Technical Report
UCED 2012/13-08
SOLAR POWER BENEFITS ANALYSIS:
SUNSHOT INITIATIVE SUMMARY and ANALYSIS
University of Nevada, RenoSolar Power Benefits Analysis: SunShot Initiative Summary and Analysis
Report Prepared by
Malieka Landis
Margaret Cowee
Elizabeth Fadali
Jeffery Stroup
and
Thomas R. Harris
Malieka Landis is a Research Associate with the University Center for Economic Development at the University of Nevada, Reno.
Margaret Cowee is a Research Associate with the University Center for Economic Development at the University of Nevada, Reno.
Elizabeth Fadali is a Research Associate with the University Center for Economic Development at the University of Nevada, Reno.
Jeffery Stroup is a Graduate Research Associate in the Department of Economics, College of Business at University of Nevada, Reno.
Thomas R. Harris is a Professor in the Department of Economics and Director of the UniversityCenter for Economic Development, College of Business at the University of Nevada, Reno.
UniversityCenter for Economic Development
Department of Resource Economics
University of Nevada, Reno
Reno, Nevada
(775) 784-1681
December 2012
Thomas R. Harris, Director
UniversityCenter for Economic Development
University of Nevada, Reno
Department of Economics
Mail Stop 204
Reno, Nevada 89557
UCED
University of Nevada, Reno
Nevada Cooperative Extension
Department of Resource Economics
Solar Power Benefits Analysis
SunShot Initiative Subgrant Summary and Analysis
Table of Contents
Executive Summary ...... 1
Introduction ...... 2
Solar Industry Representatives Focus Groups & Survey ...... 4
Residential Property Owners Survey ...... 17
Commercial Property Owners Survey ...... 37
Summary & Conclusions ...... 47
References ...... 51 1
Executive Summary
The Nevada State Office of Energy subcontracted with a team of University of Nevada, Reno researchers to estimate factors that could enhance or retard the adoption of solar power by businesses and households in Clark and Washoe Counties. Information was collected on the Nevada solar industry through a series of focus groups and online surveys targeted at Nevada solar industry professionals as well as residential and commercial property owners in Clark and Washoe Counties.
Results from the solar industry focus groups and the industry and property owner surveys were very much aligned across all sub-groups (Washoe v. Clark, adopter v. non-adopter, signaler v. non-signaler, residential v. commercial). The greatest difference in reporting between any two subgroups is based on geographical variations between Clark and Washoe counties. All subgroups reported cost measures as the most influential factor when deciding whether or not to adopt solar technology on their property. Little participation or knowledge of EnergyFit Nevada (used as a proxy for energy efficiency) programs was true for all sub-groups. Despite reported low knowledge of EnergyFit Nevada, all subgroups reported that lack of information about solar technology to be the weakest inhibitor for solar adoption. When asked to allocate a home improvement budget to a list of home projects, solar technology received the majority of the budget across the board, followed closely by energy efficiency. Contractor knowledge/expertise and cost were the most important factors when hiring a home improvement contractor for all subgroups. Average snow levels and forestation in Washoe County presents property owners in Northern Nevada with an extra set of challenges in solar adoption.
Return on investment (ROI) is the primary economic measure used by property owners when making decisions about solar adoption. In general, ROI in Southern Nevada is significantly shorter than the ROI in Northern Nevada, mostly due to environmental and geographical characteristics such as increased peak demand in the summer. Several tactics were repeatedly suggested to lower the ROI for all potential solar adopters in Nevada. Improving the predictability of the current solar incentive lottery was repeatedly expressed as the most effective measure to encourage adoption. Net metering issues such as expanding or limiting MW caps and offering portfolio credits were cited as important incentives for solar adoption, particularly with commercial and industrial businesses. Providing long term government sponsored financing through programs like PACE would likely contribute to more property owners in Nevada adopting solar technology.
Improving efficiency measures and standardizing regulation creates a predictable environment where consumers of all types can make best decisions about solar investments. Political and government support of this type of environment offers opportunities for ongoing economic development in this area. Additionally, educational programs that help consumers understand the costs and benefits of solar adoption and other energy efficiency technologies will provide the largest economic returns to residential and commercial consumers, solar and solar support industries, and municipalities through the encouragement of growth in this economic sector. 2
Introduction
With volatility of energy prices such as the recent rise of gasoline prices in California and Nevada as well as public interest in reducing carbon emissions, Nevada residents and decision makers have become interested in increased use of renewable energy. One source of renewable energy is solar power. Solar energy as an alternative energy source has higher capital costs than most conventional energy sources. However, because solar energy does not require fossil fuels as fuel input it can deliver annual energy savings over conventional technology.
