Why Doesn't Everyone Have Solar?
Why doesn’t everyone have solar on their home or business? People still think it is too costly or the process unmanageable. Think again.
Although solar has proliferated across the United States, bringing on average a new megawatt of capacity on-line every 32 minutes, there is still misinformation about the costs and the complexity of installing projects. Even with the dramatic fall in costs, technical and financial questions leave some concerned that the process is too hard, or that they won’t be in the property for long enough to see the benefit, or that ‘free on your rooftop’ is a scam.
While the difficulties are real, over the last 15–20 years, solar installers have developed systems to manage the risks. One of the key points that some consumers overlook is that developers share the risk with the owner. If the project fails, then both lose because the installer generally has some ‘skin in the game’: the company is banking on a percentage of the long term output of the project.
Solar for free is not a scam
The way solar for free works is that the installer gets paid back for their work from the savings and/or sale of the output of the solar panels. In the example at the left, a utility customer pays $100 a month for electricity. Once the solar has been installed, the system provides $40.00 in output. The customer’s bill is reduced by $10.00, while the installer receives the remaining $30.00 as payback for their installation.
There are many different variations: some contracts start with a higher percentage and ramp down over time, and some include long term maintenance clauses. How the deal is structured determines how the bill gets paid and how the installer receives their payback. If the system fails to perform as specified, the installer doesn’t get paid back in a timely manner, because their income is dependent on the output of the system.
Installers have several contracts running at one time. One way that some finance new projects is by bundling together several successful projects and selling them to an investor — in some cases pension funds — that want guaranteed income over a long period of time.
Property values rise with solar
Many property owners fear the payback time means that they are unlikely to benefit from most of the savings because they don’t plan to own the property for long enough. However, they are missing a key fact: solar increases the value of a home according to FHA and Fannie Mae. Property Management International found that 43% of US Commercial tenants say that green building incentives are a priority.
As an example, in a state like California a small 3.1-kilowatt (kW) system can add an average of $18,324 to the value of a medium-sized home while 5kWs adds an average of $29,555 to the retail value of a medium-sized home. For multi family properties and commercial structures, the benefits of reduced energy increase the value to tenants because they pay less for their utilities, even as the property owner increases the value of their property.
Incentives are still available
Although costs for solar photovoltaics have fallen dramatically, even as efficiency has risen, the incentives from government continue to help bridge the gap that any evolving technology experiences as they grow. The incentives are designed to do two things: encourage owners to invest and utilities to support new sources of generation. There remain incentives for installing solar such as:
Income Tax Credit
The ITC, currently 30% the a system price for newly deployed solar PV systems, is still available through 2019. After that time, it will decline in value from 2020 to 2022. For homeowners and businesses with tax liabilities, this is a major reward for investing in solar.
Accelerated Depreciation incentive
(MACRS) allows the capitalized cost (basis) of tangible property to be recovered over a specified life by annual deductions for depreciation.
Solar Renewable Energy Certificates
SRECS encourage the use of renewable energy. As an example, in the state of Massachusetts the Green Communities Act of 2008 mandates that utilities must get 15% of their generation from renewable resources by 2020. To meet these standards, utilities purchase SRECs from solar PV system owners. One SREC equals 1,000 kilowatt hours (kWh) of electricity. In Massachusetts, that is about a month of energy for 1.6 homes, providing solar array owners income from $285 to $350 per SREC.
Distributed Generation Contracts Program
DGCP requires local utilities, that feed into the National Grid, to deploy 40 megawatts of renewable energy over the next four years. The Grid will in turn purchase energy from qualified solar systems at a guaranteed rate for 15 years. Such contracts reassure bankers and other institutions that their investment will create real, predictable returns.
- Metering the rate of energy produced by a solar installation allows owners, who generate more electricity than they use in a given month, to receive a credit from the utility. In some cases, that credit can be transferred to other accounts within the utility’s serving area. This provides flexibility for large owners and solar installers to pool several projects, or use the income from one project to support others.
Working with Contractors
Solect sets the pace
Every solar installer has their own process, but they share many aspects. The goal is to have a renewable energy-investment that is capable of energy production for twenty-five years or more.
The Massachusetts based company, Solect, shared their insights about working with customers. Prospective solar buyers should interview solar installers in their area, asking questions on how they will manage all phases of the project, as well as what their options may be for financing, installation, site planning and so forth.
