Solar Opportuity - HUGE!!
Why Rooftop Solar is Set to Explode
By Chris Nelder | Friday, February 12th, 2010
Distributed generation of renewable energy is off to a rocky start, but it's finally making some headway.
The research side is looking good. The $28 billion request in the president's FY 2011 budget for the DOE Office of Energy Efficiency and Renewable Energy includes large increases for programs including wind, weatherization, smart grid technologies, and solar — plus $58 million for National Renewable Energy Laboratory (NREL) infrastructure and $50 million to stimulate clean energy education.
An additional $300 million would support the Advanced Research Project Agency — Energy (ARPA-E) initiative. Modeled after the DARPA program that resulted in the Internet, ARPA-E will fund the fundamental research to incubate the energy grid of the future, what Ethernet inventor Bob Metcalfe termed the Enernet.
The production side has become a bit of a buyer's market, yet manufacturers are still building new capacity in anticipation of the boom ahead. Yes, China is building more capacity in the U.S. than American companies are, but as I have argued previously, that's fortunate given the urgency of our situation. Solar PV supply is high and prices are as low as they've ever been, which is constructive for new installations.
Overall, I would say we're making progress on the hardware front. But then it's easy to throw money at hardware.
The real problems now are in finance and policy. The big up-front cost has always been the main hurdle to distributed generation (and rooftop solar in particular), but now several ways to overcome it are available.
10 Million Solar Roofs
At the federal level, we have the "10 Million Solar Roofs and 10 Million Gallons of Solar Water Heating Act of 2010" bill introduced by Sen. Bernie Sanders of Vermont, which was modeled after the California Solar Initiative (Ahnold's "Million Solar Roofs" program).
A direct rebate of $1.75/watt for PV systems and $1/watt for solar hot water would offset somewhere around a quarter of the project cost. Combined with existing 30% federal investment tax credit (ITC) and state incentives where available, it could bring the end-user's cost down to 25% of the actual retail price. The $2-3 billion price tag of the bill will be hard to swallow... but if it passes, it would be a major shot in the arm for rooftop solar.
The more interesting solutions, however, are at the local level.
PACE
Under a fairly new type of program called property assessed clean energy (PACE), local governments float bond issues secured by real property in their districts and use the proceeds to fund renewable energy and efficiency projects. The property owners then pay back the debt as special assessment included in their property tax bill over 20 years.
As an example, $12,000 in financing through the program would translate to roughly $75 a month in payments. If the property is sold, the energy systems and the tax obligation remain with it.
PACE is offered by Oakland-based Renewable Funding and has been implemented in three counties and three cities in California, including San Francisco, Los Angeles, San Diego, and Sonoma.
A statewide program expected to commence this year. San Francisco's program was approved this week and will offer $150 million in bonding capacity. Fifteen states have adopted PACE programs over the last year and a half, and interest continues to grow without discernable opposition.
Contributing to the popularity of PACE is that it's a voluntary program that only affects property owners who choose to participate, and that it applies to a wide range of measures in addition to rooftop solar.
Third-Party Financing
A different approach uses private third-party financing to front the cost of a solar PV system to end-users, who then pay it off over 15-20 years or more.
In the commercial sector, companies like Solar Power Partners (SPP) and SunRun of California assume the initial installation cost and own and operate the systems in exchange for a power purchase agreement (PPA) with the customer.
Power generated by the system is sold back to the customer, typically at or below grid rates. At the end of the PPA term, the customer can buy the system at fair market value or renew their PPA.
SPP's targets include water districts, wineries, universities, airports, and other large facilities. Their current portfolio stands at about 14 MW, which is tiny compared to a single 500-1,000 MW coal-fired plant... But I see potential for robust growth in such financing options.
Cutting the out-of-pocket expense to zero makes solar PV a no-brainer for any facility that wants to produce some of its own power and lock in fixed power prices. (If they know anything about the future of energy, they should).
The private capital behind the strategy gets a 5% annual rate of return (or better) at nearly zero risk by assuming the 30% ITC and taking ownership of a producing, hard asset.
When lines of credit shrunk or dried up altogether in the Great Credit Drought of 2008-2009, solar installation companies turned to private capital as well. Companies like Geoscape Solar of New Jersey and SolarCity of California offer financing options with zero upfront cost under PPAs and lease arrangements to the residential and small commercial market.
AI
