Solar Viability. Sean Walker BUEC 463

Transcription

1 Solar Viability Sean Walker BUEC 463 1

2 EXECUTIVE SUMMARY The signing of the Kyoto Protocol Agreement has led the Canadian Federal and Provincial Alberta governments to rethink the importance they place on fossil fuels and develop new renewable resources to meet lofty GHG emission reduction targets. Solar thermal and photovoltaic technologies in the residential sector may be able to play a role in meeting these targets by providing clean, quiet energy. In order for solar thermal systems to become a significant producer of energy in Edmonton, governments must create stronger public awareness and a direct financial incentive through tax credits to encourage investment. In the case of photovoltaics, new and innovative technology that can increase efficiencies and reduce costs, and the removal of net-metering barriers currently in place in Alberta is necessary before it can be a viable source of energy. 2

3 INTRODUCTION The sun is the oldest and most fundamental source of energy on Earth. Solar energy, direct radiant energy from the sun, has allowed life to grow and thrive on the planet for billions of years. It is the primary source for all carbonbased energy, including coal, natural gas and oil, and indirectly creates renewable energies such as wind and hydro. To enjoy the benefits of solar energy, all you have to do is stand outside. Our environment has taken a front seat in current events over the last few years, and the issue of global warming has often achieved front page headline status. As the world s dependence upon fossil fuels increases concern is mounting over the effects of fossil fuel use on global warming. Governments around the world have recognized a need for change. Canada has created initiatives to achieve long-term Green House Gas (GHG) emission reductions and strengthen its technology capacity, including solar technologies (IInternational Energy Agency, 2004) 1. Solar energy s potential for clean, quiet energy has piqued the interest of many. What better way to directly generate heat and electricity than the source of all energy, the sun. Solar energy has been utilized for thousands of years. The 7 th Century B.C. saw the first use of a magnifying glass to concentrate the sun s rays to light a fire. Romans began building bathhouses with large, south-facing windows to let in warmth in the 2 nd Century B.C (U.S. Department of Energy, 2004) 2. Photovoltaics was first discovered in 1839, and since then the technology has continued to develop into the industry it is today. Like fossil fuels, its usefulness 3

4 and sophistication has developed over time, and it is close to becoming a true alternative to fossil fuels. In Canada, fossil fuels account for 57% of residential energy use (Natural Resources Canada, 2005) 3 for space and water heating. Canada-wide, the public electricity and heat production sector (including emissions from utilities and industrial generation) (Environment Canada, 2005) 4 accounted for 17.7% of Canada s 2002 GHG emissions. In Edmonton, 88% of all residential energy use is supplied by fossil fuels, in particular coal and natural gas (National Energy Board, 2005 and Natural Resources Canada, 2005) 5. Due to Alberta s oil and gas industries and reliance on coal-fired generation, Alberta has greater levels of GHG emissions in proportion to its population than any other province. The National Energy Board s Outlook for Electricity Markets: implies that, on a per capita basis, significant GHG reductions or alternative strategies for reduction may be required. Solar energy s promise of clean and quiet energy supply is just one way the federal and provincial governments may attempt to meet their GHG emission targets. This paper will analyze solar power in one Canadian residential market, Edmonton, as a tool to meet future GHG emission targets. The paper will take the perspective of meeting energy consumers needs, because emission reductions alone will not convince the public to invest in solar technology. Solar power has many benefits and many limitations, and the true viability of this source of energy is in question. This paper will assess the viability of solar power 4

5 as a residential energy source in Edmonton, Alberta given current and developing technologies, government programs, and Edmonton s energy market. TECHNOLOGY Current solar technology can be organized into three basic sections, Passive Solar Heating and Cooling, Solar Thermal Energy, and Photovoltaics. Each has unique applications and complexities, and each has the potential to play an important role in Edmonton s renewable energy supply. Passive Solar Heating and Cooling Passive solar heating and cooling is the least technical of any solar technology. No mechanical means are employed; passive solar heating is based entirely around building design (U.S. Department of Energy, 2005) 7. In cold climates, features such as large south-facing windows allow heat in while insulating against the cold. Edmonton s bright, cool winters make passive solar heating an effective way to reduce energy consumption and heating bills for people building new homes. The simple act of keeping window curtains open during the day in winter can save home owners up to 5% in heating costs (Government of Canada One-Tonne Challenge, 2005) 8. 5

