

Table 4: System Parameters for the Existing Incentive Alternative 1

NM (Tax Equity Investor) ValueEnergy Production (kWh/yr) 410500Energy Demand (kWh/yr) 410600PV Project Lifetime (yrs) 25Roofspace (sq. ft.) 15000

Table 5: Economic Parameters for the Existing Incentive Alternative 1

NM (Tax Equity Investor) ValueTotal Capital Cost (US$) 1650000Yearly Working Cost (US$/yr) 5250


3.3.2 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 net-producing system financed by a tax equity investor with a US$0.135/kWh FIT. This alternative willbe financed by an external tax equity investor benefiting from the 30% federal tax credit availableunder H.R. 1424. However, filling the roof of NAT with solar panels amounts to a generationpotential of approximately 1.5 MW, large enough to preclude the system from taking advantage ofeither the CSI or net metering program. Instead, NAT will be able to benefit from California’s FITto sell its additional electricity back to the PG&E at a guaranteed competitive price. The FIT rateis calculated according to several parameters (Refer to Section 2.5.1) but will vary between aboutUS$0.12/kWh and US$0.15/kWh depending on the season. For this reason, we used an averagevalue of US$0.135/kWh for our calculations. A summary of the system parameters and financialfigures are given in Table 6 and Table 7, respectively. Formulas used in developing this data areavailable in the Appendix, Section 11

Table 6: System Parameters for the Existing Incentive Alternative 2

Feed-In-Tariff (Tax Equity Investor) ValueEnergy Production (kWh/yr) 2463000Energy Demand (kWh/yr) 410600PV Project Lifetime (yr) 25Roofspace (sq. ft.) 90000

Table 7: Economic Parameters for the Existing Incentive Alternative 2

Feed-In-Tariff (Tax Equity Investor) ValueTotal Capital Cost (US$) 8700000Yearly Working Cost (US$/yr) 21000

3.3.3 Existing Incentive Alternative 3: NM with PPA

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


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 ofa 1.5 MW net-producing system financed by tax equity investor with a US$0.35/kWh FIT. Thisalternative is is exactly the same as Existing Incentive Alternative 2 but with the FIT rate increasedto US$0.35/kWh rather than US$0.135/kWh. A summary of the system parameters and financialfigures are given in Table 8 and Table 9, respectively. Formulas used in developing this data areavailable in the Appendix, Section 11

Table 8: System Parameters for the Future Incentive Alternative 1

35 Cent Feed-In-Tariff (Tax Equity Investor) ValueEnergy Production (kWh/yr) 2463000Energy Demand (kWh/yr) 410600PV Project Lifetime (yr) 25Roofspace (sq. ft.) 90000

Table 9: Economic Parameters for the Future Incentive Alternative 1

0.35 - Feed-In-Tariff (Tax Equity Investor) ValueTotal Capital Cost (US$) 8700000Yearly Working Cost (US$/yr) 21000

3.3.5 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 a1.5 MW net-producing system financed by tax equity investor with a US$0.60/kWh FIT. Thisalternative is is exactly the same as Future Incentive Alternative 1 but with the FIT rate increasedto US$0.60/kWh rather than US$0.35/kWh. A summary of the system parameters and financialfigures are given in Table 10 and Table 11, respectively. Formulas used in developing this data areavailable in the Appendix, Section 11

Table 10: System Parameters for the Future Incentive Alternative 2

60 Cent Feed-In-Tariff (Tax Equity Investor) ValueEnergy Production (kWh/yr) 2463000Energy Demand (kWh/yr) 410600PV Project Lifetime (yr) 25Roofspace (sq. ft.) 90000


Table 11: Economic Parameters and Results for the Future Incentive Alternative 2

0.60 - Feed-In-Tariff (Tax Equity Investor) ValueTotal Capital Cost (US$) 8700000Yearly Working Cost (US$/yr) 21000

