A presentation by ILSR Senior Researcher John Farrell on the barriers to distributed generation in the United States and the few community distributed renewable energy projects that have overcome them.

1. Barriers to Distributed
Renewable Energy
efficient | economical | equitable
John Farrell, Senior Researcher

2. Total Installed Capacity
47,000 MW
4,034 MW
Together = 3.3% of U.S. sales

3. How Much Community-Owned?
47,000 MW
5%? 10%? 25%?
4,034 MW

4. Community-Owned
just 1%

5. Why Community-Owned?
2
Community-Owned = distributed
(distributed generation) x (distributed ownership)

6. Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility

7. Tradition
Utility Perspective Reality
Centralized Power Clean, local power
Solar PV
power plant
Storage Storage
Transmission network
Storage
Storage
House
Local CHP plant
Distribution network House with
domestic CHP
Wind
power
Factory Commercial plant
building

8. Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility

9. Capital
...buy this?
How can
they...

10. Rules for Raising Capital
• Full registration
• Regulation D
• Regulation A
• Intra-State
• Private

11. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
$30,000 Accredited investors;
Regulation D -50,000
$10,000/yr
prior relationship
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
$50,000
Intra-State -75,000
$10,000/yr (MN) In-state only
Prior relationship; no
Private Minimal Minimal
advertising

12. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
$30,000 Accredited investors;
Regulation D -50,000
$10,000/yr
prior relationship
9%
3%
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
Project Cost
$50,000
Upfront
Intra-State -75,000
$10,000/yr (MN) In-state only
Compliance
Prior relationship; no
Private Minimal Minimal
advertising

13. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
$30,000 Accredited investors;
Regulation D -50,000
$10,000/yr
prior relationship
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
59%
Intra-State 19%$50,000
$10,000/yr (MN) In-state only
-75,000
Project Cost
Prior relationship; no
Private
Upfront Minimal Minimal
advertising
Compliance Too costly for small projects

14. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
Accredited
$30,000 investors; prior
Regulation D -50,000
$10,000/yr
relationship w/
investors
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
$50,000
Intra-State -75,000
$10,000/yr (MN) In-state only
Prior relationship; no
Private Minimal Minimal
advertising

15. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
Accredited
$30,000
Regulation D -50,000
$10,000/yr investors; prior
relationship
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
$50,000
Intra-State -75,000
$10,000/yr (MN) In-state only
Prior relationship; no
Private Minimal Minimal
advertising

16. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
Accredited
$30,000
Regulation D -50,000
$10,000/yr investors; prior
relationship
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
Intra-State $50,000
-75,000 ≤ 2 turbines
$10,000/yr (MN) In-state only
Prior relationship; no
Private Minimal Minimal
advertising

17. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
Accredited
$30,000
5%
Regulation D -50,000
$10,000/yr investors; prior
relationship
27%
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
$50,000
Intra-State
Project Cost -75,000
$10,000/yr (MN) In-state only
Upfront
Compliance Prior relationship; no
Private Minimal Minimal
advertising
Still costly for small projects

18. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
Accredited
$30,000
Regulation D -50,000
$10,000/yr investors; prior
relationship
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
$50,000
Intra-State -75,000
$10,000/yr (MN) In-state only
Prior relationship; no
Private Minimal Minimal
advertising

19. Type of Upfront Compliance
Restrictions
registration Cost Costs
5%
$100,000-
27% SEC
Full 125,000
Over $400,000/yr None
Accredited
Project Cost
$30,000
Regulation D -50,000
$10,000/yr investors; prior
Upfront relationship
Compliance
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
$50,000
Intra-State -75,000
$10,000/yr (MN) In-state only
Prior relationship; no
Private Minimal Minimal
advertising
Still costly for small projects

20. Type of Upfront Compliance
Restrictions
registration Cost Costs
$100,000-
Full SEC 125,000
Over $400,000/yr None
Accredited
$30,000
Regulation D -50,000
$10,000/yr investors; prior
relationship
$50,000
Regulation A -75,000
$10,000/yr $5 million offering
$50,000
Intra-State -75,000
$10,000/yr (MN) In-state only
Prior relationship;
Private Minimal Minimal
no advertising

21. Capital is HARD
• Full = EXPENSIVE
• Regulation D = RICH FOLKS
• Regulation A = SIZE/COST
• Intra-State = COSTLY
• Private = LIMITED

22. Hope: Crowdfunding
• 2012 federal JOBS Act
• $1 million limit
• Minimal compliance
• Lower upfront cost: $10-15k

23. Example
Private
Placement

24. Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility

25. complex...

