Sol Systems featured on AOL Energy!
Sol Systems’ Andrew Gilligan was featured in AOL Energy! Check out the article below.
Hope Shines Through Bankruptcy Clouds for US Solar Sector
A spate of bankruptcies in US solar manufacturers is not a sign of imminent industry collapse, but the inevitable result of competition in a new and evolving market, according to industry representatives.
Solar manufacturer Solyndra announced its intention to file for bankruptcy on the final day of August, following bankruptcy filings by Evergreen Solar on August 15 and SpectraWatt on August 19. The three firms’ failures prompted a flurry of commentary about the challenges facing US solar manufacturing, and prospects for the sector’s survival.
But solar industry representatives suggest that this is just part of the inevitable weeding out of firms that are unable to compete as the market landscape changes. Solyndra’s bankruptcy was “an anomaly…That’s one of the gazillion technologies out there for solar. Some are going to make it, and some aren’t,” founder of American Council on Renewable Energy (ACORE) Mark Riedy told AOL Energy at the Georgetown University Energy and Cleantech conference on September 2, 2011.
All Eyes East
Competition has intensified for solar panel manufacturers as cheaper Chinese modules have become more widely available. Manufacturing costs are lower in China, due in large part to relatively cheap labor and low-cost loans from China’s state-dominated banking system.
“It’s not like they’re making huge profits either, but they can probably take on more”, said Andrew Gilligan, an associate with solar finance firm Sol Systems.
Another factor that has driven down costs is a reduction of feed-in tariffs in some European countries, according to Gilligan.
“The demand they thought was going to be there in Europe for solar has drastically been reduced in 2011,” he said.
Solar manufacturer and project developer SunPower‘s investments in Italy were hit when the government reduced feed-in tariffs in response to debt crisis, according to project development analyst Brian Bailey.
“SunPower basically lost a major market, and we’ve been moving modules to other markets and trying to fill the gap,” Bailey said at the conference. 
The Problem With Policy
SunPower’s experience in Italy also highlights the importance of policy risk in the solar industry, as firms are still working towards lower costs that would allow them to compete without government incentives.
Intensified cost competition has not driven every player out of the market. Integrated firms like SunPower and Q-Cells control solar power developments from manufacturing to project implementation, and are less sensitive to manufacturing margins.
The Money Still Flows
And SunPower and Q-Cells have both managed to attract capital, despite uncertain economic conditions.
Q-Cells is employing innovative means of raising project funds, such as going through a traditional project finance route but “wrapping” it in an insurance policy, according to director of new market development Nick Chaset. A wrap provides a guarantee against potential losses.
“We’ll provide a parental guarantee as a publicly traded company or we’ll go through a third party like [insurance company] Zurich,” Chaset said.
SunPower is continuing to fund projects using power purchase agreements, as well as lease financing, according to Bailey. The company’s creditworthiness benefits from French oil major Total‘s decision, announced in April, to buy 60% of the solar firm’s shares and provide $1 billion in credit support over five years.
“We have one of the strongest balance sheets in the world behind us”, Bailey said.
And the companies’ solid track records give them a leg up over less established firms.
“Big investment banks, financial institutions aren’t interested in taking risks on a new developer,” said Gilligan.
Two Certainties: Natural Gas And Taxes
But the US solar industry may face additional challenges in the coming years. One of the primary drivers behind a recent boom in solar projects is the option for solar developers to receive a 30% investment tax credit in the form of a cash grant, according to Gilligan. He does not expect the cash grant option to be renewed next year, which would force solar project developers to seek tax equity financing, which may not be as readily available.
And if the price of US natural gas fails to rise, it could act as a barrier to development of all renewable fuel generation sources.
“As long as this natural gas price stays around $4…it’s so cheap that it’s not going to be a good financial decision to build big wind and solar farms,” Gilligan said.
But Riedy argues that there are US solar manufacturers with the potential to survive the culling process by advancing solar technologies and achieving the necessary cost reductions.
“There’s a lot of guys that have really good stories to tell in the solar space and they’re up, they’ve got their projects going, they’re manufacturing panels, the panels are starting to compete with the Chinese,” Riedy said.
