Professional Documents
Culture Documents
1 of 7
http://ecmweb.com/print/green-building/financing-trends-solar-sector
print | close
For an energy source thats so consistent and measured in its 93-million-mile trek to Earths atmosphere, solar
power rides a roller coaster of heady promise and stark reality as its factored into the market for electrical
energy.
From a technical standpoint, snatching energy from the sun has never been easier. Technologies for accessing,
converting, and distributing solar energy chiefly via photovoltaic (PV) panels are proven and established.
Meanwhile, progress on the next game-changing technical front to refine methods of capturing and storing it in
batteries is picking up steam.
Its in the
mechanics of
integrating
itself into the
existing
electrical
energy
framework
where solar
is still
searching for
its footing.
Competing
against wind
and other
renewables,
as well as
established
fossil fuels,
on a playing
field thats
buckling under forces that swing between tilting and levelizing it, solar seems to be running in place. On one
level, its raring to go; on another, its stymied by seemingly intractable market realities.
After a flurry of activity, some publicly funded financial incentives that helped solar take off around 2005 are
ebbing. Thats left it more exposed to the mercy of fundamental energy market forces that are proving
stubbornly resistant to renewables. But at the same time, prices and supplies of fossil fuels notably natural gas
are gyrating. The result amounts to more questions than answers about long-term prospects for traditional
07-03-15 2:00 PM
2 of 7
http://ecmweb.com/print/green-building/financing-trends-solar-sector
07-03-15 2:00 PM
3 of 7
http://ecmweb.com/print/green-building/financing-trends-solar-sector
Meanwhile,
utilityinstalled PV
continued to
grow at a
faster clip
into 2012. In
the years
second
quarter
alone, utility
PV installs
numbered
more than
20 for a
combined
447MW,
according to a report from GTM Research and the Solar Energy Industries Association. According to this report,
it was the busiest quarter ever for utility-scale PV.
Overall, PV installs of 742MW were up 116% in the quarter over the same period in 2011, the report said. The
residential market experienced little growth in the quarter, while the commercial market contracted 33%
quarter-over-quarter. Still, the residential and commercial markets could be the near-term growth engines for
PV. If utilities are reluctant to disrupt the profitable status quo with big capital outlays on solar, more electric
customers are increasingly eager to get out ahead of the steepening energy cost curve. PV systems either
purchased outright or leased while still generally requiring a substantial investment thats lashed to an
extended payback period offer an opportunity to lay a foundation for lower net energy costs down the road.
Thats leading more companies, among them specialized electrical contractors, to get into the business of
formulating, designing, and installing PV solutions for this market a market thats likely to grow as solar
capital equipment and installation costs come down amidst a growing supply glut and a consolidating industry.
07-03-15 2:00 PM
4 of 7
http://ecmweb.com/print/green-building/financing-trends-solar-sector
utility-grade solar farm projects, the San Jose, Calif., electrical contractor turned its attention to utility projects
in markets where sunlight factors and exceedingly high incumbent energy costs make a near slam-dunk case for
PV.
Rosendin Electric is in the midst of building a 75MW PV solar farm project for the state-owned utility in Puerto
Rico. Because end-user energy costs are 25 to 32 cents per kWh and rising, this arrangement is an ideal
candidate for an alternative energy approach. Seeing a window of opportunity to address high energy costs and
an aging fuel oil-based electric supply, the islands governor pushed through renewable portfolio standards for
the utility, paving the way for this and many other PV projects, says Duncan Frederick, the companys director of
solar operations.
Beyond these utility-scale opportunities, theres a high concentration of industrial and commercial users in
Puerto Rico, especially in the pharmaceutical sector there, who are paying a lot for power, creating a demand for
local RDEG renewable power solutions, he says. Were [solar contractors] all chasing markets like this that
have a fundamental higher cost of power, because without that its tough to make these projects work. Larger
EPC players like us saw a great ride with local incentivized RDEG projects, but we needed to switch gears to
focus on new markets as state and local incentives have dried up.
