Tesla Energy and utility scale projects

[jhm]

Do cash and loan sales offer the same opportunities to monetize the Solar Tax Credits using tax equity structures with non-controlling interests as the prior leases/PPAs did?

My understanding is no. The owner of the solar system retains the tax credit and cannot otherwise transfer it to another party, so no monetization. Also I suspect that one's personal tax liability might limit just how valuable the tax credit would be for solar on your own home, but I am not a tax accountant. The beauty of the PPA is that tax equity was transferable to third parties because they own equity in the solar system in question. So it was a very simple and efficient way for many homeowners to realize the value of the tax credit.

 

[Cartegena]

My understanding is no. The owner of the solar system retains the tax credit and cannot otherwise transfer it to another party, so no monetization. Also I suspect that one's personal tax liability might limit just how valuable the tax credit would be for solar on your own home, but I am not a tax accountant. The beauty of the PPA is that tax equity was transferable to third parties because they own equity in the solar system in question. So it was a very simple and efficient way for many homeowners to realize the value of the tax credit.

Ok, thanks I had the impression that, under the previous business plan, SolarCity initially owned the systems used in leases and PPAs, but had insufficient tax liability to realize the benefits of the credits. The tax equity structures and NCIs was a work-around to make the economics work for all involved.

 

[Doggydogworld]

Pardon me I thought you were taking about the AES deal in Tucson, not the AEC rates on an island in the middle of the Pacific ocean.

The one in Arizona was "significantly less than 4.5 cents", 8.5 unsubsidized. And that was two years ago.

How can Tucson Electric get solar + storage for 4.5¢/kWh?

Right. It's AES winning those deals in Hawaii, of course, not AEC. My typo made it confusing.

The Tucson deal and a couple of similar bids in in Colorado have minimal storage. Something like 10% of the solar panel output for a few hours. It's a tiny fraction of the storage needed for 24 hour operation. It makes life easier for grid operators keeping the installation's output steady when clouds pass over, though. It can also reduce system interconnect cost, especially for wind, because you don't have to size lines and transformers for peak output.

 

[adiggs]

A concrete example from Idaho — a new solar installation will replace an existing coal plant at what appears to be a record low (for the US) price of only 2.175c/kWh. New record low solar power price? 2.175¢/kWh in Idaho

pv magazine thinks the low price is a result of the solar facility plugging into the existing grid/transmission lines from the coal plant that is being phased out, which reduces overall costs.

It's crazy not to swap coal for solar where it not only reduces CO2 but saves money.

It'd be pretty slick if there were a reasonably reproducible method of converting the land used for a coal power plant and infrastructure, into solar plant and infrastructure, thereby reusing the existing grid interconnect already in place for the coal power plant. Something that can be reused at plant after plant, site after site, in a reasonably straightforward fashion.

My guess is that coal plant shutdown and site remediation / cleanup doesn't lend itself to this treatment.

 

[Doggydogworld]

To replace 246 GW of coal would require some 500 to 750 GW of wind and solar given the capacity factor differences. To put this into perspective, installments of 7 GW wind and 14 GW solar have been observed recently. For 2019, the EIA is expecting a mere 24 GW of total new capacity with 11 GW wind and 4.3 GW solar. Rates like 25 GW per year come nowhere close to replacing 246 GW of coal by 2025 or even by 2035.

Good point. I try to point out similar trend data when people talk about all the new power plants EVs will require. Real life transitions take so long the impact any given year is basically a rounding error.

Wind/solar provide an additional ~1% of the US grid mix each year. At that rate it takes ~25 years to retire coal. 2% of share per year is probably the fastest possible pace - that's roughly how fast natural gas grew for a decade as fracking cranked up.

So given the scope of what needs to be replaced and how incredibly slowly progress is being made on this replacement, complaining about ITC/PTC subsidies is little more than a red herring.

​

Again, I'm not "complaining" about the subsidies (though I'd like to see tweaks). But I try to use real cost numbers.

