May Webinar Presentation SMUD Municipal Ownership of PV
Sacramento Municipal Utility District
Municipal Utility Solar Ownership Obadiah Bartholomy Sacramento Municipal Utility District May 26th, 2011
May 26th, 2011
Sacramento Municipal Utility District
What is SMUD? • Publicly owned utility formed in 1946 • Governed by independent locally elected governing Board of 7 members • Serves electricity to 1.3 million people in Sacramento region • 2,200 Employees • Peak Demand of 3,300 MW • Annual Sales ~11,000,000 MWh
May 26th, 2011
Sacramento Municipal Utility District
SMUD Overview • • • •
Population 1.3 Million Peak demand 3,300 MW Annual Sales 11,000,000 MWh 23% Renewables, 25% large hydro, 52% natural gas • Goal of 37% Renewables in 2020 • Goal of 90% reduction in CO2 below 1990 levels by 2050 • Currently ~30 MW PV installed
May 26th, 2011
Sacramento Municipal Utility District
SMUD’s 2010 Renewable Mix
May 26th, 2011
Sacramento Municipal Utility District
SMUD Ownership of Generation • 1960’s constructed 688 MW Hydro Project • 1970’s constructed 900 MW Nuclear plant • 1980’s constructed 2 MW PV Plant, retired Nuclear Plant • 1990’s constructed 350 MW NG CC Cogen, ~4MW customer sited utility owned solar • 2000’s constructed 125 MW Wind, 500 MW NGCC, 2 MW SMUD-owned PV, 20 MW Customer Owned solar • 2010’s 100 MW FiT PV, 100 MW SMUD wind, 100 MW Customer PV, likely some amount of SMUD PV
May 26th, 2011
Sacramento Municipal Utility District
May 26th, 2011
Lessons learned from Hydro, Wind • Hydro resources, once paid off, are very inexpensive sources of energy – –
Long-lived components 30 – 100 years Major infrastructure does not need to be replaced frequently
• Wind resources can be developed less expensively by a Municipal Entity – – – – –
More control over environmental and permitting Lower cost of borrowing Reduced tax burden No profit built in But don’t count on REPI
Sacramento Municipal Utility District
Mitigating Risk in Ownership • SMUD experience with Nuclear plant operational problems and shutdown – – –
Expensive ownership experience Utility very exposed to risk Shutdown vote followed 4 rate increases in ’80s
• In ‘90s cogen plants were built under Joint Powers Agency structures, legally separate entities to limit SMUD risk • Same structure used for 500MW Cosumnes NGCC, Balancing Authority of Northern California
May 26th, 2011
Sacramento Municipal Utility District
How SMUD Views PV Ownership • In 1990’s, began PV Pioneer program – SMUD owned customer sited PV – – –
–
Demonstrated and helped technology evolve Developed contractor base Identified risks, liabilities for utility ownership model Transitioned to customer owned beginning in 2000
• In 2011, finishing converting last of SMUDowned customer sited PV to customer owned • Looking forward, evaluating role of utility ownership relative to 3rd parties and IPP’s – – – –
Tax implications Finance opportunities O&M Costs Risk appetite
May 26th, 2011
Sacramento Municipal Utility District
May 26th, 2011
Tax Credit Implications • 30% ITC makes it hard to compete with private ownership • Ownership models such as energy pre-pay with short term investment owners and system purchase agreement in 7 years appears best route • Sharing of tax credit benefit can be a challenge • Complexity of finance structures can add cost from an administrative/risk side
Sacramento Municipal Utility District
SMUD Outlook on PV ownership • Currently SMUD is ahead of RPS goals –
–
23% by 2010 – met 37% by 2020 – high probability contracts signed to achieve goals through 2016
• Current Integrated Resource Plan process still has solar as 3rd priority relative to other renewables based on current cost • Considering land procurement for attractive solar sites • Looking at new business strategies as hedge for continued price-drops • Expect some deployment of PV at wind farm to leverage infrastructure in place • PV integration and associated costs a critical question for becoming more aggressive in deploying PV
May 26th, 2011
Sacramento Municipal Utility District
May 26th, 2011
SMUD Outlook Cont’d • Enormous potential on rooftops - >1,000 MW commercial, likely 500 MW residential • Some reluctance due to past experience in owning distributed PV systems on customer facilities –
–
Liability for damages O&M costs for small systems
• Expect newer systems may overcome some of past problems
Sacramento Municipal Utility District
May 26th, 2011
Final Thoughts on Ownership • Primary advantages – –
–
More control over costs, operational risks Site control provides long-term benefits and cost savings Potential for lower costs due to project finance advantages and lack of need for profit
• Advantages must be balanced with risks, particularly for customer-sited arrays • Over next 10 years, expect declining price and sunsetting of tax-credits to make municipal ownership more attractive
