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“Private and Confidential” Study Warns Costs of Solar Plan Could Soar, Questions DWP’s Planning, Financial Skills

A front page story in the Daily News  Saturday under the headline “Solar panel initiative getting costlier” reveals for the first time the contents of a definitive $1 million study (dwp-iea.pdf ) analyzing the Department of Water and Power’s operations and performance over the last five years.

City Hall reporter Rick Orlov got his hands on the year-long study by PA Consulting (IEA-excerpts.doc) and reported that Measure B, the city initiative on the March 3
ballot that calls for the installation of rooftop panels to capture
solar energy, “could cost more than double current estimates.”

“Without
significant technology advances and yet unseen economies of scale, it
would be challenging at best for LADWP to be able to implement the plan
for the current $1.5 billion low estimate LADWP has provided,” the report (IEA-summary.doc) entitled “Industrial, Economic and Administrative Survey” said.

The study estimates the minimum costs at $2.8 billion to $3.6 billion and warns that rooftop panels
on industrial, commercial and government buildings would generate only about 20 percent of the capacity the DWP needs,
with much greater energy coming from wind turbines.

Per kilowatt-hour of energy produced, over its life, solar
(photo voltaic) is expected to cost more than two times the cost of
concentrated solar generation and six times the cost of typical wind
generation,” the report said, adding the cost of rooftop solar is
$7,000 per kilowatt-hour, three times that of wind and 1.5 times that
of concentrated solar.

The report said the utility has a continuing
problem in how it is managed and does not have a comprehensive approach to strategic planning and long-term analysis.

“It is unclear that LADWP’s current strategic
planning process and financial analyses are sufficient to appropriately
plan and manage such a complex portfolio of assets,” the report said.

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6 Responses to “Private and Confidential” Study Warns Costs of Solar Plan Could Soar, Questions DWP’s Planning, Financial Skills

  1. Anonymous says:

    Win or lose Measure B this is what the ratepayers have been recieving from DWP.
    Assessment of Operational Issues…
    4-185
    City of Los Angeles 1/17/09
    ii. Findings
    At present, the relationship between several members of the Board and the Department (and
    specifically, the Office of the GM) is not conducive to effectively or efficiently resolving current
    or prospective challenges:
    · Interaction between the Department and members of the Board is often very contentious,
    and is characterized by mutual distrust
    · The proper role of the Board in relation to the Department is not agreed. The Board
    believes it has been charged by the Mayor to be “activist”; the Department believes the
    Board is unnecessarily intrusive
    · The Board recognizes the gravity of the issues facing LADWP, and has reservations
    about the ability of the Department to address them in a timely and thorough manner.
    Further, certain Members of the Board believe that a corporate culture of business and
    process improvement is entirely lacking; the concern around process discipline also
    extends to a lack of consistent strategic planning
    · Each party believes the other has adopted a pattern of behavior that undermines trust,
    cooperation, and effective decision-making (e.g., the Board, by pursuing inappropriate
    oversight; the Department, by being unresponsive to data and information requests, and
    creating barriers to open communication and perpetuating a lack of transparency)

