Weitere ähnliche Inhalte Ähnlich wie Commercial Solar Economics (20) Kürzlich hochgeladen (20) Commercial Solar Economics1. Andy Black
“Commercial Solar Economics & Solar Financial Analyst
(408) 428 0808x1
Introduction to Financing with Leases & andy@ongrid.net
PPAs”
Solar Living Institute: April 20, 2008, Los Angeles, CA, 9am-5pm
Contact: Solar Living Institute: www.solarliving.org, 707 744 2017 to register
8:30 Check-in
9:10 Introductions
Commercial Tax & Incentive Issues
Break, Q & A, Networking
TOU & Demand Rate Choices & Case Studies
~12:00 Lunch, Q & A, Networking (~30 minutes if possible)
Choosing Rebates vs. PBIs
Commercial Financing In General
Break, Q & A
Financing with Leases
Financing with PPAs
~4:30 Formal Conclusion, Break, Q & A
Interactive Examples (for those who wish to stay)
Using the OnGrid Tool
We must be out by 5:00 (add’l questions outside)
Diligence:
Heights by great men reached and kept were not obtained by sudden flight, but
they, while their companions slept, were toiling upward in the night.
- Henry Wadsworth Longfellow
2. Andy Black
“Commercial Solar Economics & Solar Financial Analyst
(408) 428 0808x1
Introduction to Financing with Leases & andy@ongrid.net
PPAs”
Solar Living Institute: April 20, 2008, Los Angeles, CA, 9am-5pm
Contact: Solar Living Institute: www.solarliving.org, 707 744 2017 to register
Abstract:
This rigorous workshop is designed to help commercial systems integrators (dealers, installers, and
salespeople) understand and make the financial case for commercial PV systems including specifics
for the local/nearby utilities (depending on location), then understand how to finance them with
PPAs and Leases.
“Economics of Solar: Making The Financial Case for Residential Solar” or equivalent is a required
prerequisite.
This class includes:
Economics of commercial & municipal systems, including the additional incentives (tax credits,
RECs, PBIs, depreciation), and utility tariff options (including TOU and demand charge rate
choices)
PPAs: Understanding the basics, subtleties, complexities, risks, and opportunities
Leases: Understanding the major types, how and when they are used
A short list of financing, legal, tax, and accounting providers who specialize in solar
All students will receive a copy of the demo version of the OnGrid Tool (licensing agreement will be
required).
Biography:
Andy Black is a Solar Financial Analyst and the owner of OnGrid Solar. OnGrid Solar provides
financial analysis and sales education & software to solar installers to help them make a strong sales
case for solar electricity to their customers. Andy has more than a dozen years of design, consulting,
teaching, sales, and research experience in solar. He specializes in demonstrating the financial payback
of solar electricity systems. He is a former NABCEP certified solar installer.
Andy Black is a recent member of the Board of Directors of the American Solar Energy Society and
served as Chapters Representative. He is also a member of the Advisory Board of the Northern
California Solar Energy Association.
Andy’s formal education includes a Bachelor’s in Electrical Engineering from Penn State University, a
Master’s in Electrical Engineering from University of Southern California, and a Marketing Certificate
at the University of California. His training in solar electricity includes Solar Energy International’s
intensive photovoltaic coursework and more than a dozen specialty courses in solar electric and related
fields. He presents regularly on the financial analysis of solar electricity to audiences nationwide.
Andy is also the groundskeeper and servant for a cat at his home in San Jose, CA.
Contact Info: Andy Black, CEO
OnGrid Solar
4175 Renaissance Dr #4, San Jose, CA 95134
(408) 428 0808x1 andy@ongrid.net www.ongrid.net
3. COMMERCIAL SOLAR Introductions & Thanks
ECONOMICS & FINANCING
! Solar Power International 09
Andy Black ! Solar Electric Power Association
Solar Financial Analyst " Julia Hamm & Emily Brown, & Stuart Raper
& Sales Software Creator
! Andy Black, OnGrid Solar
" Solar Financial Analyst & OnGrid Tool Creator
Solar Power International 2009
! You for coming!
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 2
Quick Survey -
Quick Survey - Who’s Here?
! Existing integrators / dealer / installers
Your Goals for Today?
" Managers & Owners ! Learn about economics for general knowledge
! Salesperson for integrator / dealer / installer
! Want to use economics for selling / grow
! New or hopeful integrators / dealers / installers
! New or hopeful salespeople
business
! Government / Utilities ! Want to learn about / have the OnGrid Tool
! Customers / consumers / end users
! Want to increase your knowledge to develop
! Manufacturers
your own tool
! Others?
