In Lesson 6 we will progress through the second of three lessons tied to solar economics and finance. Lesson 6 will discuss the criteria for developing a solar project as a professional in an ethically sound manner. We will cover the concept of maximizing the solar utility for the client in a given locale. In Lesson 5, we already discussed consumers as "utility maximizers," and we posed the term utility as a preference among a set of goods and services. Hence, solar utility will be that maximized preference among the set of solar-derived goods and services.

Solar energy design has broad criteria that may be explored to develop a successful resource proposal and project implementation. We design for our clients, or stakeholders, who live in a specific locale, right? Hence, the concept that solar utility has to be constrained by the preferences of our clients and the limitations or opportunities presented within their respective individual locale. We can influence solar utility in a given locale first through physical and engineering considerations, and second through consideration of financial concepts tied to the performance of our project.

By the end of this lesson, you should be able to:

• convey the three key criteria within the goal of solar design and engineering;
• list the three main engineering parameters of locale that will guide your design options;
• describe the role of the power grid for decision making for photovoltaic strategies; and
• use the economic constraints of the client to constrain your design options.

What is due for Lesson 6?

This lesson will take us one week to complete. Please refer to the Course Calendar in Canvas for specific time frames and due dates. Specific directions for the assignments below can be found within this lesson.

Questions?

If you have any questions, please post them to the Lesson 6 General Questions thread in Yellowdig. I will check the forum regularly to respond. While you are in a discussion, feel free to post your own responses if you, too, are able to help out a classmate.

Solar Utility

A design effort without constraints and boundaries can quickly spiral out of control. Your SECS is dependent on the locale, and the client! How can we efficiently maximize the client's preference for goods derived from the solar resources to help meet client goals in their particular locale? When we speak of solar utility, we are referring to maximizing the preference for solar goods and services in order to provide needed power, heat, light, food, etc.

• Utility is simply preference among a set of goods and services.
• In game theory, a utility function is used to quantify the degree of preference across a suite of alternatives, and can explain the impact of uncertainty for a client. [See the Stanford/UBC MOOC for Game Theory on Coursera]

Solar utility can be met from many technologies, it's not just about PV and solar hot water. Sometimes effective shading for a building or space will reduce demand for electricity, which is completely within the scope of a solar energy design team. Maximizing solar utility is definitely not about "efficiency" or "more power" (or more cow bell), because these are systems variables that are all married into the whole balance of energy supply, demand, fiscal wealth, and broader happiness.

One of the systems approaches to increase solar utility for SECSs is by engineering means (e.g., applying what we learned in Lessons 2-4). You need light to produce electricity and heat, right? These strategies increase the amount of light incident on the SECS through general orientation, tracking, and avoiding shading. Note that they are systems solutions, and not "find a more efficient panel."

The second systems approach that we will cover (to increase/maximize solar utility for the client in their given locale) is economic in nature. This approach is concerned with technology costs relative to metrics of financial payback, levelized costs of energy (LCOE), and net present value. For this particular lesson, we are going to focus on the costs of electricity from the grid (which is mainly coal, nuclear, natural gas, and hydroelectric power), and the incentives that are available to our clients in their locale. Both the grid and the incentives available to our clients are locale-based, as with the solar resource above.

Remember, the design team maximizes solar utility by considering the locale and the client needs, then selects a technology (or suite of approaches) that is appropriate.

Locale

The term locale in the SECS context implies more than just site or location – it rather represents a set of key parameters that would have critical impact on the system in question. Locale is defined in both time and space (because meteorology implies both time and space). Here are several parameters we can consider specifying locale for a project:

• Geographic position, address (ϕ, λ),
• Solar resource (time variations on seasonal, daily, hourly, minute and second scale) and its intermittency (specifically beam-diffuse components),
• Setting (for example, urban, rural, ecoregion) or immediate surrounding for the project (field, ground, walls, roof), which can create shading and thus have implication in system design
• Climate regime (recall the Bergeron system of air mass).

This cartoon summarizes this concept in the nutshell. Further, in the following lessons, when you are asked to provide some characterization of the locale, be sure to include some information on the following four key elements.

Figure 6.1. Main elements of locale for a SECS project.

Credit: N. Miller © Penn State University is licensed under CC BY-NC-SA 4.0

Note that locale does not refer to the design elements of the SECS (when we describe the locale, we do not yet have system in place), neither it considers client. Those two things will come into play next.

Your client (an individual, a corporation, a society?) and your stakeholders

Your "client" is a utility maximizer. They may (or may not) make rational decisions to implement a SECS. Your function in the solar design team is to be their informed advisor. However, your client may also be a whole cohort of people, or a group of stakeholders. Stakeholders are all those affected by the decision to design and install a solar energy conversion system (SECS). These may include the client, the engineers and installers, building managers, the local community members, and so on. Again, a stakeholder can be a client or just an invested individual participating in the system as a whole. One of your jobs is to identify stakeholders and asses the role their multiple perspectives may play in the design process.

