Energy Shavings

Over $2.7 billion in formula grants are available under the Energy Efficiency and Conservation Block Grant (EECBG) Program. The U.S. Department of Energy (DOE) awards these federal taxpayer funds to units of local and state government, Indian tribes, and territories to develop and implement projects to improve energy efficiency and reduce energy use and fossil fuel emissions in their communities.

To date, Arizona has been awarded over $28 million in future EECBG projects.

Arizona is trending strongly towards a black energy future because of a decades-long imposition of rate schedules that repress the investment value of solar energy and energy conservation measures in the commercial sector. The rate schedules shift an inordinate burden of energy costs into the captive small business sector; where then the costs are passed through to Arizona consumers. This effectively creates a hidden, regressive tax. Because of the inequity of Arizona’s Renewable Energy Standard and Tariffs (REST) rules, wealthy homeowners have the ability to more easily escape rising energy costs, while less fortunate renters are left to carry a doubly inordinate burden of rising energy costs piled upon a hidden energy tax.

If conscientious renters wish to support clean energy, they are further insulted by incurring a surcharge for such energy from the electric utilities. Furthermore, the densely packed renters are subsidizing the higher energy costs that result from the outspread infrastructure built to satisfy the developers, builders and owners of the houses dispersed across the distended sprawl of the Phoenix metropolitan area.

The DOE states, “Transparency and accountability are important priorities for the EECBG program and all Recovery Act projects.” The DOE can award tens of millions of taxpayer dollars to a misbuilt megapolis that is fundamentally and structurally inefficient and unsustainable. Yet, Rate Crimes, one of the few entities attempting to bring transparency and accountability to energy policy in our nation’s sunniest state, does not qualify for even the tiniest grant.

Sunny Arizona remains a final remnant of repressive electric rate schedules that induce extravagant consumption. The utilities profit from increased consumption. State and local governments gain from the concomitant increase in (regressive) tax revenue. The utilities magnify energy costs in the captive small commercial sector which must consequently increase their charges to consumers for goods and services. Again, the state and local governments gain from increased sales taxes. There are no real brakes on this machine. Ineffectual deceptions such as the Residential Utility Consumer Office (RUCO) serve only to disguise the dim reality. Arizona citizens serve to move money into the pockets of politicians and into the bank accounts of the shareholders of privately held utilities.

Now, federal taxpayer funds are being injected by the DOE into this cryptic and broken system. Until the Arizona rate schedules are repaired, yet another source of public funds will be shaved off.

A Nice Day

The friendly symbol of sunny well-wishing should be an appropriate companion to solar energy.

In his September 15th Op-Ed in the New York Times, Have a Nice Day, Thomas L. Friedman deplores the fact that the photovoltaic manufacturing industry in the United States is lagging. He notes that California-based Applied Materials, one of the world’s leading providers of solar module manufacturing equipment and fabrication solutions does nearly all of its business outside the U.S! Mr. Friedman does us all a great service by bringing this critical issue to more widespread attention. Yet, his listing of “the three prerequisites for growing a renewable energy industry” neglects the more fundamental issue that Rate Crimes exists to explain.

Mr. Friedman’s “prerequisites” are the same as those upon which the Arizona Renewable Energy Standards and Tariff (REST) rules and most other such programs are founded. However, the nation’s solar future —and even the still inadequate programs inspired by the Arizona REST rules—will continue to be delayed while the long-standing, repressive rate schedules in the nation’s sunniest state go unchallenged and unchanged. More than reparative rules, the marketplace for energy is in need of transparency and equitable accounting.

Until such change occurs, Mr. Friedman’s sarcastic, “Have a nice day” must be accompanied by a new symbol:

Made in China

Mr. Friedman exposes a sad irony, “So, right now, our federal and state subsidies for installing solar systems are largely paying for the cost of importing solar panels made in China, by Chinese workers, using hi-tech manufacturing equipment invented in America.”

It must first be admitted that we should be grateful for the efforts and foresight of China and Germany. They have sustained a critical industry while vested interests in the U.S. have repressed its advancement. However, there is a doubly sad irony.

Rate Crimes has discussed before the risks of using modules of unproven design and how the United States lags in assuring product quality. Not only should the nation immediately declare repressive energy pricing schemes to be illegal, but it should require more than safety certification. In addition, performance certification should be required for any and all photovoltaic modules sold in the United States.

Won’t that be a nice day!

The Followers of Texas

The Goldwater Institute’s 36-page policy paper of July 21st, Opening the Grid: How to Recharge Arizona’s Electricity System for the 21st Century begins with a promising first sentence. It is no secret that Arizona’s effectively unregulated, monopolistic electricity industry “is ill-equipped to meet the state’s growing demand for energy.” There is an impending, precipitous gap between the projected energy demand and what energy provision has been prepared or planned.

