mba gis solar farm feasibility study

Running Head: FEASIBILITY STUDY FOR MAKAH SOLAR FARM 1

Feasibility Study for Economic

Viability of a Makah Community Solar Farm

Eian S. Ray

Marylhurst University

FEASIBILITY STUDY FOR MAKAH SOLAR FARM 2

Copyright Information

The author hereby grants Marylhurst University permission to reproduce, either

electronically or in print format, this document in whole or in part for library archival

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The author hereby does __X__ does not __ grant to Marylhurst University permission to

electronically reproduce and transmit this document to students, alumni, staff, and faculty

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Author’s Signature: ______________________________________________


Contents

ACKNOWLEDGEMENTS .......................................................................................................................... 5

ABSTRACT .................................................................................................................................................. 6

INTRODUCTION AND BACKGROUND .................................................................................................. 7

LITERATURE REVIEW ............................................................................................................................. 8

SITING ..................................................................................................................................................... 8

GRID-PARITY ....................................................................................................................................... 11

EMPLOYMENT POTENTIAL .............................................................................................................. 13

DESCRIPTION OF SECONDARY RESEARCH ..................................................................................... 14

GIS ANALYSIS ..................................................................................................................................... 14

PROPOSED SITE ................................................................................................................................... 18

SOLAR FARM FACILITY .................................................................................................................... 20

COST OF ELECTRICITY AND GRID PARITY .................................................................................. 22

FUNDING AND FINANCING .............................................................................................................. 23

EMPLOYMENT ..................................................................................................................................... 24

BUSINESS MODEL CANVAS ................................................................................................................. 25

KEY PARTNERS ................................................................................................................................... 25

KEY ACTIVITIES ................................................................................................................................. 27

VALUE PROPOSITIONS ...................................................................................................................... 28

CUSTOMER RELATIONSHIPS ........................................................................................................... 28

KEY RESOURCES ................................................................................................................................ 29

CHANNELS ........................................................................................................................................... 29

COST STRUCTURE .............................................................................................................................. 29

REVENUE STREAMS .......................................................................................................................... 29

ENVIRONMENTAL COSTS................................................................................................................. 30

SOCIAL AND ENVIRONMENTAL BENEFITS ................................................................................. 30

LIMITATIONS OF THE RESEARCH ...................................................................................................... 31

DATA SUMMARY AND ANALYSIS ..................................................................................................... 25

FINANCIAL PROJECTIONS .................................................................................................................... 31

MARKET ANALYSIS ........................................................................................................................... 31

COST-BENEFIT ANALYSES ............................................................................................................... 34


IMPLEMENTATION PLAN ..................................................................................................................... 35

CONCLUSIONS AND RECOMMENDATIONS ..................................................................................... 36

REFERENCES ........................................................................................................................................... 38

APPENDIX A – Overview Map of the Makah Reservation ....................................................................... 42

APPENDIX B – Map of Solar Potential of Makah Reservation ................................................................ 43

APPENDIX C – Proposed Solar Farm Site ................................................................................................ 44

APPENDIX D – Overview Map of Additional Site Considerations .......................................................... 45

APPENDIX E – Cost-Benefit Analysis – 2013-2020 Development and Solar Farm Life Expectancy ..... 46

APPENDIX F – Business Model Canvas ................................................................................................... 47


ACKNOWLEDGEMENTS

I would like to express my appreciation to the individuals and organizations who

have assisted with this project. Professor Christopher Dudding, who along with other

professors at Marylhurst University, helped bring to life modern concepts of business

through the lens of sustainability by guiding and encouraging their student’s educational

goals and interests. Without which, many important issues of our day would go un-

researched and untested.

Additionally, Bud Denney, Planner of the Makah Tourism and Economic

Development Department was most helpful in acquiring data from the Makah Tribe that

is most integral to this project. His interest, insight, and direction in this project were

greatly appreciated.

I would like to thank Dave Herda of the Makah GIS Department for his assistance

with GIS issues related to this study. Much of this project would not have come to

fruition were it not for his expertise and personal and professional interest.

Lastly, I would like to thank the Makah Tribe for providing a wonderful

environment for learning and research and for the opportunity to add one additional layer

of knowledge to their multiplicity of resources and the management thereof.


ABSTRACT

This feasibility study identifies whether the climate and geography of the Makah reservation,

home of the Makah Tribe, is conducive to the development of solar energy resources at a price

that is competitive with grid-derived electricity. Geographically, the scope of this feasibility

study is limited to the Makah reservation, which is located on the northwest tip of the Olympic

Peninsula in Washington State. Due to the latitude and climate in this part of the United States,

this site is subject to unique challenges in the development of solar resources. Therefore, this

research pivots from the principal question of whether or not a community solar farm is a

financially viable energy source for the Makah Tribe to develop. By constructing a geographic

information system (GIS) to analyze the landscape for ideal siting locations, maximum solar

radiation potential areas were identified. This data was used as a basis for determining facility

generation capacity, size, and cost, which in turn was used in a cost-benefit analysis to determine

overall cost per kWh of electricity over the course of the facility’s life expectancy. Four cost-

benefit analyses were created based on four potential construction dates in the future to compare

how date of installation would affect financial viability. Also identified was the employment

potential of this type of facility. The results of this feasibility study showed that based on the

current cost of solar technology and low level of solar radiation the Makah reservation receives,

this project is not financially viable and should not be implemented.


