Beyond Energy Contracts
Determinants and Benefits of Distributed Energy Applications
Energizing the U.S. Economy: Rural America at the Epicenter of
America’s Future
October 29, 2015
Irene Xiarchos
Natural Resource Economist
The views expressed
are those of the
presenter and do not
necessarily reflect
the positions of
USDA or OEPNU
Data
Resources
NASS 2012, 2007: Census of Agriculture
NASS 2008, 2009, 2010, 2011: ARMS
NASS 2009: On Farm Energy Production Survey
Sunshot, 2014; NREL 2013
Publications
•
•
•
•
•
•
Xiarchos and Vick, 2011. Solar Energy Use in US Agriculture: Overview and Policy
Issues. US Department of Agriculture
Xiarchos and Lazarus, 2013. Factors Affecting the Adoption of Wind and Solar-Power
Generating Systems on US Farms: Experiences at the State Level. US Department of
Agriculture
Beckman and Xiarchos, 2013. Why are Californian farmers adopting more (and larger)
renewable energy operations? Renewable Energy 55
Borchers, Xiarchos and Beckman, 2014. Determinants of wind and solar energy
system adoption by US farms: A multilevel modeling approach. Energy Policy 69
Edwards, Wiser, Bolinger, and Forsyth, 2004. Building a Market for Small Wind: The
Break-Even Turnkey Cost of Residential Wind Systems in the United States. Lawrence Berkeley
National Laboratory
Denholm, Margolis, Ong and Roberts, 2009. Breakeven Cost for Residential Photovoltaics in
the United States: Key Drivers and Sensitivities. National Renewable Energy Laboratory
Renewable Energy in Rural America
NASS 2012
70000
60000
50000
57299
40000
• Wealth opportunity from the boom in
commercial wind energy on farm land
• Farmers with distributed generation
– 5x more
– More widely distributed
30000
20000
10000
0
Renewable
9054
10181
Wind
Wind Right
Leases
Distributed Generation in Rural America
Evolution
• Many early adopters of renewable energy (RE) technologies in rural areas
–
–
–
–
Before rural electrification (1930s) wind widely used on farms
After 1930s it declined until 1970s
Agriculture also hosted some of the first terrestrial PV applications
Sales of solar PV in agriculture started in the 1980s
• Prior to 1996 primarily off-grid market
• Recent growth is led by on-grid systems
– Interconnection and net metering
– Federal and State Policies especially after 2005
• Farms with renewable energy production increased almost 5 fold from 10400 in
2007 to 57300 in 2012
– Over 80% of turbines and panels installed after 2000, over 50% after 2005
Distributed Generation in Rural America
Renewable Energy Types
• Solar increased 400%
• Wind by 540%
• Digesters 340%
NASS 2009, 2012
2012
2007
36,331
7,236
SOLAR
9,054
1,420
WIND
537
121
DIGESTERS
Distributed Generation in Rural America
Renewable Energy Types
70,000
While solar PV & wind most
prominent, on farm energy
also produced by
– small hydro (electricity)
– geothermal and solar
thermal (heat/cooling)
– ethanol and biodiesel (fuels)
– methane digesters at
livestock operations (biogas)
NASS 2012
60,000
50,000
40,000
30,000
20,000
10,000
0
Distributed Generation Benefits
Distributed RE
– reduce energy
expenditures
– insulate from price
volatility
– provide reliable
energy supply
Return for solar-PV and
small-wind installations
depends on
geographically variable
– energy prices
– resource potential
– incentives
• Payback ranges 6-30
yrs.
Denholm et al, 2009
Residential PV is close to breakeven cost in areas
high electricity prices and good solar resources (CA) or
high electricity prices and incentives (NY or MA)
Renewable Energy Cost
Reported Median Price
10
2013 $/W
8
6
4
2
0
2008
2009
2010
RESIDENTIAL
Technology Type
Size
Installed
cost
Std. Dev.
2011
2012
2013
COMMERCIAL
PV
SunShot 2014
Wind
<10kW –100KW –10MW <10kW –100KW
–10MW
($/W)
$3.90
$3.80
$3
$7,86
$6.39
$3.42
(+/- $/W)
$0.92
$0.89
$0.73
$2.65
$2.34
$0.85
NREL 2013
Policy Support
•
•
•
•
Since 2005: 30% Federal Investment Tax Credit (ITC)
Rural Energy for America Program (REAP) (2002)
The depreciation tax deduction (MARCS) for farm & rural businesses
Net Metering & Interconnection
– 26 of 41 States & DC “effective” net-metering policies (Freeing the Grid, 2008)
– 14 of 37 States & DC “effective” interconnection standards (Freeing the Grid, 2008)
• Renewable Portfolio Standards (RPS) (requirements for renewable
electricity)
– 16 States also had specific solar and/or DG “set asides” (2008)
• Other State financial incentives : 27 States in 2008
– 11 with tax credits (ITC)
– 19 with grant and rebate programs (DP)
– 8 with production incentives (PI).
