Thinking about going solar

I answered an ad by an outfit called One Block Off the Grid (1BOG) which organizes the installation of solar panels on people's roofs. When I say "organize", I mean not only that they take care of various complex logistical issues including lining up a NABCEP-certified installer, but also that they try to consolidate system purchases to bring costs down. Over the past couple of years this has become big business in the U.S. because of state and federal government incentives encouraging installation.

The 1BOG folks sent me a proposal with numbers in it, and I have 30 days to make a decision during which the proposed price is guaranteed. I also spoke briefly with SolarFlair, a similar outfit here in my town, that does the same sort of purchase consolidation and does the installation themselves. Since my 30 days is nearly expired, I'm hoping to drop into the SolarFlair office some time this week and talk numbers with them.

In my own state of Massachusetts, the situation is that people with solar panels produce SRECs (wikipedia, explanatory video) worth around $500 each time the solar panels produce a megawatt-hour.

Massachusetts' renewables portfolio standard (RPS) requires each regulated electricity supplier/provider serving retail customers in the state to include in the electricity it sells 15% qualifying renewables by December 31, 2020... Solar Renewable Energy Certificates (SRECs) represent the renewable attributes of solar generation, bundled in minimum denominations of one megawatt-hour (MWh) of production. Massachusetts' Solar Carve-Out provides a means for SRECs to be created and verified, and allows electric suppliers to buy these certificates in order to meet their solar RPS requirements. All electric suppliers must use SRECs to demonstrate compliance with the RPS. The price of SRECs is determined primarily by market availability, although the DOER has created a certain amount of market stability by establishing a state Solar Credit Clearinghouse Auction (where prices are fixed at $300/MWh), as well as the Solar Alternative Compliance Payment (SACP) for the state RPS (set at $550/MWh for 2011). The Solar Credit Clearinghouse will only be utilized if or when SREC generators cannot sell their SRECs on the open market; the fixed price of $300/MWh effectively acts as price floor. The SACP, on the other hand acts, acts as a ceiling on the value of SRECs because it is the per-MWh payment that electricity suppliers must make if they fail to obtain enough SRECs to cover their RPS obligation.

There is a federal tax credit of 30% on the cost of installation. I don't know if that's factored into the prices I've been quoted, and maybe I'd need to pay that myself upfront until I get the following year's federal tax rebate.

The 1BOG proposal offers options either to lease the system from 1BOG, or to pay for it outright at a cost of about $25K. I went to the credit union and applied for a 5-year fixed rate $25K home equity loan, with monthly payments of about $450. 1BOG proposes a system to create about 5.5 kW peak, and they are guessing that averages out to about 700 watts continuous, which is about 6 megawatts per year, for a yearly SREC income of $3200. The systems saves me about $100 per month on the electric bill, and when all the dust settles, my monthly expense is about the same as it is currently.

Five years later, the loan is paid off, the solar panels are my property free and clear, SREC income is reduced but not zero, and my electric bill is still substantially reduced or absent. And I will have set a good example for friends and neighbors that one can reduce one's carbon footprint without unreasonable financial hardship.

March 2011 trip to Shanghai, Suzhou

Last week I was in Suzhou, a city a little west of Shanghai, and took some photos. Very interesting place with a lot of rather ancient history. I liked very much the Humble Administrator's Garden. It's quite large, with several small buildings and waterways and paths, and very pretty as you can see here.

Suzhou is a very pleasant place. I felt quite safe walking around after dark. There are lots of little outdoor markets. I stopped at one to get some squid on a stick, which was spicy and tasty. My photo of the squid-on-a-stick guy is unfortunately a little blurry.

I'm still kind of tired with jet lag. When my energy level is a little higher I will add more stuff to this. Generally it left me with a very positive impression of mainland China, which was a surprise as I'd been told to expect it to be a bit backward culturally. We were there for electronics manufacturing and there was certainly plenty of that, and plenty of heavy industry in the Shanghai area. Lots of construction, lots of big cranes all over the place.

More thinking about compensation models

I've been watching some of The Hunt for Gollum. The quality is quite good, and some of the camera effects are surprisingly clever.

I am interested in the question, how do you release a work so that it ultimately ends up in the public domain, but first make some money (perhaps a lot)? And how do you do this when your customer base is entirely aware that, in the long run, it will be available for free?

Back in the Eighties, Borland sold their Turbo Pascal development system for only $30 when competing products sold for hundreds, and did nothing in hardware or software to implement any sort of copy protection, while their competitors scrambled for complicated but unsuccessful approaches to combat piracy. Borland's approach to copy protection was simply the honor system, and making the product cheap enough that nobody minded paying for it.