Feasibility Study for Economic

Viability of a Makah Community Solar Farm

INTRODUCTION AND BACKGROUND

The Makah Tribe of northwest Washington State wishes to identify the feasibility of a

community solar farm located on the Makah reservation. The reservation is approximately

30,000 acres and includes the community of Neah Bay and the Ozette pene-exclave to the south.

In recent years an additional 9,000 acres of contiguous commercial timberland, currently held in

fee-status, have been acquired (Makah GIS, 2012). These lands represent a large diversity of

natural resources that the Makah rely on for sustenance and commercial enterprise. Sustainable

management practices are well-regarded and new development is encouraged.

Prior to this study, the Makah completed two feasibility studies related to the

development of energy resources on the reservation. In 2006, a study was completed which

established the Makah Utility Authority to aid the tribe in financing, developing, and operating a

30MW wind project (Makah Indian Nation, 2006). During the same year, AquaEnergy, Ltd filed

an application for license to install and operate a one megawatt pilot wave-energy generation

project in Makah Bay on the Pacific side of the reservation (FERC, 2007). Soon after, the

company determined that generating power using this technology at this location was not

economically feasible and was thus abandoned (Hydroworld, 2009).

These two projects led to interest in the potential development of solar energy resources

on Makah lands. The Pacific Northwest, particularly in the northwest region of Washington State

where the Makah reservation is located, is known for its nearly year-round rainfall, overcast

skies, and diffuse lighting, conditions that are typically unfavorable to the collection of solar

energy. The average number of cloudy days per year in Neah Bay is 239, which means that over


65% of days are partly cloudy or fully overcast (HomeFacts, 2013), making any solar energy

investment tenuous.

In order to objectively determine the feasibility of developing solar resources on the

Makah reservation, two research questions were refined to discover the crux of the problem. The

success of initiating construction of a solar farm facility in combination with its lifetime

operational success is entirely dependent upon the results of this feasibility study. These two

questions are: Is the climate and geography of the Makah Indian Reservation conducive to the

development of solar energy resources at a price point that is competitive with grid-derived

electricity over the lifetime of the solar farm facility?, and What might be the employment

potential to operate and maintain the community solar farm over the course of its life? In terms

of solar radiation, the reservation has one of the lowest insolation (solar radiation potential)

values in the nation. In fact, the reservation has lower insolation potential than parts of Alaska

(NREL, 2005), bringing into question the viability of a solar farm in this part of the world.

Fortunately, photovoltaic equipment prices have dropped in recent years (SEIA, 2013), meaning

that geographic areas that were previously not viable or only marginally so, may now provide

economic opportunities. These economic opportunities can include cost savings related to

electricity acquisition, exporting excess electricity to market, and opportunities related to the

employment of local Makah tribal members.

LITERATURE REVIEW

SITING

In addition to being constructed, owned, and operated on an Indian reservation, the siting

of the Makah community solar farm is slightly more cumbersome than photovoltaic systems in

other regions of the country due to the unique geography of the region and its relatively limited


access to reliable sunlight. This feasibility study will take both of these factors into consideration

when determining the feasibility of this project.

The future of energy in the United States is increasingly more dependent on a diversity of

sources including distributed generation from local solar energy supplies (Gies, 2011). The

Makah reservation is a semi-closed community that is heavily dependent on outside electricity

sources. Walker (2008) performed a feasibility study to install a 520kW photovoltaic project for

the Consejo community in Belize. His findings showed that the country imports nearly all of its

energy supply. As a result, the population suffers from energy insecurity. Belize encounters

frequent brown-outs and those communities that are dependent on the national grid suffer from

this insufficiency. Walker offers an analogue to the Makah community which is also isolated and

dependent on outside energy and suffers seasonal, weather related power outages. In keeping

with national trends, the Makah should consider on-site electrical generation.

The Makah reservation comprises a very small geographic area with varying topography

and overcast skies, making insolation calculations complex. When siting a community solar farm

it is necessary to locate it in areas with high amounts of insolation. Existing insolation maps and

data that are available are insufficient due to lack of resolution. Huang (2009) has shown that

small areas can easily be modeled by using ESRI’s ArcGIS Spatial Analyst toolbox to calculate

not only insolation potential for a given latitude and longitude, but to also include in the

calculation the reflected radiation from nearby hillsides, dispersed light from cloud cover, non-

horizontal horizons due to mountains and hills, and differences in aspect and angle of the hillside

on which the facility is located.

Similarly, Joseph McIntyre of the University of Guelth, Ontario outlines the use of a

geographic information system (GIS) to calculate solar energy potential in Ontario, Canada


(2012). The high latitude collection site in Ontario is similar to that of the Makah Tribe. Using

GIS software, an analysis was performed using these two documents for technical guidance.

A GIS analysis of the solar radiation calculation in conjunction with current infrastructure

data helped identify only the most ideal locations for the siting of such a facility. Fortunately,

much of this infrastructure data is easily accessible and has already been studied on a previous

feasibility analysis that discussed implementing wind power infrastructure on the Makah

reservation. This 2003 Makah study identified these locations on maps that were digitized to

include in the calculation. This information is critical to this study, as the landscape is quite

varied, remote, and not easily accessible.

One option for siting this facility is to use existing roof space on tribally owned buildings.

