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The Solar Income Tax Credit Extension and Impacts on the Industry

The Solar Income Tax Credit Extension and Impacts on the Industry

July 13, 2016 by

The solar investment tax credit, or ITC, is one of the most important federal policies impacting the solar energy industry. The ITC offers a 30 percent income tax credit to owners or long-term lessees of a solar energy system that meets performance and quality standards. The credit is calculated based on the total cost of the system, including equipment and labor. Components that are eligible for the credit include panels, mounts, equipment, and wiring. Since it was implemented in 2006, the ITC has helped solar installation grow by over 1,600 percent.

The residential and commercial income tax credit was established under the Energy Policy Act of 2005 and applied to projects installed between 2006 and 2007. In 2008, the ITC was extended for eight years under the Emergency Economic Stabilization Act. In addition to the eight-year extension, the legislation removed the monetary cap for residential installations and allowed utilities and companies paying the alternative minimum tax to receive the credit.

Most recently the 2016 Omnibus Appropriations Act included a five-year extension of the ITC for solar energy projects. The bill extends the 30 percent credit for residential and commercial properties through 2019, and then drops the credit to 26 percent in 2020 and 22 percent in 2021. Beginning in 2022, the ITC will fall permanently to ten percent for commercial and zero percent for residential projects. Additionally, the bill contains a “commence construction” provision which allows systems to come online by the end of 2023 and still qualify for larger credits.

Under the previous legislation, the ITC would have expired for residential systems and fallen to 10 percent for commercial projects in 2017. According to an independent analysis conducted by Bloomberg New Energy Finance, solar capacity in the United States would have decreased by about eight gigawatts from 2016 to 2017 without the most recent extension. A JEDI analysis performed by the Solar Energy Industries Association (SEIA) showed that the U.S. also stood to lose nearly 100,000 American jobs as well as $39 billion in economic investment from solar if the ITC was not extended.

The recent ITC extension is expected to almost quadruple solar installation by the end of 2020 while doubling solar employment and spurring more than $130 billion in economic activity. Below are a few key findings from an SEIA analysis of data compiled by GTM Research:

  • The ITC extension will lead to more than 72 GW of solar photovoltaic installations from 2016 through 2020. The 72 GW over 5 years represents an increase of over 25 GW (or 54%) over baseline expectations without the extension.
  • By 2020, the U.S. will be installing 20 GW of solar capacity annually.
  • 220,000 solar jobs will be added over the next 5 years.
  • The ITC extension will spur an estimated $132 billion in additional investment in the U.S. economy between 2016 and 2020.
  • By 2021, U.S. solar generation will offset more than 100 MMT of CO2 annually, with roughly 25 MMT, or 25%, due to the ITC extension.

The ITC plays a vital role in the continued growth of solar energy in the United States. Its recent extension provides market certainty for companies to make investments that spur innovation and competition, leading to lower costs for consumers. The success of the ITC shows that long-term federal tax incentives for renewable energy can catalyze economic growth, reduce prices, and create jobs. To learn more about the solar ITC, visit www.seia.org.

Energy Department Launches Orange Button Initiative to Standardize Solar Data

May 3, 2016 by

When evaluating the financial risk involved with a solar energy project, many communities rely on fragmented datasets that vary widely in format, quality, and content. This creates a barrier for potential solar providers who seek an accurate understanding of potential markets.

To overcome this issue, the Department of Energy recently announced the Orange Button initiative, a program aimed at increasing solar market transparency and fair pricing by establishing data standards for the industry. Orange Button targets a reduction in soft costs by streamlining the collection, security, management, exchange, and monetizing of solar datasets across the value chain of solar. The Energy Department awarded $4 million to four project partners who will help launch the initiative: Smart Grid Interoperability Panel, the National Renewable Energy Laboratory, kWh Analytics, and SunSpec Alliance.

Standardizing data will allow for a reduction in soft costs by making it easier to share solar data and speed up processes such as financing, insurance, and grid operation. The project will be divided into three phases: the first phase will convene industry stakeholders to define data requirements, the second phase will formulate data taxonomies and interoperability standards, and the third phase will help develop and implement a data exchange marketplace.

Phase I

During the first phase, Smart Grid Interoperability Panel (SGIP) will receive $615,426 to convene industry stakeholders and define the requirements of an industry-wide solar data exchange. SGIP will lead a 24-month stakeholder and engagement management project focused on identifying inefficiencies in data exchanges. This project will help integrate data standards across the solar project lifecycle, while still focusing on strengthening and enabling private sector momentum to create a financially self-sustaining data ecosystem.

Phase II

The SunSpec Alliance team will receive $1,638,765 to establish an open, easy-to-adopt solar data exchange system. SunSpec’s oSDX system will allow free flow of data and information between commercial software products that address the solar asset lifecycle, reduce solar project soft costs, and will catalyze development of interoperable solutions at lower costs.

