Is basic solar technology the key to an energy revolution?

by Judith Lewis Mernit

On a November afternoon just outside Lancaster, Calif., Mayor R. Rex Parris stands beaming through his foresty beard, expounding on the grave dangers of climate change. No one seems overly concerned – possibly because most of the audience speaks Mandarin as a first, and in some cases only, language. Instead, they're as cheery as Parris, flustered by neither the language barrier nor the 40-mph wind gusts that ruffle the mayor's brilliant white hair. "I used to say we were changing the world," he intones. "Now I say we're saving the world."

It sounds like hyperbole, but it might be true. Behind Parris, in a once-vacant lot, rise the beginnings of a 16-acre solar farm, developed in collaboration with U.S. Topco Energy, a Taiwan-based firm with offices just over the mountains in the San Gabriel Valley. The arrays will supply electricity to just a few hundred homes, but to hear Parris tell it, they're the first green shoots of an energy revolution – one that begins in local communities and spreads out to the planet.

Lancaster is a city of 150,000 in a region of the West Mojave Desert named the Antelope Valley for the pronghorn that roamed here before agriculture and industry left behind a strafed and empty landscape, dotted with sickly Joshua trees and rows of stucco bungalows. In the '80s, Lancaster and its twin to the west, Palmdale, offered refuge to middle-class families fleeing Los Angeles' crime and housing prices, but urban ills soon metastasized here: In 2007, Lancaster's violent crime rate was twice the national average.

Parris, a Lancaster native, was elected in 2008 to address that situation. His authoritarian methods, which included aerial surveillance of public places and harassing Section 8 renters, have drawn lawsuits and ridicule, but he's been re-elected twice. If the city is now in the throes of an unlikely renewal, it's in part because Parris launched an all-out war on the city's decades-long decay. Among the weapons in his arsenal: The polycrystalline silicon cell that turns sunlight into electricity via photovoltaic process.

Since 2010, 52 megawatts of PV solar panels have gone up on Lancaster's rooftops, schools, carports and warehouses, as well as on five city facilities, including City Hall and the baseball stadium, home to Lancaster's minor-league JetHawks. And it's been done with surprisingly little controversy: Last spring, when the city council mandated that new housing developments average one kilowatt of solar per structure, even KB Homes, the region's major housing developer, got behind it.

Parris, 61, is a big man – not simply tall, not overweight, but big. A millionaire personal injury lawyer with offices just down the street from City Hall, he is a Republican who rejects neither climate science nor government's role in people's lives. Just as he's tried to ban pit bulls from Lancaster, he'd like to erase dirty electricity from the planet (including  neighboring Palmdale, where plans to build a 570-megawatt hybrid gas and solar plant have him apoplectic). "I was elected for public safety," he says. "What could be more dangerous than the greatest catastrophe man has ever faced?" Lancaster satifies nearly a quarter of its peak energy demand with solar, but Parris wants it to be more – much more. Eventually, he'd like the city to become "net zero," producing more clean energy than it consumes.

"Of course," he says, "they could kick me out before we get there."

Parris might talk as if he's acting only out of concern for the planet. But there's more to it than that. If distributed solar is on the rise in cities like Lancaster, it's also because putting photovoltaic panels on rooftops – something that once required a hefty investment with uncertain payoff – has suddenly become a way to generate civic revenue. The technology has already saved Lancaster tens of thousands of dollars in utility costs, and a partnership with the solar-leasing company SolarCity to put panels on the city's school buildings has brought in close to $400,000 in just two years.

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Even the solar-home ordinance pays. More expensive homes bring the city more money through property taxes, and every kilowatt of solar, a Lawrence Berkeley Laboratory study found, raises the price of a house by $5,900. More importantly, solar is excellent stimulus: Every resident who saves money on electricity contributes more to the local economy, explains Deputy City Manager Jason Caudle. "Sometimes what they save is enough for a new car payment."

"We are not a rich city," says Heather Swan, Lancaster's senior solar project developer. "I cannot do things just for their green value. Everything has to make economic sense. We're saving the planet, yes. But we're also creating a revenue stream. Solar power could turn this city around."

Five years ago, if you asked why all of California's rooftops weren't plastered with solar panels, you'd get a list of reasons: The state's utilities profit more from centralized power plants; financial incentives are too meager; the grid can't handle part-time bursts of energy. But the biggest deterrent in California and elsewhere was always the expense, which not even the most generous state incentives and a 30 percent federal tax credit could overcome. When Ellensburg, Wash., for instance, began its 109-kilowatt community solar garden in 2006, it cost $1 million for the panels and their installation – about 24 cents per kilowatt hour in a state where the retail price dips as low as 6 cents. "It was a feel-good deal at the time," says Shan Rowbotham, the city's power and gas manager. "It was an investment made with no potential return."