Roof-top photovoltaic systems are often more difficult to install and manage, but offer the

convenience of already existing and exposed mounting planes with few shading obstructions and

access to electrical and utility infrastructure. Precision Decisions LLC performed a feasibility

study for the city of Easthampton, Massachusetts in which they analyzed the city’s public

buildings to identify which, if any, would be suitable for roof-top photovoltaic system. The study

took into account vegetation shading, roof aspect and geometry, architectural features, structural

age, and access to electrical infrastructure. The firm was able to identify specific buildings that

met the criteria for a roof-top solar system and remove from consideration the structures which

did not meet their criteria. The Precision Decisions study provides an excellent example for

supporting this feasibility study by outlining the trade-offs of roof-top versus ground based

photovoltaic systems. Since the Makah have large swaths of open space on their reservation and

few public building structures, it was decided a ground-mounted system would be preferable.


GRID-PARITY

Grid-parity is a crucial concept to consider when conducting a feasibility study for a

photovoltaic system. The term grid-parity is used to describe when the cost of generating

electricity from an energy source has dropped to a price-point that is competitive with more

traditional energy sources such as coal or other fossil fuel. This cost is leveled to be more

reflective of financing, depreciation, and maintenance costs.

Farrell (2012) describes this process and how the feasibility of a system based on these

numbers may hinge on the size of the photovoltaic array. For example, a residential array may

cost nearly twice as much per unit of energy generated than a utility-scale system due to

economies of scale. Similarly, a system placed at higher latitudes may cost more per unit of

energy generated than a unit constructed at lower latitudes, as it must be larger to generate the

same amount of power. While both systems may be feasible in a locale such as Honolulu, Hawaii

or Phoenix, Arizona, they may not be in potentially marginal locations, such as that of the Makah

Tribe.

Kirk Hasserjian wrote in Power Engineering that to determine grid-parity, the cost of

electricity from renewable energy source such as solar must be competitive with grid-derived

electricity. To determine this cost, total project costs must be divided by total expected electrical

output (2010). This means the cost of the installation, permitting, and operation and maintenance

costs are added together and divided by total units of energy generated over the lifetime of the

facility. This provides an easy formula to understand and use in determining the whether the

Makah Community Solar Farm can meet grid-derived electricity prices.

Additionally, Hasserjian discusses solar cell efficiency. He states “efficiency is a key and

well-known cost metric because a field installation assembled from less efficient modules will


require more modules and more area, thus incurring larger installation costs.” Though the Makah

Community Solar Farm would be using industry standard high efficiency cells, the latitude of the

Makah reservation results in a lower level of solar radiation, decreasing the efficiency at which

the cells collect sunlight. In keeping with Hasserjian’s observation of higher installation costs,

the Makah facility would cost more and require the development of approximately 2.3 times

more area than a similar facility in Arizona or southern California.

Currently, numerous countries around the world are achieving grid-parity through free-

market mechanisms and government subsidized programs which give solar technology a

competitive advantage. The United States is quickly approaching grid-parity and has already

been achieved in some states including California, New York, and New Hampshire (ILSR,

2012). Washington State is on track to be one of the last states to achieve grid-parity due to its

high latitude, weather (ILSR, 2012) and lower than national average electricity prices (EIA,

2013). Washington State, however, does have several incentive programs which assist in the

adoption of solar technology (DSIRE, 2013).

Many of these subsidies and incentives are scheduled to phase out between 2013 and

2020 as solar technology has becomes more prevalent. The Solar Energy Industries Association

(SEIA) provides solar industry statistics related to market potential, industry growth, future

projections and how economies of scale will drive down the costs. According to the SEIA, solar

energy was the number two source of new power in the United States during the first quarter of

2013. Such trends will only increase economies of scale in terms of manufacturing, which will

further drive down prices across the industry, making some incentives unnecessary (Minott,

2013).


In determining the cost of a community solar farm for the Makah, a cost-benefit analysis

is necessary. Since the cost of solar technology has been dropping precipitously over the last few

years, what may be marginally feasible, or not feasible in 2013, may become feasible in

subsequent years. Therefore a staggered or multi-page cost-benefit analysis must be used to

determine how projected install costs over the next seven years influence the feasibility of a solar

farm on the Makah reservation.

An important component of a cost-benefit analysis is historical electricity price data,

which assists in identifying trends associated with price increases. The Washington State average

price for electricity is 8.56 cents per kWh (EIA, 2013). This represents the rate at which the

Makah Community Solar Farm must match in order to reach parity with grid-derived electricity.

The higher the average electricity prices will make this project more attractive as more money

can be saved over the lifetime of the facility. Washington State has the lowest electricity rates in

the country (EIA, 2013). Compared to solar energy-rich states, such as Hawaii where electricity

runs at nearly 37 cents per kWh (EIA, 2013), Washington’s rates represent a difficult barrier to

breach when trying to compete with other energy sources. For it to occur, electricity prices

would need to rise and/or solar technology costs would need to drop further.

EMPLOYMENT POTENTIAL

Nationally, unemployment is a serious issue (Oedel, 2013). The Makah, like most

communities, are constantly looking for new economic development opportunities that may

result in greater employment and higher quality of life. In a lecture given by Nadia Burleson

(2013) of Burleson Consulting, unemployment is one aspect of a project that needs to be

considered when developing a feasibility plan, particularly in regard to projects on tribal lands.


Goad, Weiss, and Caperton (2012) of the Center for American Progress provide some

noteworthy statistics on the average number of jobs that various renewable energy sources

produce. According to Goad et al, a total of 6.6 temporary and permanent jobs are created for

each megawatt of solar power capacity that is installed. This is more jobs than are created by

either wind or geothermal installations on a per megawatt basis (Goad et al, 2012).

