D.C.’s Solar Power Industry Tries to Grow

July 30th, 2010

From the Washington City Paper
by Lydia DePillis


Solar is still a fraction of a percent of D.C.’s total energy consumption. The District’s renewable portfolio standard, which dictates how many SRECs electricity suppliers must buy, makes solar energy commercially viable. D.C.’s renewable portfolio standard increases every year until 2020, when it will require renewable energy to make up 20 percent of the power used here. But only 0.4 percent of the total has to be solar—which may not be fast enough to keep solar growing as quickly as it could, nor fast enough to make a dent in fossil fuel consumption and become a serious job creator.

“If they really want solar to be big, they’ve got to change those requirements,” says Yuri Horwitz, who runs the solar energy finance firm and SREC aggregator Sol Systems. (Before the company started in 2008, actually getting any profit from SRECs was a complicated and difficult proposition for a small-scale generator.)

In that structurally confined and increasingly competitive market, companies are amping up their public relations efforts, hoping to stand out. To celebrate its latest project, on top of a 40-unit apartment building at 3501 13th St. NW, Skyline Innovations alerted the media and brought Cheh and Ward 1 Councilmember Jim Graham out for a press conference. (Mayor Adrian Fenty declined an invitation to attend.) A few weeks ago, Astrum Solar trumpeted its installation of what it called the city’s largest single-family residential system on Reno Road NW with a cocktail party and speakers including Christophe Tulou, newly appointed director of the District Department of the Environment (even though, in fact, it wasn’t the largest: Standard Solar holds that honor, with a 15.8 kilowatt system in Cleveland Park).

Despite the generous array of subsidies and tax credits available for solar installations, up-front costs can still be considerable. To help get customers over the hump, sophisticated solar companies have developed “turnkey” operations: They’ll do everything from the paperwork for government assistance to bundling SRECs to maintaining the systems years after they’ve been installed. There’s even a whole secondary industry of companies that help consumers sift through their options, including Greenavise, the consulting group that brought owner Crosstown Properties together with Skyline for the 13th Street project.

While suppliers proliferate, co-ops have been driving demand. In 2008, the Mount Pleasant co-op considered contracting with one company for its members, but ultimately decided to let households make their own choices, leaving the market more open to competition. On Capitol Hill, three companies serve the neighborhood co-op. The co-op movement is getting its own publicity, too; a recent Discovery Channel special featured Mount Pleasant houses. In September, the first “Solar Congress” will try to forge a city-wide superstructure with the goal of spreading solar co-ops to every ward, while increasing their political clout.

The co-ops have fought hard to make D.C. solar-friendly. In 2008, the city set aside $2 million per year in grants for renewable energy projects, or enough to subsidize about 200 home installations per year. But because one Department of the Environment staff member was managing the program part-time, only about a quarter of that actually got dispersed. It took some wrangling for Cheh and solar advocates to get the remaining $1.5 million rolled over for 2010 rather than absorbed into the city’s general fund. Then, Fenty’s 2011 budget dramatically slashed funding for the planned Sustainable Energy Utility, and cut the solar rebate fund in half. After co-op members swarmed council hearings to protest the cuts, the funding was restored.

See the full article on the Washington City Paper

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Are SRECs taxable?

July 29th, 2010

Today, many people are inclined to believe that income from solar renewable energy credits (“SRECs”) is not taxable because (1) the IRS does not have any publication or rule related to income received from the sale of SRECs and (2) the IRS has said that the sale of SRECs does not fit within the transaction types that would initiate the generation of a 1099 form.

However, one should consider that the underlying presumption of SREC income not being taxable is: SREC income is not “profit” – or at least SREC income is not profit for the vast majority of system owners who use SREC income to pay back the initial costs of investment. (In the majority of states where Sol Systems operates, the average system payback takes 4-8 years, although it can be shorter or longer depending on state incentives and SREC values).

What happens when the solar energy system is paid off? When the system is paid off, there is a chance that SREC income would be considered profit. In that case, the IRS may decide to tax SREC income and systems owners would need to disclose that source of revenue.

Taxing SREC income would be detrimental to the solar industry and for that reason, it is very important for solar installers to educate their customers on this matter. It would also be prudent for solar energy system owners to talk with a tax professional about their solar energy investment.

Please note that Sol Systems is not an official tax advisor and cannot give tax advice. We recommend that prospective and current system owners consult a tax accountant regarding their individual financial situations.

Sol Systems will continue to research this topic and inform our customers and partners as we become aware of any changes.