SunSpec will create standards for an open and royalty-free solar data exchange system that will be adopted by more than 60% of solar stakeholders in multiple market segments and in turn, lower the soft costs of a solar project to a range of 15 to 23 cents per watt.

Phase III

During the third phase, the kWh Analytics team will receive $1 million to develop Solar BabelFish, a data format translation software tool that will translate original data formats into data standards and reduce the time it takes to adopt data standards. The tool will also improve flow of information, increase transparency, and create a more competitive solar market. At the same time, the National Renewable Energy Laboratory will receive $400,000 to develop tools for converting written solar records into machine-readable formats, as well as design an open source data repository that will allow users to search for relevant data more efficiently.

The Orange Button project will simplify and standardize solar data, similarly to what the Green Button project did for energy use data and what the Blue Button project did for health records, allowing state and local governments, utilities, customers, companies, and other stakeholders to exchange quality data. To learn more, visit the Department of Energy website.

Equitable Access to the Sun: Together Be More Powerful and Effective

October 22, 2015 by

Imagine if you could suffice your home or business energy needs through harnessing the natural sun light without causing a serious dent on your bank account; would you consider adopting solar energy? Money may not always be the sole barrier to going solar. You may encounter other challenges such as not having adequate space to host a system on your own, not being very familiar with the relatively new technology, or being concerned about the system not blending well into your existing community space. Well, worry no more. Community Shared Solar (CSS) makes it possible for you to solar power your home and business – owned or rented space – with minimum effort required from you.

Community Shared Solar enables multiple customers to share the benefits from one solar-electric system.[1] In a CSS program, a participant voluntarily purchases or leases a portion of the shared system or its energy output. In return, the participant receives electricity, renewable energy credit, financial return, or any combination of these benefits that corresponds to the participant’s share of the investment (see Figure 1).

Figure 1: Basic Configuration of A CSS Project

CSS

(Source: NREL, 2010)

The perception of solar energy being a reserved technology for the wealthy and diehard environmentalists is becoming outdated and irrelevant as the explosive market growth and penetration of solar energy breaks records time and again[2]. Precipitous cost reduction combined with improved regulatory practices and availability of innovative financing mechanisms is making solar more accessible and affordable to people across the socioeconomic spectrum. Global renewable electricity installed capacity grew by 108% from 2000 to 2013 (from 748 GW to 1,560 GW) representing 23% of all electricity generation worldwide (5,095 TWh)[3]. Renewable electricity grew to nearly 15% of total installed capacity and 13% of total electricity generation in the United States in 2013 (171 GW). Solar electricity led all renewable electricity technologies with a cumulative installed PV capacity increasing by nearly 65% (7.3 GW to 12.0 GW). Solar PV accounted for about 63% of U.S. renewable electricity installed in 2013[4].

Despite the impressive solar market growth, historically a large percentage of the U.S. population have not had the necessary means to solar power their homes and businesses. The 2008 National Renewable Energy Laboratory’s study estimated that only 22% – 27% of residential buildings were suitable for hosting a PV system[5]. The remaining 73% – 78% residential buildings may have issues including, but not limited to, structural instability, poor orientation, and shading.  In addition to the constraints with the existing space, more than 100 million U.S. residents or 33% of the total population[6] (see table 1) did not have a roof of their own to host a system in the first place. However, CSS is rewriting the solar story by expanding participatory opportunity to everyone.

Type of Household Households % of U.S. Total Residents % of U.S. Total
Renter-Occupied 43,431,904 35% 104,557,842 33%
Owner-Occupied 79,520,021 65% 208,665,183 67%
Total 122,951,925 100% 313,223,025 100%

(Source: National Multifamily Housing Council, 2014)

With CSS, customers no longer need to have an optimal roof space or own a property to go solar. CSS provides individuals and businesses with the option to purchase or lease a part of a larger solar array (or its energy output) that is hosted at an optimal site with maximum sunlight exposure (e.g., schools, municipal facilities, communal spaces).[7]

CSS also alleviates cost concerns. A varying ownership structure allows participants to co-own or lease a portion of a shared array or its energy output to match their unique situation. Combined purchasing power also facilitates maximum benefits through economies of scale, where a larger system can lead to a lower cost per installed kilowatt (e.g., a bulk discount), and take full advantage of existing tax credits and incentive programs.

Additionally beneficial, as CSS participants can rely on professional renewable energy project developers’ administrative experience. A Community Shared Solar program saves customers time and money by sparing participants from complex project development and implementation – ranging from regulatory compliances to project financing; addressing technical issues to grid connectivity; managing competing interests to system maintenance, to name but a few. Being part of a community shared solar, professional renewable energy project developers working side by side with trusted community organizations to take care the project from its inception to energy generation.