Common business language states that the customer is always right. More appropriately, the customer is always the one who decides "go" or "no go" in a solar project. The basic logic of that statement guides the design process. Every SECS is designed with the needs and requirements of a client in mind. No particular system can be used by all clients in all locales regardless of how well the said system is designed. Design requires that we have a close understanding and appreciation of what a client needs. A solar designer may start the design process by posing questions to the client, such as: How much power/energy do you need? How many hours of power do you need and what time during the day do you need this power? Is this power needed year round, or only during particular seasons? Answers to these questions will ultimately guide the designer and lead to efficient design.

Your design team holds stakeholders to the concept of the Four Es: Everybody Engaging Everything Early (developed by PA design firm 7Group). We want to engage the stakeholders in the integrative design process, and the pre-design process can involve brainstorming events called charrettes.

The design team also needs to educate the client on the different options available to him/her. For example, if a client decides to install photovoltaic panels to provide electricity, the design team will need to inform the client on the various PV technologies, the advantages and disadvantages of each in regard to price and function in different locales, the different options for funding the project through government grants and loans, etc.

As such, your client (and associated stakeholders) and your locale are the two major super parameters that can guide systems design.

Engineering Approaches to Increase Solar Utility

Locale is the space or an address in time and place within which the client occupies and demands energy resources. Recall that our clients are on the demand side of solar goods and services, and as such they seek maximal utility when making decisions.

The goal of solar design is to:

1. Maximize the solar utility
2. for the client or group of stakeholders
3. in a given locale.

We have already learned that the solar resource can be affected by the locale of the site. The solar resource is determined by the locale, as the climate regime affects the seasonal and daily irradiation patterns and frequencies of intermittence. The character or quality of the solar resource will in turn constrain the design team's options for technological solutions that compete with conventional fuel-based technologies.

According to our review of SECS Chapter 6: given that goal for solar project design, we have three main engineering approaches that we can leverage to affect the solar utility for a client in a given locale:

1. Reduce the cosine projection effect on an aperture/receiver. These are the extreme angles of incidence (also called low glancing angles);
2. Reduce the angle of incidence ($\theta$ ) on an aperture/receiver; and
3. Reduce losses from shading on an aperture/receiver.

These are the three main engineering parameters linked to the locale that will constrain your design options (you can look back to the Angular Solar Symbols guide to refresh your memory). They all affect system performance, without necessarily directly influencing the cost of the system (in the beginning). Let's review how they affect system performance.

Reduce the cosine projection effect

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Figure 6.1 The top image shows the effect of inverse square law on the Sun-Earth view factor
($F_{Sun-Earth}$ ). The bottom image shows the cosine projection effect as it affects the Sun-Earth view factor (the inverse cosine of the zenith angle reduces the intensity of the Sun's irradiance).

Credit: Jeffrey R. S. Brownson © Penn State University is licensed under CC BY-NC-SA 4.0

How does the tilt and azimuth each affect the design in SECS, and how does regionality affect the design decisions in solar energy?

We have seen in our reading of Lave and Kleissl that an annual optimum for tilt and azimuth can be selected, while Christensen and Barker demonstrate that annual optimum is not really "peaky," and fixed-tilt systems can be oriented across a broad range of directions in a given locale without dropping solar gains by more than 10-20%. If we were to adjust the tilt for a seasonal optimum, we would select a lower tilt for the summer season and a higher tilt for the winter season. Effectively, we are working to correct for the cosine projection effect of our particular latitude and climate regime (one climate regime per season, recall the "fingerprints").

On broad scales, sites near the equator will have different design constraints than sites near the Arctic Circle, due to the cosine projection effect driving our solar resource across latitudes and the seasons. In this context, the project locale serves as an effective system constraint. The amount of sunlight available on a daily basis and on a seasonal basis differs with locale. Using and implementing the same system design for a client in State College, Pennsylvania ($\varphi =+{40.86}^{°}$, $\lambda =-{77.83}^{°}$ ) and another in Lagos, Nigeria ($\varphi =+{6.45}^{°}$ $\lambda =+{3.39}^{°}$ ), for example, will yield totally different results and lead to unsatisfied clients.

You see two images of a cartoon Sun, drawn from Ch 4 of the SECS text. The top image shows the effect of inverse square law on the Sun-Earth view factor ($F_{Sun-Earth}$). The distance of 150 million km reduces the intensity of the Sun from $6.33\times {10}^{7}W/m^2$ to 1361 $W/m^2$|($G_{s}c$). This effect is fairly uniform year-round. The bottom image shows the cosine projection effect as it affects the Sun-Earth view factor. Here, the inverse cosine of the zenith angle (${\theta }_z$) reduces the intensity of the Sun's irradiance. Hence, the farther away your client is located from the Equator, the more the designer will need to make collector orientation adjustments to compensate for the losses from the cosine projection effect.