6 Solar Thermal Energy Edmonton residences rely heavily on natural gas for space and water heating needs. Average monthly residential natural gas disposition is about 12 GJ, fluctuating due to seasonality (Derived from Alberta Energy and Utilities Board, See ( aid=141&pgid=750#solar) Appendix), accounting for approximately 81% of total residential energy use (Natural Resources Canada, 2005) 10. With natural gas prices currently hovering around $11/GJ in Edmonton, and uncertainty on where these prices are headed, residential customers have started looking to new thermal energy sources that can meet their seasonal needs. Solar thermal energy systems offer an attractive supplement to natural gas. Solar thermal energy systems can be both active and passive solar systems that collect solar radiant energy. Solar heat can be transmitted by pumps or simply absorbed and distributed throughout a residence (U.S. Department of Energy, 2004) 11. Solar thermal energy systems are available for both water and space heating, and each application requires a unique setup. In 2003, 21% of Canadian residential energy use was attributable to water heating (Natural Resources Canada, 2005) 12. Solar domestic hot water systems and installations are readily available for consumers across Canada. These systems generally consist of a solar collector that converts solar radiation into useable heat, a heat exchanger/pump to transfer the heat to potable water, and a 6

7 storage tank for the solar heated water. Retail prices of solar systems vary with size and manufacturer. A common water heating system and installation will cost approximately $3,500 (derived from Natural Resources Canada RETScreen Software, see Appendix 3) and supplies approximately one half of a typical household s water heating needs (Natural Resources Canada, 2000) 13. Payback estimates for these systems range from 8 to 12 years (Canadian Solar Industries Association, n.d.) 14, although for Edmonton s climate this may be optimistic. An analysis of Edmonton climate and cost data was closer to 15 to 20 years payback. Payback time largely depends on the price of natural gas, with rising gas prices resulting in more savings and shorter payback periods. This typical water heating system would displace approximately 0.4 t CO2 /year (derived from Natural Resources Canada RETScreen Software, see Appendix 3). A reality of living in Edmonton is the winter season. A particularly long and cold season can have a massive effect on a residence s natural gas consumption. Space heating accounts for 60% of all residential energy use. Uncertainty regarding the future of Edmonton s natural gas prices is one reason consumers have begun to evaluate solar thermal air heating systems to augment traditional natural gas furnaces. Mechanical solar systems are currently too costly and only provide heat for a small area, a single bedroom for example. The most common and economical solar space heaters are metal perforated collectors attached to the south side of a building. Outside air is able to enter the collector, becomes warmed by the sun, rises, and enters the building through a home s distribution system (Canadian Solar Industries Association, 7

8 n.d.) 15. Because fresh air being brought into the house has already been heated, less energy is required to heat the air to a suitable indoor temperature. These systems have virtually no payback period when used in construction (one material is simply replacing another), and a 2 to 5 year payback period for retrofitted residences (derived from Natural Resources Canada RETScreen Software, see Appendix 3). A perforated solar space heater is one of the most cost-effective technologies available to Edmonton residences, lowering a household s reliance on natural gas and insulation, and adding resale value. In addition, a perforated solar space heating system will displace GHG emissions from burning natural gas by approximately 0.52 t CO2 /year. Photovoltaics Photovoltaics (PV) is the process of capturing sunlight and converting it directly into electricity. PV modules are the building blocks of a PV system, and are composed of interconnected cells encapsulated between a glass cover and weatherproof backing (International Energy Agency, 2002) 16. PV cells are able to absorb direct and indirect light energy from the sun so that electricity generation is possible during overcast days. The amount of energy a PV system is able to produce is proportional to its area (the number of solar panels in an array) and the intensity of sunlight hitting the area. The energy provided is silent, produces no emissions, and uses no other fuel than sunlight (British Petroleum Solar, n.d.) 17. 8

9 PV systems can be categorized into autonomous, hybrid, and gridconnected systems. Autonomous and hybrid systems are common among cottages and recreational vehicles that are independent from other power sources. Because every household in Edmonton is connected to the utility grid, this paper will focus on the viability of grid-connected systems. Photovoltaics is the most controversial of all solar technologies. PV systems are characterized by very high costs. Refining silicon to remove nearly all impurities is a labour and capital intensive undertaking. In addition, current PV cells are, at a maximum, 30% efficient at converting light energy into electricity, with more common operating levels at around 15% efficiency (International Energy Agency, 2002) 18. For these reasons, PV has found little support outside of research and development within Canada. A residential PV system can be custom-designed to any homeowner s specifications. The current PV consumer must balance desired energy production capacity, usually measured in 1 to 10 kw systems for households, and price. In Edmonton, electricity prices are some of the lowest in the world, averaging 6.1 cents per kwh, due in large part to Alberta s abundance of coal and natural gas. Currently PV modules cost $4 to $10 US per peak watt, and a system with an installed cost of $7 US per peak watt is estimated to generate electricity at a cost of 22 cents per kwh (Rhamani et al, n.d.) 19. A system of this size is estimated to cost approximately $45,000 to $50,000 US, but would be able to provide an Edmonton household s average monthly electricity needs (British Petroleum Solar, n.d.) 20. 9