However, the paper abruptly steps into something squishy and pungent with its second sentence. The authors state, “Nor, is [the electricity industry] well-suited to contain the higher costs that are likely to result from renewable energy mandates.” Apparently, the authors – two university economics professors – have missed the fact that in sunny Arizona, on-site solar electricity is an increasingly superior investment in comparison with the purchase of electricity generated from traditional, toxic fuels at gargantuan, centralized plants. This, despite the existence of repressive rate schedules that result in hidden taxes; as well as the existence of unaccounted subsidies (water, liability, etc.) that have artificially (and temporarily) maintained the illusion of inexpensive electricity from the traditional power sources.

As a central piece of evidence for its arguments, the persistently dogmatic Opening the Grid heaps hefty praise on Texas for the deregulation of their retail energy market. Even a quick glance at Texas’s energy mix shows that little has changed since their deregulation began in 2002; other than a small, but significant increase in the amount of wind power.

The landscape of Northern Texas has enjoyed abundant wind resources since it was formed. Modern wind technology has been available for decades. Only recently was Texas’s increase in wind power generation finally inspired as a reaction to the increasing costs of the traditional, toxic fuels; and by the Renewable Electricity Production Tax Credit (PTC). Because of its reliance on expensive natural gas, Texas’s cost of electricity is among the highest in the nation. The PTC is a federal tax incentive that runs counter to the fundamental tenet of the Goldwater Institute.

In its second paragraph, the Goldwater Institute’s policy paper claims that, “Texas, Pennsylvania and Britain have recently restructured their electricity industries to achieve remarkable improvements in both conventional and renewable generation capacity”. Opening the Grid is three dozen well-written pages of dogmatic arguments based on, at least, one false premise.

If the dogma of the Goldwater Institute is unquestioningly accepted, our energy policy will remain short-sighted and reactive. Following Texas will only get us deeper into a sticky status quo. Any Texan will tell you, “When following the herd, be careful where you step.”

Success will depend – for more than just Arizona - on Arizona’s ability to achieve a unique, long-range vision; and to then act proactively and with constancy. Such behavior is commonly recognized as leadership.

Solar Price Drop Soup

An article published on August 26th in the New York Times, titled “More Sun for Less: Solar Panels Drop in Price”, delights in the recent lowering of the cost of solar electric modules and praises the benefits for consumers.

While the brief article provides some of the causes of the recent 40 percent drop in prices, and also discusses some of the ramifications, it neglects to deliver the most important message: buyer beware!

A homeowner interviewed in the article is ecstatic about his $23,000 savings (on an original price of $100,000), “I just thought, ‘Wow, this is an opportunity to do the most for the least’”. Such savings would certainly appear to be a good thing. It may also be that the solar company increased its margin and made a few extra dollars. All good, so far.

The source of the problem is mentioned without analysis in the article, "'A ton of production, mostly Chinese, has come online,' said Chris Whitman, the president of U.S. Solar Finance, which helps arrange bank financing for solar projects." The problem is that increased production of modules does not equate to an increase in the proportion of quality modules. Not all modules are the same. Some manufacturers, some designs, are better than others. With a surge in production, with the arrival of numerous new companies, and with increased competition in the market, it is likely that the number of substandard manufacturers and module designs will also increase.

Modules from nearly every manufacturer now carry a 25-year warranty. The terms of these warranties are based on a number of factors, not the least of which is the competitive advantage enjoyed by experienced, large, and/or well-capitalized manufacturers who establish the de facto warranty standard, yet run a relatively low risk compared to their smaller, emerging competitors who must provide a similar warranty. A warranty is really only as valuable as the strength of the company backing it.

The only way to be assured that a module design might be reliable and durable is to subject it to a test regimen that includes advanced aging techniques. Such testing is an expensive endeavor, made doubly so because it is time-consuming. Established manufacturers often perform their own tests. However, all photovoltaic module manufacturers who intend to sell their product into the world market must obtain a performance qualification to international standards from an independent testing laboratory.

However, there is contention that even the most rigorous advanced aging tests in the existing standards only reflect about a decade of a module’s active life. More than half the module’s life is unaccounted for by these tests. Furthermore, the performance qualification examines only the module design. The performance standards do not include manufacturing standards or factory inspections.

As troubling as are the limitations of the current standards, it should be highly troubling that in the United States only safety certification is required for solar modules. No performance qualification is required for modules to be sold in the United States! This imbalance leads to the United States being a magnet for modules that are safe, but suffer from substandard performance.

A 23 percent cost savings greatly improves the economics of a solar investment. It can also cover a lot of future performance problems. However, risking $77,000 to potentially substandard modules is an inordinate risk. Buyers should be aware of the real value of the warranties. They should also demand that photovoltaic modules have at least the IEC performance qualification for the design. If the module manufacturer cannot provide a valid certificate of performance, then . . . buyer beware.

Note: It is important to verify the authenticity of any certificate of performance qualification. The industry has experienced forged certificates. The testing authority, as indicated on the certificate, will be able to provide confirmation of the certificate’s authenticity.