1: Engage with the contractor
Solar companies want projects to be a success. That’s how they get paid. Most start with a client engagement process, where they find out the customers’ goals and concerns, and do a preliminary overview of project feasibility. Solect begins by looking at a property, surveying buildings and grounds to identify the most cost-effective approach. They review such factors as the quality and age of the roof, total ‘usable’ space, shade, and the property’s exposure to sunlight. If the site appears to be able to generate enough energy over the lifetime of the project to make it feasible, the company’s experts design a draft proposal for review by the customer.
While every project is different, the expertise that solar installers bring to the table ensures a financing program that takes into account variables such as ownership structure, appropriate incentives, current electric price, cost of capital, state investment return requirements, total system costs, and system life.
Because solar installers generally share costs and rewards over the lifetime of a project, it is in their best interest to use all the tools at hand. These include past experience with funders, banks, investors, attorneys and other people who might be involved in large projects. Smaller projects can be financed solely through the vendor or in conjunction with loans or other notes in partnership with the property owner. Once the appropriate contracts are in place, the project can move forward.
3: Project Design and Installation
Once the project has been approved and financing structure investigated, the company can begin the design and installation process, which may proceed in parallel with finalizing contract documents.
Preliminary Site Plan
The first step is to produce a preliminary site plan, further investigating the lot topography, access roads, road load requirements, along with the customer’s requirements. To ensure the project’s financial success, Solect uses industry-leading tools for shading and production analysis.
Connection to Utility
Once the draft program has been approved by the client, the company can proceed to submit an Interconnection Application to connect with the local utility, as well as city or town inspectors. In some cases, smaller installations may remain off the grid, connecting directly with solar panels generally in conjunction with storage devices.
Engineers design each individual system, creating blueprints that reflect structural, electrical and solar photovoltaic (PV) requirements. The blueprints are based on each manufacturer’s technical specifications for any given component, selected on the installer’s experience with products that work well together. Each system is professionally engineered to comply with local codes for electrical and structural requirements.
The blueprints are used by contractors and subcontractors as they purchase approved equipment, prepare the site if needed, install mountings and photovolaics, and connect to the building and the grid.
4: Management and Monitoring
Another important aspect of creating a solar energy system is the ongoing management and monitoring. The customer wants to be sure that their system is working as specified, and the company wants to continue to learn how each product works over a long time line, faced with a variety of changing weather patterns which can effect equipment. Solect’s monitoring includes:
Each systems’s Return On Investment is maximized by accurately tracking and reporting such things as SRECs or distributed generation revenue.
Real-time, web-based monitoring
Such monitoring ensures that the system meets or exceeds expected electricity production estimates. This visibility allows Solect to report and track system performance, ensuring electricity production at optimal levels. The solar production is constantly analyzed, tracked and reported so that whoever owns the system knows when it needs to be serviced. This is especially important when a property with solar changes hands. The new owners, who were not party to the original negotiations, want to know what they are buying and that it’s continued success is optimized.
Annual preventative maintenance
Site visits include inspection of all mechanical, electrical, and PV components. The company also provides repair services, which has contributed to Solect earning a reputation as the Bay State’s leading commercial-scale solar provider.
“Using a company like Solect was important because installing a solar system can be a difficult process to manage. They have simplified that process,” said owner of Hillview Equipment David Pyne.
While the process sounds daunting, solar project designers and installers have the expertise to make it transparent to their customers. As John Parson of Parsons Commercial Group said,
“Working with Solect made the project seamless. Their expertise and approach to customer service made this a great project for us.”
Many solar developers are bringing benefits to their communities. For example, Solect donated an 11.75kW system to the Michael Lisnow Respite Center in Hopkinton, MA. The 50-panel system offsets up to 30% of the center’s electricity costs each month, and is expected to save the Center more than $2,500 in annual electricity costs. The company is monitoring and maintaining the system for the Center.
They also donated a systems in an orphanage in Grand Goave, Haiti.
Solect is Massachusetts leading commercial developer and installer of energy systems. Early in 2017 they announced that 2016 was a record breaking year, with completion of 115 sites, adding more than 26 mega-watts (MW) in total solar. Solect’s 57 MW of commercial-scale solar installations makes it the Bay State’s leading commercial-scale solar provider.
“Matching and then exceeding our previous five year 20 megawatt milestone in just one year is very exciting for us,” said Ken Driscoll, Founder and CEO of Solect. ”We have delivered significant cost savings and stability to hundreds of businesses and organizations in the Commonwealth, and we’re eager to provide our expertise in the commercial solar market for clients in Rhode Island and Connecticut moving forward,” He added.