Author Archives: Californiasolar Staff

Financing Rooftop Solar for Non-Profits

California Solar has worked to encourage and evaluate solar PV options for non-profit organizations, primarily houses of worship. Many of the issues faced by congregations are encountered by other non-profits, especially the inability to capture tax benefits. Our experience with congregations, evaluating the financial benefits and finding financing, apply to non-profits in general.

 Over 1000 congregations of all faith traditions in the United States have installed solar PV systems to provide electricity and as a visible statement of faith and stewardship.  As to whether a PV system financially benefits a particular congregation, the answer is “it depends.” Each congregation’s unique costs and savings need to be compared.  It is much easier to financial justify a PV system in a location with high average electricity costs such as Hawaii, California, and the Northeastern states than if costs are at or below the national average.   As example, electricity in California (300 congregations with PV systems) and Massachusetts (100) averages 17 – 18¢ per kilowatt hour (kWh); conversely, electricity in Louisiana (1 congregation with a PV system) and Oklahoma (2) averages less than 8¢ per kWh.  State policies also have a major influence on the viability of a solar PV system; installation costs vary, but not greatly, nationwide.

Installing a PV system is not synonymous with “Fund Raising.”  Hundreds of congregations have found ways to finance PV systems over time, resulting in monthly and annual savings typically with no front-end costs.  These savings provide flexibility to constrained budgets and free funds for other congregational needs.  These financing options allow for payments over time—spreading the cost over 5, 10 or up to 25 years.  In IPL’s national experience, there are four major methods by which congregations fund PV systems, including outright purchase, leasing the system (numerous variants, including congregant leases), entering into a power purchase agreement (PPA), or financing through a Property-Assessed Clean Energy (PACE) loan; not all of these are allowed in all states.  A summary of our experience with the strengths and weaknesses of each are provided below.

Also, instead of building your own system, Community Solar projects are authorized in approximately 20 states.   These are local solar facilities (typically not on-site) shared by multiple subscribers who receive credit on their electricity bills for their share of the power produced.  Despite widespread enabling legislation, only Minnesota, New York, Massachusetts and Colorado have realized a significant number of installations; size restrictions, fees, terms by which PV-generated electricity is credited to a shareholder’s bill, and slow permitting by utilities appear to be contributing to the low adoption rate.  We do not have sufficient experience to assess the economic benefits of this approach, so we have not addressed them here-in.  Developments of this option can be followed at the website https://ilsr.org/national-community-solar-programs-tracker/  .

How do you know if the PV system is a good investment?  Compare your PV acquisition costs (plus any supplemental electricity purchased from your utility) with the expected cost of continued utility-purchased electricity for the next 20 years (or appropriate analysis period).  Any PV installer who provides a proposal should include this analysis as part of their bid. 

 

Table 1.

Key Benefits and Drawbacks of PV Finance Options for Congregations

Type of Financing Benefits Drawbacks
Direct Purchase – Greatest immediate
  reduction in electrical costs

– Minimizes future payments

– Most effectively avoids future
  cost increases
– Pride of ownership
– May be able to generate  
 revenue through Solar RECs

– No capture of tax credit benefits
  (resulting in higher cost than alternatives)
  unless combined with Lease

– Need to obtain complete funding up-front

– Responsible for maintenance of non-
  warrantied items

Lease – Reduced annual cost
  (Otherwise not competitive)

– Pricing certainty

– Fixed monthly and annual  
  costs

– Captures partial tax credits

– No operating risk during lease
  term
– Shorter term than PPA
  (can be 6 years)

– Lowest long-term cost and
  lowest net present value
  (20 year) if pre-paid

– Annual cost increases as part of contract

– Balloon payment at end of lease

– Possibly more front-end paperwork

– Responsible for maintenance of non-
  warrantied items following end of lease
– A lease arrangement may complicate
  sale of the property

Power Purchase Agreement (PPA) – Reduced annual cost
  (Otherwise not competitive)

– Pricing certainty (depends on
  contract terms)
– Reduced variability of annual
  costs

– Captures partial tax credits

– No (or minimal) maintenance
  responsibility for term of
  agreement

– Typically, long term (20-25 years)

– Life-time cost often higher than Lease

– Fluctuation in monthly payments during the
   year

– Annual cost increases as part of contract
– Responsible for maintenance following end
  of PPA
– A PPA arrangement may complicate sale
  of the property

