Pitch
Nobody can afford solar panels. Or, everybody can, as long as there is community wholesale and a little bit of money pooling.
Description
Details
Regional governments can help stimulate the uptake of solar electricity through a sales tax increment.
Generally, the tax should take the form of an involuntary sales tax. This tax is broken into different categories. One conjures a value of 0.3 cents for most purchases as a principal, plus 0.005 cents per mile shipped in the goods' final form over truck, or 0.001 cents ibidem over rail. For direct petroleum products (e.g., gasoline, motor oil, plastics, and many more) it is set at a relatively large, fixed amount: 3.5 cents. Although this tax plan is more incremental than fundamental (say, a ban on plastic shopping bags or a direct payment by oil companies), it is in the spirit of top climate scientist James Hansen's recommendation that oil companies repay their true costs to society. The possible disagreement is that there is some level of government involvement.
Assume that accounting of this tax money is not a problem (it is indeed important, but the handling of the money is another discussion in its own right.)
The cost of solar panels is partially covered by this plan. Let us reasonably assume it is a non-trivial portion, 40%. Then, the remaining 60% of the cost is shared between utilities and voluntary homeowners in a proportion of 63% utility, and 37% homeowner - a beautiful ratio derived from the time constant in an RC circuit. With the first assumption that the government pays for 40%, the utility pays for 37.8% and the homeowner pays for 22.2%. The portion paid by the government is by default the homeowner's ownership fraction.
The homeowners have the sole authority to purchase whichever brand of solar panel they want, because it is their property. Furthermore, they can choose whichever solar company they want to do the installation as long as it is qualified to integrate the solar roof as part of the regional grid.
The utilities happen to own just under half of the solar panels on the residential roof. They are basically free to use that portion however they want, but by courtesy the priority is to direct that rooftop electricity to that very home, for efficiency reasons. It is well-known that transmission and distribution losses of electricity over long distances in the current infrastructure amount to anywhere between 7% to 15% [1]. Keep in mind this is not the same thing as the theoretical efficiency of a single-junction solar cell (29% maximum). Transmission and distribution losses are drastically reduced by perhaps one order of magnitude if one micro-localizes the electricity generation to the residential rooftop.
Homeowners may very well feel uncomfortable at the prospect that not all of the solar panels on their roofs are truly theirs. Then, the utility can inflate the costs of electricity as if there were still full transmission and distribution losses (viz. 8-18% based on [1]) as the form of payment to slowly purchase the remainder of the solar panels. Even half of this amount would suffice as an aggressive annual percentage rate on financing. More well-off individuals can afford the option to pay a full "electricity bill" as if there was no difference at all before and after the installation to suffice as a periodic purchase payment.
What happens if a homeowner moves? Solar panels - being personal property - can always be unmounted and transported along with other hardware, but the rest of the panels owned by the utility by default must move along with it, for the sake of system compatibility. The utilities move their own panels, including the one that is fractionally split in ownership, in order to relieve the homeowner of possible burden with moving extra panels, or offer a compensation for doing so. This only assumes local moving, where the electricity is still supplied by the same regional utility. In long-distance moves, one takes only the fraction of panels that is theirs, and settles the split ownership of the remaining panel with the utility - either buying or selling it off. Of course, the most simple option is that the homeowner just sells all panels back to the utility at a certain depreciated price.
By extension, the plan can be applicable for businesses, governments, and other energy consumers alike.
Conclusion
The advantages are as follows:
1. No party - not the gov't, citizens, or utilities - bear the full cost of solar panels by themselves, but rather cooperate to purchase them.
2. Costs are stretched out and nearly indistinguishable from normal electric bill payments. The financing APRs based on virtual transmission losses for the purchase of all remaining utility-owned panels on one's rooftop.
3. The solar installation begins immediately, meaning that the environment benefits from day one.
4. The sales tax takes into account different carbon-intensive activities, such as from the transportation sector.
5. Small businesses are supported because the landlord or homeowner is free to choose who installs the panel on the rooftop.
References
1. Ranade, Satish J. Electric Transmission and Distribution Efficiency. New Mexico State University (September 27, 2010). Retrieved January 24, 2012 from http://www.nmlegis.gov/lcs/handouts/Electric%20Transmission%20and%20Distribution%20Efficiency_Ranade92710.pdf
Summary
Experience has shown that individuals, groups, and businesses alike when buying something essential would rather have "four for 10" rather than "one for 3.49" - the reason why wholesale retailers open to the public such as Costco enjoy so much success. As scarcity in fossil fuels rises, alternative sources of energy would increasingly be categorized as "something essential." But more generally, like any other product, it would make sense to offer a large-scale wholesale deal for solar panels.
