Solar Energy Commercialization Session 11 SEC598S19 Solar Energy Commercialization Session 11 Utility Scale Solar Development Power Purchase Agreements Design Issues February 13, 2019

Session 11 - Value to class members Once again, utility scale solar energy systems have unique features largely due to the magnitude of the projects, including land and power off-take issues This session includes a review of Power Purchase Agreements and Design Issues

Utility Scale PV Systems Design Steps Selecting an appropriate site and solving all land issues Carrying out the permitting process for construction and operation Selecting a financing approach including power purchase agreements or energy off-take agreements Carrying out PV system and solar field engineering and design Interconnection to the grid

Utility Scale PV Systems Power Purchase Agreement Resources SEIA factsheet http://www.seia.org/research-resources/solar-power-purchase-agreements NREL report (2014), To Own or Lease Solar http://www.nrel.gov/docs/fy15osti/63216.pdf NREL report (2012), SW Utility PPAs http://www.nrel.gov/docs/fy12osti/51137.pdf NREL report (2010), PPA Checklist http://www.nrel.gov/docs/fy10osti/46668.pdf

Utility Scale PV Systems The Power Purchase Agreement Importance to finance and valuation It is an essential milestone in a renewable energy project’s development The financial difference between a project with a PPA and a project without a PPA can be substantial It is a binding contract between an electric utility and a project developer It can be employed at the residential, commercial, and utility scales, with differences related to scale

Utility Scale PV Systems The Power Purchase Agreement Importance to finance and valuation The utility commits to buy renewable power from the developer’s PV system for a duration of 20-25 years It defines the cash flow for an energy project It is the reason why investors will evaluate the solar project for investment potential Initial capital investment Revenue over time Level of risk

Utility Scale PV Systems The Power Purchase Agreement There are two versions of a PPA A two party agreement in which one is a buyer of solar electrical power (the utility) and the other a seller of solar electrical power (the developer) A three party agreement with a developer of a PV system, a host customer, and a utility

Utility Scale PV Systems The Two Party Power Purchase Agreement The developer generally forms a limited liability company (LLC) The LLC owns the assets of the project: Land site control Permits Solar generating equipment Project engineering documentation PPA contract The LLC sells the electrical energy (in kWh) bundled with Renewable Energy Credits (RECs) and/or some other “green” credits

Utility Scale PV Systems The Two Party Power Purchase Agreement The price of the seller’s kWh may be a fixed cost or may follow a “time of delivery” payment structure Seasonal, daily, hourly periods The buyer receives the electricity along with the RECs which it uses to demonstrate that it is meeting the Renewable Energy Standards (RES) that the utility’s regulators have established

Utility Scale PV Systems The Two Party Power Purchase Agreement Both sides stipulate that they are Good corporate citizens Creditworthy Capable of fulfilling their contractual obligations

Utility Scale PV Systems The Two Party Power Purchase Agreement Six key components of a PPA The contract electricity price The annual escalator The term of the contract The location of the generation station and the interconnection point The description of the type of generation facility Contract off-ramps (curtailment)

Utility Scale PV Systems The Two Party Power Purchase Agreement Financing considerations Credit rating of the off-taker Most utility companies have exceptional credit Some small, private, or inexperienced off takers – not so much Fatal financeability flaws Curtailment – buyer excused from paying for energy if transmission system unavailable Ambiguous regulation compliance payment terms – seller payments when regulations or laws change

Utility Scale PV Systems The Two Party Power Purchase Agreement PPA variables NREL System Advisor Model (SAM) example 20 MWdc PV system, 20 year PPA, 0% escalator 17.4cents/kWh price needed to meet IRR 20 MWdc PV system, 20 year PPA, 2% escalator 13.4cents/kWh price needed to meet IRR Dropping PV component costs More competitive bids More entrants Adding an escalator or increasing contract term often produces lower energy prices than zero escalator or shorter term contracts – getting closer to grid parity

Utility Scale PV Systems The Two Party Power Purchase Agreement PPA commitments Two riskiest elements Guaranteed construction and operation dates Guaranteed annual energy output Delay clauses often included, but missing commercial operation date can trigger damage payments to the off-taker or lead to contract termination Similar penalties for falling short in energy performance, but “development securities” often required

Third Party PPAs (SEIA factsheet)

Third Party PPAs (NREL 2010)

Third Party PPAs (NREL 2010)

The effect of escalator clauses

Utility Scale PV Systems Design Steps Selecting an appropriate site and solving all land issues Carrying out the permitting process for construction and operation Selecting a financing approach including power purchase agreements or energy off-take agreements Carrying out PV system and solar field engineering and design Interconnection to the grid

Utility Scale - Solar Farm Design Steps in Solar Farm Design Design calculations Electrical design considerations System monitoring System equipment selection Installation issues Yield calculations

Solar Farm Design - Design calculations Site Assessment – System Layout Solar Farms Chapter 4

Solar Farm Design - Design calculations Site Assessment – System Layout Effect of appurtenant structure HELIOS shadow modeling Solar Farms Chapter 4

Solar Farm Design - Design calculations Site Assessment – Solar Resource Effect of tilt angle Reduced energy harvesting with off-normal incidence Solar Farms Chapter 4

Solar Farm Design - Design calculations Site Assessment – Solar Resource Effect of tilt angle Solar Farms Chapter 4 Optimal tilt angle at the equinox

Solar Farm Design - Design calculations Site Assessment – Solar Resource Shadowing between rows

Solar Farm Design - Design calculations Rule of thumb: The rows of modules should be spaced so that there is no inter-row shading at solar noon on the winter solstice Furthermore, as a general design rule, the rows should be spaced so that there is less than 1% annual loss due to shading Solar Farms Chapter 4

Solar Farm Design - Design calculations Markvart, Solar Electricity, Fig 2.7b

Solar Farm Design - Design calculations Shadowing between rows

Solar Farm Design - Design calculations Peak Solar Hours (PSH) GAM1.5 = 1000 W/m2 Messenger & Ventre, Fig 2.3