Schools across the United States are searching for solar financing to install a solar array on their campus in order to simultaneously reduce utility costs and their carbon footprint.
According to “the Journal”, a report released in 2012 by Environment California counted 200 solar-powered K-12 schools, with plans for 60 more in 2013. Last year, Hawaii announced that it would put solar panels on all of its public schools by 2017. According to research from Greentech Media, California schools that have gone solar will save an estimated $1.5 billion in electricity costs over the next 30 years. More than 137 megawatts (MW) of solar power capacity has been installed on college campuses, which is enough electricity to maintain 400,000 homes. In 2010, college campus installations made up 5.4% of the overall installed solar in the U.S., a sector of the solar market that was valued at $300 million. According to research done at the Association for the Advancement of Sustainability in Higher Education (AASHE), K-12 schools around the country spend more than $6 billion a year on energy. The California Department of Education estimates that California schools spend $132 per student each year on energy costs, which is more than the cost of school supplies and books per student.
Financing your school’s Solar Array
Due to the high upfront cost of solar, the federal government encourages solar energy development through the use of tax credits from the solar Investment Tax Credit (ITC) fund. Unfortunately, non-taxable entities like schools are unable to take direct advantage of these incentives. In order to take advantage of the tax credits, schools are partnering with solar developers that will develop, own, and maintain the system in exchange for electricity payments made under a Power Purchase Agreement (PPA) or solar lease. Many schools find third-party ownership a feasible and simple way to install solar on their facilities because the solar installation is provided as a service without the up-front cost of owning the installation. With a Power Purchase Agreement, schools tend to pay less per kW, saving about 10% on their utility bills. After 15-20 years, the school has the option to purchase the system at fair market value or have it removed at the developer’s expense.
College Campuses utilize solar to reduce their carbon footprints
Currently, statistics show that Arizona has the most solar installations, with 117 arrays providing 50MW of solar electric capacity to college campuses. Arizona State University is ranked number one for the top campus for total installed capacity with 20MW. The state of California is in second place with 82 solar array installations spread across numerous campuses. The AASHE accredits the increase in solar installations to the variety of solar financing mechanisms, such as power purchase agreements and solar leasing, as well as significant decline in the price of solar modules.
Benefits of the Solar Array in Action
A community college in New Jersey with a solar PPA will not need to pay any upfront costs for their solar array. For the next 15 years, the college will be paying 8¢/kW compared to the 9.3¢/kW they were paying for electricity through their utility provider. The college will save $160,000 during the first year alone, with projections reaching as high as $1.6 million by the end of the 15 year contract.
DOE Report shows the significance of declining prices in solar
The Department of Energy (DOE) and the Lawrence Berkeley National Lab (LBNL) recently released a report on the declining price of solar in relation to the DOE’s SunShot Initiative. The U.S. Department of Energy (DOE)’s SunShot Initiative, aims to reduce the cost of photovoltaic (PV)-generated electricity by 75%, between 2010 and 2020.
The report focused on the installed price of solar arrays and analyzing the historical pricing trends. In this report, the writers consider the “installed price” of a photovoltaic (PV) array to be the up-front cost of the system for the owner before incentives are deducted. The analysis is based on project-level data from more than 200,000 residential, commercial, and utility-scale PV systems in the United States. The sample is a representation of 72% of all grid-connected PV capacity installed in the United States through 2012.
The Numbers don’t lie
Installed prices continued their steep decline in 2012, falling year-over-year by 14% for systems less than 10kW, 13% for systems 10-100kW, and 6% or systems greater than 100kW. Among projects installed in 2012, median installed prices were $5.3/W for systems less than 10kW, $4.9/W for systems 10-100kW, and $4.6/W for systems greater than 100kW. All these findings come from then “Tracking the Sun” report researched and complied by the Lawrence Berkeley National Laboratory (LBNL).
Partial data for the first six months of 2013 indicate that installed solar prices have continued to drop, with the average installed price of projects funded through the California Solar Initiative (CSI) declining by an additional 10-15%. Energy experts feel that in order to drive the cost of solar down, reducing the “soft costs” involved with installing a solar system will be significant in reaching grid parity.
Despite these steep declines, U.S. prices are still significantly higher than those of some international markets according to the “Tracking the Sun” report. In Germany, Italy and Australia, the price of small PV systems installed in 2012 was roughly 40% lower than prices in the United States. A majority of the 40% price difference for the U.S. can be attributed to the soft cost prices of PV systems. In addition, the U.S., in comparison to countries like Germany and Australia, has a much more divided regulatory system, which leads to different states and jurisdictions having different laws, policies and permitting requirements. If the cost of solar continues to drop by 7% annually, it will take the U.S. 13 years to match Germany’s current cost of solar.
Therefore, in order to help solar generated power reach grid parity without subsidies, the soft costs involved with installing a solar array need to decrease. The soft costs of a solar array include the following: permitting, inspection, interconnection, financing, and customer acquisition. Currently, in the United States, according to the National Renewable Energy Laboratory (NREL), soft costs account for about half of the total installed price of a PV solar system. If the U.S. solar industry were to eliminate the need for permitting and commissioning, it could see a cost reduction of about $0.23 per watt according to the NREL.
Community Solar was introduced to allow individuals and businesses within a community to participate in solar PPA’s. Previously, these individuals and businesses could not install/host solar installations, so solar was not a viable solution. With community solar, any individual or entity that qualifies can purchase solar power from a system installed locally.