At the same time, solar panels have the reliability to recuperate their cost over the long term in virtually all areas with temperate climates or sunnier. The upfront cost of installing a system is frightening and discouraging to most. Fortunately, it helps to learn that most cars and houses are not bought in cash all at once: financing options do sometimes help.
The two main strategies as outlined by this plan are to offer wholesale prices for entire neighborhoods, like done at Costco, and to spread the cost out, like done for most cars.
First, this plan first outlines that manufacturers and industry, rather than fending alone, should organize (like oil companies do so well with the American Petroleum Institute, "American Chemistry Council," etc.) and offer wholesale prices to cities, districts, or neighborhoods which lowers the required activation energy* of a purchase but still cuts a profit for the makers. This is at a larger scale than what is currently defined as wholesale relative to individual solar panels.
Second, the plan then outlines the multi-party mechanisms which may be helpful in help spreading the cost of a solar panel system out between the government (through a zero-sum sales tax), the utilities (through partial ownership), and the customer (through partial ownership). The ownership of a rooftop system changes as a function of time.
*This is a scientific term - I understand there may be a financial analog, but the context is appropriate enough to include it here.
Category of the action
Reducing emissions from electric power sector.
What actions do you propose?
Details
Key to this plan, first and foremost, is to coordinate a strong push by the solar trade association (for example, the Solar Energy Industries Association) to market solar panels by a wholesale-type deal. One may ordinarily think of a single rooftop photovoltaic (PV) system as being 'wholesale' in nature, but in the context of this plan we define it as 'individual retail.' The 'wholesale' price of solar panels must pertain to entire neighborhoods and/or cities, where members of the community can vote or opt out of participation in the collective purchases. The demarcation of such a neighborhood or district, or the determination of which brand models are to be used where, as presumably done by the trade group, for these wholesale purchases remains an open problem that will not be addressed right now.
In addition, local governments can help coordinate and stimulate the uptake of such a plan beginning through some type of marginal tax, following the cooperation of utilities and residential sectors.
A regional tax can be levied in two different ways.
Example 1: The tax takes the form of an involuntary sales tax, which is usually regional in scope. This tax is stratified into different categories according to carbon intensity. One conjures a value of 0.3 cents for most purchases as a principal, plus 0.005 cents per mile shipped in the goods' final form over truck, or 0.001 cents ibidem over rail. For direct petroleum products (e.g., gasoline, motor oil, plastics, and many more) it is set at a relatively large, fixed amount: 31.5 cents per barrel of crude oil.
Example 2: This tax is a more sweeping levy in terms of political breadth, in the form of a state or even national-level tax, where crude oil is charged somewhere in the range of $2.50 per barrel of crude. The tax directly offsets individual income taxes, by direct proportion, across all brackets - poor, ordinary, or rich. The government dedicates this money for the down payments for the regional solar purchases starting with the areas with the highest product of population density multiplied with solar irradiance. As such, for the United States, the cities of Phoenix, Houston, San Diego, and Los Angeles would have preferential initial payments.
Assume that overseeing accounting of this tax money is not a problem (it is indeed important, but the handling of the money is another discussion in its own right, more along the lines of politics and prevention of corruption.) It can be used to hedge against fine-tuning mistakes in the financial calculations in the initial stages, but mainly serves as a subsidy for solar panels (recall this is at the local county level: so far, only state and federal-level incentives make the most contributions to PV decision-making).
Because the utilities are responsible for a portion of the initial ownership, the resident needs only pay a royalty below the 63% ownership percentage for selling his or her electricity; otherwise there is really very little incentive to sell one's electricity to neighbors. The percentage of royalty can be set arbitrarily low, perhaps at 20%, because the lifetime output of a solar panel is known to be some three to five times its cost from an investment standpoint. Along with gradual appropriation payment schemes to be discussed, it appears that unlimited royalties would appear to contribute to a feasible solution.
The homeowners have the sole authority to purchase whichever brand of solar panel they want, because after all, it is their property and rooftop. Furthermore, they can choose whichever solar company they want to do the installation as long as it is qualified to integrate the solar roof as part of the regional grid.
The utilities happen to own just under half of the solar panels on the residential roof. They are basically free to use that portion however they want, but by courtesy the priority is to direct that rooftop electricity to that very home, for efficiency reasons. It is well-known that transmission and distribution losses of electricity over long distances in the current infrastructure amount to anywhere between 7% to 15% [1]. Note this number is not the same as the theoretical efficiency of a single-junction solar cell (29%). Transmission and distribution losses are drastically reduced by perhaps one order of magnitude if one micro-localizes the electricity generation to the residential rooftop.