We need to be cranking out more than 50 GW of solar and wind each year just to replace uneconomical coal plants by 2030. Current subsidies and policies are way too weak to avoid overpayment for energy. Whatever you think tax payers might save by cutting subsidies will be more than overpaid in aggregate by rate payers.

That's only true if you can use wind/solar pretty much in real time. Adding a dime per kWh for 24 hour storage raises the cost well above coal. And 24 hour storage doesn't address the seasonal issue, which is pretty severe in the northeast quadrant where coal plants are more prevalent.
​

And this is not even including the very real costs of pollution and climate change which could also be avoided.

These costs are real, but too abstract to drive large-scale decision making.​

 

[TheTalkingMule]

Right. It's AES winning those deals in Hawaii, of course, not AEC. My typo made it confusing.

The Tucson deal and a couple of similar bids in in Colorado have minimal storage. Something like 10% of the solar panel output for a few hours. It's a tiny fraction of the storage needed for 24 hour operation. It makes life easier for grid operators keeping the installation's output steady when clouds pass over, though. It can also reduce system interconnect cost, especially for wind, because you don't have to size lines and transformers for peak output.

There's not much need for more than 3hrs of storage in Arizona. It wouldn't be sufficient as the sole supply, but that's not nearly the case.

The point is that solar/wind+storage are the obvious economic choice for new capacity across nearly all the US today. 3-5 years from now when battery prices are half what they are today and used EV pack transition to grid services becomes more common it'll be insane to keep running anything requiring a fuel and turbine.

I just got back from the USVI and they're clearly building out infrastructure for solar wind plus storage microgrids. A retail kilowatt hour is something like 31 cents right now I imagine they'd be overjoyed to pay any entity 20 cents for 100% solar / battery juice 24/7.

 

[Doggydogworld]

There's not much need for more than 3hrs of storage in Arizona. It wouldn't be sufficient as the sole supply, but that's not nearly the case.

But Tucson wasn't 4.5 cents for 3 hours. It has 100 MW solar and 120 MWh storage.

It's 30 MW with 4 hours of storage at ~9 cents/kWh plus 70 MW with no storage at ~2.5 cents/kWh. The blended price is <4.5 cents.

I just got back from the USVI and they're clearly building out infrastructure for solar wind plus storage microgrids. A retail kilowatt hour is something like 31 cents right now I imagine they'd be overjoyed to pay any entity 20 cents for 100% solar / battery juice 24/7.

Tropical islands should convert en masse to solar+EV, since gas prices are also very high and travel distances are short. The EVs can smooth out intermittency and with a little V2H and commercial Ice-AC can eliminate most of the need for expensive bulk storage. It's a triple win.​

 

[ItsNotAboutTheMoney]

I'd point out that the analysis which determined that 74% of coal could be replaced at lower cost with wind and solar, also finds the following:


I believe 2025 is out far enough that ICT (solar) and PTC (wind) are no longer in play. So this 246 GW of coal is "at risk" by 2025 even without current subsidization schemes. So the only real impact of these subsidies would be to hasten the replacement of some fraction of the 246GW. It about timing, not the end result.

What this study does not contemplate is a precise timetable for each plant to be replaced. To replace 246 GW of coal would require some 500 to 750 GW of wind and solar given the capacity factor differences. To put this into perspective, installments of 7 GW wind and 14 GW solar have been observed recently. For 2019, the EIA is expecting a mere 24 GW of total new capacity with 11 GW wind and 4.3 GW solar. Rates like 25 GW per year come nowhere close to replacing 246 GW of coal by 2025 or even by 2035.

2019 Global PV installation is forecast by one group to be 123GW, and 112GW by another. It wouldn't take _that_ much of a ramp of manufacturing to allow for a large increase in installation that could replace coal by 2035. Still not really realistic though, given the location of coal generation and that the real competition is NG.

 

[Cartegena]

Tropical islands should convert en masse to solar+EV, since gas prices are also very high and travel distances are short. The EVs can smooth out intermittency and with a little V2H and commercial Ice-AC can eliminate most of the need for expensive bulk storage. It's a triple win. ​

Apologies for not having followed the discourse carefully. Isn't one of the issues for conversion to EV-Solar- Storage the individual residents' sunk costs in prior technologies? The "gilets jaunes' " discontent may not be isolated to Paris if the transition to conversion is too precipitous.