The machinima Red vs. Blue is released serially as episodes. Those guys have an interesting approach:

Members of the official website can gain sponsor status for a fee of US$10 every six months. Sponsors can access videos a few days before the general public release, download higher-resolution versions of the episodes, and access special content released only to sponsors. For example, during season 5, Rooster Teeth began to release directors' commentary to sponsors for download. Additionally, while the public archive is limited to rotating sets of videos, sponsors can access content from previous seasons at any time.

They are smart guys who have been doing this for years now, so it's likely they've hit upon as optimal a solution as is practical. Of course it helps that they have a great product that attracts a lot of interest. They are following the Borland approach: sponsorship is inexpensive and there is no attempt at copy protection.

Social policy bonds

Two earlier posts (one on DRM, the other on amortizing development cost) deal with cases where today's free market does a poor job of compensating somebody for something of value. I think these are what economists might call "missing market" problems -- it's not that a free market couldn't work in this situation, it's simply that we don't have the right market mechanisms in place yet.

One more approach to the missing market problem is the social policy bond, invented by New Zealand economist Ronnie Horesh. It works a bit like the X Prize or the Methuselah Mouse Prize, in that when something good is accomplished, somebody gets money. But with the X Prize, all the money goes to the winner (in that case Burt Rutan, who won the prize in 2004 flying SpaceShipOne), and none goes to the runners-up, or to the subcontractors who helped the winner win. The incentives in a one-winner prize therefore punish anybody who doesn't win.

Social policy bonds spread the winning money more fairly. Everybody who puts in time or money can get something back. In Horesh's vision it works like this. A deep-pocketed government announces that attaining some goal is a desirable social good. Tax money is put aside to bring about that goal in an economically efficient way. The government prints bonds which are redeemable for some large-ish amount of money when the goal is accomplished, and sells those bonds at a lower price to anybody who wants to buy them. The free market does the rest -- compensations will arrange themselves so that people work toward bringing about the goal, so that they can collect on the redemption of their bonds. People who would be potential prize winners (if the government were using a prize) can use the bonds as loan collateral to pay subcontractors.

This strikes me as a brilliant idea, although Horesh recognizes a potential free-rider problem with the scheme. When social policy bonds have been used in real life a few times, we'll have a better idea how big a problem that will be.

I like the idea that a social policy bond could be issued not by a government, but by an individual or private organization. There are two potential problems. One, an individual can't command the huge sums of money that a government can, so it might take thousands or millions of people each issuing privately-backed bonds to make something happen. Two, the issuer of a bond needs to have people believe that he/she/it will make good on the redemption, and there isn't an obvious mechanism how an individual can do this. Maybe there is some trustworthhy organization (like a bank? or Lloyd's of London?) that could hold the money in escrow. I've discussed the notion of privately-backed social policy bonds with Horesh in email, and he feels these two problems are prohibitive, but I still think it's worth a shot.

Anonymous e-cash

I once interviewed at a place called NTRU Cryptosystems. They have a very fast public key algorithm suitable for implementation in slow, memory-limited embedded systems. One of the interesting aspects of their algorithm is that creating public/private key pairs is a very quick operation. If you've used PGP or GPG, you've probably noticed that with traditional RSA, the key generation process is annoyingly slow. Recalling that cryptography's version of a person's identity is a private key, this made me think about what might be possible if key generation were a very inexpensive operation, and what you get is a kind of anonymity that could make electronic cash work really well. But you don't really need fast key generation. You can set up your home computer to generate many key pairs overnight, and save them all on a USB flash drive for use the following day.

How do you get from plentiful key pairs to anonymity? You start a bank that accepts public keys as proofs of identity, and therefore associates accounts with public keys. The bank does not ask a client for any identification other than a public key. The bank allows the money to be withdrawn by any party who can prove ownership of the public key by using the corresponding private key to sign documents, which signatures the bank can verify using the public key. The bank will transfer the money to the ownership of a different public key, given a digitally signed transfer request from the original holder. The transfer document could be presented in email, which could be routed through any number of anonymous remailers.

If I wish to transfer anonymously, I can send the bank a series of emails transferring the money from one identity to another, each identity represented by one of the key pairs I generated last night. Going through several anonymous identities provides plausible deniability that I still have the money.

All it takes to create such a bank is to set up a database that associates public keys with cash balances, and a website that performs redemptions and transfers as discussed above. One would want to locate the bank in a country or region with a favorable tax and regulatory climate.