Charged up

by Patrick C. Miller (Ethanol Producer Magazine) From an economic perspective, now might be the time for ethanol producers to consider installing a solar array to generate electricity for their operations. But from a technical perspective, producers also should be aware of the challenges.

Kinect Energy has conducted studies and financial modeling for some of its ethanol clients on how they could use adjacent land to build a solar array for electrical generation. Based on his company’s work, Franco (Nicholas Franco, director of sustainability for the Kinect Energy Group in Plymouth, Minnesota) sees a number of motivations for producers to take a serious look at solar energy, ranging from reduced solar equipment costs to regulatory changes to tax incentives to hedging against future power cost increases.

On the economic side of the equation, Franco says two regulatory standards should make solar energy more attractive to ethanol producers.

“California has a low-carbon fuel standard that’s based on the carbon intensity of the ethanol you produce,” he explains. “The lower the carbon intensity of your ethanol, the higher premium you can get for selling into that market.”

For ethanol producers that want to sell in the California market, the financial incentive is to earn a lower carbon intensity score. Franco says the key questions are: how much does each megawatt of solar energy generated reduce a plant’s carbon intensity; and how does this translate in terms of a premium for ethanol sold in California?

The other incentive is the Renewable Fuel Standard, which initially set a carbon intensity level while grandfathering in existing ethanol plants. Franco says that if those plants can use solar energy to show they’ve reduced their carbon intensity to meet the current standard, they can produce RINs above their grandfathered level—the renewable identification numbers used by obligated parties to demonstrate compliance with the RFS.

Ethanol producers also are looking at solar energy as a hedge against rising electricity prices because all the costs are upfront.

“Once you’ve paid for it, there are ongoing [operation and maintenance] costs, but they’re very small,” Franco explains.

Another economic factor Franco says producers should consider is the large federal tax incentive for solar energy, which is currently 30 percent until 2019. In 2020, it will drop to 26 percent, 22 percent in 2021 and then 10 percent in 2022.

“The other big incentive is accelerated depreciation,” Franco notes. “Solar’s a 25- to 30-year asset. Right now, you can depreciate it in five years.

In advising ethanol plant managers, Olson says it’s important for them to understand in detail all aspects of their plant’s power consumption and the potential pitfalls of adding a new electrical source to their facility. He refers to it as an educational process.

“Solar generation has to be looked at very specifically as to how it’s going to be connected into the plant without a disruption of the plant and a loss of production, and that’s not the way solar developers like to look at things,” he cautions. READ MORE