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Adventures with Solar Micro-generation

by Luis de Sousa Thu Nov 19th, 2009 at 03:19:13 AM EST

Depression. Ground flat interest rates. Oppressing unemployment. What a better time than now to invest on tangible assets? That was the mindset that lead me to consider investing in Solar photo-voltaics. Months ago I started studying the subject in order to become a micro-producer.

Coincidence or not, I stumbled upon a cousin of mine who had recently returned from a working commission in Angola to set up here a company that installs solar micro-generation systems. I embarked on a funny adventure that is far from over.

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Portugal is a lovely place, at the westernmost tip of Europe, with a long Atlantic coast, rich orography and clement weather. More sunshine only in the desert. Still, this state imports 85% of all the energy it consumes, with 100% for fossil fuels. A 10% of GDP foreign deficit is due in most part to the energy bill.

After successive failures (due to different reasons) to base the state's electric generation on Nuclear, then Coal and more recently Natural Gas, governments started shifting focus to internal renewable energies by the late 1990s. Several programmes have been taken, providing feed-in tariffs to projects licensed to large investors (mostly Wind and small-Hidro, with a few stakes on large scale Photo-Voltaics).

In 2006 the national electric grid was opened to small investors, that up to that point had to rely solely on their means to balance or store the energy they produced. Now legislation exists that sets a few rules for micro-generators to connect to the grid, including:

  • to connect a photo-voltaic system to the grid a thermal water heating system must also be in place;

  • each generator can only feed to the grid up to 3.68 kilowatts at any given time;

  • each kilowatt-hour feed into the grid is paid at 0.61 € during the first 6 years of operation, at 0.30 € from the seventh to the twelfth year and from then at grid cost price;

  • grid connection permits are issued in packages of 1000 units, totalizing 3.68 Megawatts of new installed capacity; the issuing time frame is open ad hoc and closes as soon as the 1000 licenses are attributed;

The 60 cents per killowatt-hour is about four times the present average generation cost – 15 cents. Users today are only paying 12.6 cents per killowatt-hour, with the remainder being left as a gift for future generations.

The package my cousin projected for my case is composed by 18 panels rated 220 watts each, a thermal water heater with a 200 litres deposit, the electric current inverter (which also dissipates all extra power above 3.68 watts) and installation. The installation includes the piping needed to connect the water heater to the house's water system. All this sums up to 20 000 € plus VAT, which for this sort of investment is reduced to 12%.

The photo-voltaic panels to install are made in Portugal at the Moura factory [the company's website seems to be “under construction”]. This factory seems to setting the state of the art for industrial photo-voltaic cells, presently furnishing high end makers in Germany and Japan.

This is all being set at my mother's place. I live in flat in a high rise where some other 30 flats are pilled up in relatively small area. My mother shares the roof with a single neighbour, which is also family. Also, my mother really owns her place, while I'm still indebted to the bank a few more decades.

The roof is divided in two sides, one facing Sunrise and another Sunset, which might not be the best of settings. But being the highest in a radius of several hundred meters and at this latitude, the Sunrise half gets sunlight up to 4 o'clock during half of the year. The Sunset half, where most panels will be set, should allow for full power from 11 o'clock onwards. My mother's electricity bill varies from 110 kilowatts-hour in the Summer to 150 kilowatts-hour in the Winter. The system should generate from eight times those figures (Summer) to two times (Winter).

I'll write a further post detailing the technicals, but for now I'll just refer that the prospects are for the infra-structure to pay for itself in the first five years of operation. Considering the present economic environment this seems quite a nice prospect, and with the state's dependence on energy imports, the 15 cents per kilowatt-hour figure will certainly rise in the future, turning this asset into an important income generator.

Before going on with the remainder of this story, I'd like like to make a few notes on the way the game's rules are set. First of all, paying VAT on a national product that will allow to equilibrate the state's economy is very strange, to say the least. Secondly, the limit on the power feed to the grid is not logic; the installed power to maximize the investment will in many cases exceed the 3.68 kilowatts, resulting in a certain amount of energy dissipated during peak hours, especially during Summer. The 1000 licenses limit seems also not that much in touch with reality, since 3.68 Megawatts is just a bit over a single industrial wind turbine. There are certainly load balancing issues to be addressed, but solar power is relatively easy to predict, even in the long term (especially here, where Summer equates to days on end with clear skies). A wiser scheme could achieve similar results, such as limiting installed capacity per household, or simply reducing the feed-in tariff.

