Solar Exceptionalism

My partnership just finished work on a commercial scale solar installation. It is a quarter acre of solar panels that should produce about 48,000 kilowatt-hours of electricity annually. It was a complex piece of work, from design to final wiring. It also presented a difficulty in that we had to install it in December and January. Why would we do something like this in midwinter? Take a seat. I’ll spare you as many technical details as possible.

The owners of this system started out by applying for Vermont’s SPEED program, which requires utilities to pay a higher price for renewable electricity, up to a small percentage of their overall capacity. Response to this program was so overwhelming that the state ended up having a lottery to see who got on the list. Our clients got on the waiting list, but some people above them dropped out, so they made it onto the list last September. We immediately plowed into the permit and incentive process. Because of the structure of renewable energy incentives, we had a deadline of January 31, 2012 to complete the job, get the electrons flowing, and file the paperwork.

The first and foremost obstacle was the Vermont State Historic Preservation Office. The incentive money comes from the feds, and the feds demand a review of possible disturbance of a historic site. Ok, fine, but exceptional. More on exceptional later. Our client called SHPO every week for five weeks, each time leaving a message explaining the reduction of our timeline by one week. On the sixth week he called every day, and finally got a response. They would have to do a complete archeological survey. Game over. We’d never have time to do that and complete the job. Our client expressed himself forcefully on the subject of delay, and they said that they would send someone right over to look at the site. The next day a SHPO employee visited the site, looked around, and said, “Oh, this is no problem. Go ahead.” Six weeks. Face palm. We sprinted ahead.

I have some thoughts on Solar Exceptionalism. We ran into this last year with a client who wanted to put solar panels on the newly metal-roofed shed dormer on his house. Because his house is more than 50 years old, in order to apply for the incentives we had to hire a consultant to determine whether the historic value of the house would be ruined by solar panels. This was an old farmhouse that had additions, an added porch, picture windows, new metal roofing, dormers, and who knows what else tacked on. All of that was done with only an ordinary building permit, and some of it probably without. Nevertheless, the client had to pony up hundreds of dollars for a consultant to write a report on what anybody could see through binoculars. Then we could put solar panels on top of the new raised seam roofing.

Let’s take the example of a ranch house built in 1960. It just makes the 50 year rule. If it was my house I could add, subtract, or divide it any way I liked with nothing more than a standard building permit from the town. I could bulldoze the whole thing and load it into dumpsters. But I couldn’t put solar panels on the roof, or even in its vicinity, without a study and approval from SHPO. Not if I wanted the incentive money. Roughly a third of the houses in Vermont are over 50 years old, and few of them are pristine historic buildings. An insider’s note: no installer in his right mind would try to put solar panels on a slate roof. Historical value aside, the stuff is just too brittle to work with.

If I wanted to build a house on a piece of land, with only an ordinary town building permit I could dig a hole 20 feet wide by 30 feet long and 10 feet deep for the foundation. On the other hand, if I wanted to drill a posthole five feet deep for mounting a solar array, you guessed it; I’d need a full historical review.

Similarly, if I want to build a 5000 square foot Mc Mansion with three stories and a turreted tower and paint it hunter safety orange I can do so with an ordinary building permit. If my neighbors don’t like my design sense they can go ___________. However, if I want to install a six-foot square ground mounted solar array I need to send copies of my Certificate of Public Good application (including a visual impact assessment) to all adjoining landowners, the town planning commission, the town zoning commission, the town select board, the Public Service Department, the Public Service Board, and the utility, as well as SHPO. For one client I sent out fourteen information packets. His solar array was in a clearing in the woods next to his driveway and couldn’t be seen by anyone beyond his property line. That included his adjoining neighbor half a mile away across the river. Any one of them, whether they could see the array or not, had a right to stall the project. We had to wait a month for responses before proceeding with construction.

One of my business partners has expressed his impression that there are more people engaged  in shuffling papers than installing solar panels.

I’m not one of those deregulatory fanatics. Regulation of building projects, solar or otherwise, is right and necessary if we want to avoid ruining our environment or desecrating historic sites. However, we have a problem of proportion.

My general impression, formed over years in the renewable energy business, is that regulations concerning anything that produces power are scaled for multi-megawatt facilities. In a conversation with an official at the Federal Energy Regulatory Commission about small hydro permitting, he said (without irony), “Five watts or five megawatts, it’s the same process.” As much as anything I think this is a result of legislative inertia.

Forty years ago a new power plant was a huge thing – acres of buildings and tons of concrete. It used trainloads of coal or dammed a major river. The trend over the past few decades has been away from the centralized plant producing hundreds of megawatts and towards smaller, decentralized plants. Among these might be repowered hydroelectric sites producing tens to hundreds of kilowatts, or industrial rooftops and brownfield sites of the same scale. At the bottom of the power production scale is a few thousand watts of solar panels on a residential roof.

There have been advances in the rules regarding small power producers. The process for getting a Certificate of Public Good to generate solar power has been shortened to a few pages for residential systems. Still, there are threads trailing back to the days of megawatt power plants.

A local couple contacted me, interested in producing a few kilowatt-hours a day from a stream in a gulley on their land. I looked at the situation and figured they could get about 450 watts from a micro-hydro generator about the size of a toaster oven. That’s about 10 kWh a day, enough to run a frugal household. Most of the year about 80% of the water in the stream would run past the intake and down the gulley. They might have to throttle the machine back in August and September. So, great, right? Not so fast.