Note also that the tilt of the Earth's axis will drive one to consider summer or winter optimized orientations (away from the Equator).

Reduce the angle of incidence

How does tracking affect the design decisions in solar energy?

Well, a fixed axis SECS is often oriented toward the equator at a tilt ($\beta$) somewhat less than the local latitude (do not fall for the latitude = tilt rule of thumb), per our readings from Christensen and Barker, and Lave and Kleissl. When we track the Sun, then more beam is collected (the angle of incidence tends to be consistently lower than for a fixed tilt). By looking at the poster from Huld et al. (2008), we see that a single-axis tracking system, with an axis inclined at an optimum angle towards South, should offer 12-50% improvement over a fixed axis tilted at the optimum, where a 2-axis tracker will offer a very similar solar gain of 13-55%.

So, a tracking system will minimize the angle of incidence ($\theta$), but there will be a cost in terms of land requirements. Why? Because of shading. There will also be a cost in terms of the balance of systems (e.g., the non-SECS trackers). This is why we could read "Solar Balance-of-Systems: To Track or Not to Track, Part I" for more information.

But the reality of solar development (whether on a rooftop or on a field) is that the systems are often "area constrained." We can make certain tradeoffs in systems choices to deliver a better unit cost to the client, but we may not get all the land that we desire to accomplish an optimal tracking system. As such, we must work with the stakeholders to find the highest solar utility solution given the available area.

Reduce losses from shading

Finally, a large group of our SECSs rely on access to the shortwave light from the Sun. If we shade a collector, then we reduce or remove that working energy that we wish to convert to heat or electricity. We performed the shading analysis in Lesson 2 using orthographic and spherical projections specifically to be able to avoid shading of our array over the course of an entire year.

Of course, if we were to design a system to avoid the Sun's rays, that would be different. We have seen examples of solar design for Parasoleil frameworks (shading systems) in the beginning of the textbook (e.g., southern awnings).

Lesson 6 Discussion in Yellowdig!

In this lesson we continue making connections between the technical information on solar resource and system design with project economics.

1. First, review the recommendation for the engineering principles - cosine effect, angle of incidence, shading. There are some common "rules of thumb" on how to position the panels, and there are some additional methods and tools to maintain the highest possible efficiency. Share any methods and tips you find.
2. If you are developing a project in Madison, WI (43^o N) or Melbourne, Australia (-37.5^o S), for example, what panel position would you recommend to the client. Would you go with the fixed tilt, trackers? How would your recommendations be related to the area constraints? Suggest some scenarios here.

Then, we also collect various weather and climate information about the locale. Some supporting information is available from the TMY data, environmental monitoring stations, or direct measurements. Seasons may look different in different climate zones. How do we relate all that information to the SECS performance?

1. Whats is the impact of air temperature? Why do we collect and report this information in system design justification?
2. How do the data on clearness indexes (K_T) help us in decision making about system design and capacity?
3. What about humidity, preciptation, particle concentration - is that information important?

Those characteristics of the locale are not just FYI. We are trying to reveal their economic impact on system performance, payback, and return on investment for our client.

Tagging

We will revisit some of the previous topics in Yellowdig (maybe at somewhat different angle) and will add some new as well to provide you with the discussion space on the questions above:

You can tag your post with one or several topics at the same time (just be sure to address all those in your post). All posts and contributions you create are added up to one score at the end of the week.

Importance of interaction

Yellowdig tip: Remember to respond to questions. If your post generated some, it is a good thing! The best way not to miss questions is to set email notifications in Yellowdig - then, whenever someone reacts to your post, you will get instantly notified.

Grading and Deadline

Remember that Yellowdig point earning period ends each Friday. Posting commenting, reacting regularly through the weeek will make the 1000 pts. an easy target and guarantee a high participation grade in the course. Yellowdig discussions will account for 15% of your total grade.

Power Grid 101

One of the highly visible SECS technologies is photovoltaics, which delivers (generation) electricity to the client, and now pushes excess electricity onto the electricity power grid. The electricity power grid is the physical system that delivers (transmission) electricity from the place where it is generated to the site where it is used (end-use, demand).The electricity leaving the generating station enters a sub-station with a step-up transformer that raises the voltage extremely high for long-distance transmission.

When electricity travels through wires (a conductor), some energy is lost, but less energy is lost when the electricity is transmitted at a higher voltage. At a high voltage, the same amount of power can be transmitted, but using a lower current. The amount of energy lost from the conductor is called line loss, and line losses are directly proportional to the current. By reducing current, we reduce losses for the same power transmitted. Typically, in the U.S., line losses between generation and end-use are in the 6% to 8% range.