Analyses of potential benefits of adoption of solar power at the business and household level have been concentrated on cost savings analysis. Using simulation models, reductions to business and household costs from solar power investments when compared to other energy sources can be estimated. However these cost simulation models do not provide information as to factors that affect the adoption of solar power by businesses and households. The question becomes: “What are the characteristics of solar power adopters and can these adoption factors be enhanced to increase investment and use of solar power by businesses and households in Clark and Washoe Counties?”
To address this question, the Nevada State Office of Energy subcontracted to a team of researchers at the University of Nevada, Reno within the University Center for Economic Development (UCED) and the Nevada Small Business Development Center (NSBDC). The primary objective of the subcontracted project was to estimate the factors that enhance or retard the adoption of solar power by businesses and households in Clark and Washoe Counties. Specific objectives of the project were to:
A. Complete a survey of previous studies that have attempted to estimate factors that enhance adoption of solar power by businesses and households in Clark and Washoe Counties.
To address this objective, a survey of literature was completed to investigate determining factors that enhance or retard adoption of solar power by businesses and households. This included a review of business and household questionnaires that could be adapted and modified for the Clark and Washoe Counties’ business and household survey. This first objective undertaken by the project determined that limited prior research was available specific to Clark and Washoe Counties.
B. Develop a mailing list and questionnaire of businesses and households in Clark and Washoe Counties.
To address this objective, an online survey was created by University Center for Economic Development staff based on the literature review (Objective A), two industry focus groups held in Las Vegas and Reno, and recommendations from other members of the project team. The survey was structured to obtain responses from owners of both businesses and residential property. Three subsets were identified and targeted in both the residential and business populations; adopters of solar power (signaling adopter), those who have signaled interest in solar power (e.g. participated in formal education program) but have not yet adopted (signaling non-adopters), those who have neither adopted solar power nor signaled interest (non-signalers). 3
An invitation letter was mailed to random sample of 14,812 residential property owners and 188 commercial property owners in Clark County and 4,943 residential property owners and 57 commercial property owners in Washoe County. These mailing lists were obtained through a third party private marketing firm in Reno. Additionally, a link to the online survey was embedded in the January edition of NV Energy’s RenewableGenerations newsletter, with an estimated circulation of 2,300 residents and business owners who have participated in one of NV Energy’s renewable energy programs.
C. To estimate from the questionnaires significant factors that would enhance the adoption of solar power by businesses and households in Clark and Washoe Counties.
To address this objective, stratified sampling of businesses and households were employed. Using survey procedures similar to those put forth by Dillman et al. (2009), businesses and households were twice invited through the mail to take the survey online. After allowing invitees an appropriate amount of time to take the online survey, the results were statistically analyzed to determine factors that enhance and retard solar adoption, as well as characteristics of adopters of solar power. Survey respondents were also asked if they currently employ energy saving programs. The survey responses were used to determine statistically significant factors for energy saving enhancements and then for adoption of solar power.
D. To suggest policies to theNevada State Office of Energy that could enhance solar power adoption by businesses and households in Clark and Washoe Counties.
To address this objective, the results from the surveys were used to develop this report with the intent of providing information to Nevada State Office of Energy decision makers as to statistically significant factors that could enhance the adoption of solar power by businesses and households in Clark and Washoe Counties. The knowledge derived from these statistically significant factors can provide information to develop educational and rebate/subsidy programs that would enhance future investments in solar power by businesses and households in Clark and Washoe Counties. 4
Solar Industry Representatives Focus Groups & Survey
In an effort to gain further insight to the factors that promote and retard solar adoption in Nevada’s largest population centers, focus groups with solar industry professionals were held in Las Vegas and Reno in December 2012. Additionally, a link to an online survey was emailed to a mailing list of 28 regional industry representatives.
Clark County Focus Group
The Clark County focus group for solar industry professionals was held at the Las Vegas PBS building, which houses the Clark County EnergyFit Nevada offices, on December 4, 2012. A total of three solar industry representatives were present. Participants were asked a series of questions about their perceptions of the regional market for solar photovoltaic (PV) panels, demographic information about their customers, and what they perceive to be barriers and opportunities for further development of this market. Some of the more relevant findings from this focus group were that Clark County exhibits more residential than commercial demand for solar installation; the belief that consumer education is a necessary component of expanding this market; introducing low-interest leasing options is viewed as having the potential to increase Clark County solar adoption; and the current lottery-based rebate incentive structure is viewed as presenting a barrier to Clark County solar adoption.