There is a growth opportunity for community-based solar in cities where many of its’ people live in multi-unit buildings or do not own the building they work or live in. Community solar projects have the ability to reduce the cost of PV systems on a per-watt basis while allowing more people to receive the benefits of the sun’s energy. It also allows for multiple individuals or businesses to invest in a larger-scale PV system. Community solar can give non-profits, commercial and municipals the access to solar that they otherwise wouldn’t be able to have. According to the National Renewable Energy Laboratory (NREL), only about 25% of businesses and homes have the ability to install a solar array on their rooftop.
The Benefits of community solar:
Some of the benefits of community solar, especially for commercial buildings include the following:
• Systems can be installed in optimal locations
• Achieve lower cost/Watt through economies of scale
• Virtual net metering
• Group billing, and joint ownership
States begin to adopt community solar legislation
Colorado was the first state in 2010 to create a pilot program for community solar, called the Community Solar Gardens Act. This act was created to give residents and businesses access to the same rebates and incentives on-site solar has, through virtual net metering.
California, following in the footsteps of Colorado, hopes to pass SB 43 in order to launch a 500 megawatt (MW) pilot program for 2014.
SB 43 will benefit scores of Californians who are currently unable to install renewables on their property — residents who rent homes and apartments, business owners who lease office space — as well as remove the obstacles that prevent schools and local governments from investing in off-site renewable energy.
In addition, the community solar act could help California reach the outlined goals in the Renewable Portfolio Standard, create more jobs and improve a community’s access to renewable energy.
Currently in the United States there are twelve states, referred to as the “Dazzling Dozen” in a report by Environment America, that are paving the way to a more renewable country.
The 12 states that are a part of Environment America’s “Dazzling Dozen” include the following: Arizona, California, Colorado, Delaware, Hawaii, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, North Carolina and Vermont. With California, Arizona, New Mexico, Nevada, New Jersey and Hawaii currently in the lead for solar capacity. Due to public policies and incentives these states are setting an example to the other 38 states in the U.S. on how harnessing power through the sun’s energy is possible. These states have set up policies allowing homeowners, businesses and utilities to utilize the sun’s energy by installing a solar array on their rooftop. According to Environment America’s recent report, the “Dazzling Dozen” account for only 28 percent of the U.S. population, but 85 percent of the nation’s installed solar electricity capacity.
With the declining panel prices and advancements in technology, utilizing the sun’s energy is becoming one of the preferred types of energy sources in the U.S. Therefore, the U.S. has more than three times as much solar photovoltaic (PV) capacity today, as in 2010, and more than 10 times as much as in 2007. According to research compiled by the Solar Energy Industries Association (SEIA), in the first three months of 2013, solar power accounted for nearly half of the new electricity generating capacity in the United States.
With the “Dazzling Dozen” leading the way by example, the U.S. solar industry hopes other states will follow, allowing the U.S. to receive 10 percent of their energy from solar by 2030. Solar industry leaders and experts feel this is an optimal time to invest in solar power due to the declining price of the modules and advancements in panel efficiency. Not only will solar power save energy consumers money in the long run, but it also produces 91% less emissions and pollution than gas-fired power plants.
According to Environment American’s report, “More than half of the 50 states have the technical potential to generate more than 20 percent of the electricity they currently use from solar panels on rooftops. In the western states of California, Arizona, Nevada and Colorado, the share of electricity that could be replaced with rooftop solar power exceeds 30 percent”
Research done at the National Renewable Energy Laboratory (NREL) estimated that rooftop PV systems could generate more than 20 percent of the electricity used in the United States each year. In addition, researchers from the Environmental Science & Technology publication found that solar energy could supply one-third of all electricity in the Western US by 2050, while reducing emissions 80% below levels in 1990. A team at Berkley University of California found using a virtual simulation of western America’s electrical grid that if the U.S. reaches the goals set out in the Sunshot initiative, the western U.S. could save $20 billion by 2050.
The Investment Tax Credit (ITC) is a 30 percent tax credit for solar systems on residential and commercial properties that was implemented by the US government in 2006. However, after 2016, the tax credit will be brought down to a mere 10 percent. With rapidly declining solar panel prices, the ITC drop should not impact the viability of future solar financing solutions for solar installations.
The 2008 extension of the residential and commercial solar ITC has helped annual solar installation growth by over 1,600 percent since its implementation in 2006, which is a compound annual growth rate of 76 percent. The government’s goal of extending the ITC until 2016 was to help create a solar market that was price competitive and self -sustaining, with the hopes of lowering costs for consumers. The ITC has been a part in the creation of over 625 manufacturing facilities that produce solar components across 48 states.
The US Solar Market continues to grow
According to GTM Research’s most recent Solar Market Insight report, around 90 percent of the nearly 5,000 MWs of solar capacity installed in the US were built after the ITC was increased to 30 percent during the Bush administration.
The US just recently celebrated reaching 10 gigawatts (GW) of installed solar capacity, with the predictions of reaching 18 GW by 2014.The most recently available Treasury information shows that under the ITC program, there were 44,052 solar projects awarded $2.76 billion.
Surviving the recent set back
Although the ITC program suffered an 8.7% decrease due to US sequestration spending cuts, the US solar industry has continued to grow. Despite the decrease, the US solar market has been able to thrive in part to third-party solar financing options. At SCF, we offer a variety of solar financing solutions to commercial, municipal or non-profit entities looking to install a solar array on their property.