! Who’s taken the Residential/Basic Payback Class?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 3 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 4
Quick Survey -
Instructor Background
Area(s) of Interest?
! Came to learn specifically about: ! M.S. Electrical Engineering
" Commercial Financial Analysis: IRR, Tax, etc ! SEI graduate & NABCEP Certified PV Installer
" Commercial Lease Financing ! 13 Years involved with Solar
" Commercial PPA Financing ! 9 Years studying, writing, & presenting about
# Use PPAs in selling Solar Financial Issues
# Create new PPA offering to market ! 5 Years as Solar Salesperson
! Other interests? ! Now a Solar Financial Analyst &
! Networking list? Creator of the “OnGrid Tool” solar sales
software
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 5 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 6
4. Handout Resource List Decorum
! Resources available at www.ongrid.net ! Questions: Please focus on Solar Economics
& Payback
" Articles & papers on solar “Payback”
! No Side Conversations Please
" Upcoming classes & events
" Hard for others to hear
# Sales & Marketing ! Cell phones to fun mode
# Slides from past classes ! Site Logistics & Breaks
" Free demos of the OnGrid Tool " Facilities
" Lunch & 2 breaks: Networking
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 7 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 8
Agenda Installed System Costs - Size
! Commercial Solar Financial Analysis ! Typical range $7-$11/ CEC AC watt thru 10/2008
" Commercial Incentive, Tax, & Tariff Issues ! Commercial, Gov’t & Non-Profit: $7-$9/Watt CEC
AC
" Four Financial Analysis Methods & Examples
" $5.50-$7.50/Watt STC DC (1 W DC =~ .83 W AC)
! Choosing Rebates vs. PBIs " $5.50/W STC is typical for 500kW+
! Financing with Leasing & PPAs ! Some economies of scale
! Interactive Examples using the OnGrid Tool ! Price Trends 2003-2008
Questions preferred at points marked: " Germany & Spain Questions?
" Please focus on Economics Questions? ! Price Declines Since 11/2008 and Predictions
! Down $1 by 5/2009; Down $1.50-$2 by 12/2009
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 9 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 10
PBI: Performance
CSI EPBB Rebate
Based Incentive
! Systems under 50kW (30kW in 2010+) ! Systems over 50kW (30kW in 2010+)
! EPBB: Expected Performance Based Buydown " Optional for systems <50kW
" Adjusted for Expected Performance: ! Paid for all kWh produced for first 5 years
# Tilt, Orientation, Shading, Location, Module " Actual performance
Temperature (due to lack of air flow)
# EPBB Calculator: www.csi-epbb.com
Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 11 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 12
5. CSI Trigger Tracker
Step
Statewide
MW in Step
EPBB Payments (per Watt)
Residential Commercial
Government
/
PBI Payments (per kWh)
Residential Commercial
Government
/
Tax Benefit Overview
Non-Profit Non-Profit
1 50 n/a n/a n/a n/a n/a n/a
2 70 $2.50 $2.50 $3.25 $0.39 $0.39 $0.50
3
4
5
100
130
160
$2.20
$1.90
$1.55
$2.20
$1.90
$1.55
$2.95
$2.65
$2.30
$0.34
$0.26
$0.22
$0.34
$0.26
$0.22
$0.46
$0.37
$0.32
! Federal Investment Tax Credit (ITC)/Grant
! Federal & State Accelerated Depreciation
6 190 $1.10 $1.10 $1.85 $0.15 $0.15 $0.26
7 215 $0.65 $0.65 $1.40 $0.09 $0.09 $0.19
8 250 $0.35 $0.35 $1.10 $0.05 $0.05 $0.15
9 285 $0.25 $0.25 $0.90 $0.03 $0.03 $0.12
! Only apply to taxable entities (not schools,
10 350 $0.20 $0.20 $0.70 $0.03 $0.03 $0.10
non-profits, gov’t, etc)
Disclaimer: I’m not a CPA or lawyer, and am not providing
tax advice. Seek qualified professional help
Trigger Tracker website: http://www.csi-trigger.com As of 10/19/09
Program Data & Statistics: http://csi.powerclerk.com
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 13 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 14
Federal Investment
Federal ITC “Grant”
Tax Credit - Commercial
- Commercial 2009-2010
! 30% Investment Tax Credit - Extended 10/2008
" Must be “placed in service” in 2006-2016 ! 30% ITC becomes (or optionally can be?) a Grant
" 10% if installed after 2016 ! Same general features and intended functionality as
“There is no feast which does not come to an end.” the ITC, but better:
- Chinese proverb ! " Paid < 60 days of “placed in service” or application
! IRS Form 3468 (Sect 48 of Internal Revenue Code) " Usable even if no tax appetite (effectively a
! Unused credit can be carried forward 20 years refundable ITC or Federal Rebate)
! Commercial ! Commercial systems only
" Including home businesses > 20% sqf - with caution ! “Placed in service” in 2009-2010 only, or
! Limited by AMT in 2008, No AMT limit 2009-2016 " Construction Initiated 2009-10, completed by 2017
! Vests at 20% per year (over 5 years) ! Treasury web application now Commercial Solar Economics & Financing
available
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 15 © 2009 OnGrid Solar, All rights reserved. - 16
Federal ITC “Grant” Limitations “Placed In Service”
! Commercial systems only SEIA “Guide to Federal Tax Incentives for Solar Energy”
" Limited to IRC Sec 48 and some Sec 45 Available at: www.seia.org!