Unfortunately, Goad et al does not differentiate between temporary construction jobs and

permanent jobs. Brown (2011), on the other hand, claims that a minimum of five permanent jobs

can be created per 20MW solar farm unit. The Makah Community Solar Farm would be

approximately 19MW, resulting in the potential employment of five Makah community members

if using the figure provided by Brown.

Grossman, Steininger, Schmid, and Grossman (2012) have performed lengthy research

into global employment by the photovoltaic industry in an article titled “Investment and

employment from large-scale photovoltaics up 2050,” where employment is discussed at length.

However it is discussed in terms of manufacturing capacity instead of employment potential

related to the operating and maintaining of existing solar energy facilities. The study provided

some interesting superfluous information on the trajectory of the industry, but the figures were of

no use to this feasibility study and how the Makah Community Solar Farm might employ local

residents.

DESCRIPTION OF SECONDARY RESEARCH

GIS ANALYSIS

When identifying a construction site for any facility designed to capture solar radiation, it

is necessary to perform an insolation analysis to locate which areas receive the highest

irradiance. To do this, a geographic information system (GIS) is constructed using ESRI’s


ArcGIS software. A built-in solar analyst tool is used to generate a map from an elevation model

that takes into account direct radiation from the sun, diffuse radiation from cloud cover and

atmospheric distortion, and reflected radiation. Every point on the map is given a value that can

be used to identify the most ideal location for capturing solar energy.

The reason for performing an in-house GIS analysis instead of using existing insolation

data is that this data does not have the resolution necessary to make an educated decision on the

feasibility of a community solar farm. This data is typically good for doing a regional analysis,

but when researching a local project, it is inadequate. Most solar radiation maps will classify the

insolation potential of the Pacific Northwest region into one or two classes for sake of simplicity.

Figure 1 illustrates the lack of resolution on the local scale which is similar to many publicly

available insolation maps. Note the broad insolation “bands” that extend north to south across

parts of the Midwest that are unable to show local topography variances.


Figure 1. United States photovoltaic solar resource map that illustrates lack of resolution in

small areas. Adapted from NREL. Retrieved July 10, 2013, from

http://www.nrel.gov/gis/images/map_pv_national_hi-res_200.jpg. Copyright 2008 by NREL.

Public Domain.

Local insolation analysis is necessary to acquire accurate information to be used in

determining the feasibility of a community solar farm since costs and the resulting analyses are

based on the amount of energy that can be captured per unit of land. As can be seen in Figure 1,

even from a low-resolution view, the local insolation potential of the Makah reservation is quite

low, particularly when compared to other parts of the country. According to the in-house GIS,


the maximum expected insolation potential on the reservation is approximately 3.12kWh/m2/day

and the minimum is 1.22kWh/m2/day depending on topography. For a larger insolation map

covering the entire Makah reservation, see Appendix B.

Figure 2. This map illustrates the insolation potential on Makah Lands using ESRI’s ArcGIS

Spatial Analyst. Created for this study by author in 2013.

For projects that need detailed, high resolution insolation data, it is necessary to develop

an original insolation data-set, specific to the local area of study. Without this component,

placement of a solar farm is susceptible to the biases and ignorance of project managers who

may not have the experience or expertise needed to maximize the solar farm’s output capacity.

This could lead to an under-performing facility in terms of electricity generation and increased

costs as additional generating capacity is installed to make up for inefficiency.


PROPOSED SITE

When using GIS, it is necessary to define the criteria that will be used in the analysis. The

criteria used to locate potential construction sites are as follows:

Contiguous to existing access roads,

Contiguous to electrical infrastructure,

On hillsides with a slope of less than 15 degrees,

Have a southward orientation (aspect),

And to the extent possible, locate lands that have previously been cleared for other

purposes.

A site matching these requirements exists near the Sail River Heights community on 200

Line Road on the reservation. This area provides an insolation value of 2.92kWh per square

meter per day due to its south facing slope.

Much of the proposed site was previously cleared during a timber harvest in 2011,

reducing the need to clear new land. It is bounded on the south side by a paved access road, and

is in close proximity to electrical and water infrastructure. Land development is currently being

performed near this site in an effort to slowly migrate community buildings and projects out of

the designated tsunami zone. A new Indian Health Services (HIS) clinic and a neighborhood

called Sail River Heights are currently being constructed on the north and south sides of this site.


Figure 3. Makah community solar farm site. Shows the potential construction site as determined by GIS

analysis. Created for this study by author in 2013.

While there are locations on the reservation with higher insolation values, they often

occur on extremely steep hillsides and cliffs, making the locations too costly, unsafe, or unstable

to develop. The site chosen represents a high insolation value relative to its accessibility and

slope.

Five other sites were initially considered before settling on the Sail River Heights

location. All five were located on the west side of the reservation near the Tribal Center

headquarters. Table 1 breaks down each site by criteria qualification. See Appendix D for

overview map of the additional five sites that were considered.


Table 1 Site Consideration and Selection

Site ID

Site Name Road

Access

Electrical Infrastructure

Access

Slope < 15

degrees

Southward orientation

Land Cleared in

Last 10 Years

Insolation Value

kWh/m2/day

A Cape Road

Yes No Yes Yes No 3.09

B Wa'atch Yes Yes Yes Yes No 2.99 C Bohokus No No No Yes No D Bay View No No No Yes No 2.51

E Makah Passage

Yes Yes Yes Yes No 2.97

F Sail River Heights

Yes Yes Yes Yes Yes* 2.92

Note. Site A and B had too small of area for construction. Site E had wetlands with year-round standing water.

