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Here’s why this is so important:
Cities all around the word are committing to reducing their carbon emissions by switching to renewable energy, and many have made a lot of progress. For example, Germany occasionally approaches obtaining close to 100% of its electricity from renewable sources (lots of qualifiers in that sentence).
There are a few cities in the United States that are already near 100% renewable, including Bernie Sanders’s home town of Burlington, Vermont and Aspen, Colorado. But in general, our country has a lot of work to do when it comes to going green.
That’s why we were pleasantly surprised to hear the Los Angeles city council is taking up a motion to direct the Los Angeles Department of Water and Power (LADWP), its municipal utility, to study the path the city should take to going 100% renewable.
Interestingly, LADWP already has a plan to get to 10% of electricity from solar by 2020, which includes incentives to homeowners for putting panels on their roofs, but we think that can be improved upon. We’re shooting to replace coal with solar for the whole city.
What it’s going to take to kill coal in L.A.
After some pretty intense financial calculations, we’ve come up with a rough idea of what we think it would cost for LADWP to go from its present mix of energy, with 1% solar, to a better mix of energy by 2025, with 41% solar. That number would completely replace the energy LADWP gets from coal, with enough batteries to store excess solar energy for when it’s needed.
What we found is that LA is going to need about 6.3 Gigawatts of new solar installed over the next 10 years, to hit 41% of its usage by then. That’s like 8 panels for every man, woman, and child in the city. Now, a lot of a city’s electricity goes to powering industrial and commercial buildings, so the energy output of those 8 panels will not get used in homes, but will be spread out over the whole city.
The cost of all this solar
We estimated that if the project could begin today, LADWP would have to pay $2 per installed watt of solar, which is right in line with the National Renewable Energy Laboratory’s (NREL) estimates for this year:
After 2016, we set an annual decease in the installation price of about 7.5%, which is right in line with the solar industry’s results—since 2009, the price of installing solar has gone down more than 70%.
So the total cost for all these panels is estimated to by about $6.5 billion over the 10-year project. But don’t forget: solar power can be sold to offset the costs as soon as the panels are installed! Sales of that electricity will bring the net cost of installing the panels down to just $3.9 billion after 10 years, and once the initial phase is complete, the project will break even sometime during 2028, just over 12 years after breaking ground.
What about batteries?
Batteries are becoming a hot topic in the solar community, because the sun is often shining the brightest when the grid isn’t quite ready for how much power it can deliver. Take a look at the example below of a solar home:
That bump in solar isn’t a big deal when you’re talking about just a few panels on a house, because the excess power can be sent to neighbors. But having 40% of L.A.’s electricity come from solar means that sometimes the city won’t be ready to use the power, so you add batteries that can store the excess for when it’s needed.
Our estimates allowed for up to 20% of the solar energy to be stored for later use. Now that 6.3 GW of solar will kick out around 27 GWh of electricity in a day, while the city needs 68 GWh. Our batteries can store up to 5.4 GWh so the power can be used when and where it’s needed.
Our initial estimates show a cost of about $100 per kilowatt-hour (kWh) of batteries, which we figured would go down by about 2% per year. So the total cost of the batteries over the 10 years of the project is estimated to be about $4.8 billion.
But! Those batteries do more than just store electricity. They also reduce the need for transmission and distribution line projects all over the city, because they’ll live where the power they deliver will be consumed. The value of those benefits is not added in our analysis, because it’s too difficult to quantify for anyone who isn’t a utility company bean counter.
But we’re talking about sunny L.A., so this wouldn’t work for other cities, right?
Wrong. This kind of program can work for cities all across the country. San Diego, Dallas, Miami, and oh yeah: Newark, Minneapolis, and Boston, too. Whether or not your town is super sunny, solar power is getting so cheap that it’s starting to beat even the cheapest forms of fossil fuel.
But there’s an important point about cities going solar that can’t be understated: if you let utility companies control the electricity generation, they’re going to keep raising rates and reaping the profits. A better way for a city to go solar would be to help regular home and business owners install panels on their buildings, using what they need and delivering the rest to their neighbors.
It’s not as cheap as utility-scale installations (yet), but it’s cost-effective enough to provide returns better than the long-term performance of the stock market in over half the states in the USA. Take a look at the chart below. Every state with a green segment of the ring is at or above an 8.3% internal rate of return for a solar investment:
So don’t wait until the government decides to go solar for you. Talk with one of our solar experts today and see how much you can save with solar.
Last modified: February 16, 2017