! Pass-thru entities (partnerships, LLCs, S-corps) ! Equipment delivered and construction / installation
can use grant, as long as none of the recipients is completed!
non-taxable (and therefore disqualified) " Minor tasks like painting need not be finished !
" I.e. One disqualifies all, regardless of small % ! Taxpayer has taken legal title and control !
! Allows transfer of ownership ! Pre-operational tests demonstrate the equipment
! Recapture of Grant or ITC on permanent functions as intended !
cessation of production ! Taxpayer has licenses, permits, and PTO (permission
! May be state taxable in certain cases to operate)!
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 17 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 18
6. “Placed In Service” Depreciation - Federal
! Depreciation = tax deduction spread over time
POSTT:! ! MACRS 5-Year Accelerated Depreciation (1/2 yr conv.)
! Permits & Permission to Operate signed off! MACRS: Modified Accelerated Cost Recovery System
"
! Operation Commenced!
IRS Form 4562
"
! Equivalent of tax deducting system’s ‘basis’ over 5.5 years
! Synchronization with the Grid!
Net Value = Basis * Tax Rate
! Testing Complete! Net Value = (System ITC basis - 1/2 ITC) * Tax Rate
Net Value = System ITC basis * 85% * Tax Rate
! Turnover to the Customer!
! Regular Schedule: 20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%
! 2008-09 Schedule: 60%, 16%, 9.6%, 5.76%, 5.76%, 2.88%
" 2008-09 Gets 50% “Bonus Acceleration of Depreciation”
! Commercial (including home businesses >50% by sqf)
! Up to 20 year carry-forward
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 19 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 20
Depreciation - CA State Financial Hazards & Gotchas
! Corporate: 12 Year Straight Line method ! Federal Tax on Rebate
! Non-Corporate: MACRS 5-Year ! 1099 tax forms have been issued to
" (Sole-Proprietors, LLP, etc) recipients
! Section 136 applies only to residential
! State Depr Basis is Top Line Cost minus
Rebate & State Tax Credit
! Commercial (including home businesses)
Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 21 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 22
Rebate Tax Interactions Tax Credit & Depr. Example
! If the rebate is non-taxable, the federal ITC
Non-Taxed Rebate
$150K System Cost
is on amount after rebate -$50K Rebate
$100K Net Cost After Rebate
! If rebate is taxable, then federal ITC is on -$30K Tax Credit Value (30% of $100K)
amount before rebate -$35K Depr Value (85% of $100K * 41%)
=$35K Net Cost
! Rebates are not state taxable in CA 41% = combined net federal & state tax rate
(35% Federal, 8.84% CA State)
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 23 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 24
7. Tax Credit & Depr. Example Tax Credit & Depr. Example
Taxed Rebate Non-Taxed Rebate Taxed Rebate
$150K System Cost
$150K System Cost $150K System Cost
-$50K Rebate -$50K Rebate -$50K Rebate
+17.5K Rebate Tax ($50K * 35% Fed Tax) +17.5K Rebate Tax
$100K Net Cost After Rebate
-$45K Tax Credit Value (30% of $150K)
-$30K Tax Credit Value -$45K Tax Credit Value
-$52K Depr Value (85% of $150K * 41%) -$35K Depr Value (85K * 41%) -$52K Depr Value (127.5K * 41%)
=$20.5K Net Cost =$35K Net Cost =$20.5K Net Cost
If commercial, want rebate taxable (no choice)
Then tax credit and depreciation are on amount before rebate
"
Worth more to pay tax on rebate, then get 30% credit and
"
© 2009 OnGrid Solar, All rights reserved.
depreciation on rebate
© 2009 OnGrid Solar, All rights reserved.