Note. The Sail River Heights site (Site F) met all the criteria and was thus chosen as the future site of the Makah Community Solar Farm

*Lands partially cleared from timber harvest in 2011

Though six sites were initially considered, only one was found to meet all the criteria that

were set forth. Sites A and B were immediately dropped due to lack of development space. Sites

C and D are extremely difficult to access since they are near the peaks of mountains and lack

roads and electrical infrastructure. Site E was dropped because it was almost entirely comprised

of wetlands and perennial standing water. As a result of this analysis, site F (Sail River Heights)

chosen as the potential construction site.

SOLAR FARM FACILITY

Makah Reservation Electrical Use. According to Annette Long of the Clallam County

Public Utility District #1, the Makah reservation has an average load of 2.3 megawatts. This

translates into 20,148 mWh per year or 20,148,000 kWh per year. As determined in the GIS

analysis, there are only 2.92 hours of combined usable solar radiation per day at the proposed


solar farm site. As such, a solar farm’s rated capacity must be 8.22 times (24 hours/2.92 hours)

its load requirement in order to produce enough surplus electricity that the reservation can

operate during low solar hours (night, low angle sunlight, overcast weather) using the grid and a

net metering system or power purchase agreement with the local public utility district. Based on

these numbers, the estimated rated capacity for the Makah Community Solar farm is 18.9

megawatts.

Solar Farm Footprint. Since this part of the country receives less than half of the solar

radiation as parts of the southwest, the final dimensions of the project will be more than twice as

large as a similar system in the southwest United States. According to Entergy-Arkansas, a

power utility company, one megawatt of power output requires approximately 7.4 acres of

outdoor space. Since the Makah facility is rated at 18.9 megawatts, it will require approximately

140 acres. Surrounding the site that was identified as the most ideal location are several south

facing hillsides that meet the GIS criteria for slope, aspect, accessibility, and insolation potential.


Figure 4. Makah Community Solar Farm build area footprint. A figure created by E. Ray using

ArcGIS Desktop. This map illustrates the proposed build area for a 140-acre solar farm on three

south-facing hillsides.

COST OF ELECTRICITY AND GRID PARITY

As of April 2013, electricity in Washington State costs 8.56 cents per kilowatt-hour (EIA,

2013). This represents the maximum price at which a solar farm must be able to produce

electricity in order to reach grid-parity. The cost of electricity has steadily risen an average of

3.1% per year over the past decade (EIA, 2013) and this study estimates this increase rate will

continue into the foreseeable future. Over the course of the typical 25 year lifetime expectancy of

a solar farm, compounded grid-derived electricity prices at the end of the project’s lifetime are


projected to be 17.8 cents per kilowatt-hour. This is more than double current electricity prices

which represents a 108% increase over 2013 electricity prices.

FUNDING AND FINANCING

Federal. The Tribal Energy Program and the Department of Energy’s Office of Indian

Energy Policy and Programs offered funding opportunities in the first half of 2013. The

Community-Scale Clean Energy Projects in Indian Country and Tribal Renewable Energy and

Energy Efficiency Deployment Assistance programs both had application deadlines of June,

2013 and are thus no longer available (DOE, 2013).

Other U.S Departments have related financial opportunities that could be used for a

project such as this. However, they are not directed specifically at renewable or solar energy

development. For example the U.S. Department of Agriculture offered the Rural Business

Enterprise Grant (RBEG) with a maximum grant of $500,000 (USDA, 2011). If the Makah

Community Solar Farm qualifies for this or a similar grant, these programs may represent a small

opportunity for funding relative to the total cost of the solar farm.

Also at the federal level are a number of corporate tax credits which offer a tax credit of

30% of the total install cost of a commercial or utility scale solar farm (DSIRE, 2013). Indian

tribes, however, are not eligible for this credit since tribes and tribal members do not pay federal

taxes.

State. Washington State offers $0.12 to $1.08 per kWh generated by community solar

projects using components manufactured in the state of Washington, with a maximum annual

incentive of $5,000. Maximum project size is limited to 75kW or less (DSIRE, 2013), rendering

the Makah Community Solar Farm ineligible due to the scale of its generating capacity.


Local. The Clallam County Public Utility District (PUD) offers loans through their

Utility Loan Program to small businesses and residences who install photovoltaic systems. The

loan program offers a maximum of $15,000 per applicant which amounts to two percent of the

total cost of the Makah Community Solar Farm if it were developed in 2013.

Another option that was explored with the Clallam County PUD was to set up a power

purchase agreement (PPA) to offload excess power generated on the reservation. A discussion

took place with the Utility Services Advisor, Mattias Jarvegren, about net-metering versus a

power purchase agreement. He stated that the Clallam County PUD would be unwilling to

partner with the Makah Tribe in a power purchase agreement since they believe that a utility-

scale solar farm in this area could not generate electricity at a price competitive with electricity

sourced from the Bonneville Power Administration. Furthermore, he clarified their policy on net-

metering, stating that net-metering is only acceptable for smaller solar systems less than 100kW.

This is significantly smaller than the Makah Community Solar Farm and thus is not an option.

Private. Financing is another option for acquiring funding by tapping into the capital of

private lenders. Unique Capital is a firm that specializes in lending for solar energy plant

development with loan amounts from $15 million to $500 million. Unfortunately for borrowers,

loans are only available for projects that have acquired a power purchase agreement with their

local utility, which has been shown to be an issue for the Makah Community Solar Farm since

power cannot be generated at a low enough rate to compete with other electricity sources

currently being used by the PUD.