Perceived motivators (potential and existing):
Participants were asked to describe what their perception of factors (both existing and proposed) that motivate customers to make the decision to install solar PV panels.
Portfolio energy credits: Participants unanimously agreed that the provision of tradable portfolio energy credits (PEC) has motivated residents in New Jersey and California to adopt solar PV (New Jersey’s Clean Energy Program, 2013; US Department of Energy, 2012). While Nevada has a PEC program for solar PV (among other renewables) offered through NV Energy, this program does not allow customers to retain or trade credits or certificates. The PEC programs in California and New Jersey allow customers with solar PV (and other renewables) to bank energy credits based on energy they are generating through their system in excess of that which they use. Participants expressed that they had calculated that allowing for credit or certificate trading in Clark County could effectively lower a residential customer’s return on investment (ROI) from eight to three years and believed that this ROI reduction would greatly increase solar adoption rates in Clark County.
Energy independence: Building on the concept of granting solar adopters with financial incentives to reduce energy consumption through allowing credit trading, participants stated that granting adopters a measure of energy independence is somewhat a motivator to adopt. Focus group participants noted that the concept of reducing fossil fuel usage and gaining energy independence from utility companies appeals to many of their customers. 5
Leasing and long-term financing: One of the focus group participants worked for a nationwide franchise and through economy of size was able to offer pre-paid leases to potential solar adopters. The balance of focus group participants were not involved in operations large enough in scale to offer such options to their customers and believed that this put them at a disadvantage. The participant who was able to offer leasing stated that his company is selling financing as much as solar panels. Focus group participants noted that the majority of their customers have cash to invest in solar PV and have enough disposable income to make this investment. They believed that providing customers the option of longer-term financing through a property assessed clean energy (PACE) program would increase adoption rates in Clark County. PACE programs allow solar adopters to take a long-term loan from their city of residence to pay for solar installation which they then repay over a term of 15 to 20 years through increased property tax. Additionally, access to PACE financing would allow smaller, locally-owned companies to remain competitive with the companies who are able to provide financing.
Net metering: Net metering is a means of measuring the difference between the electricity supplied by a utility and that generated through solar PV (or other renewable energy sources) by the customer. The customer is then billed only for any excess usage provided by the utility. In Nevada, customers are allowed to carry forward credits for power generated in excess of their usage, but are subject to various regulations based on their generation capacity and billing structure. Customers with systems generating more than 25kW are required to install a generation meter at their own cost; a generation meter is necessary in explicitly reporting the kW hours generated each month on the utility bill. Furthermore, ‘customer-generators’ are not offered cash incentives when net energy generation is positive as in other states. Focus group participants believed that adjusting these regulations would provide motivation for increased residential and commercial adoption.
Perceived barriers:
Rebate incentive system: Participants unanimously agreed that the current structure of the rebate incentive system in Nevada presents a barrier rather than a motivator to solar adoption. Specifically, participants cited the lottery nature of the Nevada rebate system, as well as the variable release dates of rebates. Potential adopters who have applied for a rebate do not know when the rebates will be released or whether or not they will be selected in the lottery. This creates a level of financial uncertainty for potential adopters who are then unable to accurately calculate their ROI and cash flow needs. Participants also expressed the belief that the rebates are viewed with a level of skepticism by customers because they are administered through NV Energy, the statewide power utility. Participants believed customers would have a more favorable opinion of the rebate program if it was administered through a third party.
Statewide housing crisis: Participants cited the statewide housing crisis and volume of home owners who are currently underwater on their mortgages in Clark County as barriers to solar adoption. Home owners who already owe more on their house than it is worth are unlikely to make such a long-term investment into their home. However, participants said they had seen an increase in the number of home owners who had purchased foreclosed or bank-owned homes at a discount price who were subsequently investing in solar PV. While the housing crisis itself is beyond the scope of this project, 6
participants noted that a program in California provides homeowners with an estimate of their home’s value with solar added. Participants noted that they often use the alternative strategy of telling potential adopters than their home may sell faster if it has solar PV in place, and noted that if there was a system in place allowing home appraisers to incorporate the value of solar PV in their home appraisal values, it may positively affect solar adoption rates in Clark County.
Homeowners Associations (HOAs): Participants cited HOAs as presenting some barriers to solar adoption. While HOAs are unable to provide an “unreasonable restriction” to installing solar PV panels, the definition of such a restriction is developed by HOA boards themselves. The participants noted that while they had never lost a project due to an HOA, waiting to receive HOA approval on a homeowner’s project did slow down projects. Additionally, many HOAs restrict homeowners from using yard signs; participants had noted that yard signs advertising their company name in the yard of a home on which they had installed panels was a preferred method of advertising.