I was under the impression many isolated islands used diesel (liquid) fired generators as base-load capacity. Does the increasing infra-structure build-out of LNG export/ transport/ import capabilities make CCGTs alternatives an economic option to solar for new reliable capacity?

Also, it seems like the conductors not the poles are the issue for T&D reliability in storm-threatened environs.​

 

[jhm]

2019 Global PV installation is forecast by one group to be 123GW, and 112GW by another. It wouldn't take _that_ much of a ramp of manufacturing to allow for a large increase in installation that could replace coal by 2035. Still not really realistic though, given the location of coal generation and that the real competition is NG.

For several decades global installations have been increasing about 30% annually. Manufacturing capacity has been able to more than keep up with that. Recently China has pulled back on installation growth and this may be slowing the global growth rate somewhat. Regardless, the industry is quite capable of growing production 30% per year so long as there is sufficient installation demand. So it is discouraging to see the US and China slow installations, especially because that can slow the scale up of production capacity. The trade war with China and punitive tariffs on solar panels from China do not help either. Indeed a more cynical read is that constricting the supply of solar panels in the US is an intentional impact of these trade barriers. But aside from political forces impeding solar, I see no lack of productive capacity to keep growing solar 30% each year.

 

[jhm]

Big batteries are coming to California

Two projects with combined 2.14 GWh of battery storage coming to California.

It is important to keep in mind just how quickly the cost of (stand alone) battery storage is falling. BNEF says a decline of 76% since 2012 and 35% in the last year alone. The trend is declining 21%/y, which is comparable to changes in EV pack costs too. As this trend continues a few more years, I think we'll see some big changes in the utility space.

 

[Skotty]

The people who constantly bring up battery recycling as an against argument for EVs are often the same people who recycle nothing and sneer at the idea of any effort to implement recycling of anything, be it paper, plastics, metals, etc. It will be nice if we can eventually have high quality battery recycling for EV batteries, and we should work on that, but one dead EV in a ditch isn't much different than every other dead car sitting rotting in a ditch behind someones trailer home in a pile filled with batteries, unused paint, and a dead horse.

 

[Doggydogworld]

Apologies for not having followed the discourse carefully. Isn't one of the issues for conversion to EV-Solar- Storage the individual residents' sunk costs in prior technologies? The "gilets jaunes' " discontent may not be isolated to Paris if the transition to conversion is too precipitous.

Yes. That's why the EV transition lags the solar transition on islands. Utilities make decisions based on 10-20 year economics, many citizens are month-to-month.

I was under the impression many isolated islands used diesel (liquid) fired generators as base-load capacity. Does the increasing infra-structure build-out of LNG export/ transport/ import capabilities make CCGTs alternatives an economic option to solar for new reliable capacity?

​

LNG prices tend to follow crude oil, so many islands still use diesel which is also easier to handle and store. Solar is still cheaper for islands with good sun.

 

[neroden]

It's a made-up number. Fossil fuels are massive net tax contributors in the US, Europe, etc. It's the externalities that are the issue.

It's a real number. I think $1T includes the military spending used to "secure the oil supply".

But even ignoring that, fossil fuels are massively subsidized.

Yes, in a sense the externalities are the real issue.

But a good example of direct subsidies is the following: in a normal market, when a private landowner leases their land to an oil company, the price the oil company pays is supposed to cover the damages imposed upon the landowner.

When the federal government leases land to an oil company, it pays a fraction of the going rate (as determined by what is being paid to neighboring private landowners). This is a straight-up subsidy to oil companies.

More examples come from the tax code. Oil companies are allowed a long list of arbitrary tax deductions against their profits which normal companies don't get. In other words, they're being subsidized by being charged lower tax rates. The most infamous is percentage depletion, but there are a long list of others.

There are other industries which get subsidies -- electric car buyers get subsidies -- but oil gets HUGE subsidies.