10 Large upfront system costs are a major deterrent for homeowners interested in generating their own electricity, and low grid-connected electricity costs currently make the purchase of a PV system a lifestyle choice. PV technology improves daily, and production costs are constantly decreasing. By 2020, the United States Department of Energy s goal is reach a cost of $1.50 per peak watt, a cost that could prove to be competitive in Edmonton s electricity market. SOLAR GOVERNMENTS Canada and Alberta In 2004, the Federal Government of Canada ratified the Kyoto Protocol, committing Canada to reduce GHG emissions to a level of 6% below 1990 levels in the period (Environment Canada, 2002) 21. More than $3 billion has been ( aid=141&pgid=750#solar) invested in climate change programs and to the development of new technologies, including solar thermal systems and photovoltaics. In October 2002 Alberta Environment released Albertans & Climate Change: Taking Action 22, Alberta s climate change action plan outlining the province s reduction in GHG emissions. These reductions amount to GHG levels relative to Gross Domestic Product (GDP) being 50% below 1990 levels by

11 This is approximately equal to 60 million tons of carbon dioxide equivalent gases below business as usual levels. By 2010, reductions of carbon dioxide are expected to be 20 million tons below business as usual levels. To reach these goals, the Alberta government has set a goal for increasing the renewable energy portion of total provincial energy capacity by 3.5%, or about 560 Megawatts, by 2008 (Alberta Environment, 2002) 23. Creating Awareness Consumers are having a difficult time adopting solar technologies for residential use. High initial costs and misconceptions regarding efficiencies make Canadian solar installed capacity some of the lowest in the world (Canadian Solar Industries Association, 2003) 24. Natural Resources Canada has taken steps to create public awareness, publishing introductory pamphlets and buyer s guides to educate homeowners on the benefits and limitations of solar systems. In addition, the Federal Government has taken a commendable lead by example approach in order to showcase the effectiveness of solar PV systems with investments of $1.2 million for on-site generation projects in federal buildings (International Energy Agency, 2004) 25. Creating Incentives The Government of Canada s promotion of PV systems does not extend to the residential market, citing the low cost of conventional energy in Canada as 11

12 the main deterrent to investment. It is true that solar-generated electricity isn t competitive with conventional generation, especially in Alberta. Both federal and provincial governments are determined to decrease GHG emissions within the next 5 to 10 years. Alberta residences contributed 8% to Alberta GHG emissions in 2003 for a total of 17,917 kt CO 2 eq (National Energy Board, and Environment Canada, ). With some incentives to invest in all solar energy technologies, the Edmonton residential energy market has the potential to aid Alberta in reaching its GHG emission targets. Natural Resources Canada has developed the Renewable Energy Deployment Initiative (REDI) program to reduce greenhouse gas emissions by supporting, with a direct financial incentive, solar hot air [and] solar hot water in the industrial, commercial and institutional sectors (Natural Resources Canada, 2005) 28. To be eligible for REDI incentives, customers must meet fairly strict system criteria. REDI provides no financial incentive for homeowners, and only provides informative brochures for this sector. The REDI program could be adapted by either the provincial or federal government to include the residential sector. Because of the sheer number of individual Edmonton residential users in comparison to commercial and industrial users, a program that takes each unique home project into account would be a massive undertaking, to say the least. The GHG emissions from all the extra work created would probably negate any savings from solar installations. However, direct subsidies would have the fastest and strongest impact on residential behaviour. The simplest and most effective subsidy available is the 12

13 personal tax credit. It would almost immediately and directly impact the homeowner, and the bureaucratic infrastructure, Revenue Canada, is already in place to handle the work load. California has employed a tax credit incentive (SB17x2) since 2001 for new PV installations (Database of State Incentives for Renewable Energy, 2005) 29. The following is an incentive scheme adapted from Natural Resource Canada s own REDI program for commercial users, and California s tax credit incentive. Installation Type Incentive Type Incentive Amount Solar Water Heating (approved system) personal tax credit 10% of purchase cost Solar Air Heating (approved system) personal tax credit 10% of purchase cost PV (approved system) personal tax credit Lesser of: - 5% of net system cost - $2.25/W rated peak generating capacity Because of the greater potential number of incentive applicants in the residential sector and the smaller investment needed for residential installations, the REDI-adapted incentive amounts have been reduced by more than half. California s incentive of 7.5% has been reduced to reflect the Canadian government s general lack of enthusiasm with regard to residential PV installation. For provincial- or city-induced incentives, a property tax credit would be appropriate. 13