Ultimately, any firm that can keep its costs down and provide a reliable product may outlast its competitors.
“Cost is always the key driver,” said Booz Allen Hamilton energy associate David Brown.
Sol Systems Issues Call for Solar Projects – New Project Finance Platform Now Has $400 Million in Available Funding
Sol Systems Issues Call for Solar Projects – New Project Finance Platform Now Has $400 Million in Available Funding
Washington, DC: September 14, 2011 – Less than two weeks after launch, Sol Systems is proud to announce that its new solar finance platform, SolMarket, has increased from $350 million in available investment dollars to $400 million. In addition, reception by solar installers and developers across the country has been overwhelmingly positive. SolMarket’s network now includes over 180 companies and 300 users.
SolMarket is a financing platform that will catalyze investment in solar energy projects nationwide by transforming how solar projects are financed. SolMarket provides investors and developers with the tools they need to efficiently originate, evaluate, finance, and construct renewable energy projects. It provides a standardized origination platform, a document library, modeling software, and a standardized document suite. SolMarket will also offer developers group purchase discounts for solar modules and other equipment. There are no costs for developers to participate in SolMarket.
“We talk to hundreds of solar developers about prospective commercial and utility-scale projects, and unfortunately, many of these solar projects are never built due to an inability to efficiently locate financing,” said Yuri Horwitz, CEO of Sol Systems. “We have created SolMarket to help drive efficiencies into the solar market and connect investors and developers effectively. SolMarket will reduce the cost of financing transactions and enhance the tempo of solar project development.”
SolMarket is currently seeking projects ranging from 50 kW to multi-megawatts in size. Solar developers are encouraged to submit their projects prior to September 30th, when investors will get their first look at projects. Projects entered prior to this date increase their visibility and the likelihood of getting included in the investors’ 2011 portfolios.
Sol Systems invites interested solar developers to attend a SolMarket webinar, hosted every Tuesday, Wednesday, and Thursday during the month of September at 2 pm EST. For more information, please email info@solmarket.com or visit www.solmarket.com.
About Sol Systems
SolMarket is a wholly owned subsidiary of Sol Systems. Sol Systems is a Washington D.C. based solar finance firm, and the largest solar renewable energy credit (SREC) aggregator in the nation, with over 2,300 customers and over 20 MW of solar capacity under management. Through its SREC offerings, it has promoted the development of the solar market by providing long-term financing options for SRECs, facilitating over $100 million in solar development.
Contact:
Ms. Sudha Gollapudi, Director of Strategic Partnerships
888-765-1115 x1
Sol Systems Issues Call for Solar Projects – Launches Project Finance Platform with $350 Million in Available Funding
Washington, DC: August 31, 2011 - Sol Systems today announced the launch of SolMarket, a new financing platform that will catalyze investment in solar energy projects nationwide by transforming how solar projects are financed. SolMarket launches with over $350 million of committed partner funds, actively seeking solar projects in need of financing.
SolMarket provides investors and developers with the tools they need to efficiently originate, evaluate, finance, and construct renewable energy projects. It provides a standardized origination platform, a document library, modeling software, and a standardized document suite. SolMarket will also offer developers group purchase discounts for solar modules and other equipment. There are no costs for developers to participate in SolMarket.
“We talk to hundreds of solar developers about prospective commercial and utility-scale projects, and unfortunately, many of these solar projects are never built due to an inability to efficiently locate financing,” said Yuri Horwitz, CEO of Sol Systems. “We have created SolMarket to help drive efficiencies into the solar market and connect investors and developers effectively. SolMarket will reduce the cost of financing transactions and enhance the tempo of solar project development.”
SolMarket has already attracted funding from a number of investors and is seeking projects ranging from 50 kW to multi-megawatts in size. Solar developers are encouraged to submit their projects prior to September 30th because investors are quickly building out their portfolios for 2011.
Sol Systems invites interested solar developers to attend a SolMarket webinar on Thursday, September 1st, Friday, September 2nd, or Tuesday, September 6th at 11 am EST. For more information, please email info@solmarket.com or visit www.solmarket.com.