The high-voltage electricity is carried over transmission lines to local substations, where a step-down transformer reduces the voltage to levels suitable for customer loads. Distribution lines carry the lower-voltage electricity from the local substations to customer sites.

Figure 6.2 The Electricity Power Grid

Click Here for a text version of The Electricity Power Grid Schematic

On the left, there is a Generating Station with a line going into the “Generator Step Up Transformer”. This is the Generation portion of the diagram.

From there, it goes to the Transmission Customer (138kV or 230kV) and to Transmission Lines (765, 500, 354, 230, and 138kV). This is the transmission portion of the diagram.

From the Transmission Customer and Transmission lines, it goes into a Substation Step Down Transformer for distribution. This is the Distribution portion of the diagram.

From there, it goes to the Subtransmission Customer (26kV and 69kV), the Primary Customer (13kV and 4kV), and the Secondary Customer (120V and 240 V).

Credit: U.S. Department of Energy (Public Domain)

Figure 6.3 Typical substation at a power plant (steps up voltage for transmission)

Credit: HowStuffWorks

Figure 6.4 Typical substation that steps down voltage from transmission

Credit: HowStuffWorks

Grid Energy Storage

Figure 6.5 - The Raccoon Mountain project is TVA’s (Tennessee Valley Authority) the largest hydroelectric facility. Water is pumped to the reservoir on top of the mountain and then used to generate electricity when additional power is needed by the TVA system. The Raccoon Mountain Pumped-Storage Plant is located in southeast Tennessee on a site that overlooks the Tennessee River near Chattanooga. The plant works like a large storage battery. During periods of low demand, water is pumped from Nickajack Reservoir at the base of the mountain to the reservoir built at the top. It takes 28 hours to fill the upper reservoir. When demand is high, water is released via a tunnel drilled through the center of the mountain to drive generators in the mountain’s underground power plant.

Credit: Tennessee Valley Authority

Primitive as it may seem, the energy storage technology that is "grid-tied" and having the largest capacity is accessed by simply pumping water up to a higher elevation, and storing it as potential energy. Called pumped storage, or pumped storage hydroelectricity, the energy is recovered when the water from the higher elevation is used to drive turbines for hydroelectric power conversion.

The Energy Storage Association reports, "Pumped storage hydropower can provide energy-balancing, stability, storage capacity, and ancillary grid services such as network frequency control and reserves." While the US has 20 GW of installed capacity, worldwide over 100 GW of capacity exist. The US figure accounts for roughly 2% of the country's generating capacity, while other areas' figures are as high as 10%.

All in all, however, this process uses more electricity than it produces. So, why do it? When a power plant has extra capacity, it generates electricity used to pump water uphill. Then, when the plant is stretched to capacity and electricity is at its highest price, this pumped storage can be used to generate low-cost hydroelectricity.

Pricing Energy, Power, and Capacity

The first reading from Stoft presents the core metrics being evaluated (energy, power, and capacity) and their associated utility scale pricing units of $/MWh.

• Energy is measured in units of MWh, priced as a stock in units of $/MWh
• Power is measured in units of MW, priced as a flow, but over a block of time in $/MWh
• Capacity is measured in units of MW, also priced as a flow in $/MWh

Capacity is likely the newest term to everyone; it is a measure of the potential for power delivery. The price of power or capacity is metered as monetary units (dollars, euros, yuan, etc) per time unit of an hour, per MW of power that flows. The price of energy is just dollars per MWh (analogous to dollars per MJ), which end up as the same effective unit cost metric, but from different perspectives.

• $0.12/kWh is the same price as $120/MWh
• $0.06/kWh is equivalent to $60/MWh

In traditional power systems, we have turbine-generators that yield power from spinning magnets. A generator size is set by the maximum power production it can yield, measured in units of MW. We pose the capacity of a generator in terms of the potential to produce a flow of power in MW, the same units as power.

The capacity factor is the fraction (from 0-1; or a percentage from 0-100%) of flow utilization over the duration of a load. We find this fraction as a ratio of the power generator's true output (evaluated over a period of time, such as a month) relative to the potential power output that would occur ideally when operating full out (nameplate capacity) for an indefinite period of time.

• See the EIA's Website for capacity factor.
• See Wikipedia's breakdown of capacity factor.

The capacity factor (cf) of a fueled power plant (coal, NG, fission reactor) can have a range depending on the applied technology >>30-40%. However, the capacity factor of PV is highly dependent upon the solar resource of the locale.

• Consider that night event will automatically drop solar capacity to 50% (annually),
• then the intermittency from clouds will deliver more drops in potential,
• finally, the conversion efficiency of a PV panel will drop the capacity a bit more.