CSS also enables communities to transform brownfields into brightfields – sites for clean energy generation – and to install new value to spaces that are otherwise deemed of little value or even hazardous, e.g., landfills, previously contaminated sites[8] and vacant roof space. Earlier this year, Community Shared Solar Developers broke ground for a 632 kW shared solar array on a brownfield site in Fort Collins, CO[9]. Similarly, in 2014, Rutland, VT transformed a 9.5 acre closed landfill into a source of clean energy for the local community. [10]

Community Shared Solar is already spreading fast and wide across the country. The solar capacity of Community Solar Projects in the U.S. has increased from a total of 10,000 kW in August 2012 to nearly 40,000 kW in September 2013 – a growth of 400% in one year.[11]

Figure 2: CSS Programs Spreading Across The Country

CSS Map

(Source: NREL 2014)

Community Shared Solar, like any program, is not immune to operational challenges or regulatory hurdles. Professional project developers, however, will address any issue that might emerge to optimize the participant’s CSS experience.

If you are interested in participating or starting a CSS program and wanting to know if there are any existing programs in your area, go to page 5 of our CSS toolkit and visit the websites and maps included there. The toolkit also contains a number of how-to guides and existing CSS examples that will help you navigate around CSS program development and implementation. Should you have any additional questions, complimentary technical assistance is available through the SunShot Solar Outreach Partnership to help you participate in or create your own CSS program.

 

By Chad Tudenggongbu

References:

[1] NREL (2012)1.usa.gov/1Ei8Zy9; MA DOER & Cadmus (2013) 1.usa.gov/1Pv0CVa

[2] SEIA (2014) bit.ly/1R3LdxP

[3] NREL (2014)1.usa.gov/1zfc0kb

[4] GTM Research & SEIA (2014) bit.ly/1G81Rqs

[5] NREL Study (2008)1.usa.gov/1ImAxcf

[6] National Multifamily Housing Council bit.ly/1FTZ869

[7] Solar Outreach Partnership (2015) bit.ly/1ILJAn7

[8] NREL (2013) 1.usa.gov/1JSJDxP

[9] Solar Novus Today (2015) bit.ly/1FSo91A

[10] Rocky Mountain Institute (2014) bit.ly/1r0u1hJ

[11] Konkle (2013) 1.usa.gov/1JungLC

Follow the Money: Utilizing Federally-Subsidized Bonds for Solar

As with many public projects, finding a way to pay for the upfront costs of a solar installation can be the largest stumbling block to a local government’s ambitions to go solar. One under-utilized source of financing is federally-subsidized bonds, particularly Qualified Energy Conservation Bonds (QECBs) or Clean Renewable Energy Bonds (CREBs). While understanding and utilizing these financing mechanisms can be challenging, QECBs and CREBs offer public entities a large pool of low-cost financing for clean energy projects.

How Tax Credit Bonds Work

QECBs and CREBs are federally-subsidized tax credit bonds, meaning the bondholder (i.e., the investor) receives federal tax credits in lieu of interest payments. The issuer (i.e., the local government) thus pays no or low interest on the bond. Under a 2010 law, issuers of QECBs or CREBs may elect to receive a direct payment from the federal government equal to the size of the tax credit the investor would have received. The investor then receives (taxable) interest income on the bond payments.

Tax Credit Rate

The Treasury sets the credit rate so the investor would earn returns equal to what it would earn with a market interest rate for the bond without discount or subsidy. With a QECB or CREB, the subsidy in the form of the tax credit is equal to 70% of the IRS-determined credit rate on the bonds. The partially reduced tax credit rate means issuers will likely need to pay a low amount of interest or bond discount to attract investors. The credits are taxable, and therefore the value of the credits must be included in the investor’s taxable income.

Bond Term

The Treasury sets a limit for the maximum term length based on the present value of half of the bond’s principal, calculated with a discount rate equal to 110% of the long term adjusted applicable federal rate. In recent issuances, terms have been around 15-17 years.

QECBs vs CREBs

QECBs and CREBs have the same federal tax credit structure, but differ in terms of their allocation amounts, award processes, who can apply, and what they can fund. Key differences are summarized in the table below:

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QECBs CREBs Eligible Issuers Government entities (state, local, and tribal) Government entities (state, local, and tribal) Electric Cooperatives Public Power Providers Certain Lenders Eligible Projects Qualified energy conservation projects, including but not limited to: • Renewable energy generation • Energy conservation in public buildings • Green community programs • Research and development • Demonstration projects. May also be used for privately owned projects. Capital expenditures for renewable energy generation Allocations $3.2 billion volume cap set by Congress Allocated amongst states by IRS and further allocated to local governments by population Unused volume carries over indefinitely $1.4 billion volume cap made available in 2015 Allocated between issuer types. Participants must apply to IRS for an allocation Unused volume reallocated

Availability

CREBs

The IRS allocates the original bond volume authorized by Congress over specified periods and between categories of eligible issuers. The IRS made the last allocation of the remaining volume cap of new CREBs ($1.4 billion) available in 2015. Governments and electric cooperatives apply on a rolling basis, while public power providers have a closed-end application period. For the current period, beginning September 1, 2015, the available CREB volume caps are approximately $433 million for governmental entities and $196 million for electric cooperatives. The IRS updates the available volumes approximately every 60 days at http://www.irs.gov/Tax-Exempt-Bonds.