About Sol Systems
SolMarket is a wholly owned subsidiary of Sol Systems. Sol Systems is a Washington D.C. based solar finance firm, and the largest solar renewable energy credit (SREC) aggregator in the nation, with over 2,300 customers and over 20 MW of solar capacity under management. Through its SREC offerings, it has promoted the development of the solar market by providing long-term financing options for SRECs, facilitating over $100 million in solar development.
Contact:
Ms. Sudha Gollapudi, Director of Strategic Partnerships
888-765-1115 x1
Magic and Sunrays in the Air
In a neighborhood where painting your door a different color requires approval from a presidentially appointed commission, Georgetown Energy is aiming to permanently change the view of dozens of houses – from the sky.
Georgetown Energy, a student consultancy devoted to helping residents convert to solar electricity, is heading a monumental solar project that involves turning 43 quintessential student townhouse residences to solar electricity in the midst of Washington DC’s historic Georgetown district. Although it is a long-term project to be enjoyed by the generations after many of the current members of the group have graduated, Georgetown Energy students believe that the rewards of such an innovative project are well worth the effort.
What magic surrounding solar coaxed students to become involved so profoundly? First, there is a substantial payback for the investment. In a solar lease contract signed between Georgetown University, which owns the student townhouses, and Solar City, a leading national solar installation company, adding 96.6 kW of solar capacity to 43 townhouses will require an initial investment of about $164,000, much less than if the University were to purchase the solar panels. Although Georgetown Energy has partnered with SolarCity for this project and used its solar lease scheme as a model, the project will be offered to various installers at its final stages. In the innovative solar lease scheme, the University will “lease” the roof of each townhouse to the installer, which will design, own, and operate a solar photovoltaic system on each townhouse. The installer will then sell the electricity produced from each solar project to the residents of the townhouse at a lower price than the traditional competing utility. Savings increase every year and over the 20 years duration of the solar lease contract, students would save a total of $458,856 in their electricity cost. After the contract is over, the student body can decide whether to buy the panels at a low price.
Indeed, another charming aspect of the proposal is that everything is student-owned. Originating from the need to allocate a 3.4 million dollar defunct student endowment, the solar investment will take up only a portion of the available fund and coexist with other student proposals as well as generate profit. Ideally, Georgetown Energy sees the proceeds creating a fund for related projects to further environmental awareness and energy studies on campus.
Is there anything else in it for the university, the students, and the DC area? Sol Systems, a strong force in the fight for better solar incentives in DC, believes so. Not only is being involved in such a movement ideal preparation for a career in renewable energy (two recent graduates and former members of Georgetown Energy actually work at Sol Systems), but there is much potential for the greater DC area too. Of course, cleaner air for the district tops the list. It may even attract more students interested in environmental and energy issues and demonstrate the feasibility of clean energy investments, creating a virtuous cycle of environmental awareness and action in the university community. Perhaps the project may even set an example of a successful clean energy investment that some students may follow individually in the future. Lastly, it is a modern display of service to the community, the crux of the founding Jesuit ideals of Georgetown University.
What stage is the project at right now? In April 2011, a student commission voted in support of the proposal. Now Georgetown Energy students are working with University officials on the details. These include contractual issues, billing mechanisms, pricing, and structural and electrical issues with the houses. The Georgetown Energy students are learning some concrete skills needed for evaluating any type of construction investment. The work done from June-August 2011 will culminate in a final recommendation to be handed to the University on September 1st after which Georgetown Energy students will have to persuade the rest of the student body off their feet for a concluding student referendum and choose from final proposals from competing vendors and permitting. If all goes well, the battle will be won one year from today. The panels will be constructed in Fall 2012 and convert ordinary sunrays to a unique opportunity for revenue and intellectual growth – truly magic!
Kids Learn about Solar Energy Through Show-and-Tell
Sol Systems’ valued customer, Phil Hostetter, recently had an interesting version of show-and-tell at his home in Sterling, Virginia, with twelve 4th and 5th graders from Guilford Elementary School. Phil, who has a 4.05 kW solar photovoltaic (PV) system, gave a tour of his eco-friendly home, which also has a hybrid trombe wall and a solar hot water system . Phil and his wife Stephanie became interested in solar energy during the 1980’s and decided to build a passive solar home, with the idea that it would go solar electric as soon as possible. Although the house was completed in 1986, their initial plans to add PV panels to their home were delayed until 2009. The financial help from tax credits and the current SREC benefits he receives greatly contributed to the execution of the project.