Note: The title of the New York Times article is guilty of using a common misnomer. The term “panel” is appropriate for the boxy solar thermal collectors for domestic hot water systems. A solar electric collector is a package of interconnected photovoltaic cells. These packages are modular components of one or more strings or arrays in photovoltaic systems. Therefore, even though there is often confusion in the common parlance, they are appropriately called solar modules. Distinguishing between the technologies provides greater clarity.

School Reformulation

The Arizona Corporation Commission has been asked to reclassify Arizona schools as residences for the purpose of qualifying for Renewable Energy Standard and Tariff (REST) program funds. The REST divides funding between the commercial and residential sectors. The commercial program is becoming rapidly subscribed while the residential program lags.

Even though it is tardy, bringing solar into all the schools would benefit Arizona. However, a haphazard approach that brings solar only to the schools in the more economically fortunate neighborhoods will only repeat what is already occurring in (and across) the residential and commercial sectors where those least able to afford rising energy costs are also the least able to avoid them. The funds collected by the REST program are received from all utility ratepayers, but are only distributed to homeowners and to generally larger businesses; leaving renters and small businesses to continue paying.

This situation exacerbates the long-standing, hidden energy tax on small businesses in Arizona that is forwarded onto Arizona’s consumers. This hidden tax is a result of rate schedules that repress the value of solar energy and other energy management strategies.

Schools must also endure this burden. While they might be reclassified for the purpose of funding, they will continue to purchase energy under the repressive commercial rate schedules. These rate schedules will prevent the schools (i.e. the taxpayers) from realizing the savings they would under more equitable rate schedules.

In order to realize the maximum savings from a solar electric energy system, it must be part of a comprehensive technological, operational, and economic solution. Too few of Arizona’s solar providers offer comprehensive energy solutions that integrate energy generation and energy management into an optimal whole. Even fewer understand how the commercial rate schedules work to defeat the value of such measures.

While reclassifying schools in order to ensure funding has obvious short-term benefits, it is only a palliative. Rather than treating only the symptoms, the priority should be to develop a program that provides equitable funding to all Arizonans, and that leads to the rapid adoption of solar energy and the efficient use of energy across all economic sectors.

More fundamentally, the market manipulations that lead to inequity must be corrected.

Late to School

For many years, advocates for solar energy in Arizona have encouraged schools to adopt solar energy. For several reasons, schools are excellent candidates for solar energy. School hours of operation coincide with the hours of sunshine. Schools are closed during the hottest months when the highest demand for energy occurs. School energy systems are responsive to load balancing and other energy management strategies that further enhance the value of solar energy. School buildings frequently provide nearly ideal sites for solar energy systems. The low, broad roofs not only provide ample area, but they also provide a secure, yet visible platform on which to showcase the technology for our young and their parents. What a lesson! Perhaps the greatest benefit is that the schools could avoid paying for electricity at the high and rapidly increasing commercial rates they now endure.

Sadly, when it comes to schools, Arizona’s solar advocates (including myself) have been stymied for many years. We have been deterred by the arcane and highly political funding and allocation system for schools. The excellent returns of a low-risk investment in solar energy have been a surprisingly hard sell to school administrators and boards. However, some leaders are seeing the light, or have been newly inspired by Arizona’s rapidly increasing energy costs.

Just this past week, Shari Zara, the Chief Financial Officer of the Queen Creek Unified School District filed a utility complaint with the Arizona Corporation Commission requesting that the Commission reclassify schools as residences for the purposes of the Renewable Energy Standard and Tariff (REST) rebate program. As Ms. Zara states, “Recently it has become apparent that due to the overwhelming interest in the commercial solar sector, it is highly uncertain whether any rebate incentive funds will be available for the systems proposed for Arizona's schools.” The REST divides funding between the commercial and residential sectors. The commercial program is becoming rapidly subscribed while the residential program lags.

While the REST is an important first step towards a solar future for Arizona, it fails miserably at delivering an equitable distribution of the funds that are contributed to by all Arizonans and collected by the utilities. Like all our first steps, it has been tentative and not without challenge and falter. Still, confidence is gained with each step forward and with the growing consensus that an energy gap is looming.

Every Arizona school should have had on-site solar energy many years ago. Ensuring that all of Arizona’s schools have a source of funding to help them acquire solar energy would benefit all Arizonans.

The Oil Drum

It’s been a busy few weeks.

Last week, Rate Crimes had its story, Rate Crimes: Impeding the Solar Tipping Point published on The Oil Drum, the renowned energy blog. Many thanks to the always extraordinary Robert Rapier of the R-Squared Energy Blog for posting the story on TOD and for previewing it on his blog.

Please visit TOD or R-Squared to read the article and the comments. You are invited to add any comments you may wish to share.

Other writings were submitted elsewhere. If they’re not picked up there, you will see them here on Rate Crimes.