3.3.6 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 incurno capital or operations and maintenance costs and would receive monthly rent payments fromPG&E for the use of the roof, providing a steady income over the course of the lease agreement. Aswith the PPA, complications would exist in negotiating the contract and in establishing access andalteration schemes for the building. A detailed description of the SCE plan for leasing warehouserooftops 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 thethree alternatives with incentives that may exist in the future. The Delphi method uses a processof weighing and scoring selected criteria to help select a preferred alternative. Each group memberprovided individual values for the weights before coming to a group consensus. Three sets of weightsfrom 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 Partnerweight sets. As shown in Table 12, the values were then rounded to the nearest half point, basedon our discretion. For this project, we scored the criteria based on our analysis and feedback from

Table 12: Delphi Decision Matrix Weighting Values

URS Chabot Placeworks Our Weight Average FinalEconomics 3 3 3 4 3.25 3.0Public Relations 4 4 4 3 3.75 4.0Branding 2 3 3 2 2.5 2.5Potential Power 2 1 1 2 1.5 1.5Ease of Implementation 1 2 2 2 1.75 2.0

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


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; andAppendix, Section 12).

Table 13: Delphi Decision Matrix Total Values for Existing Incentive Alternatives

Existing Incentive Alternative Total Weighted ScoreNM (Tax Equity Investor) 38.5Feed-In-Tariff (Tax Equity Investor) 23.5NM with PPA N/A

Table 14: Delphi Decision Matrix Total Values for Future Incentive Alternatives

Future Incentive Alternative Total Weighted Score35 Cent Feed-In-Tariff (Tax Equity Investor) 26.560 Cent Feed-In-Tariff (Tax Equity Investor) 32.5PG&E Lease agreement N/A

4.1 Preferred Alternative

In determining the preferred alternative from the results of the Delphi method, the existing incentivealternative, NM with PPA, and future incentive alternative, PG&E Lease agreement, were excludedand not determined as the preferred alternative for two different reasons. In the case of the NM withPPA 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 performa proper analysis. In addition, based on the large weights of the economics and public relationcriteria, any alternative that minimized these criteria would be chosen as the best alternative bythe 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 furtheranalysis for both this alternative and the “winning” future incentive alternative, 60 Cent Feed-In-Tariff (Tax Equity Investor). The analysis of these two preferred alternative solutions are discussedin Section 5.


5 Specifications of Recommended Solutions

This section outlines pertinent background information specific to the preferred alternative solu-tions, 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 narrowupper tier (Figure 7). The space is largely unobstructed, save seven short ventilation chimneys onthe 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 andthe upper tier are optimally positioned for maximum insolation. This south side faces the waterand 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 Part-ners, 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


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

Existing and Future Incentive Alternatives

Existing Incentive Alternative 1: CSI (Tax Equity Investor)

Utilized Roof Space: ~15,000 Sq. Ft.

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 25 year lifetime

Figure 8: Illustration of the NAT Warehouse utilizing 15,000 ft2 of Roof Space for the Net MeteringAlternative (Google, 2008)

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 astandard, this array will have a peak power output of 1.5 MW.

Existing and Future Incentive Alternatives

Existing Incentive Alternative 2: FIT (Tax Equity Investor)

Utilized Roof Space: ~90,000 Sq. Ft.

Advantages:– Net Producing - Sellback to Grid

– Use of entire roof space

– Keep RECs

Disadvantages:– Disqualified from all other state

incentive programs

– Very high capital cost

– Net loss over lifetime of system

Figure 9: Illustration of the NAT Warehouse utilizing 90,000 ft2 of Roof Space for the Feed-In-TariffAlternative (Google, 2008)


5.2 Economic Analysis

The economic analysis includes the financial figures representative of the two preferred alterna-tive solutions, NM (Tax Equity Investor), and 60 Cent Feed-In-Tariff (Tax Equity Investor). Forthe 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 inAppendix, 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 bythe system and the payback period. Figure 10 below illustrates a nearly linear relationship betweenthe 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 InterestRate of a Loan by utilizing Net Metering