For example, the capacity factors for PV in the USA range from 10.5% in Alaska, to 18-19% in most of the USA, up to 26.3% in Arizona, Nevada, and New Mexico. [see Table 14.2 in SECS, Brownson]. The capacity factor for PV in sunny Germany is about 11%, while the cf calculated for the desert regions of Peru is >25%.

Grid Management: Markets

The second reading by Stoft links in with our prior reading of Solar Economics in SECS and the role of market supply and demand for electricity. Electricity is not easily or efficiently stored in large amounts--we don't have pumped hydro storage everywhere, and large-scale batteries are not ready for the utility market.

In an electricity grid, power generation and power consumption must be closely matched at all times. These are key concepts in our understanding of electricity. If power generation and power consumption get out of balance, blackouts and other systemic failures occur.

• Interconnection: a network of interconnected power grids within a region. The USA has three: two major interconnections in the Eastern Interconnection and the Western Interconnection, and the third is in Texas (yes, TX has its own interconnection). That is 3 separate power grids in the lower 48 states.
• Regional Transmission Operators (RTO) / Independent System Operators (ISO): not-for-profit organizations whose job is to act on behalf of a group of electric utilities in a region, managing and maintain a joint and stable power transmission grid. RTOs can establish centralized spot markets in electric power and ancillary services, and financial contracts for hedging against transmission congestion.
• Locational Marginal Prices (LMP): the RTO provides LMPs on the wholesale market through a centralized dispatch, which reflect the social cost of transmitting electric power to a specific location within the managed system.

Government Influence on the Developing Renewable Energy Industry

How Can Policy Impact Consumer Choices?

In other nations about the world, policy for renewable energy development can emerge at either a national or regional level. In the United States, there are currently no over-arching Federal mandates requiring the development of alternative energy power generation. Thirty-three states have varying standards and mandates for the production of renewable energy for power generation.

To see this diversity of strategies, we can review the Center for Climate and Energy Solutions report of Renewable & Alternative Energy Portfolio Standards.

Try This! Interactive Map of US Electricity Portfolio Standards

Click on the image to access the interactive map showing the electricity portfolio standards for each state. Click on each state to see the updated renewable or alternative energy goals and milestones.

The legislative process in various states has influenced how these programs have evolved. If we look at the states that have "alternative energy portfolio" standards rather than renewable energy portfolios (Michigan, Ohio, West Virginia, and Pennsylvania), we note that all of those states have significant industries such as auto, coal, steel, etc. One needs to consider the various reasons why these portfolios were outlined as "alternative" as opposed to "renewable." You should also develop an awareness for those states that have no standards whatsoever, and consider what impact this has on solar development. For example, we may consider that Wyoming has a very small population with the highest per capita energy demands, while being abundant in coal.

• Consider the Pennsylvania [Alternative Energy Portfolio Standard] : 18% by 2020 (with at least 0.5% carved out for PV solar)

On December 16, 2004, Governor Edward Rendell signed into law Pennsylvania's Alternative Energy Portfolio Standard, requiring that qualified power sources provide 18.5 percent of Pennsylvania’s electricity by 2020. There are two tiers of qualified sources that may be used to meet the standard.

• Tier 1 sources must make up 8 percent of the portfolio, and include wind, solar, coal mine methane, small hydropower, geothermal, and biomass. Solar sources must provide 0.5 percent of generation by 2020. However, the source of the solar power could be delivered from anywhere in the PJM ISO area, so that small fraction was depleted quickly and led to a crash in prices for SRECS (which we will talk about next).
• Tier 2 sources make up the remaining 10 percent of the portfolio, and include waste coal, demand side management, large hydropower, municipal solid waste, and coal integrated gasification combined cycle.
  • You can read more about the Pennsylvania AEPS by directly reading the bill itself - AEPS.
  • You can also visit the Pennsylvania Public Utility Commission's site describing the program - PA AEPS site.

SRECS: Market Drivers

Unique markets have been created by government stimulus of the renewable energy industry. A key market driver has been the capacity markets that have been formed in several states. In these markets, Energy Distributions Companies (EDC) are required to purchase Solar Renewable Energy Credits (SREC) or face steep fines in order to facilitate the states' requirements for renewable energy. (SREC Trade: SREC Online Auction)

Figure 6.7 Solar Renewable Energy Credit Auction State Abbreviation

Click Here for a text alternative for Figure 6.7

Solar Renewable Energy Credit Auction State Abbreviation

States with SREC Markets	States eligible to sell into other state SREC markets (All states eligible in NC)	States with a Renewable Portfolio Standard solar requirement, but no SREC market yet	Remaining States
District of Columbia (PA) Delaware (DC, PA) Maryland (DC, PA) Massachusetts New Jersey (DC, PA) North Carolina (DC, PA) Ohio (DC, PA) Pennsylvania (DC, OH)	Illinois (DC, PA) Indiana (DC, OH) Kentucky (DC, OH) Michigan (DC, OH) New York (DC) Tennessee (DC) Virginia (DC, PA) West Virginia (DC, PA, OH) Wisconsin (DC)	Arizona Colorado Missouri Nevada New Hampshire New Mexico Oregon Texas Washington	Alabama Alaska California Connecticut Florida Georgia Hawaii Idaho Iowa Kansas Louisiana Maine Minnesota Mississippi Montana Nevada New Jersey North Dakota Oklahoma Rhode Island South Carolina South Dakota Utah Vermont Wyoming

