Preliminary Cost and Economic Performance Assessment of Utility‐Scale Solar Photovoltaics at the Snohomish County, Washington’s Tulalip Tribes’ “Big Flats” Site

Thesis (Master's)--University of Washington, 2018The U.S. Department of Energy (DOE) launched its SunShot Initiative in 2011 to reduce the costs of utility-scale, commercial, and residential solar photovoltaic (PV) installations by 2020 (U.S. DOE, 2018). As of 2017, the DOE reached its goal for utility-scale solar PV to be cost competitive with conventional power resources, without the aid of subsidies and incentives, at $0.06 per kilowatt-hour (kWh), or $1 per watt ($/W) (U.S. DOE, 2018 ). In this 2010-2017 period, a quick drop in levelized costs from $0.28 to $0.06 per kWh and an increase of installed capacity from 3 gigawatts (0.1% of US electricity supply) to 47 gigawatts (1% of US electricity supply) is proof of the growth and expected further growth of solar PV technology (U.S. DOE, 2018). With a new SunShot target for 2030, this initiative seeks to cut the levelized costs, or the total costs of a solar PV system over its 30-year lifetime of production of energy, of utility-scale by an additional 50% to just $0.03/kWh, which would spur more solar PV installation growth and make it one of the most cost-effective electricity generation sources (U.S. DOE, 2018). The Tulalip Tribe of Snohomish County, Washington have shown continued interest in a utility-scale solar PV deployment on its Big Flats site despite low Western Washington solar resources. The costs and financial parameters associated with developing on the former superfund site presents extra costs and challenges that impacts the application of the SunShot Initiative’s goals of $1/W. These common extra engineering costs to ensure the superfund site continues functioning properly may be realized in the form of an added 25% to the total direct costs of a solar PV system (Olis, Salasovich, Mosey, & Victoria, 2013). As well, a $1 million grid interconnection fee may reasonably be expected to occur as the site does not have a substation and the nearby transmission lines may be inadequate to support a utility-scale solar PV system (Olis et al, 2013). Systematic Analysis Model (SAM), a cost and performance model developed by the National Renewable Energy Laboratory (NREL), was used to estimate preliminarily the levelized costs of electricity, or LCOE, which is a common metric to assess the economic viability of an energy development. SAM estimated the LCOE for 1 megawatt (MW), 2MW, 3MW, and 4MW installation sizes, and then compared those to the necessary contracted power purchase agreement (PPA) prices. These prices are essential for all utility-scale energy projects that connect to the local electrical utility’s grid and are the price the energy developer must sell its produced energy system at to break even or earn a profit. In general, a project with a LCOE estimate equal to or less than the potential PPA contract price agreed upon by the energy producer and the energy purchaser, or utility, is considered economically viable. SAM not only produced these estimates but also produced their corresponding cash flows, internal rates of return (IRRs), and net present values. The Tulalip Tribes were assumed to select an equity flip financial structure, where an equity tax investor and the tribe share the ownership of the solar PV project and the federal investment tax incentives are accessed. The PPA prices between the Tulalip Tribes and the Snohomish County Public Utility District No.1 (SNO PUD) for each MW size were simulated in SAM until the LCOE estimates were less than the PPA prices, and the IRRs and net present values for the equity tax investor were acceptable to ensure an investor would be found for the project.. Yet, none of the sizes resulted in a realistic PPA price (around $0.10/kWh) or positive net present values and attractive IRRs for the Tulalip Tribes. These unrealistic PPA prices have the potential to become more attainable through negotiations between the Tulalip Tribes and the SNO PUD and the implementation of renewable energy credit (REC) values. If the Tulalip Tribes would be willing to accept low net present values and IRRs for the solar PV project, then the 3MW and 4MW system sizes appear to be the most economically viable among the options with PPA prices of $0.14/kWh and $0.13/kWh respectively. Importantly, the net capital costs were assumed to be paid in cash or through grants by the Tulalip Tribe which rely on the tribe’s ability to qualify for certain state and local programs. In conclusion, the economic viability of a solar PV installation on Big Flats depends on how the SNO PUD chooses to prioritize its energy supply mix, assess the costs and benefits of renewables versus conventional energy sources, and meet state renewable energy compliance laws for the years 2020 and 2021