I had to get approval from

The Vermont Agency of Natural Resources (water quality permit)

The Federal Energy Regulatory Commission (interconnection license)

The U.S. Army Corps of Engineers (river modification permit)

The U.S. Fish and Wildlife Agency (environmental impact study)

I gave it a shot, just as an experiment. Everyone was very polite and helpful, in an unhelpful sort of way. ANR had no fixed process and recommended that I work things out with FERC first. (They are, apparently, on the road to a methodology now.) The guy at FERC (“five watts or five megawatts”) sent me information on publishing my project in the Federal Register and holding a series of stakeholder meetings with “parties with legal standing” and local indian tribes. It was looking like at least a year to get through the FERC process. He also sent me back to ANR, which sent me back to FERC, and so on. Army Corps sent me a ¾” thick book describing the process of obtaining an exemption to a permit for small projects. One teaspoonful of soil moved below the high water line of any body of water triggers their jurisdiction. The nice woman at USF&W said that they would be happy to send an inspector over for only $918 a day. She figured that it might cost $20,000 to get USF&W approval, which was more than the estimated cost of the hardware. So I gave up.

If I had been installing something on the scale of Hoover Dam, this all would have been chump change. It also would have been necessary, given the huge impact of a megawatt scale dam. I was proposing something the size of a toaster oven, so I had to express my regrets to the potential clients and move on.

It makes me think of the old saying that generals are always fighting the previous war. The practical scale of electrical generation has dropped by a factor of a thousand, but the law hasn’t caught on to that fact. All commercial sources of energy in the modern world live or die by regulation and subsidy. If we are going to make the transition to distributed renewable energy before we run headlong into shortages, permitting is going to have to change to deal with the new reality.

Solar Financials

Here is something that peeves me greatly. Let’s say I want to buy an SUV, a three ton chunk of rolling steel, which:

• Loses thousands of dollars of value the instant I stick the key in it
• Will cost me thousands of dollars a year to own and operate, thus increasing my financial risk
• Will depreciate dramatically over ten years to a fraction of its purchase price

I can walk into a bank, fill out a simple form, deliver up a W-2 form, and if my credit is good, walk out with something in the range of $30,000.

If I want to buy a solar energy system, be it a photovoltaic system producing electricity or a solar hot water system, I will face problems. The solar system will:

• Depreciate slowly
• Produce a tax free return on investment, decreasing my financial risk
• Last 25 years or more
• Increase the value of my home by more than the cost of the system

The bank, however, will stiff me. Either I will have to go through the hassle of getting a home equity loan or else I will have to pay the high interest rate of an unsecured loan. No EZ loan terms for solar. Why is this? It is due to a lack of failure.

Untold thousands of people have failed to pay off their car loans and have had their cars repossessed. The banks understand the process, the residual value of the car, and the probability of default, so they can plan and manage their risk accordingly. The same goes for houses. Due to long experience, banks understand the foreclosure process and deal with it. There is no such body of experience with renewable energy systems. Therefore, such systems have no value as collateral to the banks. So it was explained to me by a patient but implacable loan manager.

At one time there were no cars, so there was a time before car loans. It follows that there must have been some bank somewhere that was the first to loan someone money to buy a car, using the car itself as collateral. I’m still looking for the first bank to make that momentous step for a solar energy system. A few large solar installation companies have each raised some money and put together their own in-house programs, but commercial banks are stuck in the past.

If solar loans could be as easy and cheap as car loans the market would expand by a factor of ten.

One thing that might end the impasse is a program of loan guarantees. The state or the Feds could devise standards and back loans that acknowledged solar panels as collateral. This would give banks some data points for calculating risk and, with the occasional failure, an understanding of repossession and resale value. I have proposed the idea to a couple of Vermont state legislators and I encourage you to do the same.

 Another peeve of mine in the realm of solar is the inevitable question, “What’s the payback?” People want to know how many years it will take for a solar system to earn back its purchase price. There are a number of answers to this.

The direct answer for photovoltaics for homeowners in Vermont runs around 11 to 19 years, depending on installation cost, initial electrical price, and how fast the price of electricity goes up. Business owners have access to more grants and tax breaks, so they would get a faster payback. Solar hot water can easily pay back its costs inside of ten years, and often within eight. People generally express dissatisfaction with these numbers.

The facetious but pointed answer is, “What’s the payback on your granite countertop? Formica will hold up a mixing bowl at a fraction of the price.” Insert the name of another expensive home or life accessory in place of “granite countertop” if you wish. We often buy things for reasons other than financial return. We buy many things that are money-sucking black holes. Your electric water heater offers no payback – you just keep pouring money into it.

The more productive response is, “What’s the payback on other options for that chunk of money?” If someone has cash on hand or ready credit, how do other options compare with energy enhancements, and at what level of risk and taxation? The range of simple return on an investment in renewable energy, using the numbers above, varies between 5.26% and 12.5%, assuming that the price of energy stays flat for a decade or two. (Dream on.) Price hikes only make it better. The returns from renewable energy are essentially risk free (covered by homeowners insurance) and tax free. Where can you find a near-zero risk investment that returns even 5% these days, or any investment this side of crime that returns over 10%? I should note that investments in energy efficiency can beat these numbers and should be your first consideration. Again, these are tax-free and risk free returns.

So what’s the payback on that CD or money market account right now? Not much better than that granite countertop, I’d imagine. Neither of these options does anything for the environment, either. Put your money where your mouth is and you’ll be putting it where your financial interests are.