Credit: SRECTrade (used with permission)

Something to look at closely is that in Massachusetts and New Jersey specifically, these credits can't be sold or purchased outside of the state. This has a significant impact on how these markets operate. New Jersey has outpaced all other states in the eastern PJM grid in the production of power from Solar PV. An unexpected development in the REC markets has been the pace at which these markets have met and exceeded the portfolio standards. Please note how this has impacted REC pricing.

Points of reference:

PJM originally stood for Pennsylvania, New Jersey, Maryland. It is simply known now as PJM; however, the grid it operates is now much larger.

PJM is the grid operator for all or part of 13 eastern states. It is the market through which Energy Distribution Companies (EDC) purchase power from Energy Generation Companies (EGC)

PJM is also responsible for charting future requirements of the grid and its users. It makes recommendations to its members, the EDCs and EGCs, regarding how to best meet these requirements. It is the principal link between the state regulated EDCs and the non-regulated EGCs. PJM is a non-profit corporation.

The Generation Attribute Tracking System (GATS) of PJM Environmental Information Services (EIS) has been instrumental in finding out trends including the growth of solar, captured methane, hydro, wind, and other renewable resources of production within PJM. The GATS has shown that based on the number of certificates generated, from 2005-2015, wind production has increased around 4,000%. In 2005, solar energy generation stood at 100 MWh, and increased to 81,000 MWh in 2009, which is a growth of 3,000%. In 2015, it stood at 2,900,000 MWh, a growth of 29,000% in a decade. Source: pjm EIS

In normal markets, supply and demand are the key drivers. A good deal of the growth of the renewable energy industry has been driven by regulation and government subsidy. So, conventional market drivers appear to be misaligned.

Of note is that renewable energy for the foreseeable future will continue to be an incredibly small part of power generation. What role will natural gas play in the future of our energy mix? I think it will have a significant impact on Pennsylvania because of the Marcellus Shale formation. Nuclear power could also grow at a significant rate should much smaller, localized nuclear power plants be developed that would enable cities and industrial sites to have their own sources of energy. Source: MIT Technology Review

Why Incentives and Taxes? Externalities

From our reading, we have seen that there are market failures in our energy industry, both from the negative externalities of emissions (greenhouse gases, SOx and NOx, and aerosols) and from the positive externalities of using SECS technologies that provide carbon neutral energy.

In the presence of a positive externality, the social value for a good exceeds the private value. Government policies can correct this form of market failure by subsidizing the good. In the presence of a negative externality, the social cost exceeds the private cost. Policies can be implemented to correct this market failure by taxing the emissions of Pigovian tax).

Figure 6.8, left, shows a demand curve of a good with higher social value than a private value (like education). Figure 6.8b, right, shows a supply curve with higher social cost than private cost (like carbon emissions from fuel combustion).

Credit: Jeffrey R. S. Brownson © Penn State University is licensed under CC BY-NC-SA 4.0

Examples of Past Government Incentives

After reading Pfund and Healey (2011), we should see that other energy sources displayed a higher social value in their own time. At the time of the late 1700s, coal was perceived in a similar fashion to our solar energy technologies like PV in the 1970s when it had several detractions, such as its bulk that made coal difficult to transport. States provided tax exemptions and incentives to move coal along, such that it surpassed timber as an energy resource in the late 1800s.

"Nature made coal abundant, policy made it cheap." p. 14

(cited from Sean Patrick Adams, The Journal of Policy History Vol. 18, No. 1, “Promotion, Competition, Captivity: The Political Economy of Coal” (2006)).

Software: SAM from NREL

The basics:

1. You can open up SAM at this point and click the button "Create a New File."
2. Click on "Photovoltaics (Detailed)" on the left of the pop-up window ("Choose a performance model").
3. Click on "Residential (Distributed)" on the right of the pop-up window ("then choose from the available financial models").
4. Hit "OK."
5. You will now have a default residential PV project, based in Phoenix, AZ, just like the last example we tried.
6. Next, we are going to explore three tabs: Financial Parameters, Incentives, and Electricity Rates.

Financial Parameters:

1. Click on the shortcut tab called "Financial Parameters."
2. This opens a field of data entry for "Loan Type," "Residential Loan Parameters," "Analysis Parameters," "Tax and Insurance Rates," "Property Rates," and "Salvage Value."