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The Future Outlook of the Connecticut SREC Market

July 28th, 2010

Earlier this year, Connecticut state legislators Rep. Vickie Nardello and Sen. John Fonfara introduced an energy reform bill that was posed to change the Connecticut renewable landscape and establish a market for Solar Renewable Energy Credits (SRECs). Solar enthusiasts celebrated the potential of ‘Bill 493 – An Act Reducing Electricity Costs and Promoting Renewable Energy’ to reduce consumer electricity rates, create green jobs, and reduce CO2 emissions. It was passed in both the House and Senate, but was ultimately vetoed by Governor Jodi Rell when it reached her desk. The governor expressed her support of the intent behind the bill, but concluded that the proposed legislation would in fact increase electricity costs, estimating a $1.4 billion price tag for the bill that would be footed by Connecticut taxpayers.

The status of solar energy financing in Connecticut remains at a standstill with no SREC market in 2010 and limited state rebates. The Connecticut Clean Energy Fund, which provides residential system owners with a state rebate of up to $15,000, has reopened but will soon be fully subscribed. As a result, it is possible that many installers and developers will move into states with solar-friendly legislation including Massachusetts, New Jersey, and Ohio. However, there is still hope for renewable energy and green jobs on the horizon. Dan Malloy, a potential Democratic candidate for Governor, has publicly stated that he would have signed the bill if it had been his decision. The election will take place on November 2nd and if he is chosen to serve the highest office in the Nutmeg State he may be able to reverse Gov. Rell’s decision and forge ahead with a Connecticut SREC market.

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Sol Systems and Clean Currents Announce SREC Partnership

July 26th, 2010

Sol Systems and Clean Currents, two pioneers in distributed solar energy finance and development, have partnered together. The collaborative partnership between Sol Systems and Clean Currents ensures more prospective solar energy system owners across the mid-Atlantic will have access to SREC financing, which makes generating solar energy both affordable and simple. “With Clean Currents’ accomplishments in context, it is a great honor for Sol Systems to announce this collaborative partnership” said Sol Systems CEO, Yuri Horwitz. Under the new partnership, Sol Systems will work with Clean Currents to ensure their customers continue to receive the highest value for the sale of their SRECs.

Clean Currents is a leading independent solar energy installer and clean energy broker, operating in the mid-Atlantic region. Clean Currents provides a diverse array of services, ranging from solar installations to power switch agreements for homeowners and businesses. Recently, Clean Currents provided Sol Systems with a Wind Renewable Energy Credit (REC) purchasing agreement that offset Sol Team’s entire business and personal carbon footprint. Clean Currents has been honored with such awards as the Maryland Green Company of the Year in 2010 and the DC Mayor’s Environmental Excellence Award in 2009. For more information about Clean Currents, please visit www.cleancurrents.com.

Sol Systems is a Washington D.C. based solar energy finance and development firm. With more than 1,000 customers across 13 states, Sol Systems has become a critical player in developing SREC markets and financing solar energy systems. Sol Systems currently offers long-term, fixed price SREC contracts, upfront SREC contracts, and SREC brokerage solutions in New Jersey. By utilizing Sol Systems’ options, customers can reduce solar installation costs anywhere from 20-40%. For more information about Sol Systems, please visit, www.solsystemscompany.com.

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Update on New York Solar RPS

July 16th, 2010

The New York State legislature recently introduced Bill S7093 (the “Bill”), its response to the growing appetite for solar energy in America.  The Bill contains draft legislation to effectively grow solar photovoltaic capacity to at least 5,000 megawatts (MW) by 2025, with interim targets of at least 500 MW by 2015 and 1,500 MW by 2020.  This is an ambitious target when viewed in comparison to existing capacity of approximately 34 MW at the end of 2009.  In addition, New York is positioning itself as a major player in the solar industry with higher solar PV targets (by capacity) than its neighboring states, with the exception of solar heavyweight New Jersey.  Aside from the obvious environmental benefits, the draft legislation, if enacted, is estimated to create 22,200 new jobs as well as boost GDP by $20 billion.

In terms of specifics, at least twenty percent of each energy supplier’s annual SREC obligation shall be met through the purchase of SRECs from retail distributors of solar energy generation (i.e. less than 50 kW systems), and at least an additional thirty percent of the obligation shall be met through retail distributed energy generation of any size.  As a result, this promotes a more distributed use of solar energy due to the combined 50% SREC purchase requirement from retail distributors.  Furthermore, the Bill requires energy suppliers to purchase at least 75% of their SREC compliance obligation from systems owned by an independent third party. This effectively provides for a robust secondary SREC market.

While this may seem like a win for solar enthusiasts, certain ambiguities contained in the Bill makes it toothless.  Specifically, the alternative compliance payment (ACP) is not mandatory.  According to the Bill, the New York Public Service Commission is charged “… to establish an alternative compliance payment that electric distribution companies may pay in the event they cannot meet their annual SREC obligation [Emphasis added].”  Without tougher language for enforcement, Bill S7093 may be ineffective.  We look forward to tracking the development of this Bill, and will be sure to keep you posted.

