- Extensive business development experience in both utility-scale and distributed solar.
- Responsible for over 40 MW of solar development in the U.S.
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- Price is the key driver and, as of now, solar is still a more expensive option in many geographies.
- Currently, price per kWh is the key driver throughout the market. An obstacle to solar adoption is the price variation across the country. In many locations, non-sustainable energy sources are still the least expensive option. For example, in West Virginia, the current price for electricity is about four cents per unit, while in San Francisco the going rate is about 14 cents for the same unit of power. If a large-scale solar plant can produce the same unit of electricity for 10 cents per unit, then solar adoption is an obvious choice for San Francisco but no one in West Virginia is likely to touch it.
Although there's a rising demand for sustainable solutions, as long as solar energy remains too pricey for some lower-market regions, then conversion from other sources of energy remains unlikely for these regions.
- The yield of solar energy is dependent on precise variations in the environment or placement of the solar plant; there are high risks involved for making a wrong decision on where and how to build the plant.
The output of the solar energy plant depends on the particulars of the environment in which it is built. Small differences between one location and another can yield major differences in terms of the output of the plant. Sub-optimal decisions around the location and construction of a plant can have big consequences over the life of the facility. The costs of building the plant are more or less equal, whether it's built in "locale X" or at a different site just two miles to the east that could yield double the production of a sub-optimal site. This means that errors can be extremely costly and this risk may be prohibitive in some instances.
The key is to understand the micro-environment around the location of the power plant, the specifics of how the facility will be installed and then selecting the best technology to facilitate that specific environment. Each of these factors can create tremendous obstacles to building solar plants.
- For the grid managers at utilities, the risk vs. reward calculation does not, in their minds, tend to favor solar adoption.
If you are a grid manager at a utility, your job is to keep the electricity coming so that when customers flick the switch the lights go on. The grid manager's job is not to go out on a limb with new technologies and take risks. Grid managers are not rewarded for that. They are rewarded for being reliable. The source of the electricity they distribute is not their concern as long as it keeps coming.
For this reason, those who favor solar adoption need to make the argument that solar is a much cleaner source. It’s a much more sustainable source, and, unlike wind power, the facilities are not eyesores. Solar is low to the ground. It has no moving parts, which require yet more energy to operate. It depends on a nuclear fusion bomb – the Earth's sun – 93 million miles away that is going to outlast the human race. All of these arguments need to be made, but there are enormous hurdles within the utility marketplace because the industry's DNA has little to do with taking risks.
- The perception is that solar is an intermittent source that cannot be relied upon.
Wind is truly an intermittent power source. We currently have difficulty predicting daily wind conditions. Solar on the other hand is much more predictable. The sun is coming up tomorrow – that is a given. With current technology we can forecast the amount of insolation (radiation from the sun that reaches the surface of the earth) which a particular site will receive over a year. This level of predictability is accurate enough to make financiers comfortable enough to finance 20-year power purchase agreements (PPAs).
Bankers don't like risk. Systems can be affected by temporary weather or environmental conditions. A large thunderhead could obscure the sun or a large fire could occur with enough smoke to impede insolation, causing production of energy to drop off temporarily. Grid managers still look at solar as too unreliable to bet too much of their sourcing on it. It still appears to be too risky. And the perceived value of having sustainable sources of energy is still weighted against the utility’s mission, which is to provide as uninterrupted a stream of energy as possible.
- The different business models of the utilities impede the adoption of solar.
- In the U.S., there are roughly 3,100 utilities across the 50 states. The utility companies have three major business models: investor-owned, municipally-owned and cooperatives.
Municipally-owned utilities are subject to voter influence. In places where solar is a popular option politically, there is a greater possibility of adoption. Investor-owned utilities are controlled by a state public utilities commission (PUC), and they are responsive to that commission although they’re expected to turn a profit for their investors. There is a moderate amount of leverage through the PUC to nudge these companies toward solar power.
Cooperatives are generally in rural areas and are owned by its members. They buy their power through wholesalers and distribute it within their co-op. They typically buy the power from the closet transmission/distribution lines to the rural farmers and residents who own those distribution lines and transforming gear. There are some very successful co-ops across the United States driven by the membership mandate to buy the cheapest power possible. Thus, this model does not favor the adoption of solar until the price can be competitive and that remains difficult in most co-op areas.