For this analysis, the loan interest rate is a critical parameter. Because the investor paying forthe PV system is able to receive federal tax credits for up to 30% of the investment, and due to thepublicity generated by investing in “green” technologies, there exists potential to receive nominalinterest 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 ?? il-lustrates the relationship between the loan interest rate and electricity price escalation rate neededfor a 25 yr payback period. A 4.7% nominal escalation rate is considered a conservative forecastsince the rate is based on historical data and does not take into account recent movements in sup-ply/demand balances (Kammen, 2008). Also, electricity prices could also be affected if a tax oncarbon emissions or a carbon credit structure would be implemented.

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


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Figure 12: Representation of the the Levelized Cost of Energy (LCOE) versus the Nominal InterestRate 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) producedby the system and the payback period. Figure 12 below represents three different relationships be-tween 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 toa FIT value of US$0.60/kWh. This trend should indicate to the NAT Partners that a FIT value ofUS$0.60/kWh or more would be most desirable when an interest rate on a loan is larger then 5 to6%; however, please do not forget that there exists a small bit of leverage that the NAT Partnerscan 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 electricityproduced is sold to PG&E, the building electrical power demand is met by purchasing electricityat the regular market price. Once the payback time is reached, the energy produced generatesnet revenues for the NAT. Payback period relationships to interest rates on particular loans areillustrated in Figure 13, again showing that a FIT value of US$0.60/kWh is most favorable.


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

5.3 System Design

The system design includes panel type, inverter, racking system and additional electrical compo-nents such as the control box and wiring. As an example, we give a recommended system designbased on information provided by Julia Davis of SunPower Corporation. However, it should benoted that there are many other competitive photovoltaics manufacturers whose products shouldbe 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 ofSunPowers models, the 305 uses a back-contact design to deliver a high efficiency of 18.7% andpeak wattage of 305 W/panel. The panel comes with a 25 year limited power warrantee and a 10year limited product warrantee. (Davis, 2008).


5.3.2 Inverter

The recommended Inverter for NAT is the Xantrex GT250 inverter for the load-matching 250 kWsystem under the NM (Tax Equity Investor) alternative or three Satcon PowerGate Plus 500 kWinverters for the net-producing 1.5 MW system under the US$0.60/kWh FIT alternative. Both ofthese 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 SunPowerT10 Solar Roof Tile. Both models offer high wind resistance and neither model involves roofpenetration. The T10 tiles incorporate a 10 degree tilt which allows for a higher power conversionbut lower coverage per unit roof area than the Powerguard tiles. The full system warrantee appliesto both models. (Davis, 2008).

5.3.4 Wiring

The additional electrical components transferring DC power generated by the solar panels to theinverter and then transferring the converted AC power to NAT and the grid will include wiring, acontrol box, several switches and a transformer, among other items (Figure 1). The details of theelectrical connections will be determined by the designer and installer based on the requirementsof 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 theproposed NAT vintner’s hall. Based on our analysis, the only potentially viable existing alternativefor implementing solar power at NAT is the installation of a load-matching 250 kW photovoltaicsystem with initial costs financed either by a loan from an independent tax equity investor or bythe arrangement of a PPA. Both of these options keep the remaining 75,000 ft2 of the roof availablein the likely event that PG&E begins leasing large warehouse rooftops. Furthermore, each optionmust be assessed relative to the possibility of a future policy measure raising California’s FIT to arate on the order of US$0.60/kWh as discussed in our winning future alternative. The best finalalternative will depend on the degree to which favorable loans and contracts can be negotiated,