EMPLOYMENT

Brown (2011) states that five permanent employment positions can be expected from

each 20MW of capacity that is installed. Based on this figure and determined size of the Makah


Community Solar Farm, it was determined that an operations and maintenance crew of five will

be necessary. Since the Makah facility is just under 20MW (18.9 MW) it will employ a three-

person maintenance crew, an engineer, and a security officer. The projected economic impact of

these five positions over the lifetime of the facility is approximately $8.5 million. Due to the

isolation of Neah Bay, this money is likely to be reinvested/spent in the local community.

DATA SUMMARY AND ANALYSIS

Based on the literature review, grid-parity will be a difficult barrier to breach since

electricity rates in Washington State are low relative to other U.S. states. These low electricity

rates, in conjunction with poor insolation values, make any solar farm project questionable in

terms of economic viability. Though there is employment value added to the tribe and local

community, it is insignificant relative to the substantial cost of construction.

Employment potential is also questionable since there is a lack of published data specific

to jobs related to the operation and maintenance of solar farm facilities. Despite this ambiguity,

this study has identified a realistic employment figure that will meet the operational needs of the

solar farm and provide the community with additional employment opportunity. It is

recommended that six employees be hired which contributing approximately $8.5 million to the

local economy over the lifetime of the facility.

BUSINESS MODEL CANVAS

KEY PARTNERS

This feasibility study will require the partnership of the following organizations and

entities:

Makah Indian Tribe

Clallam County Public Utility District


Bureau of Indian Affairs (BIA)

Financing Partner(s)

Makah Community Members

Engineering Consultant

Coordination with the Clallam County Public Utility District is necessary to develop a

power purchase agreement for the sale of excess electricity from the Makah Community Solar

Farm. This conversation can only occur once it can be proven that electricity can be generated at

a price below what the Bonneville Power Authority could provide it at.

Since the solar farm will be constructed on Indian lands held in Tribal Trust status, a

proposal would be made to the Bureau of Indian Affairs outlining the project and seeking

permission to construct the facility. Once approval was granted, an environmental review would

take place to measure potential impacts on the surrounding area.

Financing is an integral part of this project. Acquiring financing through a bank or third-

party investment group specializing in energy development projects would be necessary as the

total estimated cost of the project is far greater than the tribal budget can handle. This study

recommends contacting Unique Capital, an investment firm specializing in lending to energy

development projects.

Makah community members should be asked to participate in public hearings and

scoping sessions to seek unique perspectives from those who will be living and working in and

around the facility. Often these individuals have important insight or concerns that a feasibility

study or management had not previously considered. Furthermore, as consumers of the

electricity and members of the Makah Tribe, they have the right to be heard and voice their

opinion.


Finally an engineering firm will be consulted to draw up blueprints for the facility and to

do a geologic and hydrologic analysis of the proposed build area to ensure slope stability prior to

installation of the solar farm.

KEY ACTIVITIES

If this project moves forward, a Makah Community Solar Farm committee should be

assembled to meet and facilitate the communication and needs of this project and its

stakeholders. Initially their purpose will be to build relationships with those whom the tribe

deems Key Partners. Specific Key Activities will precipitate from interactions with these

partners.

This feasibility study previously demonstrated the lack of grants and solar technology

incentives available to the Makah Tribe. Prior to development, these multichannel funding

sources need to be reconsidered to identify any changes to these incentive programs. If the tribe

does at that point qualify, the on-staff tribal grant writer, Crystal Hottowe, should be tasked with

applying for the grant(s).

Since the proposed construction site is on Indian lands held in trust by the Federal

Government, a proposal seeking permission from the Bureau of Indian Affairs (BIA) is required.

In addition, since it is in Federal trust status, an environmental review will be required. The

tribes Environmental Department would work in conjunction with the Planning and Economic

Development Department to develop this report for submission to the BIA.

Once the BIA has approved the land for development and after the environmental review

was able to show the project would find no significant impact, the Clallam County Public Utility

District would be brought on board to establish a power purchase agreement to offload excess

power generation during peak daylight hours.


VALUE PROPOSITIONS

A facility such as this would reduce the external costs of electricity to the tribe by up to

100% since all tribal power needs would be met by internal electricity generation. Since the

Clallam County PUD is a non-profit organization, there would be no profit margin that the tribe

could benefit from unless power could be generated below the Washington State average of 8.56

cents per kilowatt-hour. Tribal members would be employed at the facility, and the Makah

people could showcase it as a source of pride in the region, and also as a case study for other

tribes. Additionally, the site can be a learning tool for local schools both inside and off the

reservation.

Although the cost of the facility is considerable, much of the investment will be internal

to the Makah Tribe. Ideally all employees will be local individuals who would be able to return

money back into the economy. Despite the high cost of the facility itself, the Tribe would then

have an established solar farm site that can be redeveloped at a lower cost after the initial

installation lifetime expectancy has passed and solar technology prices have fallen even further.

Another option would be to lease the site to a third-party utility for redevelopment.

CUSTOMER RELATIONSHIPS

The tribe would essentially be its own customer and would likely not be doing businesses

with outsiders. If excess power is generated it would be sold to the Clallam County PUD at an

acceptable rate, which would create a customer-like partnership with the PUD. Additionally,

there are a couple of leased properties on the reservation that are managed by non-Makah,

however they amount to very few in number and would represent a negligible customer base.