14 Impacts It would be impossible to determine the exact impact of tax incentives on Edmonton s residential sector without a full market analysis. California s, and indeed the world s, solar success can be credited to the generous subsidy programs available. Solar thermal systems are already a relatively affordable energy solution for any household, but given the small installation capacity for these systems in Canada, homeowners need an extra incentive before they are willing to overcome the high installation costs. The following is a rough estimate of Edmonton s residential solar thermal potential: Solar Domestic Hot Water Systems Installation Yearly Energy Yearly t # of Residences CO2 eq Capacity Supplied (GJ) displaced Single Home % 9, ,543 3,852 8% 14, ,868 6,164 10% 18, ,086 7,705 15% 27, ,629 11,558 Solar Space Heating Systems Installation Yearly Energy Yearly t CO2 eq Capacity # of Residences Supplied (GJ) displaced Single Home % 9, ,066 37,125 8% 14,453 1,624,133 59,401 10% 18,066 2,436,200 74,251 15% 27,099 3,248, ,376 Photovoltaic Electricity System (3 kw system) Installation Yearly Energy Yearly t # of Residences CO2 eq Capacity Supplied (kwh) displaced Single Home % 1, ,117 4,342 2% 3,613 1,268,233 8,684 3% 5,419 1,902,350 13,026 4% 7,226 2,536,466 17,368 (Data derived from BP Solar Estimator, RETScreen Software, with support from other online references, Appendix 1) 14

15 If 15% of all Edmonton residences were to install solar hot water systems and solar space heating systems, 122,000 tons of CO 2 equivalent gases would be displaced. This quantity is approximately equal to 3% of the reduction target Alberta hopes to achieve by PV technology has not been included in this estimate because it is unlikely that in the next decade enough residential PV systems will be installed to impact Alberta s GHG emission goals. Currently there are approximately 25 grid-connected PV systems in Alberta (Energy Solutions Alberta, 2005) 30. THE ENERGY MARKET The Restructured Electricity Market In 2001, Alberta s Electric Utilities Act was passed and Alberta s electricity market began to restructure, moving away from regulation and opening the market. Alberta s electricity generation is now competitive, and with this restructuring Edmonton is poised to become an optimal market for on-site electricity generation, such as photovoltaics. Competitive markets may create opportunities for distributed generation (small generation such as PV) to connect to the electricity grid through the process of net metering. Net Metering and Net Billing Net metering is the process of running an electricity meter backwards. If electricity generated on-site exceeds the amount consumed, this excess can be fed back into the power grid, possibly resulting in a credit to the homeowner s 15

16 electricity bill. Net metering is currently illegal in Alberta (Epcor, 2002) 31. Next to cost of generation, this is PV s greatest barrier to entry in Edmonton. In order for PV to be an economical energy choice, net metering must be permitted. Energy Prices Alberta retail electricity prices are low at approximately 6.1 cents/kwh. Ratepayers are benefiting from existing generation oversupply that increased with the addition of Epcor s Genesee 3, but growing demand will diminish Alberta s oversupply (National Energy Board, 2005) 32. Additionally, new natural gas-fired electricity generation will create upward pressure on electricity prices. Electricity prices are not likely to rise to PV-generation cost levels, but any rise in electricity prices increases the likelihood that photovoltaics will become viable in Edmonton. Natural gas prices are traditionally more unstable than electricity, and observers expect to see more extreme price volatility in the natural gas market over the next decade (National Energy Board, 2004) 33. Similar to electricity, any upward pressure on prices will make solar thermal systems that much more economical to Edmonton residences. CONCLUSION Every day the sun provides ample energy for Edmontonians to meet all their residential energy needs. It is possible that one day solar technology will be 16

