Wednesday, December 02, 2009

Chicago - That Solar Town

Chicago’s cloudy skies make huge South Side solar project extra costly

(Blog Editor's Note: This blogger has been predicting market distortions as a result of outsized federal stimulus spending in Alternative Energy markets. This article describes but one should example.)

by Emma Jackson, Medill

The country's largest urban solar project, which Commonwealth Edison's parent Exelon Corp. is constructing on Chicago's South Side, will produce expensive power compared to other low-carbon energy sources. Chicago's limited sunlight makes it even more expensive than other solar projects. But the company says government incentives make it economical.

The $62-million, 10-megawatt, photovoltaic facility will generate enough electricity to power about 1,200 to 1,500 homes, Exelon said. California-based SunPower Corp. will provide the project with 32,800 solar panels, using its one-axis Tracker System. The system automatically tilts the solar PV panels to follow the sun, increasing daily energy production.

The solar photovoltaic capacity factor--the percentage of actual power output relative to the power output that could have been produced if the solar panels were operating at full capacity continuously--is a measure of solar efficiency. It's diminished by clouds and other atmospheric conditions.

“The capacity factor of course is going to be lower in a place like Chicago where you don’t get as much sunlight as you do in Arizona or in Texas or Florida,” said Mary J. Hutzler, a senior fellow at the Institute for Energy Research.

The estimated capacity factor for solar PV in 2012 is about 21 percent, making it much smaller than other low-carbon energy sources. In sharp contrast, the estimated capacity factor in 2012 for nuclear and geothermal is about 90 percent, according to the U. S. Energy Information Administration.

A lower capacity factor produces higher electricity costs. The cost of electricity generated by Exelon's project would be about 39 cents per kilowatt-hour, according to Yangbo Du, a research assistant at Massachusetts Institute of Technology. The same project in Phoenix would be about about 27 cents per kwh, he said.

Severin Borenstein, co-director of the Energy Institute at Haas School of Business, at the University of California at Berkeley, said investing in large-scale solar projects will crowd out less costly low-carbon energy sources.

“If what you’re trying to get is the maximum clean energy bang for the buck, solar PV is probably not the best investment right now,” he said.

Solar PV is an expensive energy source. Factoring in the energy-incentive provisions in the government's stimulus program, the estimated costs of new electricity generation in 2016 include solar PV at about 40 cents per kwh, wind at 14 cents per kwh, nuclear at about 11 cents per kwh and natural gas at about 8 cents per kwh.

The installed cost of solar PV in the U.S. declined by more than 30 percent from 1998 to 2008, according to a report by the National Renewable Energy Laboratory. The driving force in the expansion of the industry has been financial incentives provided through state and federal programs, the report added.

Although solar PV costs have come down, solar continues to provide only a tiny percentage of the nation's energy. In 2008 solar represented 0.09 percent of all energy consumed in the U..S. and 0.02 percent of all electricity generated in the U.S., according to the EIA.

With the limited sunshine in Chicago, a utility-scale solar project becomes even more costly. Chicago had an annual average percentage of possible sunshine of 54 percent, sunny Phoenix Arizona averaged 85 percent, and rainy Seattle, Wash., averaged 43 percent, according to National Oceanic and Atmospheric Administration data.

“Solar output costs are inversely proportional with the amount of sunlight. So, of course if you have less sunlight, costs per kilowatt-hour go up,” said Ken Zweibel, director of the George Washington University's UniSolar Institute. “In the U.S., the Southwest and some parts of the Midwest have better sunlight than Chicago, so of course you’re paying more for kilowatt-hour.”

To make the project economical, Exelon has utilized a multitude of government incentives, including the federal investment tax credit, Illinois Enterprise Zone ITC, and a federal loan guarantee of 80 percent of the cost. The company plans to sell solar Renewable Energy Certificates, or RECs, from the output of this plant. Companies that exceed their allowable production of air pollutants may buy these certificates to achieve compliance with government renewable-energy standards.

Peter Elsberg, a spokesperson for Exelon, said the company wouldn’t have undertaken the project if it wasn’t cost effective. Referring to the government incentives, he said, “when you put all those things together, it lowers the financial risk enough to make this project worthwhile.

Aimee Curtright, an associate physical scientist at RAND Corp., said less sunlight will mean higher electricity costs.

“And you have to ask yourself how much other low-carbon technology you could buy for that same price,” she said. “Energy efficiency improvements, for example, would be a much better deal.”

For the cost of the Chicago project, she added, one could insulate at least ten times the number of homes that Exelon expects to serve with PV-produced electricity, and achieve a financial payback in energy savings of a decade or less. She estimated the payback time for a solar PV project at 30 years.

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