KEY RESOURCES

Resources that are key to the success of this project are available land that meets siting

criteria, assets such as access roads, and electrical and water infrastructure. Solar radiation,

however, is the most important natural resource. Care should be taken to not unnecessarily

damage existing vegetation, wetlands, or waterways. Human resources in the form of employees

who will manage and operate the facility are key to the success of this project. Without them, the

completed facility would cease to operate efficiently.

CHANNELS

Approval of this feasibility study went through the heads of the GIS and Tourism and

Economic Development departments. Further approval and coordination necessary to move

forward from here would be through the Tribal Council, the Bureau of Indian Affairs, and the

Clallam County Public Utility District #1. Additional coordination with the Realty, GIS, and

Tourism and Economic Development Departments will also be necessary to acquire tribal

datasets and appropriate planning and development procedures.

COST STRUCTURE

There would be fixed costs associated infrastructure hookups to the grid and water lines

and training of staff to operate and maintain the facility. Clearing of vegetation and forest on the

development site as well as the cost of the solar farm equipment would represent marginal costs.

Engineering and consulting firms would need to be consulted to develop blueprints and a

construction plan..

REVENUE STREAMS

Funding for a community solar farm would come from tribal funds, applicable grant

moneys, and financing through a private sector bank or investment firm. The power purchase


agreement with the Clallam County PUD will represent a potential revenue stream, however

since the tribe will be consuming most if not all of the electricity produced, it will end up

purchasing that electricity back from the PUD through the power purchase agreement during

hours of low solar activity.

ENVIRONMENTAL COSTS

Approximately 140 acres of existing forest and previously-cleared but productive

industrial forestlands will be taken out of commission if a solar farm is constructed. This will

affect wildlife to some extent. Due to the amount of rain the area receives, cleared land has the

potential to create excess runoff, possible effecting hillside integrity and stream and water

quality. An environmental assessment will be required to determine what, if any, impact would

occur. It was suggested that some or all of this facility be constructed on the roof surfaces of

existing buildings. However due to the size of the solar farm necessary to meet the tribe’s needs,

it was decided that no portion of the system will be constructed on building rooftops. There

simply isn’t enough available roof-space, nor are existing roofs in areas with high solar radiation

potential.

SOCIAL AND ENVIRONMENTAL BENEFITS

A community solar farm of this size would reduce carbon dioxide emissions by 14,215

metric tons per year (EPA.gov, 2013). This is the equivalent of removing 2,962 cars from the

road each year (EPA.gov, 2013). It would provide excellent education for local residents and

students and introduce them to the potential of renewable and sustainable energy/business. There

would be employment opportunities associated with this project which would increase the

quality of life on the reservation.


LIMITATIONS OF THE RESEARCH

Lack of previous research on the employment potential from the operations and

management of a solar farm limits the reliability of calculated employment benefits and costs.

Two articles were identified that provide a glimpse of employment potential. Goad et al (2012)

gives a figure of 6.6 direct jobs per installed megawatt related to the “construction, installation,

and operation and maintenance." Unfortunately the methods used to arrive at this number are

unknown rendering this figure somewhat arbitrary. Construction and installation jobs are of less

concern because they are temporary while operation and maintenance employment figures would

be ideal. A second source published on CleanTechnica claims that each 20MW portion of a solar

project should employ a “three-person maintenance crew, an engineer, and security personnel”

(Brown, 2011). While this study did deduce what it believes to be an accurate employment figure

within the Makah context, the discrepancy between these two sources brings into question any

conclusion on the matter of employment. This study recommends consulting with a solar

engineering firm to determine a reasonable employment figure for the Makah Community Solar

Farm.

FINANCIAL PROJECTIONS

MARKET ANALYSIS

The Solar Energy Industries Association (SEIA) provides solar industry statistics related

to market potential, industry growth, and future projections and how economies of scale will

drive down the cost of this technology drastically. In 2011, total solar installations in the U.S.

increased by 177% from 2010 figures. In 2012 new installations increased again by 76% from

2011 figures. 2013 is projected to be yet another year of massive solar industry growth as

indicated by growth in Q1 2013 versus Q1 2012 (SEIA, 2013).


Figure 5. U.S. PV installations by market segment, Q1 2010 – Q1 2013. Illustrates the massive growth

of the solar industry in the united states over the last three years. Reprinted from U.S. Solar Market

Insight Q1 2013, by SEIA, 2013. Retrieved from http://www.seia.org/research-resources/us-solar-

market-insight-q1-2013. Reprinted with permission.

In determining the cost of a community solar farm for the Makah, a cost-benefit analysis

was performed. Since the cost of solar technology has been dropping precipitously over the last

few years, what may be marginally feasible or not feasible in 2013 may become feasible in

subsequent years. Therefore a staggered or multi-page cost-benefit analysis was used to

determine how projected install costs over the next few years would influence the feasibility of a

solar farm on the Makah reservation. Current projections predict the installed cost of solar to

drop by approximately 7% per year until 2020 (ILSR, 2012).


Figure 6. Average installed price by market segment, Q1 2011–Q1 2013. Illustrates the precipitous

drop in install costs of solar technology. Reprinted from U.S. Solar Market Insight Q1 2013, by SEIA,

2013. Retrieved from http://www.seia.org/research-resources/us-solar-market-insight-q1-2013.

Reprinted with permission.

An important component of a cost-benefit analysis is historical electricity price data,

which assists in identifying trends associated with price increases. Higher average electricity

prices will make this project more attractive since more money will be saved over the lifetime of

the facility.