When Phil heard about the environmental club at nearby Guilford Elementary School, he conceived the idea of the show-and-tell as a way to share his enthusiasm for solar and other green technologies and to inspire young students to take an interest in environment issues. The environmental club members had been learning about sustainable living for quite some time. Phil briefly described the process of the system to them but remarks, “The kids definitely knew a lot. They knew how it worked and could recognize many features of the system.” The club practices composting and cultivates a vegetable garden at the school. (Phil and Stephanie donated vegetable and flower seedlings from their greenhouse.) Club members also sell some of the harvest to raise money for the school and are thinking of doing some sort of solar installation in the near future.
Phil received numerous thank you notes and illustrations of his house. “We got a great response from the tour. I’m pleased they took the time to write thank you notes.” We at Sol Systems enjoyed the letters and wanted to share with our other customers. It is without a doubt important to educate the youth of the importance of sustainable living with a limited number of resources in the world. We hope this article and the letters posted below inspire our other customers to host similar events for local school children. Thank you, Phil, for sharing your story, and for continuing to spread the knowledge!
Thank you notes from students at Guilford Elementary School
Financing Residential Solar
Michael Leibreich, chairman of Bloomberg Finance’s Research Group on Energy Finance, recently stated that he believes the cost of developing a solar power project will be cut in half in the next decade. These cost reductions will pave the way for utility scale solar and they will also help make solar a viable option for residential solar.
Residential solar installations will remain a key part of the solar industry’s remarkable growth, and the distributed nature of these systems represents some of the most unique and most advantageous aspects of solar technology; however, reductions in technology costs are not enough to make solar affordable for everyone. Luckily, today, a homeowner has more options than ever to help finance the installation of a solar energy system.
The most basic way is to pay for the system out of pocket. This approach leads to the highest rate of return — assuming the homeowner can take full advantage of the federal investment tax credit/grant, state incentives, and the value of Solar Renewable Energy Credits or SRECs. However, solar PV systems still pose a high initial cost, and many residents do not have the ability to pay for the system completely out of pocket.
A subset of this option is taking out a loan to pay for the system. Residents can take out home equity loans from their banks or secure low-interest loans to cover the system cost from their installers. (In D.C., homeowners have received access to zero-interest loans for the first year through their solar installer.) This approach also allows the homeowner access to all the economic incentives for going solar, which along with energy savings, can be used to repay the loan in a very reasonable period of time.
Two other options that do not require the homeowner to fund the entire cost of the installation would be to (1) lease the system or (2) enter into a Power Purchase Agreement (PPA). Although these structures are now common among commercial solar installations, these financing structures are becoming more popular with homeowners in the past two years.
While the nuances of leasing structures often differ, the customer is basically leasing the solar energy system just like someone leases a car. This approach allows the customer to reduce energy bills without the high initial cost of going solar. However, in leasing a system, the homeowner would not own the system; therefore, they would not receive the federal tax incentives or state rebates – and in most cases they would not be able to take advantage of the economic incentives like selling SRECs.
Finally, a Power Purchase Agreement allows a homeowner to purchase electricity from a system located on their roof at a reduced rate. This means the homeowner will experience savings on their energy bills without large upfront costs. However, just like in leasing the system, the customer will not own the system, be able to take advantage of SRECs, or the federal and state incentives. In effect, they have not “invested” in a solar energy system, but they will still reap financial benefits because they’ve created a hedge against rising utility costs.
It can be a difficult decision for homeowners when selecting which financing option to use. A lot will depend on how the homeowner feels about the high upfront cost associated with owning a PV system. However, if the customer can afford the initial capital, then purchasing the system will provide them with a return on investment over the lifetime of the system.