Commercial Solar Economics & Financing - 25 Commercial Solar Economics & Financing - 26
Section 179 Not Available Small Business Carry-Back of NOL
! Can’t use Section 179 Deduction (in lieu ! In 2009(+?), small businesses can carry
of depreciation) and also get ITC or back Net Operating Losses up to 5 years
Treasury Grant
" $15 Million Gross Receipts limitation
" Normally only 2 year carry-back
! 2009 Economic Stimulus
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 27 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 28
Tax Benefits System Variables in More Depth
! ITC & MACRS reduce customer cost, but not ! Demand Charges
up-front ! RECs
! Not available to all customers - affected by
! Time-of-Use (TOU) Choices & Issues
AMT (before 2009 only)
! Commercial Tax Issues
" Ask about customers “tax appetite”
" More in Lease & PPA section
! Customers beware of optimistic sales claims
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 29 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 30
8. CPUC Loading Order
Least GHG, Least Total Cost Electric Rate Structures Overview
(including new power plants) 1a. Customer Awareness
via Energy Audits and
Analysis
1 - Energy Efficiency & Conservation
1b. Efficiency Rebates ! Options for Solar - Net Metering
Eg: programmable thermostats and
lighting controls, CFLs, etc.
2a. TOU & Super-Peak Rates ! 3 Customer Classes (Res, Com, Ag)
2b. Demand Charges
2 - Demand Response
& Load Control
2c. Utility Control Systems
with large critical
! 2 Types of Rate (Flat, TOU)
Greater customers
System
2d. Advanced Metering
2e. “Flex Your Power” Ads
" TOU: Time of Use
3 - Renewables
Reliability 2f. PV
3. California Solar Initiative (PV), ! Demand Charges for Commercial
& other RE programs
Overall 4 - Clean
Cost Fossil
Effectiveness
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 31 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 32
Time of Use with
Common Electric Rate Schedules
Annual Net Metering
Net Metering on an annual basis Common Commercial Rate
! Utility Common Ag Rates
Schedules
Combined with
! Time Of Use metering
CA - PG&E A1, A6, A10, E19, E20 AG1, AG4, AG5
CA - SCE GS-1, GS-2, TOU-GS-3, TOU-8 PA-1, PA-2
! Sell at high rate, Buy at low rate
CA - SDG&E A, AL-TOU, A6-TOU, DG-R PA
! 2:1 or 3:1 in customer favor
! Can reduce system size 0-30% NJ - JCPL GLP
" Reduction depends on % on-peak usage & rate schedule NJ – PSEG GP
# Commercial is usually small reduction
# Shading and orientation AZ - APS E-32
Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 33 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 34
Time Of Use
Commercial Rates (PG&E) Commercial PG&E A6 & A10
Demand Commercial "A6" & "A10" Time-of-Use Pricing Periods
Rate Size Flat Rate TOU Rate
Charge
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
A1 <20kW 13-19¢ Flat None Midnight - 6am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
40¢ Peak 6am - 8:30am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
A6 Any* None 8:30am - Noon Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak
11¢ Off-Peak Noon - 6pm Off-Peak Peak Peak Peak Peak Peak Off-Peak
A10 <500kW 10-13¢ Flat High 6pm - 9:30pm Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak
15¢ Peak 9:30pm - Midnight Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
A10 TOU <500kW High
9-11¢ Off-Peak
14¢ Peak ! Use and/or Sell On-Peak @ up to 40¢/kWh on A6
E19**/E20 >500kW High
7-8¢ Off-Peak ! More usage on peak, less benefit from TOU
*If not required to be on another rate schedule
**Required schedule if measured demand is >500kW Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 35 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 36
9. SCE Commercial
Commercial Rates (SCE) Time Of Use
SCE Commercial Time-of-Use Pricing Periods
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
11pm - 5am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
5am - 8am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
8am - Noon Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak
Noon - 6pm Off-Peak Peak Peak Peak Peak Peak Off-Peak
6pm - 11pm Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak
! Use and/or Sell On-Peak @ 24-32¢/kWh on Option R
" Part-Peak @ 14-19¢/kWh
! More usage on peak, less benefit from TOU
Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 37 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 38
Electric Rate Structures Overview Demand Charges
! Usually applies only to Large users
Commercial and Agricultural
! Options for Solar - Net Metering "
! On a per kW basis (load, not usage)
! 3 Customer Classes (Res, Com, Ag) " Size of the wire, power plant for peak usage
! 2 Types of Rate (Flat, TOU)
" TOU: Time of Use
! Demand Charges for Commercial
! Based on highest 15-30 minute peak load average any
time during the last 1-12 billing months
Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 39 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 40
Demand Profile vs.