Property Assessed Clean Energy (PACE) – Traditional measures of
  credit worthiness aren’t
  applied; can benefit
  congregation’s ability to secure
  loan
– Spreads cost of system over
  life of system (longer term)
– May be able to generate 
  revenue through Solar RECs *
– Typically, long term (20-25 years)
– Fails to capture either environmental
  tax credits or interest payment deductibility
– Adds interest costs to installation costs
– Interest rates may be higher than
  alternatives 
– Often promoted by contractor who receives
   a financial benefit
– Large biannual payments can be a shock
– Loan terms may complicate sale of the
  property

              * Renewable Energy Credits

California speeds up energy transition to face immediate energy crisis and long-term climate goals

California’s government has issued a roadmap for the US state to achieve its long-term goal of 100% clean energy, while an immediate State of Emergency has been declared over concerns the electric system will struggle under heat waves this summer.

https://www.energy-storage.news/news/california-speeds-up-energy-transition-to-face-immediate-energy-crisis-and

Two U.S. Companies Seek Continued Tariffs on Imported Solar Panels

The tariffs, which largely affect imports from Chinese-owned companies, were imposed in 2018 and are due to expire next year.  Two small U.S. solar companies plan to petition the government to extend tariffs on solar cell and panel imports, reigniting a fight that has split the industry—and one that could force the White House to choose sides. Auxin Solar Inc., a San Jose, Calif., solar panel manufacturer, and Suniva Inc., which owns an idled solar cell factory in Norcross, Ga., plan to ask the U.S. International Trade Commission to extend the solar tariffs for four years.

https://www.wsj.com/articles/two-u-s-companies-seek-continued-tariffs-on-imported-solar-panels-11627819200

A Simple Solution for NEM 3.0 ?

Well, admittedly nothing is simple when it comes to the California Public Utility Commission (CPUC) rule-making process and energy politics more generally in California.  But the following proposes a solution as to how some greater equity can be established in utility billing without gutting the essential growth of rooftop solar in this state.  As will be shown, a 5-year shortening of the benefit period and moderate increase in PV household utility payments allows homeowners to retain a competitive return on their PV investment while correcting some of the cost-shifting of the current approach.

To review, there are two sides to the debate on establishing new billing/ cost recovery rules for utility customers with rooftop solar PV systems.  (Utilities are the investor-owned utilities (IOUs), primarily Pacific Gas & Electric (PG&E), Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E)).  These utilities observe that rooftop solar has grown to 25% of peak load for PG&E, 33.1% for SDG&E and 16.1% for SCE—well beyond the targets set in original enabling legislation. They contend this high share of rooftop generation has created such problems as:

  • A cost shift of $200+ per year from “wealthier” single family homeowners who are more likely to have installed PV systems to those of middle- and lower-income who are less likely to have such systems (this is reportedly a $2.8 billion cost shift).
  • Overly generous compensation of PV customers; as costs of PV systems have fallen, payback times are as short as 5 years, but benefits continue for 20 years.
  • The cost shift (as above) produces higher electric rates for most Californian’s which results in delaying the environmentally-desired shift to such technologies as electric heat pumps and electric vehicles.
  • Being tied to retail electricity rates, the program benefits are greater for higher income households than for those who participate in statewide electricity price-discount plans (such as the California Alternative Rates for Energy, or CARE).
  • Inadequate price signaling to promote more modern technologies and use patterns (to reflect time-of-day variations as example).

Those supporting a more solar-supportive NEM argue that specific changes proposed by the utilities to address the above problems would double the cost of solar with such changes as:

  • increasing utility charges by $56 to $96/month (depending on IOU)
  • substantially reducing the credit received from electricity supplied to the grid to 5.7¢ (from possibly 25¢ at present)
  • eliminating carry-overs for excess solar production, so excess production in summer would not credit against higher level of grid-obtained electricity in less sunny months

They further contend:

  • The $200 cost shift estimate is twice as high as it should be in reality (from $200 to $100 per year)
  • The proposed changes would eliminate much of the $4-billion, 65,000-employee, rooftop solar installation industry
  • The utility industry argument (resulting in fewer solar PV installations) will result in more transmission and distribution investment on which the utilities make a profit and guaranteed rate of return.
  • The utilities misrepresent the long-term benefits of rooftop solar PV, there-by cutting the “cost” of these investments to non-user by half (from $100 per year to $50/year)
  • The benefits of older rooftop solar installations in avoiding costs that would have been borne by customers is not fully recognized; if included these would further reduce the costs paid by non-users from $50/year to $25/year
  • The utility argument of the cost differential between rooftop solar and larger (utility-scale and other off-site) solar projects is incorrect as it assesses only generation costs, and not the added transmission and distribution costs of moving the electrons.
  • No value is assigned to use of “rooftop” space versus desert or farmland, nor to the reduced fire risk from the added load on transmission lines.

