Testimony of David K. Garman
Assistant Secretary for
Energy Efficiency and Renewable Energy
U. S. Department of Energy
before the Subcommittee on Economic Development, Public Buildings, and Emergency Management
Committee on Transportation and Infrastructure
U.S. House of Representatives
August 1, 2001
Mr. Chairman, thank you for the opportunity to present testimony on H.R. 2407, the Federal Photovoltaic Utilization Act.
The Department of Energy supports the advancement of photovoltaic technology and the greater use of reasonably priced renewable energy in federal facilities. We also recognize the importance of matching renewable resources with their optimal use, keeping in mind the specific strengths and weaknesses of each renewable energy resource.
Any discussion of the role of photovoltaics, or PV, should begin with recognition of the very modest role they hold today. During the year 2000, renewable energy resources provided 362.7 billion kilowatt hours of our nation's electricity, or roughly 9.6% of the net electricity produced according to the Energy Information Administration (EIA). Of the net electricity produced from renewable resources, 77% came from hydroelectric generation. The balance of net renewable generation was split between biomass, geothermal, wind and solar. The table below summarizes electricity net generation production data from the year 2000.
| Total Electricity | Total Renewable | Hydroelectric | Biomass | Geothermal | Wind | Solar | |
|---|---|---|---|---|---|---|---|
| Production - Million of KwH (Year 2000) | 3,799,944 | 362,715 | 278,633 | 64,088 | 14,197 | 4,953 | 844 |
| % of Total Electricity | 100.00% | 9.55% | 7.33% | 1.69% | 0.37% | 0.13% | 0.02% |
| % of Renewable Electricity | 100.00% | 76.82% | 17.67% | 3.91% | 1.37% | 0.23% |
Roughly 844 million-kilowatt hours of electricity was produced last year from solar thermal and PV. By itself, PV is estimated to have produced about 240 million-kilowatt hours, or 0.006% of our total electricity production. I do not point this out to belittle PV or its potential. Indeed, while the current contribution of PV may be small, it is unsurpassed in many niche applications, particularly off the grid.
Of course the key barrier to the broad application of PV is its high cost. PV installations average around $10,000 per kilowatt. However, guaranteed volume purchase/buy down programs such as the one put in practice by the Sacramento Municipal Utility District has brought their grid-connected systems down to an average of $5,100 per kilowatt. It is difficult to translate these numbers to a price per kilowatt-hour that we can relate to when thinking about nationwide application since the eventual price will depend on the specifics of the installation, how sunny or cloudy the climate, and other factors. Assuming a 30-year lifetime, a $5,100 per kW system translates to about $0.20 cents per kW hour; and a $10,000 per kW system translates to about $0.38 cents per kW hour. These numbers can be compared to typical commercial rates of $0.06 cents per kilowatt-hour paid by many federal government users. Industrial electricity rates are generally less.
Of course, price is not the sole consideration. The benefits of solar photovoltaic energy include the absence of emissions, freedom from fluctuating fuel prices, the matching of power produced with summer peak demand, low maintenance demands, modularity, versatility, and reliability.
With those advantages and disadvantages in mind, one can begin to see the kinds of installations where PV can be best employed, and where federal dollars in support of PV should be spent in pursuit of the goals we share: the greater deployment of PV in the marketplace.
The President's National Energy Policy supports PV through its recommendation that Congress adopt a 15% tax credit for residential solar energy, up to a maximum credit of $2000. The administration is also working with Congress to address other barriers to PV installations including the lack of uniform interconnection standards and net metering arrangements in many areas of the country.
Our strategy for getting more PV in the market is actually a four-pronged effort:
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First, we will continue our R&D efforts to bring down the costs of PV.
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Second, we urge that Congress approve a residential tax credit as proposed by the President in his budget and recommended in his National Energy Policy.
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Third, we are working with Congress to address the interconnection and net metering issues that act as barriers to PV and other forms of distributed generation.
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Fourth, we are working to promote life cycle costing in federal purchasing, consistent with the Administration's capital programming efforts and OMB Circular A-11, Part 3, and to incorporate energy-saving strategies in the design and construction of new federal buildings.
