There is only one week left for potential New Jersey solar projects to submit applications into Round 2 of the PSEG Solar Loan Program prior to the Tuesday March 11, 2014 application deadline. We have long been big supporters of this program, which – despite its complexity – provides a terrific value proposition for New Jersey businesses that are considering going solar.
PSEG’s Solar Loan Program provides solar system owners with an innovative form of financing that can fund a significant portion of the upfront cost of a commercial solar system. The Program also provides system owners with a fixed price for all SREC’s generated, eliminating the key risk of SREC price volatility, and providing unparalleled project cash flow certainty in tandem with highly attractive ROI.
Having said that, in our view, the PSEG Solar Loan has been frequently misunderstood. In many ways, the label “Solar Loan” is a misnomer, and the high implicit “interest rate” of 11.2% is often a turn-off for prospective participants (i.e. your company’s CFO says “we borrow at 3%, why on earth would we ever pay 11%??!!”). The important thing to keep in mind is that this “loan” is first and foremost a mechanism that allows the owners of a solar project so sell 10-years of future SREC production to PSEG at the beginning of the project, with very competitive SREC pricing. In our opinion, the high implicit rate is a small price to pay for the SREC pricing certainty that PSEG Solar Loan participants enjoy (and is something that is simply not available outside of this program).
Since the 2009 launch of the PSEG Solar Loan I Program, EnterSolar has helped numerous NJ businesses to take advantage of the PSEG Solar Loan Program, under both “direct ownership” scenarios and “power purchase agreement” (“PPA”) scenarios. We strive to provide our corporate clients with the most objective (and timely) guidance when it comes to solar power solutions, and the solar incentives that allow commercial solar project economics to “pencil out”. For NJ businesses located within PSEG’s electric service territory, the time to explore solar (again) is now!
Due to the overwhelming success of the first Massachusetts ‘RPS Solar Carve-Out’ Program, a second phase of the program known as ‘SREC II’ is expected to be formally launched later this quarter. For Massachusetts businesses with large under-utilized roof or land areas, the SREC II program can provide a lucrative way for companies to ‘go green’.
By way of background, an SREC is a Solar Renewable Energy Certificate and it represents the renewable attributes of one Megawatt-hour (MWh) of solar generated electricity. Massachusetts requires its investor owned utilities to buy a certain number of SRECs annually in order to meet the state’s Renewable Portfolio Standard requirements. The purchase of these SRECs provides additional revenue to businesses and property owners with solar energy systems. When packaged into multi-year contracts (also known as strips), SRECs can provide highly visible and predictable cash flow streams that can be readily financed.
Key Design Features of the SREC-II Program are:
- The SREC financial incentive differentiates between various market sectors and is particularly attractive for roof mounted systems on large commercial buildings (i.e. 30,000 square feet or larger).
- The SREC incentive is reduced in value over time, providing the best benefits to those businesses that enter the SREC Program early.
- The SREC revenue combined with attractive Federal tax credits and depreciation, plus new and existing State and Local Incentives, make solar a very compelling investment for Massachusetts businesses and property owners who also want to demonstrate leadership and position their companies at the forefront of their Industry.
Whether your business is interested in owning a solar PV system, leasing one, or simply purchasing low-cost solar energy with no capital outlay as part of a ‘Power Purchase Agreement’ (PPA), the revenue provided by the new SREC-II program is a key economic driver that makes going solar a compelling business case.
There are only 15 business days remaining for potential Long Island solar projects to submit applications into the PSEG Long Island (aka the utility formerly known as LIPA) Solar “Feed-in-Tariff” II (FIT II) Program prior to the January 13, 2014 application deadline. The FIT II Program is a central element of Governor Cuomo’s “NY-Sun” Initiative, and was designed to dramatically increase the deployment of distributed solar generating systems on Long Island.
As we have detailed in previous blog posts, the FIT II solar incentive program can provide significant benefits to Long-Island businesses and commercial real-estate owners, either through the direct ownership of a solar system or through the leasing of unused roof space or land to allow for the installation of a solar system.
Direct ownership of a solar system can provide the biggest “bang for your buck” since it allows businesses to fully capture all of the project economics and available solar incentives, but entities must have significant taxable income to effectively utilize these solar incentives. Leasing available roof or land areas to serve as host sites for solar projects can be an attractive alternative where capital is a constraint or when businesses are simply looking to generate incremental revenue streams (with no corresponding investment requirements).
Although the clock is winding down on the FIT II Program, there is still time to act! Please contact the EnterSolar team if your business has any interest in learning more about the FIT II Program before its too late. This may be the last chance for LI businesses to “go solar” on such attractive terms.