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 optimumflexibility as long as a favorable interest rate can be negotiated. It is clear from the economic analysisin Section 5.2 that even with the CSI rebate and net metering, the load-matching scenario financedby an independent tax equity investor is infeasible with a typical loan rate of 10%. However, if aninterest rate of 5.5% or less could be negotiated, the annualized price of electricity with the incentiveswould be equal to, or cheaper than grid-purchased power. With such an interest rate, the systemwould be a good investment by NAT regardless of future solar-friendly policies. Furthermore, in theideal scenario that a US$0.60/kWh or more FIT is passed, NAT has no constraints to scaling up thesystem to be a net-producer and reap the benefits of selling power back to the grid. Acknowledgingthe caveat of interest rate, a 250 kW load-matching system financed by a tax equity investor is thebest 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 areavailable on rates and pricing for existing PPA arrangements and the specifics of contracts vary fromone project to another. Therefore, it is difficult to provide a numerical estimate for the economicbenefits of a PPA. NAT would essentially be exchanging higher short term electricity prices for longterm savings when future prices rise above the negotiated rate for power from the solar array. Theuncertainty lies in the timeline for reaching this threshold within the terms of the contract, but theever increasing popularity of PPAs is a good indication that many commercial solar customers findit to be an economically attractive option. If NAT Partners are able to negotiate a favorable pricefor electricity, a PPA will eliminate start-up costs and provide long-term savings while allowingNAT 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 thesystem at market price after a fixed amount of time, usually six or more years. Such a clause allowsthe host the opportunity to reassess the economic and political environment and decided whetherit is favorable to purchasing the system outright, giving flexibility to adapt to new policy measures


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

6.4 Final Recommendation

NAT Partners must approach the negotiating table knowing if they are willing to pay a higherprice 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 anenvironmentally friendly “green” facility. In order for the project to be feasible, NAT partners mustuse the incentives and public relations credibility available to the tax equity investor to argue fora favorable interest rate. In addition, the donation of RECs to the investor could also potentiallyserve as a negotiating tool. At the same time, NAT partners should also look into pricing for aPPA and weigh the two options to find the best solution.


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Wind-Works (2008). “Model Advanced Renewable Tariff Legislation.” Report No. None Given,Wind-Works.org by Paul Gipe. [Online] Available http://www.wind-works.org/FeedLaws/USA/Model/ModelAdvancedRenewableTariffLegislation.html, December1, 2008.


WRCC (2008). “Mean Number of Clear Days.” Report No. None Given, Western RegionalClimate 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.


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

and Laws (Rickerson et al., 2008)!

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ind

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ance

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ents

, LLC

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, govern

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ibal

councils

, ele

ctr

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216B

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ph (

c))

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PS

not

met

10%

or

hig

her

20

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sta

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and f

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l in

centives

100%

to

utilit

y

2 y

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tilit

y

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in b

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,100

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al

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to 2

0 M

W)

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) !"<2=$$#">#22"34"6&""#"34E"""""""""""""""""""""""""""""""""""

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r eff

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)

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mass o

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er

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to

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) !"5$6778"98$$"%&"+2""8"%&B"""""""""""""""""""

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None

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mass o

r B

iog

as

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as

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None

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t 200%

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20

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100%

or

net

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N/A

N

/A

TB

D


8 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 StoreHours 10am to 6pm; Tasting Room Hours 12pm to 6pm; Site Lighting Hours 7am to 9pm


9 Appendix - Monthly Energy Demand and Energy Generation

(Net Metering) Results from HOMER

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


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


10 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)


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

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


11 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 netmetering, we first calculated the annual cashflow of the entire system using a cash flow analysis asfollows,

A = [ C × CRF(i, nl) ] + M

WhereA = 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 sizedat around 250 kW and an operation and maintenance cost based on data from NREL atUS$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 bythe generation rate as follows,

P =A

G

WhereP = 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 firstfive years with the PBI).


Feed-In-Tariff (FIT)

In calculating the cost per kilowatt hour for the alternatives utilizing the FIT, we first calculatedthe annual cost of the entire system as follows,

A = [ C × CRF(i, nl) ] + M

WhereA = 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 sizedat around 1 MW and an operation and maintenance cost based on data from NREL atUS$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 bythe generation rate as follows,

P =A

G

WhereP = 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.


