By Peter V.K. Funk, Jr.
Mission Critical magazine
August 1, 2011

Cost, capacity, location all important

Should data centers install photovoltaic (PV) solar arrays to provide electric power? The answer for some data centers is an unqualified "yes." Companies and facilities that are planning to install, or have installed, PV systems to provide some portion of needed power include i/o Phoenix One, Google, AISO, Sonoma Mountain, Microsoft, Cisco Systems, BendBroadband Vault, DataScan Technologies, Facebook, and Intel.

Despite these examples, installations have been sporadic and exploratory. While certain data center characteristics such as high cooling loads when the sun is hottest and large flat roofs lend themselves toward solar installations, other characteristics such as 24/7 power needs and the large PV footprint relative to its power output, may mitigate against installation. i/o Phoenix One's installation of a 4.3 megawatt (MW) installation on an 11-acre roof provides only 5 percent of its 80-MW peak demand. Another mitigating factor is PV's perceived cost relative to output. Some companies, like AISO, have installed solar systems to provide a substantial amount of its power needs (supplemented by additional sustainable systems and propane generation), but such an installation may not be practical on a larger scale.

Some critics of PV focus upon its failings. As an intermittent source it cannot supply capacity and is also not well suited to any facility requiring continuous power. That view has meaning on the transmission level since the independent system operators (ISOs) that regulate electric transmission systems generally categorize PV as a generation source that does not provide capacity. Comparing PV to providers that generate electricity on a continuous basis makes an "apples and oranges" comparison. On-site PV is instead well suited to serve in a supplementary role.

Since data centers require redundant power sources to be useful as a power source solar does not need to meet a data center's entire demand, but rather that it is able to serve a portion of the load-in particular when cooling needs are the greatest. The coincidence of high temperatures and hot sunlight means that solar power can serve an important "peak shaving" function by reducing high-cost electric energy consumed and the utility tariff demand costs. A PV component can also serve as a long-term hedge against electricity costs for a portion it supplies.

An on-site PV plant confers two other important societal benefits: decreasing the peak strain upon transmission grids by reducing the demand, and reducing peak demand can reduce the cost of wholesale electric power in the day-ahead markets administered by ISOs in light of market-clearing methodologies used to set hourly wholesale electric prices.

Installation expense per kilowatt compared to conventional power plants is an oft-cited barrier to greater on-site PV use. However, once PV use increases and becomes "cost effective," goes this argument, it will be widely adopted. Cost-effective used in this context essentially means the cost of power produced by fossil fuel in conventional plants. Such comparisons portend a long wait since they rarely weigh favorable factors such as PV's value as a long-term hedge against fossil fuel costs, the benefits of distributed generation upon system reliability, the benefits of multiple energy sources, the potential for wholesale electric market cost reductions, and the importance of developing energy security for the future. Such comparisons also tend to make long-range planning a captive of short-term fossil fuel price fluctuations.

I will use a hypothetical installation to illustrate the considerations relative to installing a PV system providing electric service to a data center. You, the owner of a data center that has a peak electric demand of 25 MW, have weighed the benefits and decided to install a grid-interconnected 2-MW PV system on the flat, unshaded roof of your facility to provide a portion of its power needs. A preliminary engineering study confirms the feasibility of the system. Since you wish to avoid the capital cost of installation and lack experience with PV, you decide to outsource the system. After review, you find that the arrangement that most closely fits your needs is a power purchase agreement (PPA) with a solar electricity developer and provider.

PPA: In return for a long-term right (as much as 15 to 25 years) to occupy your roof and sell you all the electric power at a predetermined price, the provider will bear the upfront costs and burdens of financing, securing permits, financing, engineering, procurement of materials, installation, and commissioning as well as operation and management. The provider offers two alternative pricing structures: 1) a fixed/escalated price per kilowatt-hour; or 2) a price-capped cost indexed against a utility tariff. The provider will have suggestions as to possible systems. One possibility for a large roof space may be the light-weight Solyndra system coupled with the installation of a white roof, which provides additional temperature mitigation benefits.

The PPA will permit the provider to utilize and receive available renewable incentives such as solar renewable energy credits (SREC) and the tax benefits of system ownership such as the 30 percent federal grant or investment tax credit and accelerated depreciation. SRECs are certificates that each represent 1,000 kWh generated by solar power. These can be sold or traded separately from the power and are an important component in solar project financing. State Renewable Portfolio Standards (RPS) help to support the price of SRECs by creating a mandate to purchase renewable energy. Though RPS requirements vary, solar qualifies in every state.

In reviewing the PPA, it is important to consider and seek advice as to the PPA. One issue is whether the PPA's allocation of rights and responsibilities are appropriate and consistent with nature of the transaction.

Roof Lease: Depending upon factors such as state law and the requirements of its lender, the provider might require that you enter into a recordable roof lease for the system. Their concerns are with situations such as abandonment or sale to a buyer who did not assume the PPA. In such circumstances, the lease provides a right to enter the premises and retrieve the system. The financier may also demand "step-in rights in the roof lease and PPA" as protection against a provider default.

Condition of Roof and Warranty: Your roof presents potential issues. Is it sufficiently structurally sound to support the system? Does the roof need repair? If so, the provider may be willing to pay for repairs. It is likely that the warranty provided by the roofing membrane manufacturer is subject to termination if work is performed on the roof or the roof membrane is penetrated. Even the Solyndra modular system or a ballasted system that rests on the roof may vitiate the warranty. These issues need to be worked out with the manufacturer by you or the provider prior to installation.

Interconnection: Interconnection of generators sized larger than 1 MW generally require application to, and approval by, the applicable ISO or RTO. This time-consuming process involves costs, studies, and evaluation. The tariff and technical requirements of the local utility must also be satisfied and likely require an interconnection agreement. If it is necessary to extend or upgrade the utility transmission or distribution facilities, a line extension agreement with the utility will required. Interconnection may be necessary to generate SRECs.

Net Metering: An interconnection will also enable selling power to the grid, up to a state set amount, and support net-metering (e.g., spinning the meter backwards, which effectively "sells" power not needed on site to the utility at its retail power price). Your data center, with its relatively flat electric load curve, is unlikely to have unneeded power to sell.

QF Status: In order to participate in certain utility programs that may provide benefits, it is necessary to be qualified (or to self-qualify if less than 1 MW) by the Federal Energy Regulatory Commission (FERC) as a small power production facility.

Real Property Taxes: Another possible issue is real property taxes. If the system constitutes real property under applicable state law, it might increase the assessed value of the building. Ballasted systems that rest on the roof are less likely to be considered real property. Attached systems may be considered real property. You should also check to see whether there is an applicable exemption for real property taxes.

Despite its limitations, it appears to be worthwhile for data centers to consider PV solar in light of its benefits. In the future, rising electric costs and continued reductions in the cost of PV installations are likely to make PV installations increasingly more attractive to data centers. Other solar technologies, such as solar thermal power, which makes use of the sun's heat, are cheaper than PV and are being explored by Google and others.