Reducing Demand Charges
Solar Production
! Difficult for solar to offset demand
TYPICAL " Clouds, spikes in usage not during solar hours,
BUILDING
DEMAND inverters tripping offline
DEMAND
&
! Add control systems ~$30K+
IDEAL
PRODUCTION
SOLAR ! Some rates have no/low demand charges
PRODUCTION
" And sometimes high peak (sell) rates
7am 12noon 5pm " Benefits depend on Size: Usage ratio and demand &
HOUR
usage patterns with respect to rate schedule hours
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 41 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 42
10. Reducing Demand Charges RECs, Green Tags, TRCs
! RECs = Renewable Energy Credits
! TRC = Tradable Renewable Certificates
! Green Tags = RECs = TRCs = S-RECs
! What are these?
" The green value part of a solar kWh
" The Legal Rights to Green-ness Electricity (kWh)
Generating Plant
(kWh)
Green Tags (kWh)
Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 43 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 44
REC Value CA REC Value
! RECs have value to other consumers ! REC sale value can be added to other value
generated by the system to calculate payback, etc.
" Those who can’t get solar directly " Not included in any examples here
" Utilities who need it to get into " Likely 1¢ to 5¢/kWh in California - same as Wind
compliance with emissions " Must give up “Green Attributes” & claims
requirements. ! Challenges in aggregating from small systems
! The best performing systems produce the most
! Value ranges from 1¢ to 68¢/kWh
RECs
" Depends on location, type & term ! Double counting in sales
Questions?
" Depends on state mandate for S-RECs
! Green-e Certified RECs: www.green-e.org
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 45 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 46
NJ REC Value Commercial Cost / Value Overview
- System Cost
! REC sale value can be added to other value + Rebate / PBI
generated by the system to calculate payback, etc. - Tax on Rebate / PBI
" 15 year producible life + 30% Fed Tax Credit
" Assumption in examples at 48¢ for 1 year, 30¢ for + ~41% Depreciation * 85%
12 more years, and 10¢ for the final 2 years + Savings & Inflation
! Challenges in aggregating from small systems - Lost Electric Bill Tax Deduction
" Estimated/calculated RECs used - Maintenance & Inflation
- Inverter Replacement Cost
! The best performing systems produce the most
+ REC Value, Green Marketing, Morale
RECs ------------------------------------------
Questions? = Net Cost Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 47 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 48
11. Financial Analysis
Agenda
Methods & Tests Overview
! Commercial Solar Financial Analysis ! Simple Payback: In reasonable time
" Commercial Incentive, Tax, & Tariff Issues ! Total Lifecycle Cash Flow
" Four Financial Analysis Methods & Examples " Gives back lots more than cost over time
! Choosing Rebates vs. PBIs ! Rate of Return analysis: 6-15+% returns
! Financing with Leasing & PPAs ! Cash Flow when financing: Cash Positive
! Interactive Examples using the OnGrid Tool ! Increase in Appraisal Valuation
" Appraises for more than it cost
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 49 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 50
General Commercial Utility Specific
Variables & Assumptions Commercial &
! 35% federal tax bracket, corresponding state tax bracket Muni/Non-Profit Assumptions
! Facing south, 14° pitch, simple composition shingle roof by Staring/Ending Rate
AC kWh
~2008 Cost per Schedule
full service provider, no complications Utility Insolation Production per
rated kW per year
rated Watt Peak%/ PP%
Incentives
Demand
! Slightly conservative real system performance, no shade A1 / A6
CA - PG&E San Francisco 1540 / CEC kW $1.10/W Rebate
47%/35%
! Final Net Cost = total installed system costs - Rebate (if any) - GS2B / GS2A
10kW: $8.50 CEC
CA - SCE Los Angeles 1590 / CEC kW 48%/43% $1.55/W Rebate
2009 Fed 30% ITC + $800 Permit + $0 Utility Fee 25kW: $8.25 CEC
50kW: $8.00 CEC
2x Min Demand
AL-TOU / DG-R
! System maintenance cost is 0.25% of gross system cost per CA - SDG&E San Diego 1700 / CEC kW 39%/51% $1.55/W Rebate
2x Min Demand
year, adjusted for inflation SRECs: 48¢/1yr,
NJ - JCPL Newark 1100 / STC kW 50kW: $6.50 STC GP 30¢/12yrs, 10¢/12yrs
! 5.0% electric inflation (2.2% in CO) $1/W Rebate
! Module degradation: 0.5% per year
! Inverter replacement costing $700/kW occurs in year 15
! Solar only - no Energy Efficiency included
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 51 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 52
General Gov’t/Non-Profit
Variables & Assumptions
! Facing south, 14° pitch, simple composition shingle roof by
full service provider, no complications
! Slightly conservative real system performance, no shade
Final Net Cost = total installed system costs - Rebate (if
Watt’$ the Payback?
