Solar Power & Light Aims for another Innovation That Will Put Even More Power in Peoples

Hands Without question, the success of the solar industry still depends upon the governments game changing policies. These policies enable solar to compete with other forms of non-renewable energy production. On the federal level, it is the Investment Tax Credit (ITC) that permits the owner of a solar system to receive a tax credit for 30% of the systems total cost. On the state level, it is the Renewable Portfolio Standard (RPS) that each state has chosen to adopt, or in the case of 26 states, not to adopt. In Ohio, the RPS requires that electric utilities obtain an increasing percentage of their electricity from solar generating facilities each year. In 2011, the solar requirement is.030% of each utilitys total energy sales. If an Ohio utility company sells 10,000,000MWh (megawatt hours) of electricity, then 3000MWh must come from solar. So far 8 of the 24 RPS states have implemented a solar alternative compliance penalty (SACP) for each MWh that a utility falls short of compliance. The Ohio SACP for 2011 is $400. To avoid the SACP, the utility can either build its own solar farm to generate the 3000MWh, or it can purchase 3000 Solar Renewable Energy Certificates (SRECs) generated by an independent solar generator, like Solar Power & Light. Purchasing 1SREC gives a utility credit for 1MWh of required solar electricity. Generally, as long as the price of an SREC is below the SACP, a utility will choose to buy the SREC. The purpose of this SREC in lieu of SACP policy is to incentivize the proliferation of solar systems by creating bankable cash flows for the Solar Power & Lights of the industry. This cash flow can represent 20-40% of the total project costs and greatly reduces the time to a return on investment. The states set the solar requirements far beyond what the utilities could realistically develop alone, so there would be predictable shortfalls, and thus, demand for independent developers (SP&Ls) SRECs. SRECs are bought and sold through brokers, utility RFPs, and website auctions, much like stocks or commodities are traded. One major difference between an SREC and stocks or commodities is that there is no intrinsic value to the SREC. The value is based on avoiding a legislated penalty, so if the penalty goes away, so too does the value of the SREC. This could happen if the state government repealed its RPS legislation or if utilities install enough of their own solar to meet the RPS. In addition to the cost of the penalty, SREC prices are also determined by good old fashioned supply and demand; which means the price could also plummet if independent solar developments exceed the RPS and flood the market with an oversupply of SRECs. Conversely, if there isnt much solar installed, there will be a low supply of SRECs and therefore a higher demand and price for them. To summarize Economics 101, low supply leads to high demand and higher prices, while excess supply leads to low demand and lower prices.

Given a low supply of SRECs, there may be instances when utilities would pay even more than the cost of the SACP for an SREC. This is because the RPS permits utilities to increase their customers bills to offset SREC costs, but not SACP costs. The SREC amounts to an equal increase in revenue for the utility, while the cost of the SACP amounts to a direct reduction of profit. As long as the price of an SREC is below the $400 SACP, a utility would choose to buy the SREC. In 2011, at an SACP of $400, the price of SRECs has ranged from $200-$401. SP&L is pleased to report that its first SRECs from the buyCASTINGS.com system were sold at the peak of the Ohio market, for $401 an SREC. This successful transaction was a fitting capstone to SP&Ls inaugural solar development project. It is a rigorous certification process to ensure the integrity of the SREC market does not follow in the footsteps of other financial markets infamous corruptions. SP&L is proud to have attained PUCO (Public Utility Commission of Ohio) certification and approval to trade its SRECs through PJM GATS (Generation Attribute Tracking System). Since the sale of SRECs are integral to making solar projects bankable, SP&L is encouraged by the recent strength of the SREC market that is exceeding analyst projections. Even more so than the stock market, experts are at a loss to make reliable predictions about the future of the SREC market. There are many variables that can affect the value of an SREC, but most influential of all is state legislation, and whether the politicians elected in the future will continue to enforce the proenvironmental policies of their predecessors. The value of the SREC market is based on the RPS (Renewable Portfolio Standard) state law. This law fines the utility companies for either not generating a certain percentage of their power from renewable energy, or for not buying the comparable amount of SRECs from independent power producers who are generating that renewable energy, like SP&L. What we know now is that the SREC market in Ohio is very strong, especially considering PUCOs recent ruling to enforce the RPS and not let First Energy off the hook for its 2010 renewable energy requirements. SP&L believes this is as strong an indicator as any for the future strength of the solar industry. There is no question that government policies are essential to the solar industrys growth. And there is no question that the solar industry must continue to grow if it is to provide job relief to the millions of unemployed Americans. What remains questioned though, are the side effects of these game changing policies, known more commonly as handouts, subsidies and incentives. Are these policies merely a Prozac prescription for our depressed economy, or are they actually digging up its problematic underpinnings and rebuilding a more stable and sustainable foundation for Americans to build their lives upon. Critics of solar energy complain about the subsidies required to make solar competitive with other forms of energy. Critics argue that the beauty of our Capitalist economy is that unsubsidized competition drives innovation to higher and