 

There are clearly some major differences of fact and perspective.  And to some extent, a few arguments on each side are not addressed by the opposing perspective.  (Meaning they aren’t being challenged?)

But what seems salient to us is:

  • More needs to be done to seriously address climate change induced by rising atmospheric greenhouse gases. The report by the International Energy Agency released in May this year (https://www.iea.org/reports/net-zero-by-2050) highlights how the efforts by all nations need to be increased significantly if we are to keep atmospheric warming below 1.5°
  • Rooftop PV systems can be a critical part of the necessary transition to renewable energy. A 2016 study by the National Renewable Energy Laboratory (NREL) concluded that rooftops of small buildings (less than 5,000 square feet) in California had the potential to generate almost 44% of the state’s electrical demand (Table 3, https://www.nrel.gov/docs/fy16osti/65298.pdf).  While time-of-day issues aren’t addressed, this substantial potential source of production cannot be ignored.
  • Grid management and time-of-use is becoming increasing important as the amount of intermittent renewable-generated electricity, solar and wind, increase as a share of generation. Indeed, there have been times when the renewables have provided over 90% of the state’s power needs (https://www.latimes.com/environment/newsletter/2021-04-29/solar-power-water-canals-california-climate-change-boiling-point .  This leads to exporting power, and in some cases paying users to take it, https://www.latimes.com/projects/la-fi-electricity-solar/ ). The “duck curve” effect has become increasingly extreme during hours of high solar production. (https://www.enerdynamics.com/Energy-Currents_Blog/The-Duck-Curve-Becomes-Extreme-in-California.aspx ).  Incentives for storage to shift behind-the-meter supply from sunnier to later hours is increasingly desirable.
  • The cost-shift argument appears to have some merit on both sides, recognizing that the exact amount (and its significance) remain in dispute.
  • Infrastructure problems such as wildfire threats are growing as the climate dries; finding ways of reducing the need for substantial transmission system expansion appear desirable. Admittedly, this will also require a change in how IOU investments and investor returns are calculated—not a small change!
  • Finally, we observe the state mandate for rooftop solar on new homes that went into effect in 2020 shouldn’t end-up burdening home buyers with excessive electricity costs and charges for systems they are required (by law) to acquire.

So where do we (CaliforniaSolar.org) see an opportunity for common ground?  We find taking the economic perspective of a homeowner who is considering a solar PV system helps identify this opportunity.

This perspective arises as a neighbor (“Bob”) asked this editor to help him evaluate a PV system for his home in June 2021.  (Disclosure: this editor has had a 2 kW rooftop PV system for 10 years.)  Bob’s annual consumption is 6200 kWh; we identified that a system of about 4 kW at a cost of about $13,000 (about $10,000 after tax if he could fully utilize the benefits) would meet Bob’s household demand. 

Would this be a good investment for Bob?  ABSOLUTELY!  With projected PG&E cost increases and NEM 2.0 rules, this investment (using the after-tax cost and other fixed charges) provided him a 20-year return on investment of 18%– substantially better than any other opportunity. Bob’s problem is now finding an installer with the capacity to take on the project!

BUT what if Bob could only benefit for 15 years?  Still a 14% rate of return.  Shortening the duration of the benefit period from 20 to 15 years would not be a “deal breaker” for him.  Or, what if he was required to pay a share of the grid-supplied electricity he was not using, perhaps 25% of the retail rate of what he was self-generating? (In effect, a cost recovery or “in lieu of” fee.)    His rate of return (20 years) would be 10%, a return he still found attractive.  Finally, allowing him to pay a 25% cost-recovery fee AND for only 15 years (before returning to full retail) would make his financial return marginally more attractive (compared to other investments) at 7%, but for him still desirable as he’s also committed to producing environmental (carbon emission reduction) benefits.

