Engineering Management Field Project A Critical Analysis of the Viability and Impacts of Solar Energy Carve-Outs in Renewable Portfolio Standards By Aaron D. Anderson Fall Semester, 2010 An EMGT Field Project report submitted to the Engineering Management Program and the Faculty of the Graduate School of The University of Kansas in partial fulfillment of the requirements for the degree of Master’s of Science Herb Tuttle Committee Chairperson Michael Katzman Committee Member Robert Healy Committee Member Date accepted: November 19, 2010 TABLE OF CONTENTS Page No. List of Abbreviations and Acronyms .................................................................................................. viii Acknowledgements .................................................................................................................................. x Executive Summary ................................................................................................................................ xi Chapter 1 - Introduction ......................................................................................................................... 1  1.1  Study Objectives and Methodology....................................................................................... 2  1.2  Organization of Report .......................................................................................................... 2  Chapter 2 - Literature Review ................................................................................................................ 4  2.1  Renewable Energy Overview ................................................................................................ 4  2.2  Solar Energy Overview ......................................................................................................... 6  2.3  Renewable Portfolio Standards.............................................................................................. 7  2.4  Solar Energy Carve-Outs ....................................................................................................... 9  2.4.1  Economies of Scale .................................................................................................... 10  2.4.2  Diversification ............................................................................................................ 12  2.4.3  Green Jobs .................................................................................................................. 13  2.5  Summary and Conclusions .................................................................................................. 14  Chapter 3 - Overview of Study Investigations ..................................................................................... 15  Chapter 4 - Characterization of Carve-Out States (Investigation 1) ................................................ 17  4.1  Investigation Overview ........................................................................................................ 17  4.2  Generation Portfolio ............................................................................................................ 17  4.2.1  Methodology ............................................................................................................... 17  4.2.2  Results ........................................................................................................................ 18  4.3  Electric Rates ....................................................................................................................... 19  4.3.1  Methodology ............................................................................................................... 19  4.3.2  Results ........................................................................................................................ 20  4.4  Energy Consumption ........................................................................................................... 21  - i - 4.4.1  Methodology ............................................................................................................... 21  4.4.2  Results ........................................................................................................................ 22  4.5  Air Quality ........................................................................................................................... 23  4.5.1  Methodology ............................................................................................................... 23  4.5.2  Results ........................................................................................................................ 24  4.6  Wealth .................................................................................................................................. 25  4.6.1  Methodology ............................................................................................................... 25  4.6.2  Results ........................................................................................................................ 25  4.7  Summary and Conclusions .................................................................................................. 26  Chapter 5 - National Differential Economic Analysis (Investigation 2) ............................................ 28  5.1  Investigation Overview ........................................................................................................ 28  5.2  Capacity Factor Characterization ........................................................................................ 29  5.2.1  Wind Energy Capacity Factors ................................................................................... 29  5.2.2  Solar Energy Capacity Factors ................................................................................... 31  5.3  Pro Forma Economic Analysis ............................................................................................ 34  5.3.1  Pro Forma Inputs ........................................................................................................ 34  5.3.2  Pro Forma Results ...................................................................................................... 36  5.3.3  Busbar Cost Sensitivity Analysis ............................................................................... 40  5.4  Summary and Conclusions .................................................................................................. 42  Chapter 6 - State Case Studies (Investigation 3) ................................................................................. 45  6.1  Investigation Overview ........................................................................................................ 45  6.2  Economic Evaluation Methodology .................................................................................... 