!
any) + $800 Permit + $0 Utility Fee
! System maintenance cost is 0.25% of gross system cost per
year, adjusted for inflation
! 5.0% electric inflation (except CO is 2.2%)
! Module degradation: 0.5% per year
! Inverter replacement costing $700/kW occurs in year 15
! Solar only - no Energy Efficiency included
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 53 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 54
12. General Commercial
Variables & Assumptions
! 35% federal tax bracket, corresponding state tax bracket
! Facing south, 14° pitch, simple composition shingle roof by
full service provider, no complications
! Slightly conservative real system performance, no shade
! Final Net Cost = total installed system costs - Rebate (if any) -
2009 Fed 30% ITC + $800 Permit + $0 Utility Fee
! System maintenance cost is 0.25% of gross system cost per
year, adjusted for inflation
! 5.0% electric inflation (2.2% in CO)
! Module degradation: 0.5% per year
! Inverter replacement costing $700/kW occurs in year 15
! Solar only - no Energy Efficiency included
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 51
Utility Specific
Commercial &
Muni/Non-Profit Assumptions
Staring/Ending Rate
AC kWh
~2008 Cost per Schedule
Utility Insolation Production per Incentives
rated Watt Peak%/ PP%
rated kW per year
Demand
A1 / A6
CA - PG&E San Francisco 1540 / CEC kW $1.10/W Rebate
47%/35%
GS2B / GS2A
10kW: $8.50 CEC
CA - SCE Los Angeles 1590 / CEC kW 48%/43% $1.55/W Rebate
25kW: $8.25 CEC
2x Min Demand
50kW: $8.00 CEC
AL-TOU / DG-R
CA - SDG&E San Diego 1700 / CEC kW 39%/51% $1.55/W Rebate
2x Min Demand
SRECs: 48¢/1yr,
NJ - JCPL Newark 1100 / STC kW 50kW: $6.50 STC GP 30¢/12yrs, 10¢/12yrs
$1/W Rebate
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 52
13. Commercial Total
Total Lifecycle Payback Lifecycle Payback
kWh PV System Final Net Cost w/ Cumulative Savings Lifecycle Years
Pre-Solar
Utility Usage per Size & Tax Benefits & Over First 25 Years Payback To
Bill
Month Rating Rebate (including inflation) Ratio Payback
PG&E $346 2000 10 kW CEC $23K $68K 2.9x 11
PG&E $853 5000 25 kW CEC $56K $172K 3.1x 10.6
PG&E $1,696 10000 50 kW CEC $107K $344K 3.2x 10.3
SCE $333 2000 10 kW CEC $20K $27K 1.3x 21.1
SCE $695 5000 25 kW CEC $48K $75K 1.5x 19.1
SCE $1,297 10000 50 kW CEC $92K $156K 1.7x 18.2
Total Savings SDG&E $371 2000 10 kW CEC $20K $55K 2.7x 11.6
SDG&E $840 5000 25 kW CEC $48K $137K 2.8x 11.2
Initial Cost SDG&E $1,621 10000 50 kW CEC $92K $274K 3.0x 10.9
NJ - JCPL $692 10000 50 kW STC $91K $116K 1.3x 8.1
NC - Progress $800 10000 50 kW STC $47K $88K 1.9x 17.9
CT - UI $2,309 10000 50 kW PTC $133K $310K 2.3x 13.1
AZ - APS $906 10000 50 kW STC $60K $127K 2.1x 16.4
! Total Savings (whole area) is much larger than Initial Cost HI - HECO $2,144 10000 50 kW STC $47K $368K 7.9x 5.1
CO - Xcel $805 10000 50 kW STC $109K $57K 0.5x 40.2
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 55 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 56
Gov’t/Non-Profit
Total Lifecycle Payback Total Lifecycle Payback
PV System Final Net Cost w/ Cumulative Savings Lifecycle
Gov’t/Non-Profit vs. Commercial
Pre-Solar kWh Usage
Utility Size & Tax Benefits & Over First 25 Years Payback
Bill per Month
Rating Rebate (including inflation) Ratio
PG&E $346 2000 10 kW CEC $68K $122K 1.8x
PG&E $853 5000 25 kW CEC $162K $306K 1.9x
PG&E $1,696 10000 50 kW CEC $311K $613K 2.0x ! Differerences between Gov’t/Non-Profit
SCE $333 2000 10 kW CEC $63K $48K 0.8x
SCE $695 5000 25 kW CEC $150K $134K 0.9x & Commercial? - Taxes!