Back then, inventors were chasing hard after the next innovation that would make solar more efficient and thus less expensive: cylindrical designs, special concentrating lenses, nanomaterials. The U.S. Energy Department, under then-Secretary Steven Chu, offered loan guarantees to companies working on the problem, as well as on lowering "soft costs" with easier installation, faster permitting and streamlined integration with the grid.

In the end, though, the big breakthrough turned out to be not an imaginative new technology, but plain old polycrystalline solar, combined with China's formidable manufacturing discipline. Starting in 2009, the Chinese government invested billions of dollars in speedier production, and the price of PV solar dropped like eBay bids on obsolete iPhones. Ellensburg paid $3 to $5 per watt for its panels in 2006. The ones going up at Lancaster's solar farm cost one-third of that.

Other factors have contributed to solar's affordability as well. Forty-three states allow solar homeowners to offset the electricity they use at night with the excess they generate during the day, spinning their meters backward to zero, an arrangement called "net energy metering." Some utilities – including the Los Angeles Department of Water and Power – have rolled out "feed-in-tariff" programs that pay certain small generators outright for their production. And companies like SolarCity allow residents and businesses to reap solar's rewards without even buying a system. California's average retail rate for electricity is about 16 cents per kilowatt hour; SolarCity charges Lancaster just 10 cents per kilowatt hour to power the city's five civic facilities.

SolarCity was founded in 2006 by brothers Peter and Lyndon Rive, cousins of Tesla Motors' Elon Musk. Their business model was forged when only large producers could take advantage of the federal tax credit; households had a $2,000 cap. But even after the cap was lifted in the 2009 stimulus, their strategy endured. The company functions like a sub-utility, installing, permitting and claiming all incentives and tax credits in return for charging a reduced electricity rate. In November, the company added 10 cities to its roster of 14, which means there's a SolarCity office within 30 miles of almost everyone in California, as well as in Colorado, Arizona, Washington and Oregon, and on the East Coast.

Other companies, among them Sunrun, Clean Power Finance and Sungevity, provide similar services throughout the country. Greentech Media Research, which monitors energy trends, reports that leased installations account for 80 to 90 percent of new solar in California and Arizona.

Cheap solar combined with the leasing model has spawned Lancasters all over the sunny West. Sebastopol, Calif., has gone a step beyond Lancaster in mandating solar not just on homes, but on all new construction; Boulder, Colo., buoyed by inexpensive PV, is in the process of  wresting its electricity production away from investor-owned Xcel Energy with the intent of establishing a municipal utility. SolarCity has covered the rooftops of 22 Walgreens stores across Colorado and 120 California Walmarts with solar panels. For the first time in 15 years, the U.S. outpaced Germany in new solar installations.

Solar PV still generates only 0.3 percent of the nation's electricity, but that's 15 times more than it contributed in 2009. If prices continue to decline, solar may soon cost no more to put on the grid than the cheapest coal.

And rooftop solar already has utilities running scared. Last January, investment analyst Peter Kind wrote a report for the Edison Electric Institute called Disruptive Challenges, warning of all the ways that for-profit utilities could fall to self-generation. "(It) was written to create a shock," says Jeff Navin, a consultant with Boundary Stone Partners who until recently served as a deputy chief of staff in the Energy Department. "And it did." It was also a cry for help to regulators who might not recognize the threat to utilities. "It was the first step in the effort to roll back net-metering laws," Navin says, "and to slow down the growth of distributed solar."

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It's hard to get utility spokespeople to acknowledge any objections to rooftop solar. In email conversations, Southern California Edison's Robert Laffoon said the utility, spurred on by a state incentive and marketing program called the California Solar Initiative, has installed solar on 49,000 customers' rooftops and has reservations for 11,000 more, for a total of 668 megawatts. With help from the California Public Utility Commission, the utility holds workshops, in Lancaster and elsewhere, on installing solar and connecting up with the grid.

Yet in their lobbying and advocacy, utilities argue that their consumers' unpredictable systems cost them money and deprive them of revenue. They're not wrong: In states with lots of sun and energy policies that favor rooftop solar, Navin says, "utilities are losing some of their best customers at peak periods," people with big roofs and houses full of always-on electronics; desert dwellers who run air conditioners from April until October. On top of that, those states require utilities to buy power back from those same people at retail rates.

With just a smattering of solar-covered rooftops, that's not such a big deal. "But if you look at places like San Diego," Navin says, "where in five years they grew from 2,900 to 29,000 homes with solar, that has an impact."

The utilities' quest for relief has not gone well. Southern California Edison and California's two other investor-owned utilities, San Diego Gas & Electric and Pacific Gas & Electric, leaned heavily on state regulators and legislators to add usage fees to net-metered customers' bills; the impasse ended this fall with the Legislature allowing for a modest surcharge on solar customers' bills, but clearing the way for even more net metering. In Arizona, the state's largest utility, Arizona Public Service, wanted regulators to add a $50 to $100 per month surcharge to the bills of net-metered customers. Instead, they got 70 cents per kilowatt of solar capacity. For a good-sized solar-powered home, that comes out to only about $3.50 per month.