46  6.3  Environmental Evaluation Methodology ............................................................................. 48  6.4  Case Study Results – Missouri ............................................................................................ 50  6.4.1  RPS Overview ............................................................................................................ 50  6.4.2  Economic Impacts ...................................................................................................... 52  6.4.3  Environmental Impacts ............................................................................................... 55  6.4.4  Summary and Conclusions ......................................................................................... 55  6.5  Case Study Results – New Jersey ........................................................................................ 56  6.5.1  RPS Overview ............................................................................................................ 56  6.5.2  Economic Impacts Analysis ....................................................................................... 58  6.5.3  Environmental Impacts ............................................................................................... 61  - ii - 6.5.4  Summary and Conclusions ......................................................................................... 61  6.6  Case Study Results – New Mexico ...................................................................................... 62  6.6.1  RPS Overview ............................................................................................................ 62  6.6.2  Economic Impacts Analysis ....................................................................................... 63  6.6.3  Environmental Impacts ............................................................................................... 66  6.6.4  Summary and Conclusions ......................................................................................... 66  6.7  State Case Study Conclusions ............................................................................................. 67  Chapter 7 - Conclusions ........................................................................................................................ 69  Chapter 8 - Suggestions for Additional Work ..................................................................................... 72  8.1  Declining Capital Cost Evaluation ...................................................................................... 72  8.2  Green Jobs ........................................................................................................................... 72  8.3  Time of Day Usage .............................................................................................................. 72  8.4  Location of Solar Energy Manufacturing Facilities ............................................................ 73  Bibliography ........................................................................................................................................... 74 * * * * * - iii - LIST OF TABLES Table No. Page No. Table 1. Generation Portfolio Summary .................................................................................................. 18  Table 2. Electric Rates Summary ............................................................................................................. 20  Table 3. Energy Consumption Summary ................................................................................................. 22  Table 4. Air Quality Summary ................................................................................................................. 24  Table 5. Wealth Summary ....................................................................................................................... 26  Table 6. Solar Energy Gross Capacity Factor Estimates by State ........................................................... 33  Table 7. National Differential Analysis Results ...................................................................................... 37  Table 8. Summary of Results from Investigation Two ............................................................................ 44  Table 9. Missouri Renewable Portfolio Standard Mandates .................................................................... 51  Table 10. Missouri Case Study Economic Impacts Summary ................................................................. 52  Table 11. Missouri Case Study Environmental Impacts Summary ......................................................... 55  Table 12. New Jersey Renewable Portfolio Standard Mandates ............................................................. 57  Table 13. New Jersey Case Study Economic Impacts Summary ............................................................. 59  Table 14. New Jersey Case Study Environmental Impacts Summary ..................................................... 61  Table 15. New Mexico Renewable Portfolio Standard Mandates ........................................................... 62  Table 16. New Mexico Case Study Economic Impacts Summary .......................................................... 64  Table 17. New Mexico Case Study Environmental Impacts Summary ................................................... 66  Table 18. State Renewable Portfolio Standards Milestone Summary ..................................................... 85  Table 19. Net Electric Generation by State by Fuel Type (GWh) (2009) ............................................... 89  Table 20. Average Retail Electric Rates by State by Sector (¢/kWh) (2009) .......................................... 90  Table 21. Energy Consumption by State (2008) ...................................................................................... 91  Table 22. CO Emissions by State (2007) ................................................................................................ 92  2 Table 23. Nonattainment Statuses (2010) ................................................................................................ 93  Table 24. Wealth Indices by State (2008) ................................................................................................ 99  Table 25. State Renewable Portfolio Standards Summary .................................................................... 100  Table 26. Wind Energy Gross Capacity Factor Estimates by State ....................................................... 101  Table 27. Historical Missouri IOU Electric Sales, Customers, and Usage (2001-2008) ....................... 102  Table 28. Historical Missouri Average Retail Electric Rates by Sector (2000-2008) ........................... 