higher levels until a new player can compete on its own two feet in the marketplace. This necessity to beat the competitions price and performance has been the mother of all the greatest inventions we cherish today. Critics contend that if we start subsidizing, we risk cutting out this fruitful source of innovation that our economic vigor depends upon. One cant blame these critics for coming to the defense of our economys life giver. It is understandable how they see subsidies as a threat to her unbending crucibles fertility. What would happen if a foundry weakened the walls of its crucible? The crucible would burn away and allow molten metal to pour all over the floor. Instead of valuable castings, all that would be left is a big mess. A similar outcome for our economy is clearly something we should protect against, and since a competition of ideas is just as fruitful for the shaping of public policy as it is for products in the marketplace, we have everything to gain by answering this concern as thoroughly as possible. The below chart illustrates there isnt a source of energy the government doesnt subsidize. Nuclear and coal receive more than solar The source of the big stink over subsidies is most likely being caused from the same source of our environmental pollution, the coal and oil industry. Yes, subsidies for solar increased 533% from 2007 to 2010, while subsidies for coal and gas decreased 30%. However, the combined subsidies for these supposedly cheaper forms of coal and oil are still 368% greater than for the solar industry in 2010. The subsidies for nuclear energy are also 220% greater than for solar.1

1.

Source: Energy Information Administration, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year2010, July 2011, http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

Of course, it isnt prudent to justify an argument for solar subsidies based on the otherwise overlooked and thus socially accepted subsidies of coal, oil, natural gas, and nuclear. Possibly the justification for the RPS cant be properly explained by whether it is weakening or strengthening the walls of the crucible. What the RPS is really doing is making the walls transparent, so it is now possible to see the hidden costs of nonrenewable energy processes that have been overlooked and allowed to get away with murder. These processes have been responsible for threatening the very ecosystem that makes life on Earth possible. Even more important to defend against than the threat to our economys sustainability, is our planets. Without our planet, there is no need for an economy. This order of importance is one that hasnt come naturally to Capitalism; however this operating system for our economy is to survive, it too must adapt to serve the values that allow for its existence. It cant continue to elevate profit determined by Generally Accepted Accounting Principles (GAAP), over net values determined by more conscientious standards. The GAAP standards are not high enough to hold accountable a corporate America that has

been trained to see more value in one dollar than a clean river. An economy that is focused only on monetary appreciation will sell the oxygen out of its own lungs to earn one last dollar before dying. If Capitalism is to persevere, it must recognize the higher and deeper level of values to uphold and maximize - values that uphold life and the reason for even having an economy. Is the RPS enough. It is at least a start and the training wheels we so urgently need to help us make early progress to redefining our countrys course to a sustainably better future. I think it is without question that the quality of life made possible from a more dependable and just economy is an outcome we would all be willing to invest towards achieving. But in order for our economy to be dependable, the values it aims to appreciate, must first lead to a dependable planet. If we are willing to invest towards achieving a sustainable economy, then wouldnt we also be willing to invest towards achieving a sustainable planet The question though, is which career, company, stock, mutual fund, political party, country, charity, church, or school system do we invest in for such achievement?

is not equipped to account for obsolete o and in need of hopefully in time for a which The RPS penalties for pollution and corresponding rewards for RPS Thshould be enough to redefine the values that our Are we increasing the temperature We are making them transparent

SP&Ls mission has always been to empower people with the choice of using clean solar energy for less cost than using non-renewable resources that pollute the environment. Along its way of providing this service SP&L remained on the lookout for more opportunities to empower its customers and discovered an investment opportunity that would do just that. Not only would this investment opportunity empower a customer to another opportunity to empower people. This opportunity is the investment vehicle that SP&L believes

that have been at the root of our Make the RPS even higher by getting the public to invest in Will utility companies lose? No, they will just be forced to compete in a new crucible, not The crucible With The innovative buyCASTINGS.com culture from which SP&L was born is The Government incentives

Solar Renewable Energy Certificates are the latest Market is uncertain. Nobody wants to invest in a There wont be stability in this market until its investors