SCE $1,297 10000 50 kW CEC $285K $278K 1.0x
SDG&E $371 2000 10 kW CEC $63K $97K 1.6x ! Tax deduction for electricity
SDG&E $840 5000 25 kW CEC $150K $244K 1.6x
SDG&E $1,621 10000 50 kW CEC $285K $488K 1.7x ! Commercial tax deduction lowers the
NJ - JCPL
NC - Progress
$692
$800
10000
10000
50 kW STC
50 kW STC
$301K
$351K
$318K
$150K
1.1x
0.4x
value of a kWh saved by solar
CT - UI $2,309 10000 50 kW PTC $336K $539K 1.6x
! Commercial gets tax credit & depreciation
AZ - APS $906 10000 50 kW STC $276K $218K 0.8x
HI - HECO $2,144 10000 50 kW STC $351K $628K 1.8x
CO - Xcel $805 10000 50 kW STC $351K $95K 0.3x Questions?
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 57 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 58
IRR Timeline
Year X
Year: Year 0 Year 1 Year 2 Year 3 … …
(12-15-20)
System
-System Cost
Cost
+Incentives Rebate PBI 1 PBI 2 PBI 3 … PBI X …
+Bill Savings Savings 1 Savings 2 Savings 3 … Savings X …
Maint. X
-Maintenance Maint. 1 Maint. 2 Maint. 3 … …
Watt’$ the Rate %f Return?
Inverter
+Fed Tax Credit Fed ITC
+State Tax Credit State ITC
-Fed Cost of Fed Cost
State Tax Credit State ITC
+Fed Depr. Fed Depr Fed Depr Fed Depr …
+State Depr. State Depr State Depr State Depr …
- Fed Cost of Fed Cost of Fed Cost of
…
State Depr State Depr State Depr
=Net Net 0 Net 1 Net 2 Net 3 … Net X …
! IRR is function of Net0 : Net25 line
! Inverter replacement: $700/kW in yr 12-20
! PBI, Savings, Maintenance adjust for inflation and/or module degradation
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 59 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 60