103  Table 29. Missouri AC Energy Estimates and Calculated Busbar Costs ............................................... 104  Table 30. Missouri Case Study Solar PV Premium Calculation ............................................................ 107  Table 31. Missouri Case Study Residential Rate Impacts Detailed Calculations .................................. 108  - iv - Table 32. Missouri Case Study Life Cycle Analysis Detailed Calculations .......................................... 109  Table 33. Historical New Jersey Retail Electric Sales by Sector (2000-2008) ...................................... 111  Table 34. Historical New Jersey Retail Customers by Sector (2000-2008) ........................................... 111  Table 35. Historical New Jersey Average Retail Electric Rates by Sector (2000-2008) ....................... 111  Table 36. New Jersey AC Energy Estimates and Calculated Busbar Costs .......................................... 112  Table 37. New Jersey Case Study Solar PV Premium Calculation ....................................................... 113  Table 38. New Jersey Case Study Residential Rate Impacts Detailed Calculations .............................. 114  Table 39. New Jersey Case Study Life Cycle Analysis Detailed Calculations ...................................... 115  Table 40. Historical New Mexico Electric Sales, Customers, and Usage (2001-2008)......................... 116  Table 41. Historical New Mexico Average Retail Electric Rates by Sector (2000-2008) ..................... 117  Table 42. New Mexico AC Energy Estimates and Calculated Busbar Costs ........................................ 118  Table 43. New Mexico Case Study Solar PV Premium Calculation ..................................................... 123  Table 44. New Mexico Case Study Residential Rate Impacts Detailed Calculations ........................... 124  Table 45. New Mexico Case Study Life Cycle Analysis Detailed Calculations ................................... 125  * * * * * - v - LIST OF FIGURES Figure No. Page No. Figure 1. Net Generation by Energy Source (2009) .................................................................................. 5  Figure 2. Net Renewable Generation by Energy Source (2009) ................................................................ 5  Figure 3. Wind Energy Gross Capacity Factor Estimates by State .......................................................... 30  Figure 4. National Busbar Cost Differential – Wind Versus Fixed-Tilt Solar PV ................................... 38  Figure 5. National Busbar Cost Differential – Wind Versus Single-Axis Tracking Solar PV ................ 39  Figure 6. Sensitivity Analysis Tornado Diagram – Wind at 35% CF ...................................................... 41  Figure 7. Sensitivity Analysis Tornado Diagram – Fixed-Tilt PV at 18% CF ........................................ 41  Figure 8. Sensitivity Analysis Tornado Diagram – Single-Axis Tracking PV at 21% CF ...................... 41  Figure 9. Life-Cycle Carbon Dioxide Emissions from Wind and Solar Energy ...................................... 49  Figure 10. Missouri Levelized Busbar Costs for Fixed-Axis Solar PV at Latitude Tilt .......................... 54  Figure 11. New Jersey Levelized Busbar Costs for Fixed-Axis Solar PV at Latitude Tilt ...................... 60  Figure 12. New Mexico Levelized Busbar Costs for Fixed-Axis Solar PV at Latitude Tilt .................... 65  Figure 13. Average Annual Solar PV Resource at Latitude Fixed Tilt.................................................... 82  Figure 14. Direct Normal Solar Irradiance Resource Map ...................................................................... 83  Figure 15. International Photovoltaic Solar Resources ............................................................................ 84  Figure 16. State Renewable Portfolio Statuses ........................................................................................ 86  Figure 17. State Renewable Portfolio Standards with Solar/DG Provisions ........................................... 87  * * * * * - vi - LIST OF APPENDICES Page No. A. Glossary of Terms ....................................................................................................................... 77 B. Conversions and Equivalence List .............................................................................................. 80 C. Solar Insolation Maps ................................................................................................................. 81 D. Renewable Portfolio Standard Summaries ................................................................................. 85 E. Investigation 1 (Characterization of Carve-Out States) Detailed Tables .................................... 88 F. United States Wind Resource Potential .................................................................................... 100 G. Investigation 3 (State Case Studies) Detailed Tables for Missouri Case Study ........................ 102 H. Investigation 3 (State Case Studies) Detailed Tables for New Jersey Case Study ................... 110 I. Investigation 3 (State Case Studies) Detailed Tables for New Mexico Case Study ................. 116 * * * * * - vii - LIST OF ABBREVIATIONS AND ACRONYMS AC Alternating Current BPU Board of Public Utilities Btu British thermal unit CdTe Cadmium Telluride CH Methane 4 CO Carbon Monoxide CO Carbon Dioxide 2 CSP Concentrating Solar Power DC Direct Current DG Distributed Generation DNI Direct Normal Irradiance DOE Department of Energy DSIRE Database of State Incentives for Renewable Energy EIA Energy Information Administration EMGT Engineering Management EPA Environmental Protection Agency EPIA European Photovoltaic Industry Association FIT Feed-In Tariff GCF Gross Capacity Factor GDP Gross Domestic Product GHG Greenhouse Gases GW Gigawatt GWh Gigawatt-hour Hg Mercury IOU Investor-Owned Utility ITC Investment Tax Credit J Joule KCP&L Kansas City Power & Light kW kilowatt kWh kilowatt-hour LBNL Lawrence Berkeley National Laboratory LCA Life-Cycle Analysis - viii - MACRS Modified Accelerated Cost Recovery System MMBtu Million British thermal units MMT Million Tons MW Megawatt MWh Megawatt-hour NAAQS National Ambient Air Quality Standards NO Nitrogen Oxides x NREL National Renewable Energy Laboratory O Ozone 3 Pb Lead PM Particulate Matter of 2.5 Microns in Diameter or Smaller 2.5 PM Particulate Matter of 10 Microns in Diameter or Smaller 10 POU Publically-Owned Utility PSC Public Service Commission PTC Production Tax Credit PV Photovoltaic REC Renewable Energy Credit RPS Renewable Portfolio Standard SACP Solar Alternative Compliance Payment SEIA Solar Energy Information Administration SO Sulfur Oxide x SREC Solar Renewable Energy Credit TMY Typical Meteorological Year TW Terawatt TWh Terawatt-hour W Watt * * * * * - ix -