We believe this multi-pronged approach is the kind of balanced effort that will best promote the introduction of PV in the marketplace, particularly if solar and other distributed generation technologies are considered when federal facilities are first designed.
To illustrate how interconnection and net metering can assist in the economics of PV, consider the example of the "solar home" displayed on the mall earlier this year. This home is now located in nearby Loudoun Country Virginia, where some degree of interconnection and net metering is available. After the Virginia electricity market is fully restructured, the owner of the home, Alden Hathaway, plans to sell the excess electricity generated by his 6 kilowatt system back to a green power provider, who in turn will market this power at a premium price. Alden will benefit from the positive cash flow that helps offset his higher initial investment in PV. The local electric cooperative will benefit because it will have a clean source of peak power that can be sold at a premium price. We will all benefit from the fact that the additional increment of peak power provided by Alden's PV array will not have to be generated by an emitting plant.
In an effort to address the interconnection issue, the Department of Energy has been supporting efforts by industry through the Institute of Electrical and Electronic Engineers (IEEE) to develop voluntary national interconnection standards. This effort has involved extensive working group deliberations involving electric utilities, equipment manufacturers and distributed energy project developers. We expect the technical standard being developed by the IEEE will be used both by states and the Federal Energy Regulatory Commission as they set new rules for a restructured electricity system. We are also on record in support of net metering, recognizing that these decisions have historically fallen under state jurisdiction. We believe the broad application of interconnection and net metering will improve the economic viability of wind, biopower, geothermal, solar and other renewable and distributed energy projects.
We commend Representative Oberstar for his efforts to promote PV, but have concerns about H.R. 2407 that prevent us from supporting it in its current form. H.R. 2407 would authorize over $1.3 billion in pursuit of the deployment of 150 megawatts or more of solar electricity. There are questions, of course, over whether appropriations of this magnitude would actually be forthcoming from the Congress. Because such a program would be subject to annual appropriations, the uncertainty of consistent appropriations would send confusing signals to the market. Manufacturers offering solar energy systems would find it difficult to anticipate appropriations levels and subsequent demand. Thus, they would face difficulty planning capital expenditures to ensure that enough systems would be available in the marketplace.
A residential solar tax credit, as recommended in the President's National Energy Policy, is not subject to the uncertainty of the annual appropriations process and would send a stronger, more certain signal to the market. Moreover, it would do so at much lower cost to the Treasury. The Treasury Department has estimated the cost of the President's proposed residential solar tax credit at $140 million over the years 2002-2009. This estimate assumes that 70,000 homeowners take full advantage of the tax credit. Assuming the average homeowner could be expected to install a PV system of about 2.5 kilowatts, the result would be an installed capacity of 175 megawatts. This exceeds the new installation goal in H.R. 2407, but does so at a sharply reduced cost.
But we also have other initiatives underway to promote federal purchases of renewable energy.
Last month Secretary Abraham announced that the Department of Energy, through the Bonneville Power Administration, would sign pre-development agreements for seven new wind power projects to provide an additional 830 megawatts of generating capacity in the energy-strapped West. This initiative would produce enough electricity to meet the needs of nearly 270,000 homes, and it represents an approximately 20 percent increase in the nation's wind power capacity.
We are working to make renewable energy purchases for ourselves and for the customers of our power marketing administrations, and we are doing it because it makes good business and environmental sense.
We also hope to make a difference in the construction of new federal facilities. Through the Department of Energy's Federal Energy Management Program, we are working to assist our federal colleagues to incorporate "whole building" energy efficient design and life cycle costing early in the planning stages of new federal facilities. We are even hoping to one day make "net-zero energy" buildings a reality by leveraging the possibilities provided by PV, combined heat and power, microturbines, fuel cells, and advanced storage systems.
We hope to work with this Subcommittee in investigating these ideas and others that we might employ to increase federal use of clean energy resources, distributed generation, and energy-efficient designs.
Thank you for inviting me to this hearing, and I would be pleased to answer any questions you might have.