The first few things to notice is that the Loan Term (and Analysis Period) is 25 years as a default. This is the standard period of covered life for a PV module. Much like your computers, the actual life will be longer than the warranty, but 25 years is the most risk that the manufacturers will currently take on to guarantee their products. In general, all the SAM defaults are going to be conservative, and you can indeed adjust them for your own projects.

You want to enclose your period of loan or mortgage ($n_L$) within the full period of evaluation ($n_e$, years of analysis), so that $n_e\ge n_L$. The loan rates are assumed to be a bit high, but you could change it to a lower rate if appropriate.

Tax, insurance, and property rates can be left at the defaults unless you know better from practical experience. When working with a full team in industry, you will need to be working with an expert knowledgeable in these areas to accurately represent them for the client.

The salvage value will almost never be zero in a real project. Just think, a PV system at the end of 25 years may be operating at 60-80 percent of its original peak performance, but will not catastrophically fail that year. In fact, it will likely keep on truckin' for decades more. Even a 20-year-old operational truck has a resale value that is a significant percentage of the original value. So, change it to something greater than zero, but less than 100, and you can still be conservative.

Incentives:

1. Now, click on the tab for "Incentives." You can see at the top that there is a direct link for the DSIRE website.
2. There are five types of incentives listed, each with Federal and State entries. Some also have open fields to enter utility incentives or space for an alternative incentive from another source. They also have time horizons within which the credits or incentives are valid. Check the DSIRE site for the credits and incentives in your locale!
   1. Investment Tax Credit (ITC): this is the standard federal tax credit of 30% for installed solar systems, for both residential and commercial properties.
   2. Production Tax Credit (PTC): has been a common inscentive for wind farms, hydro, geothermal, biomass and now has been reinstated for solar generation projects under the Inflation Reduction Act (2022). This is per-kWh-generated tax credit that reduces the tax liability of solar projects. It is inacted for the first 10 years of system operation (Source: EPA,  accessed 2026).
   3. Investment Based Incentive (IBI): an incentive to reduce annual expenditures of a project for Year One cash flow (see help menu in SAM).
   4. Capacity Based Incentive (CBI): similar to an IBI, in that it is an incentive to reduce annual expenditures of a project for Year One cash flow. However, the CBI can be expressed as a function of the system's rated capacity in Watts (see help menu in SAM). This is a direct cash incentive.
   5. Production Based Incentive (PBI): This is another direct cash incentive, and a PBI reduces the project's annual tax liability from years one through the period of valid application (which you can specify). The PBI is a dollar amount per kilowatt-hour of annual electric output. You can use the PBI inputs for SRECs that are paid on a $/MWh basis. The PBI can also accept Performance Based Incentives such as a Feed-In Tariff.

Electricity Rates:

1. Now, click on the "Electricity Rates" tab. You will see whether or not "Net Metering" is occurring in your model. In most cases, this will be "Enabled" with a checkbox and a Year end sell rate (this is low, not the rate that you pay).
2. The top left box is a handy link to search for electricity rates in the USA from the OpenEI utility rate repository. The Open Energy Information (OpenEI) provides powerful centralized access to the latest data and energy information, and an opportunity to make new tools to interpret those data and dynamic information sets.
3. There is a middle hidden box (Blue plus sign) for "Description and Applicability" that is for your own record keeping, to assign the locale information for your client's site.
4. You can select "Net Metering" if the locale permits electricity from a SECS to enter the grid. The Solar Energy Industry Association has a good site describing net metering in the USA. Obviously, this is important to a residential or commercial PV system, but has to be adapted for a solar thermal hot water scenario (all SAM inputs are in terms of electricity).
5. The electricity rates can either be "Flat" (same $/kWh charge in a month, regardless of time of day) or "Time of Use (Energy Charge)." The local electricity provider will be able to specify the selection.
6. On top of electricity rates, there are charges for services, bundled as "Fixed Monthly Charges."
7. Some utilities will specify "Peak Demand Charges" for high demand blocks of time (high LMP periods for the locale), and "Tiered Rates (Energy Charge)" for various scales of electric demand in kWh.
8. Finally, notice that little box in the upper right called "Annual Electricity Cost Escalation". The default is for SAM to assume that the price of electricity will not go up in the next 25 years. The rate is set to zero. I will pose that this is not really an appropriate guess given our future in energy demand. A conservative increase of 1-3% is probably a better estimate.

Please Comment!

If you have any questions or comments, please post them under the Lesson 6 Questions topic.

Congratulations! Your design team has been hired by Costco Wholesale Corporation to propose solar integration in one of their regions (to showcase one of their commercial retail buildings in each location). Your job is to make a short written survey of the case, suggesting a plan to maximize the solar utility for their regional management in Texas.