By owning a solar energy system, the homeowner will be able to monetize all available incentives and also reap the value of producing clean electricity through the selling of SRECs. SRECs are valuable because several states have solar-carve outs in their Renewable Portfolio Standard (RPS) that require energy suppliers to procure a certain percentage of their electricity from solar or pay a steep Alternative Compliance Fee (ACP).
At Sol Systems, we offer 1, 3, 5, and even 10-year agreements for monetizing the SRECs of a system depending on the state. Fixed cost agreements such as Sol Annuity allow customers to confidently know their cash flow due to SRECs and subsequently calculate their payback period more accurately.
It is important for these financing options to remain economical choices as residential solar continues to grow. Furthermore, it is important homeowners take their time and fully understand the advantages and disadvantages before choosing how to finance their solar system.
Counterintuitive Energy Subsidies
One of the most common arguments against renewable energy resources such as wind and solar is that they are not cost-competitive compared to traditional fossil fuels. Accordingly, government officials, business leaders, and taxpayers are concerned about the billions of dollars that would have to be spent in government funding and subsidies to make renewable energy more cost competitive today. However, when one examines the subsidies that fossil fuels receive annually, as well as their negative externalities, it is harder to argue that renewable energy is “too expensive”.
The majority of industries require support and legislative stability during their infancy, and this is especially true of the energy industry. It should come as no surprise that government funding and subsidies were used to help the coal and oil industries when they were first developing. However, it is unclear why fossil fuels, now a mature industry, received $72.5 billion in U.S. federal subsidies between 2002-2008. To put this in comparison, the solar industry received less than $1 billion in federal subsidies during that same time period, and all renewable energy fields together received $29 billion. If fossil fuels are so much cheaper, why should they receive more than double the amount of federal funding?
Federal subsidies include incentives, tax breaks, loan guarantees and other credits. President Barack Obama made a commitment to support clean energy, and solar subsidies have significantly increased since he took office, highlighted by a 30% Federal Tax Credit or Grant program for solar. Furthermore, Obama has proposed reducing subsidies and tax breaks for oil, natural gas and coal producers in his budget proposal each year. The G20 echoed this rhetoric, proposing in 2009 to begin phasing out fossil fuel subsidies, which was applauded by economists and environmentalists.
Yet nothing has changed. Congress successfully opposed these cuts and reductions, thanks in large part to heavy lobbying from oil, gas, and coal companies. Furthermore, none of the G20 countries have enacted a subsidy-cutting policy.
Even though 80% of Americans agree that Congress should consider reallocating federal subsidies from fossil fuels to solar, and 92% of Americans support pollution-free technology, it appears inevitable that renewable energy will lose out in subsidy fights because of the power of the entrenched fossil fuel industries. Supporters of fossil fuel subsidies point to the fact that oil prices often depend on situations in foreign countries, making the market more volatile and thus they need insulation, but this seems to be a critical disadvantage of the oil industry, not something that should be supported.
At this point, fossil fuel industries have a price advantage over alternative fuel sources because of industry maturity and federal subsidies. If a free market without subsidies existed though, fossil fuels would still be priced inaccurately due to their negative externalities.
An externality is a cost or benefit to a party that did not directly participate in the transaction. For example, fossil fuels’ most significant negative externality is pollution. Fossil fuel energy production is the primary contributor to greenhouse gas emissions that are associated with climate change. In basic economics, when a product or service has negative externalities that are not reflected in the cost, it makes sense for governments to levy a tax or charge that reflects the true cost of that action to society. However, under the status quo, levelized cost does not exist for energy sources – and the fossil fuel industry receives billions of dollars in annual subsidies to help reduce their cost.
Federal incentives for the fossil fuel industry are likely to continue, meaning renewable energies must be able to take advantage of other opportunities in order to compete. Several states have recognized a need for state-based intervention and they have helped create a better market for solar deployment through solar “carve-outs” in their Renewable Portfolio Standard (RPS). These carve-outs mandate that electricity suppliers procure a certain percentage of their electricity from solar sources. In effect, this legislation leads to a valuable market for Solar Renewable Energy Credits, or SRECS.
The ability to sell the benefits of clean solar electricity at reliable prices has prompted an increase in solar deployment in states like Pennsylvania, New Jersey, Ohio, and the District of Columbia among others, and this market-based solution does not have to rely on federal or state funding.