17 so efficient that residences will be able to forsake fossil fuels for their heating and electricity needs completely. At this point in time, solar technology is a mixed bag. Solar thermal systems, whether they are for water or space heating, are an excellent addition to any home that has the appropriate south-facing walls and roofs. The energy savings, payback periods, and emission reductions these systems offer justify their installation, and they provide an excellent way to supplement traditional fossil fuel systems. However, the federal and provincial governments need to increase consumer awareness of these solar systems and perhaps offer financial assistance to homeowners if they are truly dedicated to reducing GHG emissions in the residential sector. Photovoltaics has an incredible potential for small, on-site electricity generation. Large systems are able to meet an entire household s monthly electricity needs with absolutely no air or noise pollution. Currently, these systems are simply too expensive to be justifiable, especially in Edmonton where electricity rates are relatively inexpensive. In addition, Alberta s net-metering barrier must be removed before any significant residential installation will take place. At this point in time, without very significant government subsidies, the photovoltaic industry will never get off the ground in Edmonton. The future of photovoltaics is in the hands of researchers, who are constantly developing more efficient, more cost-effective PV technologies. Can solar power become a viable source of energy in Edmonton? In many ways, it already is. For its true potential to be realized a significant number 17

18 of homeowners must look past the high initial costs and into the future to the monetary and environmental savings their investment can provide for themselves, their province, and their country. 18

19 Appendix 1: References 1. International Energy Agency. (2004). PVPS Annual Report 2004: Implementing Agreement on Photovoltaic Power Systems. Retrieved October 8, 2005 from 2. U.S. Department of Energy: Energy Efficiencies and Renewable Energy. (2004). Solar Timeline. Retrieved November 24, 2005 from 3. Natural Resources Canada. (2005). Energy Use Data Handbook, 1990 and 1997 to Quebec: Office of Energy Efficiency. 4. Environment Canada. (2005). Canada s Greenhouse Gas Inventory, Retrieved November 12, 2005 from 5. National Energy Board. (2005). Outlook for Electricity Markets: Calgary: Nation Energy Board. 6. See 5. 19

20 7. U.S. Department of Energy: Energy Efficiencies and Renewable Energy. (2005). Passive Solar Heating, Cooling and Daylighting. Retrieved October 29, 2005 from 8. Government of Canada: One-Tonne Challenge. (2005). Your Guide to the One-Tonne Challenge. Retrieved November 7, 2005 from =4. National Energy Board. (2004). Looking Ahead to 2010: Natural Gas Markets in Transition. Calgary: National Energy Board. 9. Alberta Energy and Utilities Board. (2005). Alberta Energy Resource Industries Monthly Statistics (ST3). Retrieved November 2, 2005 from See U.S. Department of Energy: Energy Efficiencies and Renewable Energy. (2004). Space Heating and Cooling. Retrieved November 2, 2005 from See 3. 20

21 13. Natural Resources Canada. (2000). An Introduction to Solar Water Heating Systems. Retrieved October 31, 2005 from Canadian Solar Industries Association. (n.d.) The Cost of Solar Water Heating System. Retrieved November 2, 2005 from Canadian Solar Industries Association. (n.d.) Heating your Home with Solar Air. Retrieved November 2, 2005 from International Energy Agency. (2002). Basics of PV. Retrieved November 2, 2005 from British Petroleum Solar. (n.d.). How sunlight is converted into energy. Retrieved October 31, 2005 from See Rahmani, M., et al. (n.d.). A Comparison of Renewable Energy Options for Florida. Retrieved November 17, 2005 from 21

22 20. British Petroleum Solar. (n.d.). Solar Savings Estimator. Retrieved October 31, 2005 from Environment Canada. (2005). About the Kyoto Protocol. Retrieved November 25, 2005 from Alberta Environment. (2002). Albertans & Climate Change: Taking Action. Retrieved November 18, 2005 from See Canadian Solar Industries Association. (2003) Solar Energy: Powerful, Proven, Practical. Retrieved November 2, 2005 from See See Environment Canada. (2005). Canada s Greenhouse Gas Inventory, Retrieved November 12, 2005 from 22

23 28. Natural Resources Canada. (2005). REDI for Homeowners, Educators, and Kids. Retrieved October 31, 2005 from Database of State Incentives for Renewable Energy. (2005). California Incentives for Renewable Energy. Retrieved November 24, 2005 from state=ca&currentpageid= Energy Solutions Alberta. (2005). Age No Deterrent to Going Solar. Retrieved November 16, 2005 from ID= Epcor. (2002). Distributed Generation. Retrieved November 25, 2005 from See National Energy Board. (2004). Looking Ahead to 2010: Natural Gas Markets in Transition. Calgary: Nation Energy Board. 23

24 34. Albertafirst.com. (2005). Dwellings. Retrieved November 15, 2005 from Statistics Canada. (2001). Private Households by Household Type, Showing Number of Household Maintainers, for Alberta, 1996 Census (20% Sample Data). Retrieved November 15, 2005 from See Alberta Government. (2005). Electricity Statistics. Retrieved November 2, 2005 from See 9. 24