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Delaware Senate Passes Amendment to Strengthen RPS

July 14th, 2010

On June 30th, the Delaware House of Representatives voted to pass an amendment to Senate Bill No. 119. The bill would strengthen the RPS requirement and increase penalties for non-compliance. Taken together, these measures will improve the growth prospects for the solar industry.

The legislation ramps up the amount of renewable energy required in Delaware from 20% in 2019 to 25% by 2025. The proposition also raises standards for solar energy, from 2.005% in 2019 to 3.5% by 2025. Short-term solar energy prospects in Delaware are addressed by increases in annual targets for solar that move to .2% by 2011 (previously .048%) and .354% by 2014 (.8%).  The new targets ensure immediate incentives for the development of solar energy and will be seen as welcome news for regional installers and developers as well as Delaware homeowners interested in financing their solar energy systems.

The legislation has different effects on electricity suppliers in Delaware. The fine administered to utilities for non-compliance, known as the ACP, is raised to $400 per MWH (it was previously set at $250). As previously legislated under SB-119, a $50 increase in the ACP will be administered annually to non-compliant utilities.

A new provision in the amendment grants the State Energy Coordinator the authority to adjust the ACP by 20% “to determine reasonableness compared to market-based SREC prices.” Another new provision allows the solar requirement to be frozen if the total cost of compliance exceeds 1% of the retail cost of electricity. These amendments exhibit Delaware’s intent to provide more robust compliance incentives while also safeguarding against unreasonable increases in the cost of electricity.

The amendment to SB-119 is currently awaiting final approval from Governor Jack Markell who is expected to sign the bill this week. The amendment follows similar legislative changes in neighboring Maryland, which has recently expanded its renewable energy targets. Delaware’s proposed bolstering of the RPS is further evidence for the success of RPS programs implemented in several states across the mid-Atlantic region.

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As New Jersey Announces a New Round of Solar Funding, SRECs Remain Prominent in Project Finance

June 30th, 2010

After several weeks of uncertainty, the New Jersey solar energy rebate program set a start date of September 1st, 2010 for the third funding cycle for solar energy systems. Known as the Renewable Energy Incentive Program (REIP), the program has been extremely popular with New Jersey homeowners looking to take advantage of the state solar incentives. In the previous round of funding in April, 2010 more than 1,000 applications were received within the first week – despite the fact that incentives had been lowered from $1.75 per watt to $1.35 for residential installations. The popularity of the program caused a delay in the new round of funding which was finally confirmed last week.

The current cycle of funding will offer $0.75 per watt in incentives limited to the first 7.5 kW of solar installations. Excluded from funding eligibility are commercially owned systems as well as all systems over 10kW. The current rates mark the lowest incentive offerings by the REIP since its inception.

Overall the REIP program has been very successful in making solar energy more affordable. However, as REIP incentives are scaled down and applications for incentives are backlogged, homeowners interested in installing solar energy are relying more heavily on SREC income to finance their solar energy systems. New Jersey SRECs remain the most valuable in the country and as state incentives decrease, SRECs will play an even larger role in making solar energy affordable to homeowners across the state.

Currently,  NJ homeowners and businesses interested in SREC financing have three different options to monetize their SRECs, each of which are available through Sol Systems: multi-year fixed-price contracts (Sol Annuity), upfront payment for SRECs (Sol Upfront), and a short-term market-based option which allows owners to sell SRECs at their current spot-market value (Sol Brokerage).

For more information on Sol Systems products, please click here. For more information on solar energy rebates and incentives in the state of New Jersey, please visit the Database of  State Incentives for Energy and Efficiency.

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Sol Systems CEO to speak at Earth Shot Conference

June 28th, 2010

Sol Systems Chief Executive Officer, Yuri Horwitz, will be a panelist in Earth Shot Foundation’s conference regarding solar best practices in the Mid-Atlantic today.  The conference is part of Earth Shot’s Terranaut Almanac Series, a gathering each month in Washington DC, Boston, and San Francisco to explore issues revolving around energy, economy, and environment.  Government, non-profit, and industry leaders from California, New Jersey, Washington DC, Maryland and other states will be participating in the roundtable.

This event assembles industry and policy leaders from the region, and nationally, to discuss the future of commercial and residential solar at the state, regional and national levels.  Participants will discuss and debate best practice for RPS goals and solar carve-outs (commercial/residential), net-metering and interconnection, state policy/funding impact, project finance and net levelized costs of energy, policy successes (and challenges), and a strategic roadmaps for the region.

Mr. Horwitz will be focusing on Sol Systems’ experience helping to develop, implement and work within the framework of state RPS legislation, as well as his experience and knowledge of some of the more significant issues facing the 200+ Sol Systems’ Partners in the solar space.