Suppose the cost of solar panels is partially covered by the aforementioned government tax. Let us reasonably assume it is a non-trivial portion, 40%. Then, the remaining 60% of the cost is shared between utilities and voluntary homeowners in a proportion of 63% utility, and 37% homeowner - a beautiful ratio derived from the decay of the standard exponential. With the first assumption that the government pays for 40%, the utility pays for 37.8% and the homeowner pays for 22.2%. The portion paid by the government is by default the homeowner's ownership fraction, because individual and sales taxes are pooled separately from the corporate or capital gains in the accounting process.
Utilities, because they are motivated by shareholders, must virtually act as for-profit entities. Therefore, there must be a method in which utilities sustain a large pace of growth while still collaborating with business owners and homeowners alike to take part in explosive solar PV expansion, instead of going bankrupt. Naturally this question, in its more particular form, asks whether or not all parties collectively can recuperate the fixed distribution costs, which mainly involves the installation of solar panels and their customized design on every rooftop, which may substantially vary for each home or business edifice. The tentative answer is yes, because the demand charges which cover a portion of the distribution costs are artificially inflated as necessary by this plan for years after installation (similar to [5]).
Homeowners may very well feel uncomfortable at the prospect that not all of the solar panels on their roofs are truly theirs. Then, the utility can inflate the costs of electricity as if there were still full transmission and distribution losses (viz. 8-18% based on [1]) as the form of payment for the individual to slowly purchase the remainder of the solar panels. Even half of this amount would suffice as an aggressive annual percentage rate on financing. More well-off individuals can afford the option to pay a full "electricity bill" as if there was no difference at all before and after the installation to suffice as a recurring purchase payment, with the annual percentages adjusted in 12-month cycles.
What happens if a homeowner moves? Solar panels - being personal property - can always be unmounted and transported along with other hardware, but the rest of the panels owned by the utility by default must move along with it, for the sake of system compatibility. The utilities move their own panels, including the one that is fractionally split in ownership, in order to relieve the homeowner of possible burden with moving extra panels, or offer a compensation for doing so. This only assumes local moving, where the electricity is still supplied by the same regional utility. In long-distance moves, one takes only the fraction of panels that is theirs, and settles the split ownership of the remaining panel with the utility - either buying or selling it off. Of course, the most simple option is that the homeowner just sells all panels back to the utility at a certain depreciated price.
Also, what happens from the utilities' perspective once the homeowner owns a majority (perhaps all) of the panels on his/her rooftop? In that state, the sell-back to the energy utility is nearly exhausted and because the taxes imposed above are thought to extend beyond initial purchases, they then go on to invest in sustainable energy storage, which is an upcoming industry.
Much work remains to be done in constructing large-scale energy reservoirs, for which utilities can still charge a high rate (typically 1.5X higher than normal day and night rates right now) for using their modes of energy storage. High-altitude reservoirs, compressed underground air, and large batteries are thought to be some potential projects for the utilities to build upon. The rationale is that most homes will not want to invest in a night-time storage unit which will provide substantial amounts of power (48 hrs or more) because at the current technology (absorbed glass mat, valve-regulated lead acids) it is still too expensive to maintain nighttime storage for the individual. In contrast, the utilities can afford to do this because their purchasing power can result in such a high quantity of batteries that their lifetimes will be long enough (in parallel) to recuperate the principal (recall that the cycle life for most batteries is highly non-linear with cycle life; in fact it is almost logarithmic). This is in additional to their investments in the other technologies of compressed air or high-altitude reservoirs.
By extension, the plan can be applicable for businesses, governments, and other energy consumers alike.
Advantages
The advantages are as follows:
1. The cost of each panel is lowered by the amount one would expect from bulk purchases of any item.
2. No party - not the gov't, citizens, or utilities - bear the full cost of solar panels by themselves, but rather cooperate to purchase them.
3. Costs (i.e., customer demand charges) are stretched out and nearly indistinguishable from normal electric bill payments. The financing APRs based on virtual transmission losses for the purchase of all remaining utility-owned panels on one's rooftop.
4. The solar installation begins immediately, meaning that the environment benefits from day one.
5. The tax takes into account different carbon-intensive activities, such as from the transportation sector. The highest level of tax from the government offsets an individual's income tax, so as not to exacerbate an individual's finances.
6. Small businesses are supported because the landlord or homeowner is free to choose who installs the panel on the rooftop.
Who will take these actions?
The trade association (it may be a new one formed, or the currently existing SEIA) will formulate the wholesale schedules, and determine the geographic cities, districts, or neighborhoods suitable for the implementation of wholesale prices. It would also determine the differences of pricing for different neighborhoods, because of the income disparity at such local levels.
The government and the democratic electrion process is generally the facilitator in initiating such broad changes to the way a utility's commodity is produced and consumed. Therefore, the first step is a local ballot measure which proposes the petroleum-stratified involuntary sales tax as a first step.