Building Location: Austin, TX

I would suggest you develop the outline that addresses three topics that commonly occur in a solar integration discussion: (1) energy efficiency, (2) adding solar technologies on site or off-site, and (3) economic and environmental rationale.

Here is the suggested structure:

1. General Information for Locale (in its diverse meaning)
2. Building Energy Information: energy demand (known or approximated), energy provider, energy sources, e.g. natural gas, electric., etc.)
3. Location/Site Analysis for SECS: Area available for SECS: PV / Solar Hot Water Systems / Passive solar / Solar roof control (white roof, green roof)
4. Energy Efficiency Strategies: SECS efficiency considerations and building energy efficiency/conservation
5. Key Stakeholders (not only Regional Managers)
6. Economic Considerations
7. Environmental Considerations

Resources:

• Another company previously developed a similar summary for Costco NY location. It is available to you as an example (see Canvas), but resist to just copy their format - you can do a better job organizing and presenting your data!

Diverse resources available from the USA Dept. of Energy:

• Open EI: Energy Information Database
• Buildings Performance Database
• Green Power Network
• Database of State Incentives for Renewable Energy (NCSU and DoE/NREL)

There are also extensive resources available at the 7Group website.

Submission:

Submit your outlines as PDF files in the Canvas Learning Activity 6.1 Dropbox: Pre-Design Summary. Appropriately cite any references used in your report.

Grading Criteria

You will be graded on your ability to develop a compelling outline that raises new questions and provides scope for the upcoming charrette. All this is based on limited information of the actual site, but extensive access to general information about the type of building and potential stakeholders. The activity assesses your knowledge of investigating the client and stakeholders and the locale when planning to maximize solar utility in the pre-design phase.

Grading Rubric

This is a 20 point assignment

• 4 pts: include at least 4 elements of locale
• 4 pt: assess the building type (commercial retail/warehouse) for on-site energy demand
• 4 pt: assess the area/site and its suitability for installing solar technologies for local energy production
• 2 pt: assess strategies for reducing energy demand
• 2 pt: include a list of at least five types of potential stakeholders for the charette
• 2 pt: list economic questions to consider
• 2 pt: list environmental questions to consider

Deadline

See the Calendar tab in Canvas for specific due dates.

Consider this activity as a slight detour in preparation for your final project proposals in this course.

While you are still on your way through the course lessons that explore solar design concepts, it is probably about time to start thinking about a potential locale and client you want to direct your efforts towards for your couse project. This final proposal will be the synthesis of your prior work, learned skills and tools in the form of a professional project SECS design, which eventually may become the basis for the real implementation scenario.

Here are some guiding points to start this off:

• List a few (2-3) geographical sites that are of potential interest to you. Consider that the solar dataset (TMY2) needs to be available for a location nearby. This will initially limit you to several hundred sites in the USA for your SAM simulations (although data from other locations can be incorporated by synthesizing a weather file in SAM).
• Take a brief look at policies in the locale or government incentives that would make a project proposal more likely in each site.
• Address whether the constraints of site location and local/regional/federal policies might guide one toward proposing a residential, commercial, or utility scale SECS (thermal or PV).
• Finally, address the following question: If you were looking for a client base (individuals or a group of investors), who is your target audience to make a "pitch" to in a future charette?

Create a post in Yellowdig with your brainstormed project ideas using the  Course Project Topics  tag. Be sure to check what everyone is doing and respond with comments and suggestions and answer any questions to yours.

Deadline

I would like everyone complete their topic brainstorm by the middle of Lesson 7 week (following Sunday), so you have some extra time to search and choose until then. And this is actually a mandatory activity! I need to see what everyone's plans are for the project, so if nothing is posted, I will get back to you and bug you :)

Summary

This was a pretty good lesson to help us to put boundaries around our design projects. We learned that we need to identify the constraining features of our design problem. A design effort without constraints and boundaries can quickly spiral out of control, having too many possibilities to draw from. We address that challenge using the goal of solar energy design and engineering:

We found that locale in this course means a broad range of factors in time and space that affect SECS design. Locale is tied to the meteorology and physical placement of the SECS, and locale is tied to the cost of fuels (here, as electricity) and incentives available to our client.

Which brings us back to our client. We do not design to make the coolest SECS (although, a really cool SECS is pretty fun to admire and brag about), we design to offer the highest solar utility to our client, as an individual, a corporation, a community, or a group of stakeholders with financial shares in the potential development. It is the client who responds to high fuel costs (seeking a solar substitute), and it is the client who responds to incentives in project proposals. We have observed that there are market and government drivers that can strongly affect the financial portion of the solar utility argument. Keep in mind also that our clients will not always behave as rational agents within the market. It is our job to learn about the locale and the client to best serve them in the design and project development arc.