• Federal and State loan programs.
Xiarchos & Lazarus, 2013
Determinants of Adoption
Farm characteristics positively influence adoption at farm & state level:
– Characteristics - livestock operations, farm residence and land tenure, internet access,
income, organic and conservation practices, and newer farmers.
Economic factors positively influence adoption at farm & state level:
– Factors - solar resources, energy prices
State attributes positively influence adoption at farm & state level:
– Attributes- per capita income levels, democratic voting, energy used in agriculture
Institutions and policies that influence adoption:
– Share of customers served by electric cooperatives negatively influences adoption
– Best practices in both net metering and interconnection policies positively
influence adoption at the farm level
– Distributed generation RPS positively influences wind and solar adoption rates
– New renewable RPS positively influences wind adoption rates
Xiarchos & Lazarus, 2013; Borchers, Xiarchos & Beckman, 2014, Beckman & Xiarchos, 2013
Determinants of Adoption
Discussion
• The percentage of State electric customers served by an electric
cooperative is negatively related to adoption.
– Electric cooperatives (historically served rural areas and farm customers) are
excluded in 2008 from net-metering requirements in 14 States,
interconnection standards in 15 states, and RPS in 9 States
– Today, more electric cooperatives are touting renewable as a portfolio
option
• There are slight distinctions between different types of renewable energy
adoption:
– Solar energy adoption rates is influenced by tenure share, the corresponding
renewable energy resource, and energy used.
– Solar energy adoption rate is influenced only by the solar/DG RPS target,
while wind is also influenced by new renewable RPS
Determinants of Adoption
Further Research
• No connection seen between financial policy instruments &
adoption. Why?
– Decisions might instead be determined by farmer characteristics.
– Instruments are not sufficiently large to induce a significant impact.
OR
– Might not be capturing the actual prices and incentives farms face
– Incentives provided at the utility or local level were not available.
• Characteristically average financial support received affects size (type) choice
of renewable energy system in CA.
• The REAP program lacked sufficient geographic distribution prior
to 2009 to draw conclusions.
– In first five years of REAP, grant awards tended to be concentrated in a few States.
– Today, each individual State Rural Development office has been allocated funds for its
State, providing adequate variation in award distribution to evaluate in the future.
Conclusions
• Farms with Distributed RE increased almost 5 times in 5 years
since 2007
• Though the financial gain is smaller than wind leases, distributed
generation has a wider impact on farm and rural business.
• Institutional and policy settings are important determinants for
distributed generation
• USDA’s REAP has expanded access to rural businesses and the
Rural Development Utilities Programs is in a unique position
to work with electric cooperatives to promote distributed
generation of renewable energy while increasing green job
opportunities
Future Considerations
• Return for distributed generation will depend on energy prices,
resource potential, incentives, and installation costs
– Recent policy incentives have had a huge impact on adoption.
– Installation costs have decreased substantially and is projected to decrease
further
– If electricity prices increase in the future, more farms may find onfarm power generation profitable.
• Shale gas innovations can have a dampening impact on electricity prices
• GHG regulations can have a boosting impact on electricity prices
• Distributed Generation Future
– In 2014 residential solar PV capacity surpasses commercial capacity
– Still utility scale installations lead growth
Data
Resources
NASS 2012, 2007: Census of Agriculture
NASS 2008, 2009, 2010, 2011: ARMS
NASS 2009: On Farm Energy Production Survey
Sunshot, 2014; NREL 2013
Publications
•
•
•
•
•
•
Xiarchos and Vick, 2011. Solar Energy Use in US Agriculture: Overview and Policy
Issues. US Department of Agriculture
Xiarchos and Lazarus, 2013. Factors Affecting the Adoption of Wind and Solar-Power
Generating Systems on US Farms: Experiences at the State Level. US Department of
Agriculture
Beckman and Xiarchos, 2013. Why are Californian farmers adopting more (and larger)
renewable energy operations? Renewable Energy 55
Borchers, Xiarchos and Beckman, 2014. Determinants of wind and solar energy
system adoption by US farms: A multilevel modeling approach. Energy Policy 69
Edwards, Wiser, Bolinger, and Forsyth, 2004. Building a Market for Small Wind: The
Break-Even Turnkey Cost of Residential Wind Systems in the United States. Lawrence Berkeley
National Laboratory
Denholm, Margolis, Ong and Roberts, 2009. Breakeven Cost for Residential Photovoltaics in
the United States: Key Drivers and Sensitivities. National Renewable Energy Laboratory