COST-BENEFIT ANALYSES

To determine the financial feasibility of the Makah Community Solar Farm in terms of

meeting the price of grid-derived electricity, a series of cost-benefit analysis was completed. Due

to the precipitous drop in solar costs, four cost-benefit analysis were created in an attempt to

determine if it would be more cost-advantageous to delay construction until a future date when

solar technology became cheaper. The initial cost-benefit analysis was performed for the year

2013, while future cost-benefit analyses were performed for the years 2015, 2017, and 2020.

Costs that these analyses took into account were the initial installment of the facility,

scheduled maintenance and cleaning, unscheduled maintenance, inverter replacement, salaries of

workers, and training costs. Cost data for the installment of the facility was found at multiple

sources, however this study was based off of only two. For install costs in 2013, the Solar Energy

Industries Association (SEIA) provided a range of figures. For the purposes of this study, the

highest figure was chosen for calculations was $3.90 per watt of installed capacity. For projected

costs, data was collected from the Institute for Local Self-Reliance. They calculate that costs will

drop by nearly half by 2020.

Benefits that were considered for the cost-benefit analyses were limited to electricity

savings over the course of the solar farms life, as well as the employment value of those who

were hired to operate and maintain the facility. Since the tribe would be encouraged to hire

enrolled Makah members, these are funds that will remain within the community, reducing

unemployment and increasing the quality of life of the community.

This study initially seeks to include applicable state and federal grants, tax credits, and

incentives in the cost-benefit analyses. There is a lack of such programs that can be applied to the

Makah Tribe, one reason being Indian Tribes do not pay federal taxes. Washington State has a


program designed to pay solar energy generators for each kWh produced. However the state

limits the size of eligible solar farms to less than 75kW and limit the payout to not more than

$5000 per year (DSIRE, 2013). As a result, no incentives or grants were included in the cost-

benefit analyses. If the size of the solar farm were drastically reduced to provide more local

energy needs like in neighborhoods or for various departmental buildings, the install capacity

size would likely be under the 75kW size and the tribe could then benefit from the Washington

State incentive programs and would qualify for net-metering. This may not be feasible either,

however, since multiple sites on the reservation that met our siting criteria do not exist.

Despite using multiple cost-benefit analyses, none of them showed that it was financially

feasible to develop Makah solar resources. Even when located in an ideal site, it was still cost

prohibitive. Prices for solar technology would have to drop below $1.00 per watt of installed

capacity to break even. A solar farm built in 2013 would result in electricity costs of

approximately $0.24/kWh. For solar farms constructed in 2015, 2017, and 2020, the cost would

be $0.22/kWh, $0.21/kWh, and $0.20/kWh, respectively.

IMPLEMENTATION PLAN

In order for the Makah Community Solar Farm to be implemented, certain elements of

this project will have to change in order to make the Makah Community Solar Farm financially

feasible. There are several ways this might occur.

The price of solar technology needs to drop drastically

The efficiency of solar technology needs to increase dramatically

Significant grant/incentive money is acquired to offset installation costs

While the first two of these three factors are currently taking place in the market, they have many

more years before they reach either the price or efficiency point necessary to drive down the cost


of electricity generated by the Makah Community Solar Farm below the state average of 8.56

cents per kilowatt hour. Regular reviews of new market and technology data need to be

conducted in order to determine when and if price and/or efficiency shift occurs.

If significant grant money can be acquired, the initial install cost could be offset to the

point that electricity can be generated at a competitive rate. Currently there are not enough

federal, state, or local incentives available to make this possible, even if the Makah Tribe

qualified for each one.

If the Makah Community Solar Farm becomes financially feasible, a power purchase

agreement (PPA) will need to be established with the Clallam County PUD. The PUD explained

that until they are confident that a power generator can generate electricity below the cost of

power sourced from the Bonneville Power Authority, they are not interested in discussing a PPA.

CONCLUSIONS AND RECOMMENDATIONS

At current solar technology prices and at projected prices over the next seven years, the

Makah reservation is not conducive to the development of solar energy resources at a price point

that is competitive with grid-derived electricity. This is primarily due to the lack of solar

radiation at this latitude and climate resulting in a much larger install capacity than would be

required in other parts of the country. This fact, in conjunction with relatively cheap grid-derived

electricity in Washington State, render a Makah Community Solar Farm not financially feasible

at this time. At 24 cents ($0.24) per kWh, such a facility would generate electricity at a price

approximately three times that of electricity purchased from the grid at 8.56 cents ($0.0856) per

kWh.

This study recommends that the Makah Tribe not pursue the development of their solar

resources using this technology. In the future the tribe should conduct regular reviews to


determine if market conditions have changed. In the meantime, the Tribe should focus on

researching and developing their many other resources. One such resource worth consideration is

the large amount of biomass the Tribe has access to as a result of their logging operations. A

feasibility study should be performed on the economic viability of a biomass heat and electricity

generating facility; ironically an indirect form of solar energy.


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APPENDIX A – Overview Map of the Makah Reservation


APPENDIX B – Map of Solar Potential of Makah Reservation


APPENDIX C – Proposed Solar Farm Site


APPENDIX D – Overview Map of Additional Site Considerations

Running Head: FEASIBILITY STUDY FOR MAKAH SOLAR FARM 46

APPENDIX E – Cost-Benefit Analysis – 2013-2020 Development and Solar Farm Life Expectancy


APPENDIX F – Business Model Canvas

mba gis solar farm feasibility study

Documents