14. Commercial Total
Lifecycle Payback
kWh PV System Final Net Cost w/ Cumulative Savings Lifecycle Years
Pre-Solar
Utility Usage per Size & Tax Benefits & Over First 25 Years Payback To
Bill
Month Rating Rebate (including inflation) Ratio Payback
PG&E $346 2000 10 kW CEC $23K $68K 2.9x 11
PG&E $853 5000 25 kW CEC $56K $172K 3.1x 10.6
PG&E $1,696 10000 50 kW CEC $107K $344K 3.2x 10.3
SCE $333 2000 10 kW CEC $20K $27K 1.3x 21.1
SCE $695 5000 25 kW CEC $48K $75K 1.5x 19.1
SCE $1,297 10000 50 kW CEC $92K $156K 1.7x 18.2
SDG&E $371 2000 10 kW CEC $20K $55K 2.7x 11.6
SDG&E $840 5000 25 kW CEC $48K $137K 2.8x 11.2
SDG&E $1,621 10000 50 kW CEC $92K $274K 3.0x 10.9
NJ - JCPL $692 10000 50 kW STC $91K $116K 1.3x 8.1
NC - Progress $800 10000 50 kW STC $47K $88K 1.9x 17.9
CT - UI $2,309 10000 50 kW PTC $133K $310K 2.3x 13.1
AZ - APS $906 10000 50 kW STC $60K $127K 2.1x 16.4
HI - HECO $2,144 10000 50 kW STC $47K $368K 7.9x 5.1
CO - Xcel $805 10000 50 kW STC $109K $57K 0.5x 40.2
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 56
Gov’t/Non-Profit
Total Lifecycle Payback
PV System Final Net Cost w/ Cumulative Savings Lifecycle
Pre-Solar kWh Usage
Utility Size & Tax Benefits & Over First 25 Years Payback
Bill per Month
Rating Rebate (including inflation) Ratio
PG&E $346 2000 10 kW CEC $68K $122K 1.8x
PG&E $853 5000 25 kW CEC $162K $306K 1.9x
PG&E $1,696 10000 50 kW CEC $311K $613K 2.0x
SCE $333 2000 10 kW CEC $63K $48K 0.8x
SCE $695 5000 25 kW CEC $150K $134K 0.9x
SCE $1,297 10000 50 kW CEC $285K $278K 1.0x
SDG&E $371 2000 10 kW CEC $63K $97K 1.6x
SDG&E $840 5000 25 kW CEC $150K $244K 1.6x
SDG&E $1,621 10000 50 kW CEC $285K $488K 1.7x
NJ - JCPL $692 10000 50 kW STC $301K $318K 1.1x
NC - Progress $800 10000 50 kW STC $351K $150K 0.4x
CT - UI $2,309 10000 50 kW PTC $336K $539K 1.6x
AZ - APS $906 10000 50 kW STC $276K $218K 0.8x
HI - HECO $2,144 10000 50 kW STC $351K $628K 1.8x
CO - Xcel $805 10000 50 kW STC $351K $95K 0.3x
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 57
15. Commercial Analysis Commercially Attractive?
! Ideal commercial customers can see after- ! IRR must exceed a hurdle rate
tax IRRs in the 3% to 8% range " > “Risk Free Rate” + ~1-2%
= Risk Free Rate + Sum of Risks (more later)
" Comparable to other business investments # Source: Photon International, Aug 2007, p114
" Plus has green marketing and morale ! Current “Risk Free” interest rates:
benefits " LIBOR = 1.25% As of October 2009
" 10yr = 3.5%, 30yr = 4.4% As of 10/29/2009
" Depends heavily on system cost
! ! Commercially Attractive >= 6-7%?
! Must properly factor all benefits and costs ! PPA & Lease investors were getting 6-8%
" More on this later, due to recent financial market
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 61 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 62
Complete Commercial Analysis Commercial Rates of Return
PV System After-Tax
Pre-Solar kWh Usage System Gross Final Net Cost w/ Tax
Utility Size & Annual
Bill per Month Cost Benefits & Rebate
! Proper commercial analysis is after-tax PG&E $346 2000
Rating
10 kW CEC $85K $23K
Return
7.4%
! A. Extra incentives: PG&E $853 5000 25 kW CEC $206K $56K 7.8%
PG&E $1,696 10000 50 kW CEC $399K $107K 8.2%
" Federal Tax Credit & Depreciation SCE $333 2000 10 kW CEC $85K $20K 1.8%
! B. Loss of electric expense tax deduction SCE
SCE
$695
$1,297
5000
10000
25 kW CEC
50 kW CEC
$206K
$399K
$48K
$92K
2.8%
3.4%
! A & B approximately offset each other SDG&E $371 2000 10 kW CEC $85K $20K 6.6%
SDG&E $840 5000 25 kW CEC $206K $48K 7.0%
" Net results are comparable to residential, but SDG&E $1,621 10000 50 kW CEC $399K $92K 7.4%
are “after tax” values, so sometimes appear NJ - JCPL $692 10000 50 kW STC $350K $91K 6.9%
NC - Progress $800 10000 50 kW STC $350K $47K 3.5%
smaller. CT - UI $2,309 10000 50 kW PTC $375K $133K 5.9%
AZ - APS $906 10000 50 kW STC $350K $60K 4.6%
HI - HECO $2,144 10000 50 kW STC $350K $47K 14.4%
Questions? CO - Xcel $805 10000 50 kW STC $350K $109K -3.7%
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 63 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 64
Gov’t/Non-Profit Analysis Gov’t/Non-Profit Rates of Return
PV System Pre-Tax
Pre-Solar kWh Usage System Gross Final Net Cost w/ Tax
Utility Size & Annual
Bill per Month Cost Benefits & Rebate
! Ideal government & non-profit customers PG&E $346 2000
Rating
10 kW CEC $85K $68K
Return
4.2%
can see non-tax IRRs in 1% to 5% PG&E $853 5000 25 kW CEC $206K $162K 4.6%
PG&E $1,696 10000 50 kW CEC $399K $311K 5.0%
" Comparable to funding costs (muni bonds) SCE $333 2000 10 kW CEC $85K $63K -1.7%
SCE $695 5000 25 kW CEC $206K $150K -0.7%
" Long term thinking, modest returns OK SCE $1,297 10000 50 kW CEC $399K $285K -0.2%
SDG&E $371 2000 10 kW CEC $85K $63K 3.1%
" Has green societal and moral benefits SDG&E $840 5000 25 kW CEC $206K $150K 3.5%
SDG&E $1,621 10000 50 kW CEC $399K $285K 3.8%
! Simpler analysis of benefits and costs NJ - JCPL $692 10000 50 kW STC $350K $301K 0.5%
NC - Progress $800 10000 50 kW STC $350K $351K #NUM!
CT - UI $2,309 10000 50 kW PTC $375K $336K 3.3%
AZ - APS $906 10000 50 kW STC $350K $276K -1.5%
HI - HECO $2,144 10000 50 kW STC $350K $351K 4.2%
CO - Xcel $805 10000 50 kW STC $350K $351K #NUM!
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 65 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 66