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50 MICROPOWER: THE NEXT ELECTRICAL ERA REWIRING THE MARKET RULES 51 schools, rural health clinics, and wireless telephone systems, a large-scale solar home program had not been attempted until recently.110 In early 1999, then-President Nelson Mandela announced a rural electrification program to install 350,000 solar PV systems in remote rural areas. Seven private consor- tia are being considered for concessions in separate districts, where they are to develop rural energy utilities; the first two have been identified, with Eskom partnering with Shell Renewables and BP Solarex, respectively. The 1999 Eskom- Shell joint venture is aimed at installing 50,000 home PV systems over the next three years in areas where grid exten- sion is not feasible. Using a public subsidy, rural utilities will adopt a fee-for-service approach to make small systems for lights, radio, and TV accessible to even the poorest homes along with cooking and heating.111 It is unclear, though, whether the new utilities will become self-sustaining. Investors may be reluctant to sup- port off-grid electrification if there is a risk that the aggres- sive grid expansion program will later undermine it. The off-grid utilities will also need to sign legal contracts with the local authorities responsible for providing the people with electricity services in order to share the public subsidy. And a new regulatory framework has yet to be established to ensure that the national home solar system standard is being met and that rural utilities will be compensated in case their investments are overtaken by grid extension. As the South Africans are discovering, conventional markets often dis- criminate against small-scale power.112 Rewiring the Market Rules The Great Depression of 1929 may have wiped out Samuel Insull’s sprawling Chicago-based empire of utility hold- ings, but his legacy lived on for decades in the rules of elec- tric power markets. Although the state-granted monopoly promoted by Insull and others in the early twentieth centu- ry is now beginning to be dismantled, a slew of subsidies, regulations, and policies remain that reinforce large central- station power and inhibit the use of smaller systems. As Walt Patterson of the Royal Institute of International Affairs writes in his 1999 book, Transforming Electricity, “all too often...inherently decentralized technologies find them- selves ‘playing away’, on the home terrain of the centralized system and according to its rules.” Creating a fair playing field for micropower is a prerequisite for its spread.113 The “home rules” begin with the $120 billion in annu- al subsidies for fossil fuel and nuclear energy. Another key market barrier to small-scale generators is that they are not reimbursed for the grid support and environmental benefits they provide. (See Table 10.) The European Commission esti- mates the value of distributed solar power in Italy at more than 10 cents per kilowatt-hour—half from generating the solar power, and half from added reliability and grid support. Such values typically go unrecognized in the market, deter- ring micropower development.114 One solution to this “market access” problem is to reform the tariff and regulatory system. The electricity “in- feed” tariffs established in Denmark, Germany, and Spain, which have already spurred wind power use, require utilities to purchase wind-energy-derived electricity at prices ranging from 7 to 10 cents per kilowatt-hour. In March 2000, the German Parliament reformed its feed-law, continuing its strong support for wind and providing a generous 47-cent per kilowatt-hour payment for solar PV generators.115 Although its operating costs are much lower, micro- power also has higher initial costs than conventional sys- tems. One way to reduce these costs is to allow system owners to use their excess power to offset purchases from the grid, paying for the net amount used. This is the approach of the Japanese solar roof program, which permits customers to sell excess PV-generated power back to the electrical grid at the retail price, which runs as high as 23 cents per kilowatt- hour. In the United States, 30 states have adopted “netPDF Image | Micropower: The Next Electrical Era
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