My family has actually claimed percentage depletion. On federal leases with those submarket lease rates. If these subsidies weren't in the tax code and the lawbooks, the government would have more money.

 

[neroden]

Good point. I try to point out similar trend data when people talk about all the new power plants EVs will require. Real life transitions take so long the impact any given year is basically a rounding error.

Wind/solar provide an additional ~1% of the US grid mix each year. At that rate it takes ~25 years to retire coal. 2% of share per year is probably the fastest possible pace - that's roughly how fast natural gas grew for a decade as fracking cranked up.

Arrant nonsense. Solar and wind have both proven to grow on exponential curves.

There was no reason to believe that fracking would follow exponential growth, and it didn't; it's resource exploitation economics.

Wind and solar are manufacturing economics, mostly; they will keep following the exponential curve until market saturation. (Maybe somewhere around 50% of electricity production, it'll slow down.) They may be limited by how fast installers can be trained.

This isn't just theoretical: wind's already been growing faster than your "fastest possible pace" in multiple jurisdictions. Take a look at South Australia.

And 24 hour storage doesn't address the seasonal issue, which is pretty severe in the northeast quadrant where coal plants are more prevalent.

I don't know if you've noticed that coal plants have essentially been eliminated from NY and New England already. Yes, we have a lot of gas, but we also have a lot of hydropower, including substantial pumped hydro.​

 

[ItsNotAboutTheMoney]

You really should read the Wikipedia article that you linked to:
Although theoretically dispatchable, certain thermal plants such as nuclear or coal are designed to run as base load power plants and may take hours or sometimes days to cycle off and then back on again.[5]

I read it. I used it to provide you with a link to correct your misunderstanding.

The ramp time is irrelevant. To be dispatchable does not mean having the ability to act as a fast-ramping peaker plant. The text you highlight is simply pointing out that most coal power plants are not very flexible. So they can't be called on for response to quick changes in demand. However, they can be called on to adjust output according to predicted demand, such heating or cooling that depends on temperature.

For example, in the UK, in summer, there are an increasing number of days during which the remaining coal power plants are shut down because their power isn't required. However, the plants are run during the rest of the year. That is, they are dispatched according to general demand, expected production from wind and solar power and other cost factors.

 

[jhm]

Renewable energy now accounts for a third of global power capacity
More Power! I wish IRENA would include battery storage and other storage in this sort of report. There are signs that as renewables are providing a larger share of new capacity the grow rate slows due to saturation. Fortunately, batteries will expand the addressable market for renewables. Grid batteries allow renewables to compete for peak generation and other load following, while EV batteries allow renewable electricity to compete with motor fuels. Microgrid batteries enable renewable to reach beyond the grid, especially in underdeveloped economies.

 

[jhm]

Australia: 100% renewables could be cheaper, quicker and easier than thought

This is interesting, a model for 100% renewable Australia. Here's a basic break down:

Generation
Wind 32GW 54% of total demand
Util. Solar 16.7GW 21.7% of total demand
Roof Solar 32.5GW 22% of total demand
Hydro about 7.5GW remainder of demand
Total Generation about 90 GW

Storage
Hydro existing 1.1GW / 22GWh
3M home batteries 15GW / 30 GWh
10% of 1M EVs, 50 GWh
Grid battery ? 4 GW / 13 GWh ( this is my guesswork)
Total Storage 28GW / 115GWh = 4.1h * 28GW

Surprisingly there is little need for major transmission upgrades. The extensive use of home batteries (30GWh) and coupled with rooftop solar (32.5GW) may be the secret sauce for minimizing need for transmission grid upgrades. The combination of batterie coupled with utility scale solar and wind and distributed batteries provides the means to level out the load on the transmission grid. Annual peak load on a transmission grid is the main factor determining the size and cost of the transmission grid. So if the ratio of peak load to average load can be made low (through effective buffering with central and distributed storage), then the grid can be used with great efficiency (high capacity factor). So I suspect this model is sophisticated enough to capture this sort of interplay between transmission and storage assets.