26. Minnesota Commercial Solar Project Cash Flow
30% 25% 25% 20%
0% 25% 50% 75% 100%
Federal tax credit Depreciation
State rebate Net metering

27. Germany/Ontario Commercial Solar Project Cash Flow
100%
0% 25% 50% 75% 100%
Feed-In Tariff

28. Feed-In Tariff
• Long-term, fixed price contract
• Guaranteed, simple grid connection
• Price sufficient for small profit

29. Policy Shapes Cost
High
U.S.
Return
Ontario
Germany
Low
Low Risk High

30. Policy Shapes Participation
80%
of German solar is on small rooftops

31. U.S. Exception
University Park community solar

32. Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility

33. Which Makes Sense for
Community Solar?
A.Nonprofit
B.City
C. County
D.Cooperative
E. All of the Above

34. Which Makes Sense for
Community Solar?
A.Nonprofit
B.City
C. County
D.Cooperative
E.All of the Above

35. Which One Works?
A.Nonprofit
B.City
C. County
D.Cooperative
E. All of the Above

36. Which One Works?
A.Nonprofit
B.City
C. County
D.Cooperative
E. All of the Above
F.None of the Above

37. Minnesota Nonprofit Solar Project Cash Flow
15% 15% 25% 25% 20%
0% 25% 50% 75% 100%
Federal tax credit Middleman
Depreciation State rebate
Net metering

38. Exception
Mt. Pleasant Solar Cooperative
Group purchase, no legal entity

39. Exception
South Dakota Wind Partners
7 turbines, 600 owners, 1 expired cash grant

40. Barriers to Distributed Generation
• Tradition
• Capital
• Cash Flow
• Legal
• Utility

41. True or false?
In 2012, most utilities measure how much
electricity is used during peak periods and
during minimum use periods on their own
grid.

42. True or false?
In 2012, most utilities measure how much
electricity is used during peak periods and
during minimum use periods on their own
grid.
FALSE

43. How Local Solar Gets Capped
≤
1. A Limit on Local Power Generation
Utilities always want local power generation to be less
than local minimum electricity demand so that
electricity will not flow out of neighborhoods and back
onto the grid.*
?
2. A Guesstimate of Minimum Demand Peak use
Whoops! Utilities assume minimum demand
is about 30% of peak demand, because they
don’t measure minimum demand.
÷
2 3. An Arbitrary Safety Margin
Utilities take this 30% threshold and
divide by 2 to get a 15% cap on local solar.
“Minimum”(30%)
÷2
Default cap of 15%
*Also addressed with 2-way electrical equipment
Percent of peak power allowed from local solar

44. How States Can Raise the Cap (Hawaii)
Hawaii’s Update (2011)
1. A Daytime Minimum
How much solar power is produced at 4 AM?
Hawaii estimates the minimum
None. But that’s the time of day utilities used demand during daytime.
for their minimum demand calculation.
Hawaii solar advocates negotiated a change: to
estimate minimum demand when the sun is
up (Sundays at noon).
“Daytime min.”
Even though utilities maintain the arbitrary
“division by 2” safety margin, this change
÷2
could allow nearly twice as much local solar
on the grid.
Cap is raised to ~25%
Percent of peak power allowed from local solar

45. How States Can Raise the Cap (California)
1. A Measured Daytime Minimum California’s Update (2012)
Utilities must actually measure the minimum Measured daytime demand
demand on a power line between 9 AM and 4 PM No “division by 2”
and no longer use peak demand as a proxy.
÷
2
2. No “Division by 2”
Utilities can’t arbitrarily divide the cap by 2, now
that the power line capacity is actually measured.
The result could nearly triple the original Daytime minimum
15% cap on local solar power.
Cap is raised to ~50%
Percent of peak power allowed from local solar

46. Utilities also Want Limits on Total Net Metering
LEGEND
no statutory net metering limit
Lets
customers
pay
aggregate limit higher than 1%
“net”
of
own
use
and
of peak demand
aggregate limit 1% of peak
own
generation demand or less

47. Exception
Replicable
community solar!

48. Distributed Generation
Barriers Exceptions
• Tradition • Mt. Pleasant Solar Coop
• Clean Energy Collective
• Capital
• Maryland Solar LLC
• Cash Flow
• SD Wind Partners
• Legal
• Utility
Learn more at
EnergySelfReliantStates.org