If it is approved (and this plan may have to change drastically if it is to happen), the plan is first enforced by the state or provincial government, which can have sufficient authority.
Where will these actions be taken?
Major metropolitan areas with suburban sprawl are the geographical locations with the highest energy consumption, but highest areal potential for solar energy utilization.
The cities positioned in sunny locations would be selected first for demonstration. The cities descibed with the highest population density - solar irradiance product are Houston, Phoenix, Los Angeles, and San Diego in the relative context of the United States.
How much will emissions be reduced or sequestered vs. business as usual levels?
A rough order-of-magnitude hypothesis is that this may offset a city's energy consumption to carbon-neutral steady-state modes by between a sixth and a third (16.7 to 33.3%) after ten years of careful implementation. Suppose it is a sixth.
For example, a city consuming 12 GW of electricity can save at least 12 GW * 8760 hr / 6 = 105,120 GW-hr / 6 = 17,520 GW-hr of electricity. Using Ref. [2] each kWh produces about half a pound of carbon dioxide; the city will then save 9,180,000 lbsm CO2 per year.
If we are looking at the 10-year conservative timeframe to implementation, then assume a linear interpolation of savings (for which any sigmoidal trend of any skewness is equivalent as long as the point of inflection sits at the 5-year point), then the city has saved 4,590,000 lbsm CO2.
If the four large metropolitan areas were to implement this (56 GW Los Angeles [3]; 30 GW Houston; 19 GW San Diego [3]; 12 GW Phoenix), then the total is about 45,000,000 lbsm CO2 over the initial 10 years.
What are other key benefits?
The key auxiliary benefits are two points:
1. The large-scale creation of energy storage facilities in the advanced phases of the proposal.
2. The wide-scale realization that a carbon tax isn't as nasty as it sounds, and actually winds up giving people more disposable income.
What are the proposal’s costs?
The proposal costs are entirely covered by taxes from the beginning; new taxes are introduced on a regional level, while the tax on a national level can be fundamentally adjusted to have minor impacts on individual citizens.
However, there is a certain variable amount of overhead and costs associated with retooling the accounting structure or subsidizing other advance payments to utilities or regional goverments. These may total anywhere between 10 million (10^7) to 1 billion (10^9) dollars as a rough order-of-magnitude.
Time line
Years 1-2: Trade Association Planning, Local Government Planning, Logistics, Budgeting, and Coordination with Regional Utilities.
Year 2: Industry offers the wholesale prices for thousands of districts nationwide. Local citizens can pass or deny referendum on implementation of sales tax(es).
Year 3. Grace period to allow tax money to accumulate, if passed, and accounting structure to calculate optimal investment from districts and wholesale prices. Determine to what extent income gaps influence price of each wholesale district.
Years 4-10. Collective buying and installing solar panels begins at the homeowners' discretion, with immediate buy-back rates kicked in.
Years 6-10. Utilities begin constructing large-scale energy storage projects for night-time electricity usage from excess renewable capacity.
Related proposals
The tax is intimately related or even a derivative of the classic carbon tax. The advocacy for the carbon tax is usually appealing in that it intends to offset individual income tax, sparking the race for "who can become the most green."
The coordinated solar purchase plan attempts to structure the tax in accordance for the regional-type competition on which regions and cities can become the most carbon neutral; the competition relates to how the utilities and regional governments decides to proportion the money apart from the percentages described in the details above.
A multitude of wholesale prices for PV panels can be found online, but they usually cater to individuals building a single system, and not a wholesale of systems.
The Westmill Solar Cooperative is a similar embodiment of the principles in this idea, in which the community owns a large-scale solar plant [4].
References
1. Ranade, Satish J. Electric Transmission and Distribution Efficiency. New Mexico State University (September 27, 2010). http://www.nmlegis.gov/lcs/handouts/Electric%20Transmission%20and%20Distribution%20Efficiency_Ranade92710.pdf Retrieved January 2012.
2.Carbon Footprint Calculator Assumptions. Pacific Gas & Electric (2012). http://www.pge.com/about/environment/calculator/assumptions.shtml Retrieved November 2012.
3. California Statistics: Per Capita Energy Consumption. Institute for Local Government (2012). http://www.fypower.org/partners/ilg/statistics/per_capita_consumption.html Retrieved November 2012.
4. World's Largest Community Solar Project Launches in England." Treehugger.com. http://www.treehugger.com/renewable-energy/worlds-largest-community-owned-solar-project-launches-england.html Retrieved June 2013.
5. "Rate Structures to Encourage Energy Efficiency." City of Seattle (June 2013). http://www.seattle.gov/citylightreviewpanel/documents/RateStructures-to-EncourageEnergyEfficiency060413.pdf Retrieved July 2013.
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