There are countless calls to action to mitigate climate change caused by human activities, but supporters of those calls must acknowledge any action that requires significant sacrifice must be justified and will be subjected to a level of scrutiny commensurate to the sacrifice. Subsequently, any action that requires limited to non-existent sacrifice will enjoy limited to non-existent resistance and benefit from a stronger likelihood of broad acceptance and adoption. One of the actions promoted to mitigate climate change is the use of photovoltaic (PV) solar cells to generate electricity in lieu of using electricity from non-climate friendly sources. PV electricity currently supplies about 1.5% of the total power generated in the United States. The primary sacrifice metric for PV solar electricity and its ultimate success in climate mitigation is financial. If PV solar electricity results in higher overall costs for the same amount of power generated by its competing sources, the significance of the increase will fuel the degree of resistance to its use. If, however, the overall cost is the same or less, who wouldn’t prefer to purchase PV solar electricity that also mitigates climate change concerns?

While everyone retains the right to their opinion about PV solar electricity and may pursue its use how they see fit within the rule of law for their private domain, the public domain requires a level of consensus. This consensus is going to be directly related to the overall cost differential of PV solar electricity as compared to power delivered by local utilities. In addition to the existing desire to mitigate climate change, the budget impact of the 2008 recession and technological advancements of PV technology triggered a renewed interest in PV solar electricity, especially with local, state and federal entities. Consequently, some have engaged PV solar electricity with increased overall costs and have suffered both financially and politically while decreasing public trust in solar energy specifically and renewable energy generally. Some examples would include the City of Sedona, Arizona, which settled a lawsuit against its PV solar electricity provider, Sun Edison, which paid the City $375,000 to mitigate the increased costs resulting from their purchase of PV solar electricity under their contract in common. Likewise, Casa Grande Union High School District of Arizona also settled a dispute with their PV solar electricity provider, Constellation Solar, which paid the District a one-time payment of $250,000 and an ongoing annual payment of $50,000 for the remainder of their twenty year contract.

While the preceding examples demonstrate a reduction of the overall increases of cost for their PV solar electricity, it is unlikely skepticism about the technology or confidence in the administrations of these entities has experienced the same degree of improvement. Reviewing PV solar electricity school district contract reports from the Arizona Auditor General paints a story consistent with the aforementioned entities for Gila Bend USD, Paradise Valley USD, Higley USD, Riverside ESD and others. Every time this story repeats itself, the barrier to its pursuit grows in contradiction to the intended goals of anthropogenic climate change extenuation. The problem was significant enough for the office to produce a “School District Alert” about “Solar Power System Contracts” in an effort to help those public entities who are not purchasing their PV solar electricity for the same or less overall cost as compared to their local utility and as a checklist of “Do’s and Don’ts” for those considering such pursuits. Four primary concerns are identified in the alert, 1) demand and transmission charges from the local utility, which PV electricity cannot offset; 2) overvaluation of PV electricity; 3) annual PV electricity cost escalation exceeding local utility rate inflation; 4) selling unused PV electricity to the local utility below its cost.

Because PV solar generated power is not available twenty-four hours per day, accounts utilizing PV electricity as an alternative must rely on firm power available from their local utility when the solar system cannot provide all the needed energy at any given moment. As a result, the account must remain connected to its local utility to fulfill twenty-four hour power requirements. In Arizona, as is the case in most locations of North America, any account connected to the local utility will incur a level of minimum connection costs even if they do not use any power for the cycle. Obviously, nothing can reduce this cost. Secondly, “demand” fees, which represent an account’s share of infrastructure costs to operate the grid for their area, are generally immune to the influences of PV generation. This charge is based on the maximum demand of electricity during any one of the approximately 2,880 fifteen minute intervals of a billing cycle and represents about one-third of the total bill on average for public accounts. Once again, since PV solar generated power is only available during hours of solar insolation, it cannot influence any peak demand that occurs during non-solar hours. Lastly, even if the greatest peak demand occurs during solar hours, it is likely slightly smaller sized peaks occurred outside solar hours which limit cost savings of this metric to tenuous levels.