We observe that as Bob’s cost-recovery payment would be about $400 per year ($35 per month), he would eliminate any cross subsidy he was placing on homeowners who could not afford a PV system even assuming the highest (IOU) charges identified.

Our conclusion? From the perspective of a possible PV customer, a 5-year shortening of the benefit period and a modest rise in fees (25% or less then full retail equivalent) appears not to have a strong adverse impact on the financial benefits of a PV system as an investment for a homeowner.  It appears there is room to maneuver with increased utility revenues and reductions in benefits to homeowners installing PV systems that result in benefits to each, while continuing California’s lead (and example-setting) for the energy transition we badly need.

California Nimbys Threaten Biden’s Clean Energy Goals

Ranchers, farmers and environmentalists are coming together to oppose what would be the largest solar plant built in the San Francisco Bay area, a project local officials say is critical to the state meeting its climate goals.

https://www.bloomberg.com/news/features/2021-07-29/san-francisco-bay-area-solar-farm-opposed-by-nimbys

Governor Newsom Signs Emergency Proclamation to Expedite Clean Energy Projects

In the face of extreme climate impacts across the West, Governor Gavin Newsom today outlined the state’s goals to achieve a 100 percent clean electricity system that supports long-term clean energy reliability. The Governor also signed an emergency proclamation to free up energy supply to meet demand during extreme heat events and wildfires that are becoming more intense and to expedite deployment of clean energy resources this year and next year.

https://www.gov.ca.gov/2021/07/30/governor-newsom-signs-emergency-proclamation-to-expedite-clean-energy-projects-and-relieve-demand-on-the-electrical-grid-during-extreme-weather-events-this-summer-as-climate-crisis-threatens-western-s/

How Does Solar Power Benefit the Environment?

The solar power industry is scorching hot.  In 2020, despite the pandemic, solar power installation increased by a whopping 43%. That’s a blistering pace, and there are no signs of a slowdown. Experts predict that by 2030, installations will quadruple from what they are today. If you feel like you’re late to the solar power party, fear not; the sun isn’t expected to burn out for another 5.5 billion years, so you still have plenty of time to make the switch.

You might be thinking, how will solar power benefit me? It’s a valid question, and there are myriad reasons why making the switch to solar panels is a great idea.

https://californianewstimes.com/how-does-solar-power-benefit-the-environment/454384/

Net Zero by 2050 (International Energy Agency)

The number of countries announcing pledges to achieve net-zero emissions over the coming decades continues to grow. But the pledges by governments to date – even if fully achieved – fall well short of what is required to bring global energy-related carbon dioxide emissions to net zero by 2050 and give the world an even chance of limiting the global temperature rise to 1.5 °C.  This special report is the world’s first comprehensive study of how to transition to a net zero energy system by 2050 while ensuring stable and affordable energy supplies, providing universal energy access, and enabling robust economic growth.

https://www.iea.org/reports/net-zero-by-2050

 

California just hit 95% renewable energy. Will other states come along for the ride?

I’ll say it again: 95% renewables. For all the time we spend talking about how to reach 100% clean power, it sometimes seems like a faraway proposition, whether the timeframe is California’s 2045 target or President Biden’s more aggressive 2035 goal. But on Saturday just before 2:30 p.m., one of the world’s largest economies came within a stone’s throw of getting there.    There are several caveats….

https://www.latimes.com/environment/newsletter/2021-04-29/solar-power-water-canals-california-climate-change-boiling-point

NEM 3.0: What Changes Are Coming?

In August 2020, for the second time in just four years, the California Public Utilities Commission (CPUC) opened up a new proceeding to change California’s net energy metering (NEM) program. Although no new rules or regulations have been rolled out, a final decision on NEM 3.0 is expected in 2021.

The decision could either drastically and negatively impact Californians looking to go solar or usher in an era of growth. If the CPUC goes with the latter, we could see greater consumer savings and more clean energy throughout the state. If not, this decision may effectively kill the California solar market as we know it.

California’s investor-owned utilities (IOU), PG&E, Southern California Edison, and Sempra Gas Company, which owns San Diego Gas & Electric, jointly filed opening comments. In those comments, the utilities called for drastic cuts to NEM that would harm the ability for consumers to invest in their own solar energy system. Some of the suggested changes include the following…

https://nrgcleanpower.com/learning-center/nem-what-changes-are-coming/