  2. Anonymous says:

    From the IEA report…..Is our City Council nuts? How could they put this on the ballot? ……
    The Green Energy and Good Jobs for Los Angeles Act is a proposal outlining the installation
    of 400 MW of rooftop solar generating capacity by 2014. While the proposal would support
    LADWP’s efforts to meet or exceed current renewable standards, its implementation carries
    significant costs and may pose substantial implementation challenges. The initial proposal
    taken to City council would benefit from more detailed planning, technology review and
    levelized cost review of alternate renewable sources.
    PA was asked by the City to perform a high level and extremely rapid and preliminary
    analysis of this proposal by the Department. The review, because it was done in a very
    compressed time frame with little project specific documentation, must be considered only as
    a preliminary indication of potential issues – not a conclusive report. Far more detailed
    analysis and review is needed to fully evaluate the current project proposal. That said, the
    review indicates that the project may face significant challenges including:
    · Costs – Given the intended focus on rooftop photovoltaic (PV) in the near-term, the
    minimum installation costs of the 400 MW plan assuming existing technology and pricing
    were projected to range from $2,8 billion to $3.6 billion. Without significant technology
    advances and yet unseen economies of scale it would be challenging at best for LADWP
    to be able to implement the plan for the current $1.5 billion low estimate LADWP has
    provided
    · Comparative costs – Rooftop PV solar would be expected to have an average annual
    capacity factor of about 20 percent. This compares with about 33% for typical wind
    projects in California, and about 70% for a new gas-fired combined cycle power plant.
    Per kilowatt-hour of energy produced, over its life, solar PV is expected to cost more than
    two times the cost of concentrated solar generation and six times the cost of typical wind
    generation. The cost to install solar PV is expected to exceed $7,000/kW, which is ~3
    times that of wind and ~1.5 times that of concentrated solar.
    · Context – The 400 MW goal is equivalent to approximately 143 percent of the total
    installed capacity of grid-connected PV solar capacity in California today, and is
    equivalent to almost 85 percent of the current PV solar capacity installed in the entire U.S.
    · Timing – Though solar costs are expected to fall if investment and manufacturing capacity
    in the US increases, manufacturing capacities will need several years to ramp up
    operations to enable expected cost decreases. The installation timing required by the
    proposal would force the City to compete for relatively scarce supplies, and would not
    allow the City to take advantage of anticipated solar cost reductions.
    · Structure – Though the federal ITC was recently extended, the requirement that LADWP
    own the solar generating facilities could likely eliminate the financial benefits of the federal
    Assessment of Operational Issues…
    4-135
    City of Los Angeles 1/17/09
    tax credit, as LADWP is tax exempt. All else being equal, if a private sector entity could
    own such facilities, LADWP may be able to realize the benefits of the ITC.
    · Implementation – LADWP is focused on several major projects and initiatives, including
    RPS compliance, significant capital projects (water system), and overhauling the IT
    infrastructure, each of which demands significant focus and financial management insight.
    It is unclear that LADWP’s current strategic planning process and financial analyses are
    sufficient to appropriately plan and manage such a complex portfolio of projects.
    Our rapid analysis suggested that additional rigorous analysis would be necessary to more
    fully assess the benefits and risks attendant to this proposal. More generally, more
    comprehensive resource planning efforts, greater analysis of cost impacts, allowances for
    negotiation privacy, and expedited procurement processes could all contribute to successful
    portfolio and resource planning efforts.

  3. Anonymous says:

    It is absolutely criminal that the Los Angeles Times, Daily News, and the major Television and Radio stations in Los Angeles have not jumped all over this wreckless, politicized, power grab by the Los Angeles City Council. Someone at City Hall does not care about the cost. What they care about is City Council quietly getting direct control over the DWP. The DWP is supposed to be overseen and managed by its citizen commission — not City Council. The provision that grants complete discretion to Council to amend or replace the Solar Program appears to be a grant to Council to directly control the DWP.
    Then we have the complete folly of the DWP works tramping on the rooftops of commercial, industrial and other PRIVATELY OWNED buildings. If the work of the DWP punctures the roof of buildings holding expensive and sensitive equipment and roof leaks ruin or destroy property of the private businesses, who will get stuck with liability claims against DWP? That’s right. Ratepayers.
    The private sector should be installing solar and assume that liability. DWP should stick to maintaining and extending our electrical distribution system.

  4. anonymous says:

    The mayor and city council should be declared unfit to serve. The consequences of their collective greed, avarice, and ignorance will be the death knell for L.A. and CA! Their collective thirst for power knows no bounds! It’s time to grab the reins of power from them NOW…they can’t be allowed to continue on the path to destruction! We need to take it to the streets!

  5. sheila says:

    well, i gotta say the report is pathetically out of touch when it comes to wind vs. rooftop solar, so i don’t find it the best argument against DWP’s boondoggles. it obviously ignores the enormous environmental harm caused by Industrial Wind and Industrial Solar, as well as the huge GHG emissions and expense of Big Transmission (at least $16.5 million/mile) when trying to make the case against rooftop solar. add to that they are estimating DOUBLE the rate SCE pays for its existing large-scale rooftop solar program ($3.75/watt installed), and you just have a fundamentally unreliable report.
    I’m not defending DWP, here, because they are DEAD WRONG with their mania for monopoly. just saying that this report is also complete crap. DWP would be at least as wrong, if not more wrong, to pour ratepayer money down the black hole of Big Wind or Big Solar plus Big Transmission, plus they would be killing the planet. Ask SCE if you want to know how much the Wind “Farms” (ha! more like Wind Wastelands) actually produce by Palm Springs. Yep – 15% of rated capacity, plus transmission losses. 15%. and all that beautiful space, completely dead. it’s an economic and ecological disaster.
    the affordable option for clean, renewable, cheap, fair power is for RATEPAYER GENERATORS to get AB 811 loans funded from the City (guaranteed repayment, no cost to ratepayers or taxpayers), and to implement generous feed in tariffs like they have in 45 countries already (WA has legislation at 65 cents/kWh, FLA at 32 cents – I think CA should hit around 50 cents to get the level of interest we need).
    if LA doesn’t rally around this plan i suggest, we will see ourselves completely ripped off again, and see our outlying communities (like Joshua Tree) poisoned, dynamited, bulldozed, paved, and GHG’d to death to feed the snarling maws of the DWP monster.

  6. Angelo Foley says:

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