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Update on Proposed Changes to Pennsylvania’s Alternative Energy Portfolio Standard

June 15th, 2010

This week, the Pennsylvania House of Representatives will review the Clean Energy and Jobs Bill (HB-2405), a proposed amendment to the Alternative Energy Portfolio Standards Act.  The bill includes a solar carve-out, which would mandate an Alternative Compliance Payment of $450 in 2011 for utilities that do not meet solar output requirements. The newly proposed solar carve-out would raise the required solar component of Pennsylvania’s RPS from .5% to 3% by the year 2025. The proposed bolstering of PA’s solar carve-out mirrors recent legislative changes in New Jersey and Maryland that mandate a solar RPS component of 2% or higher. The net result will be greater financing incentives for Pennsylvania homeowners and small businesses looking at solar energy, as well as a stronger platform for installers located in Pennsylvania looking to include SREC values in their sales.

Under HB-2405, Pennsylvania’s RPS would cease to accept SRECs from solar systems located outside PA but within the PJM region. If passed, this component of the bill would be detrimental to out of state homeowners and businesses looking to take advantage of PA SREC income to defray the high installation costs of solar energy. The bill also adversely affects regional developers who incorporate the value of PA SRECs into the financing of solar energy systems located outside the state.

Sol Systems will continue to monitor and provide updates on HB-2405 in the coming weeks.

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Solar Feed-in Tariffs vs. Renewable Portfolio Standards

June 14th, 2010

Solar feed-in tariffs or FiTs and Renewable Portfolio Standards both work to increase the output of renewable energy, but each regulatory process differs in function.  With an RPS, utilities are obligated to generate a percentage of their annual energy supply from renewable sources or else purchase Renewable Energy Credits on the open market to fulfill this requirement.  If they do not meet the RPS, these suppliers face an Alternative Compliance Payment higher than the market price of RECs.  On the other hand, FiTs mandate that all renewable energy generated each year must be purchased by utilities and at high prices that work towards establishing grid parity.  This is achieved when the cost of producing renewable energy is less than or equal to the cost of grid power.[i]  Establishing a national RPS is a better option for the U.S. because FiTs have created less-than-desirable consequences in foreign economies and in the solar energy market as a whole.

The United Kingdom recently adopted a FiTs policy, establishing a rate of $53.50/kWh of electricity generated (for a typical 4Kw system) and a rate of $4.35/kWh of surplus electricity that is exported to the national grid.[ii]  Wayne Morris of RenweableEnergyWorld.com even suggests an average rate of return of 10% for homeowners who enter the program.[iii]  But consumers who do not own a solar system and have not opted into the program will pay a higher electricity bill each month as the increase in energy rates are passed on to them by utility companies.  Some cities in the US have adopted the European-based policy, beginning in 2009 with Gainesville, Florida.  The policy in Gainsville established a 25% premium over the subsidies the city formerly offered and utilities estimated the program would increase the average homeowner’s electricity bill by 74 cents per month[iv]

The risk of boom-bust cycles is another reason that a national RPS is superior to FiTs.  Germany was the original FiTs success story, and in 2009 these subsidies helped increase the country’s total solar capacity by 60%[v].  Unfortunately, the aggressive government subsidies created artificial growth and when these subsidies were taken away last January, the solar bubble burst.  A national RPS will promote organic growth in the domestic solar industry as opposed to its regulatory cousin FiTs.


[i] Wikipedia.com  “Grid Parity”  Website <http://en.wikipedia.org/wiki/Grid_parity>

[ii] Renewable Energy World.com  “Solar feed in tariff announced”  Website <http://www.renewableenergyworld.com/rea/partner/big-green-company/news/article/2010/03/solar-feed-in-tariff-announced>

[iii] Renewable Energy World.com  “Solar feed in tariff announced”  Website <http://www.renewableenergyworld.com/rea/partner/big-green-company/news/article/2010/03/solar-feed-in-tariff-announced>

[iv] Galbraith, Kate,“Europe’s Way of Encouraging Solar Power Arrives in the U.S.”  New York Times <http://www.nytimes.com/2009/03/13/business/energy-environment/13solar.html>

[v] EthicalCorp.com  “Feed-in tariffs: Solar energy bubble is FiT to burst”  Website <http://www.ethicalcorp.com/content.asp?ContentID=6901&newsletter=24&utm_source=http://communicator.ethicalcorp.com/lz/&utm_medium=email&utm_campaign=EC%20News%2018%2005%2010&utm_term=Growth%20and%20CR,%20Japan%20briefing,%20award%20winners%20in%202010,%20and%20tackling%20kickbacks%20in%20China&utm_content=178429>

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