Overvaluation of PV electricity rose out of an inappropriate methodology and evaluation of the same. The prevailing methodology consisted of adding all the local utility costs for an account targeted for use of PV electricity and dividing the amount by the total electricity as measured in kilowatt hours delivered in the same period. This resulted in a PV “blended” kilowatt hour value. The PV “blended” kilowatt hour value was then used for an equitable evaluation against the cost of electricity delivered by the competing local utility to determine the contract rate for the generation and delivery of PV energy. Because this methodology creates a “one to many” direct relationship between the PV kilowatt hour and local utility billing cycle, demand and kilowatt hour costs, it inappropriately establishes reductions in local utility billing cycle charges it cannot achieve and demand charges it’s highly unlikely to reduce. Since these charges represent about one third of the electricity charges for the average public utility account, using the “blended” kilowatt hour valuation results in a similar cost increase for the account.

Annual PV electricity escalators have been promoted by solar developers and providers. Conceptually, escalators are intended to represent local utility rate inflation. When promoting a PV solar electricity contract, a vendor will sometimes request an annual PV kilowatt hour cost escalator be included in order to entice investors to finance the project. According to the Arizona Auditor General’s “Solar Power System Contracts” alert, about half of PV solar contracts with schools included annual escalators. For contracts without escalators, this issue does not impact their bottom line. Do the escalators, which have ranged between 2 and 5 percent, actually compete with local utility rate inflation? When the Auditor General reviewed Gila Bend USD’s contract they found an escalator of 5% per year. This was based on a less than 6% average of a 6 year period of the local utility’s, Arizona Public Service (APS), rate inflation prior to executing a 20 year contract. Conceptually, the school district was expected to experience a slowing in the increases of its PV solar accounts over time. In reality, the Auditor General evaluated APS inflation for a 20 year period, which was equal to the contract term and found the average inflation to be slightly greater than 1% per year. In the end, the increased costs of Gila Bend USD’s electricity will continue to get worse every year until the contract comes to term.

Lastly, Arizona Corporation Commission law, rules and regulations create circumstances that require accounts to sell unused PV kilowatt hours back to their local utilities at slightly below wholesale rates, which are one sixth to one third the amounts paid to purchase the power from the PV solar provider. Every time this occurs, the respective PV solar contract’s cost differential with the local utility rate increases. This issue is exacerbated by oversized PV capacity. Since solar provider profits increase with increased PV generation, this has occurred all too often. For oversized PV systems, at a minimum the buy-back will occur once a year. For grossly oversized or improperly designed systems, this can occur continuously when the PV system is generating power.

Fortunately, these pitfalls are easily avoided with proper due diligence by qualified individuals, which ideally are directly and only responsible to the public entity. Actual cash flow, utility cost and any other analysis should be broken out by respective billing cycle, demand and kilowatt hour metrics to expose the proper valuation for the various aspects of PV solar contracts. Push for term set rate kilowatt hour contracts. If that’s not possible, utilize consumption profiles consistent with a targeted account to calculate average bills, again broken out by all individual metrics of a bill, for a period of 20 to 30 years earlier to provide a better gauge for inflation/escalation consideration. Next, evaluate the impact of unused PV kilowatt hour buy-back per the law, rules and regulations for your account to determine the optimal system sizing over time. Fully consider the account profile over the life cycle of a proposed PV investment. Occupancy, use and other issues may change an account's profile so “what-if” scenarios should be considered and evaluated since PV installations are long-term considerations. Finally, since any PV installation is a long-term investment, consider different finance options like a “lease purchase”, which has a greater pay back if waiting is not an issue.

Earnest attention to detail will reveal the fitness for consideration of any public domain PV solar project. For those that would increase the overall electricity costs as compared to their local utility, great care should be taken to ensure a substantial if not super majority of the public stakeholders believe the environmental benefits out-weigh the increased expense. This is likely a very difficult endeavor for most and should provide incentive to take more time to consider alternative configurations or ideas. But, for those PV projects that would provide the environmental benefits while simultaneously reducing overall electricity costs, it is a “win-win” outcome. While a project meeting this criteria is obviously a “win”, adding a successful result to, hopefully, a growing number of the same, will provide a much needed boost in public acceptance and adoption of the technology.