Solar Water Heating as a DSM Strategy for Colorado Utilities & Their Customers

Joe Bourg October 22, 2009

Millennium Energy, LLCGolden, Colorado

jbourg@q.com(303) 526-2972

3rd Colorado Utility Efficiency Exchange

Presentation Summary

• News you can use

• Tips on solar program design

• United Power SHW Pilot Program • Utility Perspective• Customer Perspective

• SHW Business Models

• Tools for Customer Service Reps

• Q&A

US Markets Heating Up for Solar Water Heating

• In 2007, California approved a 10-year plan to add 200,000 solar water heaters statewide.

• Renewal of Federal solar investment tax credits provides a long-term extension of tax credits; removes $1,500 cap

• Lakeland, FL: 3,000+ systems in outsourced package deal

• February 2009, Energy Star™ Launched solar water heating promo; U.S. stimulus to include SWH

SWH IS Water Heating in Austria, Australia

But How Will That Play in Colorado?

Solar fraction: the % of typical, annual residential water heating needs that can be met by standard SWH technology.

Source: NREL

The Utility Can Add Strategic Value

• Improving customer service• Reducing customer bills• Diversifying the utility resource mix (easy solar)• Supporting local economic development• Meeting or anticipating regulatory requirements• Generating RECs for possible future use • Managing peak loads (demand-side management)• Reducing purchased power costs

Caveats:1) Is electric water heating significant in the utility territory, or is fuel-

switching from propane or gas advised?2) Is it worth going after such a small, dispersed solar resource?

Principles of Good Program Design

• Assess co-op program drivers (situation analysis)• Review technical potential• Adjust for market potential (define the target market)• Address technical and market requirements• Choose a business model (financing and incentives) • Test program economics and make adjustments• Plan for implementation• Plan for evaluation and improvement

Don’t Forget the Economic Development Impacts

United Power SHW Program AnalysisCoincident Peak Demand Reduction - Winter

United Power SHW Program AnalysisCoincident Peak Demand Reduction - Summer

United Power SHW Program AnalysisMonthly Coincident Peak Demand Reduction

United Power SHW Program AnalysisMonthly Coincident Peak Demand $ Savings

United Power SHW Program Economics• Inputs:

• Results (NPV basis):

Peak Demand Cost Demand Ratchet Avoided Energy Green Tag Value Avoided Coincident Program Cost$/kW-Month Months/yr Gross Margin $/kWh Peak kW/SWH system $/SWH System

$21.50 12 11.00% $0.00 0.45 $200.00

Rebate Model -- Utility Perspective CostsRebate $0Program ($200)Gross margin lost energy sales ($568)(Maintenance is customer cost) $0

BenefitsAvoided demand charge $2,081Green Tags $0Other $0

Total Net Benefit (cost) $1,314

United Power SHW Program Customer Economics

• Inputs:

• Results (NPV basis):

• The economic analysis was conducted with the Millennium Energy developed spreadsheet model available on the “GEO Utility SHW Tools and Information Resource CD”

Life of Annual Energy Annual Energy Year '1' Cost Inflation Rate Federal Cost of Solar WaterSystem Savings (kWh) Consumption Of Energy Tax Credits Heating (SWH) System

20 2,703 10,000 0.1066 3.50% $2,625 $8,750

Total Rebatesfor System (GEO)

$3,000

Discount Rate

4.25%

Estimated AnnualO&M Costs ($/kWH)

$0.005

Customer Cost ofSWH System

$3,125

Net Present Value Benefit-Cost Average Annual Simple Payback Lifecycle % of Electricof SWH System Ratio Value of Energy Period (years) IRR Bill Savings

$1,796 1.53 $407 7.7 9.37% 27.03%

Customer Payback Vs. System Cost

3 Basic SWH Business Models

1. Rebate Model. Utility provides support services and rebates, paid to solar customers or sometimes to trade allies. The most common utility program model.

2. Utility Ownership Model. Utility provides turnkey SWH energy services. Success has been limited, but instructive.

3. Third-Party Vendor Partnership Model. Similar to ESCO model. Customer receives SWH at no charge, but continues to pay for kWh-equivalent energy services. The utility benefits by outsourcing risks and partnering to meet strategic and economic needs. An emerging business model worth watching.

Tools and Information for Customer Service Reps: Education and Outreach CD

More ResourcesDenholm, P., The Technical Potential of Solar Water Heating to Reduce Fossil Fuel Use and

Greenhouse Gas Emissions in the United States, National Renewable Energy Laboratory, Technical Report, March 2007. Available at http://www.nrel.gov/docs/fy07osti/41157.pdf

Energy Star Residential Water Heaters: Second Draft Criteria Analysis and Proposal, U.S. EPA, October 2007. Available at http://www.energystar.gov

Solar and Efficient Water Heating: A Technology Roadmap, U.S. DOE Energy Efficiency and Renewable Energy Program, 2005. (New plan under development in 09-10) Available at http://www.nabcep.org/solar.cfm

Solar Thermal Action Plan, European Solar Thermal Industry Federation, September 2007. Available at http://www.estif.org

U.S. H2O, utility-solar interest group, information at www.eere.energy.gov/solar/ush2o

Contact: Joe Bourg, President

Millennium Energy LLCGolden, Colorado

jbourg@q.com(303) 526-2972