Looking forward, states should make good use of solar carve-outs in an attempt to level the playing field with the fossil fuel industry. State-created solar requirements and SREC values can help the solar industry get stable funding in its developing years – and eventually solar will stand on its own in the market.
What House Budget Means for Solar
Early on Saturday, February 19th, 2011, the House passed its version of this year’s budget, which was highlighted by $61 billion in cuts from federal programs. The bill will now move to the Senate where there will likely be amendments and eventual compromise before President Obama signs the bill. Nevertheless, it is an interesting time to examine what this budget and drive to reduce the federal deficit means for solar financing and the solar industry in general.
President Obama has made it clear that, although his priority is to trim the federal deficit, he is not willing to sacrifice funding for clean energy research and development. For the 2012 fiscal year, Obama unveiled a $29.5 billion budget request for the Department of Energy (DOE), which includes $3.2 billion for the DOE’s Office of Energy Efficiency and Renewable Energy (EERE)– a 44% increase over the current appropriation. This request includes an 88% increase in funding for the solar EERE program specifically.
The budget passed by the House, however, is more aggressive in its attempts to reduce the federal deficit and would cut billions of dollars from federal energy and environmental programs. In particular, the Advanced Research Projects Agency-Energy, which invests in early stage and risky projects, would be hit hard. Similarly, the EERE would lose 35% of its budget relative to last year, a stark contrast to the White House’s plans. The budget would also cut funding for several DOE loan guarantee programs.
The Solar Energy Industries Association (SEIA) has characterized these cuts as “disastrous”. Currently, solar developers use the DOE loan guarantee programs to help finance solar projects at low interest rates, and these cuts could halt solar projects around the country. However, the chances of the House budget passing into law in its current form are very slim. Senate Democrats and President Obama will likely push back against dramatic reductions in the DOE loan guarantee program.
Despite the fact that House Republicans are currently proposing cuts to clean energy funding, it is important to highlight that a GOP Congress has historically supported solar. The first tax credits for solar were passed in a 2005 Energy Bill by a Republican Congress and later extended by President George W. Bush.
Both parties see the job growth opportunities in the solar industry. Solar employers expect jobs to increase by 26 percent over the next year, and lawmakers from both parties share concerns over the current U.S. unemployment rate.
It is important to note that no matter what happens with the Federal Budget, there will be states that maintain policies promoting solar deployment and allowing for job growth in the renewable energy industry. For example, more and more states are adopting a Renewable Portfolio Standard (RPS) that contains a solar carve-out requiring utilities to procure a certain percentage of their electricity from a solar source. These solar carve-outs create markets for Solar Renewable Energy Credits, or SRECs. An SREC is a tradable credit that represents all the clean energy benefits of electricity generated from a solar electric system. SRECs are a market-based mechanism that do not rely of state or federal funding, so SRECs will help system owners finance their solar energy systems regardless of federal cuts to clean energy programs.
The House resolution on the budget, although likely not to pass in its current form, would certainly be detrimental to the health of the solar industry, particularly the reductions in the DOE loan guarantee program. We hope lawmakers will recognize the job growth and economic opportunity that the solar sector represents, instead of seeing it as a way to trim government spending.
Sol Bridge Allows Business Owners to Go Solar with Low Out-of-Pocket Costs
Sol Systems, the oldest and largest solar renewable energy credit (SREC) aggregator in the U.S., recently announced a new financing solution for commercial-size solar energy systems called Sol Bridge. The bridge financing solves a problem that many prospective solar owners face: commercial-sized solar energy systems have high capital costs (typically more than $100,000), and system owners must pay for the system costs several months before they receive their federal and state solar incentives or solar renewable energy credit (SREC) payments. Because most businesses have limited cash and must reserve their capital for business-related expenses and investments, owning a solar energy system is a distant possibility.
Sol Bridge addresses this problem by providing a 90 day cash advance to system owners for the 30% federal tax grant and any applicable state incentives. This option allows business owners to go solar without tying up capital, while still retaining ownership of their system and all the benefits including SREC payments and electricity bill savings.