07-03-15 2:00 PM
5 of 7
http://ecmweb.com/print/green-building/financing-trends-solar-sector
installations
can represent
an investment
in a key
component of
competitiveness. Combine that with the ability to possibly offset costs with incentives for the use of alternative
energy and the ability to use power purchase agreements (PPAs) to sell power produced on-site back into the
grid, and big commercial energy users may begin to see the advantages.
If youre a large business like a Wal-mart-type operation that has a lot of buildings that allows you to do an
aggregated bid on a system, the numbers can be made to work, Crowdis says. But I think its still going to be
harder to make the financial case without any incentives in place, with the exception of spots where electric rates
are very high.
The bar for financial feasibility in the non-residential market may not be as high, though, if creative funding
schemes and payback scenarios can be brought into play. Third-party finance, for instance, can bring in outside
entities to build, operate, maintain, and attempt to turn a profit from a PV system. The commercial entity, in
turn, gets to tap into some of the power generated, presumably at competitive rates. The owner, meanwhile,
juices its return via tax-equity financing that takes advantage of investment tax credits for funding renewable
energy projects.
Cupertino Electric, Inc., a San Jose electrical contractor, is hopeful that creative financing and other forms of
outside investment will help fuel an uptick over time in commercial PV in California. Saurabh Samdani, who
oversees forecasting and modeling for the company, sees commercial PV prospects still being uncomfortable
with the idea of outright system ownership.
We can tell everyone that solar systems are easy to operate and maintain, but many companies dont have the
processes or people in place to do it, Samdani says. They may not be interested in taking the risk of owning and
operating a system. The common perception is that these activities are best left to the entities who understand
this risk. Therefore, these companies are more comfortable with a third-party owning and maintaining the
system.
Still, from a financial resources standpoint, many companies willing to consider aggressive steps to get a handle
on their own energy costs may be better positioned than ever, says John Curcio, who started Cupertinos
renewables division in 2007 and now serves as its chief commercial officer.
Theres a tremendous amount of cash on company balance sheets today, so the resources might be there to
directly fund a PV system, he says.
07-03-15 2:00 PM
6 of 7
http://ecmweb.com/print/green-building/financing-trends-solar-sector
As much work as went into refining solar PV technology, theres been no shortage of effort into finding ways to
07-03-15 2:00 PM
7 of 7
http://ecmweb.com/print/green-building/financing-trends-solar-sector
make it financially practical to install. Financing solar PV has almost become an industry unto itself, as all
parties look for creative ways to factor up-front costs, payback periods, prevailing electric rates, subsidies, and a
host of other variables into a favorable equation.
While every financing deal can come with its own unique structure and nuances, most come down to a choice
between system ownership of some sort or reaping the cost benefits of solar-produced electricity.
Outright ownership: Residential or commercial power users with deep pockets or willing lenders can buy a
system, reaping both the potential benefits of lower cost power and the intrinsic value of a PV system. Tax
credits, net metering, and depreciation can effectively lower the costs of ownership over the systems life and
potentially raise a propertys value, but system maintenance and financing costs are offsets. Users without the
ability to pay cash for a system can access a variety of lending schemes, including bank and subsidized loans, as
well as those secured by the solar equipment or property, or unsecured commercial or guaranty loans like those
through the Small Business Administration.
Leasing: Significant up-front costs can be eliminated under leases where a third party owns the system. The user
makes lease payments on the hardware, but those costs are offset by cheaper power. Under a typical lease, the
user can extend the lease at terms end or purchase the system for residual value.
Power Purchase Agreements (PPA): Users simply interested in cleaner, cheaper power can purchase the solar
power generated from a hosted system. Installation, ownership, and maintenance is handled by a third party,
which contracts to offer the user power at a set rate for a period of time. Power cost savings are typically reduced
in this scenario, but up-front costs are eliminated.
Source URL: http://ecmweb.com/green-building/financing-trends-solar-sector
07-03-15 2:00 PM