12 Appendix - Delphi Method


13 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 + 11 + inflation rate

− 1

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 taxequity investor to acquire the PV system.

• The discount rate, d, was used to calculate the present value of savings and costs (includingloan payments) occurring on an annual basis during the system lifetime. Due to thefinancial crisis affecting the economy, nominal discount rates are currently in the order of2%. However, given the lifetime of the system, the nominal discount rate was set to 5% andthe real discount rate to 1.3%.

• The real discount rate, d, was modified when the progression of annual costs of savings donot follow inflation. For example, according to the EIA and Kammen, the escalation rate ofelectricity, 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 thesystem, 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 thefuture, the FIT rate may, or may not, be adjusted for inflation. In the latter case, the FITrate would effectively depreciate during the system lifetime. A depreciation rate rd derivedfrom the inflation rate ri is used to correct the discount rate and obtain the modifieddiscount rate dfit for FIT savings. Also, the CSI Performance Based Incentive (PBI) is notadjusted for inflation and is effectively depreciating. The discount was modified in the samemanner and both can be calculated as follows (Masters, 2004),

dfit = dpbi =d− rd

1 + rd

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


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


14 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 usingthe Present Value Function (PVF).

In calculating the levelized cost of energy, we first need to calculate the net present value of thetotal life cycle cost. We start this series of calculations by calculating the present value of theloan with interest as follows,

Ploan = [ C × CRF(i, nl) ] × PVF(d, nl)

WherePloan = 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 approximatedto 13 years. Although an additional loan may have to be contracted to cover the cost of a newinverter, we considered the simplest option in which the new inverter is paid at once. The cost ofthe inverter was assumed to follow inflation. The calculation is as follows,

Po&m = M× PVF(d, ns) +I

(1 + d)13

WherePo&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 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 for inflation (US$/kWh)G = Energy Generation (kWh/yr)


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 asfollows,

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 =NPV1G× 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)


In calculating the loan and system payback period, we need to recalculate the present value of theoperation and maintenance costs only throughout the lifetime of the loan as follows,

Po&m(2) = M× PVF(d, nl) +I

(1 + d)13

WherePo&m(2) = Present Value of the Operation & Maintenance (US$)


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)

WherePelec = 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” isequal 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 aspreadsheet program such as Microsoft Excel or OpenOffice.org Calc. The value calculated for nl

is the payback period for the loan and the system.


15 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 andsimply buy conventional electricity at the current, conventional rate. Perhaps, even RenewableEnergy 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 thetotal life cycle cost. We start this series of calculations by calculating the present value of theloan with interest as follows,

Ploan = [ C × CRF(i, nl) ] × PVF(d, nl)

WherePloan = 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)


And we need to calculate the cumulative present value of the operation and maintenance costs asfollows,

Po&m = M× PVF(d, ns) +I

(1 + d)13

WherePo&m = Present Value of the Operation & Maintenance (US$)


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


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 =NPV2G× 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)


In calculating the loan and system payback period, we need to recalculate the present value of theoperation and maintenance costs only throughout the lifetime of the loan as follows,

Po&m(2) = M× PVF(d, nl) +I

(1 + d)13

WherePo&m(2) = Present Value of the Operation & Maintenance (US$)


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)

WherePfit = Present Value of the FIT Savings (US$)FIT = Feed In Tariff, not adjusted for inflation (US$/kWh)

G = Energy Generation (kWh/yr)PVF = Present Value Function (yr)

d = Discount Rate, “real” (%)rd = Depreciation Rate (%)

= 11+ri

− 1ri = 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


equal to zero (i.e. when the cumulative cost of the system equals the cumulative savings). Thiscalculation can be done with numerical methods by using SOLVER or GOAL SEEK in aspreadsheet 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 Solar Feasibility Report

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