The cash advance is provided upon system completion and can be assigned to the solar installer, so that the installer reduces the customer’s payment amounts accordingly. Sol Bridge and the corresponding loan fees are due after 90 days, however, the loan fees can be wrapped into the total installation costs and therefore included in the amount that will be refunded upon receipt of the federal grant and state rebates.
In addition, Sol Bridge can be paired with the Sol Upfront SREC payment option which allows system owners to pre-sell the future SRECs to Sol Systems in exchange for a one-time lump-sum payment. When the Sol Bridge and Sol Upfront options are combined, the system owner is responsible for merely 10-30% of the remaining system costs; moreover, the business owner reaps the full benefits of their electricity savings because there is no ongoing solar lease fee or PPA payments.
Please visit the Sol Systems website for more information about Sol Bridge.
About Sol Systems:
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit www.solsystemscompany.com.
Why Big Solar is not Better Solar
As solar energy systems become a more popular and profitable investment, many small and large scale projects are being developed. The idea of large solar projects may be attractive because of cost advantages due to scale, yet while the technology behind big and small solar projects is similar, some of the characteristics of big solar cancel out the advantages that are unique to solar energy.
Let’s define “big solar” as a photovoltaic (PV) system or a concentrated solar power (CSP) system that feeds energy into the grid as opposed to “small solar” which feeds the direct energy load of a given facility (most commercial facilities require less than 1 MW of power).
First, big solar is inefficient in terms of its land use. Instead of using the millions of acres of rooftop space and small vacant lots across the country, big solar is often built in deserts or remote areas, which could be potential agricultural or construction space, or even wildlife habitat.
Second, big solar requires significant transmission upgrades. Since large solar projects are far away from where electricity is used, long and costly transmission lines must be constructed to connect big solar projects with the grid. It costs approximately $1.5 million per mile for new transmission lines, a substantial cost that removes a lot of the economic advantages associated with large scale projects. Big solar projects will require the U.S. to engage in even more costly infrastructure upgrades over the next few decades; whereas small solar projects actually reduce the need for costly infrastructure upgrades.
Third, big solar does not alleviate grid-congestion. Even if new transmission lines can be financed, the electricity will only add to an already congested transmission and distribution system. Whereas, if small scale solar power is added near the power demand (such as the rooftop of a house or building), then it would not add at all to the congestion of the electrical system (one of the main causes of the 2003 blackout in the Northeast). Grid congestion is becoming even more important as U.S. electrical demand is increasing at a much higher rate than U.S. transmission capacity.
Fourth, big solar wastes a significant amount of energy during transmission. Transmission from a centralized power plant to a user wastes electricity: according to the EIA, line losses accounted for 6.5% of total electricity generation in 2007. Small solar, typically constructed on the roof or within a ¼ mile of the building it powers, has virtually no energy loss due to transmission.
Fifth, big solar has the same security disadvantages of large centralized power plants. In other words, large scale solar is just as susceptible as other power plants to national security threats from hackers or terrorist groups.
Now that solar technology is becoming more affordable on a residential and commercial scale, there is the potential to dramatically increase the prevalence of distributed generation power systems. Achieving this would insulate the U.S. against its current dependence on large scale power plants and an outdated electrical grid’s transmission ability. Yet, despite the relative disadvantages of large solar power plants, big solar and small solar often compete for solar incentives such as SRECs (Solar Renewable Energy Credits).
An SREC is a tradable credit that represents the clean energy benefits of electricity generated from a solar electric system. Each time the electric system generates 1000 kWh, a SREC is issued that can be sold or traded separately from the power. SRECs have value because utilities and energy suppliers can purchase them from system owners in order to meet the requirements determined in a state’s Renewable Portfolio Standard. Residential and commercial solar system owners can harness this value to offset the costs of their solar energy systems. In some states, big solar threatens to reduce the value of these incentives by flooding the SREC market and decreasing the price of SRECs.
When creating and adjusting renewable energy policies, legislators and policy makers should recognize the unique benefits of small solar and distributed generation. It is important to understand that even though “big solar” may have some cost advantages, it is not the “best solar”.