New York City’s 2MW Solar Plan Is No Done Deal
By Yuliya Chernova, Dow Jones Newsletters
New York, April 09, 2008
source: Dow Jones /Money.CNN.Com
http://money.cnn.com/news/newsfeeds/articles/djf500/200804091313DOWJONESDJONLINE000905_FORTUNE5.htm
New York City plans to issue a request for proposals to solar-power system installers to bring two megawatts of solar power onto the roofs of city-owned buildings, but the initiative will have to cut through significant red tape and other challenges before it can take off. While this move is significant in that it shows the city’s interest to test solar as part of its electricity supply, there are several issues that need resolution. On the one hand, the city’s electric utility, Consolidated Edison Inc. (ED), has a current limit of 10 kilowatts per installation of solar that it will accept on the grid, and that may be too small to accomplish the scale proposed by the city. On the other hand, the total size of the RFP is relatively small and the city would likely need to throw in a potentially longer-term relationship to attract some of the larger systems installers.
Mayor Michael R. Bloomberg said the city invites installers to propose projects whereby they will install, own and maintain solar panels throughout the five boroughs and charge the city under a 20-year power purchase agreement. The city identified 11 potential sites for installations, including five schools and a college. This is part of the Mayor’s broader city improvement plan called PlaNYC. The city’s press office didn’t return a request for comment.
“We are planning on responding and my team is just now reviewing the information,” Bob Hopper, vice president at MMA Renewable Ventures, a firm that puts together solar projects, wrote in an email to Clean Technology Investor.
SunEdison Inc., another large solar-project developer, hasn’t made any decisions regarding its participation in the initiative, Jigar Shah, SunEdison’s chief strategy officer, said in an interview. He added that city officials contacted SunEdison some time ago for its opinion regarding the feasibility of a solar initiative in the city and that his company proposed that it makes sense to start with 50 MW. He added that SunEdison wasn’t involved in the RFP and didn’t even know it was issued until a reporter brought it to the company’s attention.
Given that panels plus their installation cost more than $8 per watt on average, this initiative is worth about $16 million to potential bidders. Under a power purchase deal, the cost would stretch out over several years. The City University of New York, or CUNY, will manage the solar program.
“We welcome talking to the Mayor about these installations, but there are issues to be resolved,” Chris Olert, a spokesman for ConEd, said in an interview with Clean Technology Investor.
The utility’s 10 kW limit on individual installations stems from its concern over the safety of integrating large new electrical generation into its densely packed grid, Olert said. “We’re responsible for the safety of our customers and our employees,” he added. Adding power supply at random points on the grid calls for additional safety equipment to make sure that a fault in the system doesn’t cause a fire, for example.
There is a question as to who will finance such equipment – the grid owner or the systems owner. The utility will have to hash these questions out with other players involved, including the New York Power Service Commission, Olert said. He added that at this point it still isn’t clear whether the proposed installations would be connected to the grid all the time under net metering, but that is more than likely, given other municipal installations. “That is usually the case, and I assume that’s the case here,” MMA’s Hopper wrote. “Net metering also allows for a credit back to the customer for energy generated but not used,” he added.
Overall, installers have been facing significant delays in processing interconnection applications, according to a January 2007 report from CUNY. Time to market is also longer in the city because of recent changes to the city’s electrical code that require that solar systems be tested onsite by national lab representatives, the report said.
Solar-project developers like MMA, SunEdison and Honeywell International Inc. (HON) have been installing solar panels on school and other government buildings, with project size typically upwards of 50 kW. Honeywell, for example, is implementing solar arrays for a school district in San Diego, putting panels up on four school buildings for a total of 578 kilowatts. SunEdison, meanwhile, made a 54 kW installation (measured in AC power) in a California high school last May, but its other projects for different campuses of the California State University have ranged from 147 kW to 470 kW each.
In total, ConEd has a limit of 8 megawatts for the total load from renewable energy on its grid, according to Olert, who added that the city is far from reaching this limit. The new plan from the Mayor will more than double the city’s current solar capacity, according to a statement from the city government.
SunEdison, which is active in New Jersey and Connecticut, hasn’t done any installations in New York.
“The leadership of the state of New York has viewed solar not as a solution but as a niche market or a toy almost,” Shah said, adding, “because of that there’s a limited budget for solar.”
New York State draws less than 2% of its total power supply from renewable energy, and solar represents a small percentage of that, according to the state’s Public Service Commission. That is true even though the state has a Renewable Portfolio Standard, mandating that 24% of the state’s power come from renewables by 2013.
The limited solar installations in the city have been partially to blame for the higher costs installers charged, the CUNY report said. Because the city is limiting its new RFP to 2MW, they “might have to pay a premium for solar,” Shah said, explaining that the scale is relatively small.
“The number-one thing we look for in a new contract is scale,” he said. In San Diego, SunEdison has an exclusive five-year relationship with the municipality, so that any additional city-owned projects are commissioned to the company. ” We’d look for an open-ended commitment,” Shah said.
Overall, it costs SunEdison about $1 million just to start up operations in a new state because of associated legal costs and the need to set up an office, something that local governments like in order to increase local employment, he said. “We need some significant scale so that we could pay for the overhead without burdening the specific project,” Shah said.
On the other hand, he added, this may be a way for the city to test out the case for solar. Besides negotiations with the utility, Shah envisions that the city will have to involve many agencies to get this initiative passed, necessitating architectural reviews and other permits, he said. The problem, he added, is that “none of these (agencies) have a lot of experience in approving solar.” The Mayor’s initiative may be a way to sort through the processes, Shah said, and to see what needs to be improved before launching any bigger solar plans.