So I am quite impressed with this model. Financially this leads to the following cost breakdown:

Price says that both wind and solar could deliver at around $50/MWh or lower. The average cost of firming is around $25 – cheap in Tasmania and Queensland, more costly in South Australia and Victoria. Other “back up” generation would cost around $155/MWh.

Additionally:

“When you put that together …you get firm renewable power for less than $70/MWh,” Price says That is for the 94 per cent renewable share modelled in this data set. Filling in the remaining 6 per cent could add some to costs, but there is opportunity from soaking up the 11 per cent of output that is curtailed.

For now I am thinking that electrolyzers would be the prime candidate for soaking up the 11% curtailment of excess renewables. The model does not appear to contemplate electrolyzers, but throwing them into the mix should allow for lower cost solutions. Specifically, they can make it economical to bring on even more wind and solar at below $50/MWh cost while cutting the need for storage capacity (GWh). Indeed, electrolyzer cut specifically into the value that pumped hydro creates. Since Australia is already committed to Snowy 2 pump hydro, this may have preempted the need to model electrolyzers. Even so, electrolyzers may still find a place in this market, and would reduce the need for 6% not covered by wind and solar. But all this is working out details. The key result is that Australia can go 100% renewable at low cost without needing a massive transmission grid expansion or nuclear power.

 

[jhm]

Global storage market to grow more than 13-fold by 2024

Wood Mac is projecting 38%/y GWh growth for grid batteries. About half of this is front of the meter (utility side, as opposed to back of the meter, consumer side.

This leads to 15GW 41GWh in 2024. They see this primarily displacing diesel, oil, and gas peaker generation. I would not that the gas peaker market is about 6 GW per year. So the projected 15 GW is more than enough to satisfy this market. But there is likely more money to be saved displacing diesel and oil. Think islands and remote areas.

As bold as Wood Mac may think this projection is, I am still inclined to see it as conservative. EV battery production will be growing in excess of 50%/y through 2024. Why would grid batteries grow much more slowly? The grid battery market helps battery makers like Tesla offset the risks of rapid scaling in the EV market. Both kinds of batteries benefit from the same tech and experience curve gains. The only way I see grid batteries growing more slowly is if uptake of EV batteries is so strong that grid batteries are put on a back burner, as Tesla has done recently. But across the industry somebody will be snatching up the opportunity. Furthermore, battery makers not making their own EVs will be selling cells, modules and packs at highest margins regardless whether its ultimate destination is the grid or an EV. So the question is which segments will be paying the higher margins. With the average pack price at $187/kWh, there is not much of a price gap with average EV pack price.

And this price was after a 35% decline, which brought the two pack segments into parity. Going forward I expect prices for both segments to track each other and to decline about 20% per year for the next 3 or more years.

Very exciting times.

 

[winfield100]

Yes, it optimizes both the value of solar power and the cost of inverter+interconnection capacity. Both sides are important.
One of the classic arguments against solar power is that as more is added to the grid, the value of that power is reduced. Of course, this is true of any power source. But what that naive argument missed was the role that inverters and batteries would play. Once the value of incremental peak solar is below the incremental cost of the inverter capacity, DC:AC ratios shoot up. And as the cost of batteries come down, they step in to soak up the excess and tap the value of peak power prices. So super cheap panels don't so much undermine the value of solar, rather they increase the value of batteries and inverters. Ultimately the cost of peak power comes down to the cost of the battery for storage because the surplus capacities of panels and inverters provide nearly zero marginal cost power for charging the batteries and inverting its power for distribution. Thus, value erosion for solar really leads to solar providing cheap power 24x7, including the peak power. The classic solar value erosion argument was that solar power really would no value when the sun is not shining and so would be limited to just fraction of the day.
Also I think the electrolyzers have an important role to play for balancing seasonal excess supply. I just posted this too. Shorting Oil, Hedging Tesla

eagerly trying to get 1-2 powerwalls (I haz ca$h) documented produced 4.99 megawatt hrs since 12/10/2018 (system not recording from ~1/10/-1/17/19) and used only 2.26 megawatt hrs (balence to the grid) IF I had a battery or 2 or 3 I _could be node x in a local VPP