Municipal Utility Solar Ownership Obadiah Bartholomy Sacramento Municipal Utility District May 26th, 2011
May 26th, 2011
Sacramento Municipal Utility District
What is SMUD? • Publicly owned utility formed in 1946 • Governed by independent locally elected governing Board of 7 members • Serves electricity to 1.3 million people in Sacramento region • 2,200 Employees • Peak Demand of 3,300 MW • Annual Sales ~11,000,000 MWh
May 26th, 2011
Sacramento Municipal Utility District
SMUD Overview • • • •
Population 1.3 Million Peak demand 3,300 MW Annual Sales 11,000,000 MWh 23% Renewables, 25% large hydro, 52% natural gas • Goal of 37% Renewables in 2020 • Goal of 90% reduction in CO2 below 1990 levels by 2050 • Currently ~30 MW PV installed
May 26th, 2011
Sacramento Municipal Utility District
SMUD’s 2010 Renewable Mix
May 26th, 2011
Sacramento Municipal Utility District
SMUD Ownership of Generation • 1960’s constructed 688 MW Hydro Project • 1970’s constructed 900 MW Nuclear plant • 1980’s constructed 2 MW PV Plant, retired Nuclear Plant • 1990’s constructed 350 MW NG CC Cogen, ~4MW customer sited utility owned solar • 2000’s constructed 125 MW Wind, 500 MW NGCC, 2 MW SMUD-owned PV, 20 MW Customer Owned solar • 2010’s 100 MW FiT PV, 100 MW SMUD wind, 100 MW Customer PV, likely some amount of SMUD PV
May 26th, 2011
Sacramento Municipal Utility District
May 26th, 2011
Lessons learned from Hydro, Wind • Hydro resources, once paid off, are very inexpensive sources of energy – –
Long-lived components 30 – 100 years Major infrastructure does not need to be replaced frequently
• Wind resources can be developed less expensively by a Municipal Entity – – – – –
More control over environmental and permitting Lower cost of borrowing Reduced tax burden No profit built in But don’t count on REPI
Sacramento Municipal Utility District
Mitigating Risk in Ownership • SMUD experience with Nuclear plant operational problems and shutdown – – –
Expensive ownership experience Utility very exposed to risk Shutdown vote followed 4 rate increases in ’80s
• In ‘90s cogen plants were built under Joint Powers Agency structures, legally separate entities to limit SMUD risk • Same structure used for 500MW Cosumnes NGCC, Balancing Authority of Northern California
May 26th, 2011
Sacramento Municipal Utility District
How SMUD Views PV Ownership • In 1990’s, began PV Pioneer program – SMUD owned customer sited PV – – –
–
Demonstrated and helped technology evolve Developed contractor base Identified risks, liabilities for utility ownership model Transitioned to customer owned beginning in 2000
• In 2011, finishing converting last of SMUDowned customer sited PV to customer owned • Looking forward, evaluating role of utility ownership relative to 3rd parties and IPP’s – – – –
Tax implications Finance opportunities O&M Costs Risk appetite
May 26th, 2011
Sacramento Municipal Utility District
May 26th, 2011
Tax Credit Implications • 30% ITC makes it hard to compete with private ownership • Ownership models such as energy pre-pay with short term investment owners and system purchase agreement in 7 years appears best route • Sharing of tax credit benefit can be a challenge • Complexity of finance structures can add cost from an administrative/risk side
Sacramento Municipal Utility District
SMUD Outlook on PV ownership • Currently SMUD is ahead of RPS goals –
–
23% by 2010 – met 37% by 2020 – high probability contracts signed to achieve goals through 2016
• Current Integrated Resource Plan process still has solar as 3rd priority relative to other renewables based on current cost • Considering land procurement for attractive solar sites • Looking at new business strategies as hedge for continued price-drops • Expect some deployment of PV at wind farm to leverage infrastructure in place • PV integration and associated costs a critical question for becoming more aggressive in deploying PV
May 26th, 2011
Sacramento Municipal Utility District
May 26th, 2011
SMUD Outlook Cont’d • Enormous potential on rooftops - >1,000 MW commercial, likely 500 MW residential • Some reluctance due to past experience in owning distributed PV systems on customer facilities –
–
Liability for damages O&M costs for small systems
• Expect newer systems may overcome some of past problems
Sacramento Municipal Utility District
May 26th, 2011
Final Thoughts on Ownership • Primary advantages – –
–
More control over costs, operational risks Site control provides long-term benefits and cost savings Potential for lower costs due to project finance advantages and lack of need for profit
• Advantages must be balanced with risks, particularly for customer-sited arrays • Over next 10 years, expect declining price and sunsetting of tax-credits to make municipal ownership more attractive