Now, in Colorado, Xcel Energy wants to take 6 cents off the 10.5 cents per kilowatt hour that it pays to solar-equipped customers, claiming that people without solar subsidize the cost of putting their neighbors' rooftop PV on the grid.

But are utilities really suffering as much as they believe? Jon Wellinghoff, the former chairman of the Federal Energy Regulatory Commission, thinks not. Distributed energy has advantages for utilities, too, because it obviates the need for large new centralized power plants and the complicated land-use agreements that come with them. It's also more efficient, as there's no loss along transmission lines. "The utilities that see the value of (distributed energy) to their local distribution system and use it to enhance that value will survive," he says. "Those that fight it – that try to oppose consumers putting in the systems (they) want – will have much more difficulty."

An energy lawyer for 30 years in Reno, Nev. – he drew up the state's landmark renewable energy standard in 1997 – Wellinghoff served at FERC from 2006 until late last year; he's now at the San Francisco law firm Stoel Rives. At FERC, he shepherded through new rules that would help "firm up" intermittent power sources like solar with storage, including two that directed utilities and regulators to place a higher value on energy stored in batteries, flywheels and tanks of molten salt. Battery technology has lingered in the doldrums relative to other technological advances in the 21st century, because batteries just weren't profitable. The FERC orders invigorated the industry.

Wellinghoff likes distributed generation, he says, because it makes communities more resilient when catastrophes hit the grid. He suspects that's why consumers like it, too. "People are starting to understand that the grid is an unreliable system," he says, "especially in the face of major climatic events." But so far, resiliency remains an illusion in places like Lancaster, because solar-electric systems are useless in a blackout. When the grid goes down, they go down with it.

In the next three to five years, Wellinghoff believes, that will change. More homes will be able to switch from grid-connected to "island" mode – even at night, as "we see the coupling of PV with storage." He also sees a bright future in liquid metal batteries, which, unlike solid batteries, last for a decade or more. Plug-in electric vehicles already store some solar electrons, and Tesla Motors' Musk will partner with his cousins to provide lithium-ion battery backup for business and residential solar.

More ways to complement solar loom: Dean Kamen, the inventor of the Segway, has developed a super-efficient and quiet gas generator the size of a mini fridge called the Beacon 10. David Crane, CEO of NRG Inc., a New Jersey energy developer with offices in Arizona and Palm Springs, sees a future in which there's a solar array on every roof and a Beacon 10 in every garage.

Utilities like storage and Kamen's machines even less than they like rooftop solar alone. Southern California Edison recently began denying net-metering credits to customers who back up their solar arrays with batteries, on the grounds that battery power isn't necessarily from renewable sources, so utilities aren't required to buy it. The move could easily backfire: Consumers who can't sell their electrons back to the utility have little incentive to maintain the relationship.

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That's precisely what Peter Kind warns of: "One can imagine a day when battery storage technology or microturbines could allow customers to be electric grid independent," he wrote. "To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically 'cut the cord?' "

Indeed, says Navin, the big telephone companies chugged along with the exact same business model as the utilities do now – until the cell phone came along. Then, he says, "AT&T went from being the largest company in the world to being bought out by a subsidiary that turned it into a cell phone company. That transformation happened very fast."

Heather Swan, a tall, energetic blonde who wears spike heels even on the pitted tarmac at the solar farm, has spent most of her 31 years in Lancaster, seven of them in City Hall. She started in 2006 as an accounting temp while finishing her MBA at California State University Northridge, then moved up into the city's redevelopment department. Lancaster had been a boomtown thanks to thousands of new homes sold under subprime mortgages, but in 2008, the housing crash hit hard. "We were second in the state for foreclosures," Swan remembers, right behind Stockton.

Hoping to spur a revival, Swan honed a knack for luring people from neighboring cities to shop in Lancaster, offering gift certificates for local restaurants and getting the city to pay registration fees for cars bought on Lancaster's lots. By the time Parris had begun to court Topco and SolarCity, Swan was working in the mayor's office, and made clear that she wanted to work on solar. "I'm a tree-hugger at heart," she says.

"Solar Lancaster" fits what Swan calls her job description: "To do great things with almost no money." When Lancaster partnered with SolarCity on the schools project, Swan and Jason Caudle, along with Public Works Director Robert Neal, leveraged municipal bonds to finance 70 percent of the project, and SolarCity brought in investors to pay for the rest. Because the federal tax credit is useless to a municipality, Lancaster couldn't reap its rewards. But the investors could, and Lancaster benefits from the sale of the energy.