With the project consolidated on paper we proceeded for the licensing process. It comprises the following steps:

  • pre-register on-line the household's and technical data;

  • applying on-line for the license during the licensing period;

  • install the infra-structure in the 120 days following the licensing period;

  • submit the system to a technical inspection by a certified third party;

The on-line licensing takes at website with the ironic name RenovaveisNaHora.pt (Portuguese for “renewables on the hour”). Sometime in October a new licensing period was announced to start on the 2nd of November at 10 o'clock. The pre-registration was made and all left to do was waiting. My cousin warned me that there were 5000 pre-registrations and that we could experience difficulties applying, but at the time I wasn't expecting major problems.

On the morning of the 2nd of November I tried to log on to the website around half past nine. Nothing. The other end was dead. I tried pinging the server, trace the connection, but silence was all I got. I'm presently working with a broadband 3G connection that among other things, allowed me to download an image of Ubuntu in minutes. The website was simply down. After one hour continuously trying I quit.

I attempted to connect several other times during the day, also without success. On the morning of the 3rd of November I finally managed to logged on. To my complete startlement the following announcement had been posted:

The licensing period opened on the 2nd of November at 10:00 am closed at 11:04 am, after the maximum number licenses been attributed.

Something looks terribly wrong in this picture. The information I have points to the server being down during that time, or at least in a state of denial of service. So how in hell could 1000 candidates apply for a license? I later conferenced with my cousin (whom beyond mine, failed to apply four other projects) that I suspected those permits couldn't have been applied for on-line.

A few days later, after some inquires among the usually well informed sources, we got to knew the picture a little better. Word has it that half of the licenses were attributed to two of largest banks in the country and several hundred others ended up in the hands of large institutional investors. There are horror stories floating around of entire call-centers mobilised to generated traffic to block the server from the common man.

I just don't know what to do. On one side I'm not willing to enter any illicit scheme that may be in place to get a license, but on the other side, the window to make this investment will not be open forever, with interest rates expected to rise in Europe next Spring.

This is indeed a lovely place to live.

If you don't mind, I will email this to everybody I know. The last part is disturbing.
by t-------------- on Sun Nov 15th, 2009 at 11:58:24 AM EST
Hi Tiago, I'll have a portuguese version crossposted at local blog in a few days. Keep in touch.

by Luis de Sousa (luis[dot]de[dot]sousa[at]protonmail[dot]ch) on Sun Nov 15th, 2009 at 12:41:10 PM EST
[ Parent ]
I think that there are a few people that might follow up on this (I am thinking on a few MPs/MEPs and "opinion makers").

It would be nice to also have an executive summary version (less techie) to give to those people. Essentially focusing on the problems with getting the licenses (possible hoarding of licenses) and the strategic importance of micro generation.

by t-------------- on Sun Nov 15th, 2009 at 12:56:18 PM EST
[ Parent ]
Novidades sobre o texto em Português?


by t-------------- on Fri Nov 20th, 2009 at 01:35:06 PM EST
[ Parent ]
The license system looks like it is set-up to allow this kind of abuse. Guess there is no punishment if the banks does not install any solar power, so no incentive not to hoard. And as you point out there is no need for licenses, so all it does is handing power and money to middle-men. If a huge amount was installed, investments will be needed for the net operator to make sure loads are balanced, but distributed energy sources are easier to balance then big centralized ones like nuclear. So it should not really be any concern.

The license problem gets me to think about a similar problem - subsidies that are limited to a total amount. Swedish limited subsidies (for example there has been to convert heating away from inefficient direct heating and heating by oil) has been constructed on a first-come first-serve basis, where the authority in question hands out the subsidies after projects has been finished and reported. If the funds are running out the authority declares that after a certain date no more subsidies will be payed out. This is not perfect, but at least it gets the projects done and fast.

If a similar system would be in place for the licenses you would get a license to sell power to the system only if you have a system that is already constructed. If there is any legitimate reason to slow the process of building solar power in Portugal this would serve better. But really, I do not think there is any legitimate reason, only a system set up to hand money to the middle-men.

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by A swedish kind of death on Sun Nov 15th, 2009 at 02:58:54 PM EST
I don't get it, what's in it for the banks?
by njh on Thu Nov 19th, 2009 at 03:31:43 PM EST
What's in it for the banks? Leverage on 20% loans?

They're doing the same thing in the USA. The general rule is this: the little folks never get in on the latest big things.

by ormondotvos (ormond.otvosnospamgmialcon) on Fri Nov 20th, 2009 at 03:47:34 AM EST
[ Parent ]
Ok, I agree, that's pretty scabby.
by njh on Fri Nov 20th, 2009 at 06:51:06 AM EST
[ Parent ]

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