Expand Solar PV Incentives

Assumptions

• Solar photovoltaic panel life cycle is 25 years
• Rebates available to private solar customers are $6,600 from the state, $2,000 federal government and an average San Francisco incentive of $4,000.

Analysis

Putting solar panels on San Francisco municipal facilities is not a cost-effective way to reduce carbon emissions, because municipal facilities already are powered with carbon-free electricity from the hydroelectric plant at Hetch Hetchy Reservoir in the Sierra Nevadas. The only way to offset the carbon emissions associated with the other electricity portfolio that serves San Francisco — PG&E’s — is to provide an incentive for private installations, as the GoSolarSF program does. At the current level of financing and availability of federal and state rebates, the City’s investment of $3 million in the first year is expected to result in the installation of 707 additional photovoltaic systems with an expected electricity output of 2,000 megawatt hours. However, solar is not more cost-effective than many other public financing options to reduce emissions, such as increasing energy efficiency or investing in a smart grid. Solar still is an emerging technology.

What we do now
The City and County of San Francisco has installed approximately 5 megawatts of solar photovoltaic capacity on municipal buildings and facilities, including Moscone Convention Center, the airport, two wastewater treatment plants and the recycling facility at Pier 96. The City has more than 1,000 buildings and facilities, providing an opportunity to take advantage of the roof space on municipal buildings to tap solar energy for electricity or hot water. The San Francisco Public Utilities Commission is aggressively implementing solar projects on City and SFPUC facilities. The City also is conducting a pilot program, GoSolarSF, to provide additional solar rebates to private citizens and businesses in San Francisco. GoSolarSF provides $3 million a year, funded by Hetch Hetchy revenues, to reduce the cost of installing solar PV beyond what state and federal rebate programs provide. Up to $6,000 is available per installation. Higher levels of rebates are available for PV equipment purchasers who use a City-based and City-trained installer, and for residents in low income districts.

What we could do
Solar is a less cost-effective option for city government than for private citizens, for two main reasons. First, the City receives inexpensive, zero-carbon electricity from Hetch Hetchy, while municipal customers pay a range of costs for electricity from the same source, from zero to 12 cents per kilowatt-hour. Most of the time, Hetch Hetchy power exceeds City needs and other obligations, and the SFPUC sells this power at cost to other customers in California. Second, municipal projects are not eligible for state rebates under the California Solar Initiative, which means the installed cost is higher for a municipal owner of a photovoltaic system. Still, because Hetch Hetchy revenues are available to reinvest, the City is continuing to investigate opportunities to place renewable energy equipment on its facilities.

Although it would not generate revenue, the City could contract with private providers — who would be eligible for the state and federal tax rebates — to lease its facilities and sell back any power generated on City property. The City could also make more of its Hetch Hetchy revenues available to fund the GoSolarSF program at higher levels.

Cost
Installing solar for municipal uses, based on data from the Moscone Center installation, costs approximately $12,000 per installed kilowatt capacity. Subtracting revenues at the Hetch Hetchy rate, and assuming a 25-year lifetime for the panels, the cost per kilowatt-hour is just more than $8.¹ Privately owned solar, as estimated by the GoSolarSF program, averages about $7,133 per installed kilowatt capacity once federal, state, and local rebates are taken into account. The cost per kilowatt-hour, assuming a $3 million local rebate program with $150,000 in administrative costs, provides an additional 707 installations and 2,000 MWh annually, as projected, is $1.50.

Carbon savings potential
Because the City already uses carbon-free electricity, and therefore the City’spurchase of solar generation equipment it owns or leases does not displace the use of carbon-based fuels, there is no carbon savings potential from installing PV and using it municipally. All expenditures on City-owned solar are net costs to the City.

However, the use of City funds to provide rebates for local residents and businesses does create an offset, because these solar PV systems avoid the use of PG&E power. Using PG&E’s figures for the carbon impact of its power mix, and an estimated 25-year lifetime of PV panels, the cost per ton of carbon abated is $252.

Endnotes
¹ According to an April 2008 document prepared by the San Francisco Public Utilities Commission for the Board of Supervisors Budget and Finance Committee, $3 million invested in a municipal project, based on data from the Moscone Center installation, would buy a photovoltaic system with a capacity of 250 kilowatts, capable of producing 270 megawatt hours per year. This produces annual revenue of about $32,400 (assuming 12 cents per kilowatt hour) to offset the $3 million cost.