Now Swan is the only full-time employee of the Lancaster Power Authority, a municipal utility the city created in 2011. It doesn't amount to much yet, since it owns none of the city's solar and still depends on the regional utility, Southern California Edison. And while Lancaster has joined forces with the California Delta city of Pittsburg, 40 miles northeast of San Francisco, to build transmission that would allow the export of utility-scale solar – a plan that SCE opposes – Swan says it has no intention of breaking with SCE. "We'd have to buy up all their infrastructure. And we don't have that kind of money."

At least, not yet. As Lancaster generates more electricity on rooftops, as more 500-kilowatt solar canopies cover more parking lots, it seems inevitable that the utility's role will shrink, and perhaps ultimately disappear. When I press Swan on the direction the Power Authority has taken, on the fact of its very existence, she admits that independence is likely. "That is the natural progression," she says. "Yes."

What would it take for Lancaster to disconnect from the grid? It might be a worthwhile cause: In the same way that Mayor Parris believes solar serves public safety by cutting carbon emissions, solar, supported by storage, might also serve public safety when disaster strikes the grid. It's not hard to imagine that happening: Lancaster sits virtually on top of the San Andreas Fault, whose handiwork is visible where the Antelope Valley Freeway cuts through Avenue S in Palmdale. Swirls of shaken earth, laid down in layers over thousands of years, show how one violent event after another pushed up mountains and cracked open canyons. The next time the fault breaks – and it's long overdue – it will likely disrupt supply lines that follow its path through the mountains. Distributed energy's reliability could help more here than it did on the East Coast after Superstorm Sandy.

Jon Wellinghoff has an idea for exactly how it would work: "Microgrids," he says. "They're the only way we're going to make our energy system reliable and resilient." They're also a model for how utilities and customers generating their own power might cooperate to build a stronger grid.

Two hundred miles south of Lancaster, at the University of California, San Diego, Energy and Utilities Manager John Dilliott defines a microgrid as an electrical distribution system that shares a single point of connection to the main grid but can sometimes function without it. The university's own microgrid serves as a "living laboratory" for energy, he says, with strategically placed fuel cells, super-efficient concentrating solar arrays and zinc-bromine liquid batteries all feeding into a 42-megawatt campus-wide system. At its center, a natural gas-fired turbine generates both electricity and reusable heat, balancing the intermittent renewable power with always-on supply.

The microgrid came about for practical reasons, not revolutionary ones. The local utility, San Diego Gas & Electric, had neither the means nor the inclination to wire up the campus to support the university's massive research laboratories, including the Scripps Institution of Oceanography and a world-famous climate analysis center. So in the early '90s, university engineers bumped up the voltage, built a substation and ran cables underground. The microgrid saves the institution         $8 million annually.

It's already proved its reliability: In September 2011, when a grid failure triggered a cascading blackout in San Diego and beyond, the university's system was back up in four hours – three hours before the utility. Dilliott's team is perfecting the technology that will allow an even faster response, but he doesn't trivialize the connection with San Diego Gas & Electric: The utility's larger network adds a layer of resiliency should something flicker out in the campus system.

San Diego Gas & Electric also has a microgrid project of its own in Borrego Springs, Calif., where 2,780 utility customers, many of them retirees, cluster in a desert valley served by a single, remote transmission line. Built over the past year with federal and state grants, the Borrego Springs microgrid firms up 900 kilowatts of solar PV with lithium-ion batteries. On Sept. 6, when a lightning storm took out 20 power poles, the microgrid kept power on for more than 1,000 customers, including the local library, where a designated "cool zone" stayed open – a literal lifesaver for elderly residents in the late-summer heat.

Like UC San Diego, Borrego Springs serves as an energy laboratory. "We're learning what the utility of the future might look like," says San Diego Gas & Electric spokesman Hanan Eisenman, "We can test technologies; we can see how distributed resources interact (with the grid). And we get to see what happens when we have more of a two-way relationship with the customer."

Which brings up another question, one Jeff Navin has pondered a lot: "What if utilities had gotten ahead of the curve and seen the opportunity in distributed energy?" he asks. What if, instead of watching SolarCity come in and scoop up customers, Southern California Edison had embraced the lease model first, installing solar arrays for free and milking the kickbacks? What if, instead of battling net metering, it had worked to streamline solar permitting?

After all, Navin asks, "If you're a consumer, who would you trust to provide your power? The utility that you've known and had a relationship with for 20 years? Or this brand-new startup that you've never heard of?"

Lancaster, by contrast, now moves so fast on permitting that installers, says Parris, call the city "not just fast, but China fast." And Heather Swan is slowly growing her solar team at the Lancaster Power Authority. "It really is the future for this city, this utility," she says. "It's what's going to keep our parks open, our streets paved, our sheriffs on the beat. It could change everything."

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