Persuading homeowners and businesses to plunk down $10,000 or more for solar panels isn't easy in the current economy, so two utilities with renewable electricity standards to meet are testing a novel approach.
Rather than leaving the upfront costs of the panels and installation to consumers, Duke Energy and Arizona Public Service (APS) are preparing pilot programs that will install utility-owned solar systems on homes and businesses for free.
The newly announced projects will turn rooftops across North Carolina and Flagstaff into mini renewable-energy power plants for the utilities.
Duke's $50 million project in North Carolina will generate 8 MW – enough electricity to power 1,300 homes, and it will get the utility a step closer to fulfilling the state's renewable energy requirement. In Flagstaff, APS will install a $14.7 million project generating 1.5 MW of electricity, enough to power 230 homes.
In most solar energy incentive programs for homes or businesses, the customers pay the initial purchase and installation costs. They use the energy generated on their own property, and some are able to sell leftover electricity to the utility. They recoup their investment over time by reducing their electricity bills and making money from what they sell to the grid.
In the Duke and APS pilots – called distributed-generation because the energy is created in a number of sites rather than one plant – the energy produced will feed the entire grid, not only the properties with panels.
"Each of these installations will be owned and operated by Duke Energy, and they will be Duke Energy power plants – mini power plants in comparison to a traditional power plant, but a power plant nonetheless. Duke Energy will pay for the installation of the solar panels, maintain them and service them. All the electricity generated will be owned by Duke Energy," says Duke Energy spokesperson Dave Scanzoni, adding that Duke will pay each property owner a rental fee based on the amount of energy expected to be generated at the site.
Duke could make solar power more cheaply. In a separate venture, the company will generate power from a 16 MW solar farm, spending less for each unit of energy created.
But Scanzoni says distributed generation offers other benefits, such as reduced "line loss" (the energy lost as power travels long distances from plant to homes and businesses). Distributed generation also requires less paper work than plant construction, which entails zoning and legal issues. Duke also plans to use the pilot to study how to integrate larger distributed generation projects into the grid.
Duke's other motivation is meeting North Carolina's renewable portfolio standard (RPS).
Twenty-eight states have an RPS, and Congress is considering a national renwable electricty standard that would require utilities nationwide to obtain a certain percentage of their power from renewable sources. For Duke, the North Carolina RPS means it must generate 12.5% of the energy it sells from renewables by 2021, including 0.2% of solar or geothermal. Of that tiny fifth of a percent, this pilot will constitute one-eighth.
APS faces a similar Arizona mandate. APS must use renewable energy for 15% of its electricity generation by 2025, and 30% of that 15% must come from distributed sources by 2025.
"We're looking for different ways in which we can help increase the amount of solar energy we are able to provide customers," says APS renewable energy spokesman Steven Gotfried.
"This pilot project is one of several projects, including our incentive program, that gives customers different options that they can use."
APS's incentive program, introduced in 2002 and used by more than 2,900 customers, pays residential customers almost half of the installation cost of the panels. For instance, customers who installed 3 kW of panels costing roughly $21,000 would receive $9,000 (or $3 per watt). The program also pays business customers a yearly check based on the amount of power produced.
For its distributed generation pilot, APS, like Duke, will install, own and maintain the panels, and the energy generated will feed the entire grid, not just the homes in the program.
However, unlike the Duke program, APS will not pay the customer a rental fee. The customer will instead lock in a fixed price for part of their electricity bill for the next 20 years. For instance, if the customer's electric bill is $100, and their panels generate an amount equal to half of the electricity they use, the customer will pay the same rate on half of their bill for the next 20 years.
The APS pilot will be indirectly funded by all Arizona utilities customers. State electric bills charge a renewable energy standard surcharge that goes into a fund for renewable energy projects.
Both Duke and APS hope to have their pilots fully installed by the end of 2010.
Customers will be chosen based on the sturdiness and newness of their roofs (to prevent installation on roofs that need re-roofing in the next few years) and the amount of exposure to the sun. APS will choose 200 to 300 homes for its program, while Duke plans to use more large business roofs and expects between 100 and 400.
The interest is out there. Utilities just need to tap it, Scanzoni says:
"We have had well over 500 customers, businesses, homeowners, schools, churches, religious institutions, sign up to be considered for inclusion in the program."