In early 2015, CL&P and United Illuminating (UI) will formally issue requests to bid for the 2015 Connecticut Zero-Emission Renewable Energy Credit (ZREC) solar incentive program. For Connecticut businesses with large under-utilized roof or land areas, the ZREC program provides a lucrative way for companies to ‘go green’.
By way of background, a ZREC represents the renewable attributes of one Megawatt-hour (MWh) of solar generated electricity and can be more commonly referred to as ‘carbon credits’. Connecticut requires its investor-owned utilities to buy a certain number of ZRECs annually in order to meet the state’s Renewable Portfolio Standard requirements. The purchase of these ZRECs in the form of a 15 year contract provides secure and highly visible and predictable revenue to businesses and property owners with solar energy systems.
Whether your business is interested in owning a solar PV system, leasing one, or simply purchasing low-cost solar energy with no capital outlay, EnterSolar will clearly demonstrate how Solar will boost your bottom line.
We hear this question all the time, from our clients and potential clients, from our solar industry partners, even from our friends and family. And with the upcoming 2017 stepdown in the 30% Investment Tax Credit for solar projects – the primary federal incentive for solar – the question of solar’s need for continued subsidies is front and center.
As advocates of free markets (and free trade), we tend to have a visceral aversion to “subsidies” of all kinds. However, this question of when solar subsidies should be eliminated in the U.S. is often predicated on a fundamental – and false – premise, namely that that the retail cost of electricity reflects a pure and appropriate market-driven price.
The fact is, the “market” cost of a delivered kWh of electricity derived from fossil fuels is highly subsidized (and has been for decades) – both in terms of direct subsidies (i.e. advantageous tax treatments for the coal, oil & gas industries that are permanently embedded in the U.S. Tax Code) as well as “externalities” (fossil fuel costs that are not reflected in the purchase price of electricity, such as pollution and adverse public health impacts).
According to a 2013 study published by researchers at the EPA, properly accounting for just the health impact alone of fossil fuel-derived electricity would add an average of $0.14 to $0.35 per kilowatt-hour to the average U.S. retail cost of electricity. Note that this estimate reflects only the cost of health impacts, and excludes all other externalities such as climate change.
We agree completely with the sentiment stated in the Economist’s December 2014 Technology Quarterly that “the world would no doubt be a better place if the externalities imposed by fossil fuels were properly accounted for in the price of electricity”. We welcome the concept of a “level playing field” – one in which all relevant costs are properly accounted for – and the value of clean, quiet, sun-powered renewable electricity can be accurately measured and compared with its brown power competition. But until that day comes, we will argue aggressively for appropriate and prudent solar incentives that help re-balance the uneven playing field.
For companies with large and geographically diverse real estate holdings, a properly executed Solar Portfolio Assessment provides a comprehensive analysis of the project-level solar feasibility across each individual facility. When solar project economics are favorable, companies can capitalize in several different ways, such as entering into long-term low-cost solar electricity purchase agreements, or by owning solar systems directly and earning attractive ROI.
For better or worse, the underlying economics of individual solar projects in the U.S. varies dramatically depending on the location of the potential project site. A major trap that we see a lot of companies fall into is the assumption that solar project economics can be readily compared across geographies. We meet a lot of business managers who tell us, “we looked at solar, and just couldn’t get it to pencil”. And while it is true that solar project economics are not yet economic in many states, they are quite compelling in other states. It is all but impossible to make broad generalizations about solar project economics, and this explains why a detailed and comprehensive portfolio analysis is so important when assessing solar across broad geographies.
A well-developed Solar Project Portfolio Assessment will incorporate the relevant site-specific information for all possible project location candidates, such as the facility size, available roof, parking and/or land areas, the onsite electricity load profile, and other relevant characteristics. Once the physical viability (or lack thereof) has been determined, the Assessment should then determine the potential economic viability.
The key variables that drive project economics include the local environmental conditions (i.e. solar resources and temperature ranges), the retail cost of electricity, the availability of state/local solar incentives, and the all-in cost of the proposed system installation. It is important to note that the economic viability is a dynamic analysis that frequently changes over time (and often quite quickly) due to factors such as new incentive programs being launched or dramatic swings in the underlying retail cost of electricity,
When done correctly, a Solar Project Portfolio Assessment allows large businesses to confidently make fact-based decisions concerning the economic feasibility of incorporating solar energy into their energy procurement plan.