QECBs

The American Recovery and Reinvestment Act of 2009 expanded the total QECB volume to $3.2 billion. IRS allocated this total amongst states by population; the original state allocations were published in IRS Notice 2009-29. States have further allocated their totals amongst local jurisdictions. The Energy Programs Consortium tracks allocations and issuances of QECB bonds, and provides a list of known issuances and remaining state volumes on its website. As of August, 2015, only 36.48% of total QECB volumes have been issued.

The QECB or CREB issuer must use the proceeds within 3 years of bond issuance, and 10% of the expenditures must be incurred within 6 months of the issuance. The issuer can request an extension past 3 years for a “reasonable cause” of delay.

Challenges and barriers to using energy bonds

While federal energy bonds allow local governments to finance projects at very favorable terms, there are significant barriers to their utilization. First and foremost, it is time consuming and expensive for local governments to issue bonds, even federally subsidized bonds. Due to the costs of issuing bonds, including legal and financial advisor fees, as well as the time and costs of voter approval in the case of certain municipal bonds, bond funding is often utilized only for larger projects. However, in the case of QECBs, some jurisdictions have allocations that are too small to be worthwhile.

One solution around this barrier is to aggregate multiple projects into one bond issuance. For example, the North Carolina Agricultural Finance Authority established a “green community program” in which it grants loans to solar and other types of private clean energy development using proceeds from a QECB issuance. Boulder, CO used QECB allocations to launch a commercial PACE program, which in turn has funded many projects, including solar installations. Discrete projects could also be pooled across municipal jurisdictions and issued by a State agency or other coordinating group.

Other solutions to high issuance costs include bundling a QECB issuance with other, non-energy bond issuances, or using other sources of funds, such as Energy Efficiency and Conservation Block Grants, to cover administrative costs or buy-down interest rates.

Local governments may also hesitate to use federal energy bonds due to debt aversion. In these cases, QECBs could be used to fund privately-owned clean energy projects, where the private entity holds the debt. Private activity QECBs are limited to 30% of the jurisdiction’s allocation, however.

Additional resources

For a deeper dive into using QECBs or CREBs to finance a clean energy project, several resources are available:

• The Database of State Incentives for Renewables and Efficiency contains summaries and links to more information for both CREBs and QECBs.

• In addition to its regular updates of known QECB issuances, the Energy Programs Consortium has published a detailed issue paper on QECBs, which includes basic information about how the bonds work, challenges and barriers to utilizing them, and several case studies of projects funded with QECBs.

• The National Renewable Energy Laboratory has a guide for utilizing CREBs: Financing Public Sector Projects with Clean Renewable Energy Bonds (CREBs).

• The U.S. Department of Energy also provides information on both types of bonds, including a presentation-format QECB and CREB primer.

• The IRS publishes current bond credit rates, terms, allocation availability, and answers to frequently asked questions about using federal tax credit bonds.

• For additional information or assistance, contact the Solar Outreach Partnership at solar-usa@iclei.org!

*Note: This post pertains to “New” CREBs. “New” CREBs refer to allocations authorized under 26 USC 54 and available starting in 2009. While the Energy Policy Act of 2005 created the original CREB program, “New” CREB bond allocations have significantly different rules than the “Old” CREB allocations.

NARC’s Regional Solar Deployment Tools

July 31, 2015 by

As demand for solar energy continues to grow, many local governments look for strategies to spur solar deployment in their communities. Regional planning organizations are in a prime position to provide tools, guidance, and technical assistance to their member governments to help them increase local solar adoption. The National Association of Regional Councils (NARC), as part of the U.S. Department of Energy SunShot Solar Outreach Partnership (SolarOPs), recently completed several resources aimed at assisting regional councils in helping their local governments learn about, plan for, and adopt solar energy.

The Regional Solar Deployment Handbook is a comprehensive guide to implementing solar energy at the regional level. The handbook identifies seven key strategies that regional councils can use to successfully drive solar adoption in their jurisdictions. Focused on regionally-specific actions, tools, and case studies, this handbook explains the complexities of solar energy while also providing examples of how regional councils have worked on solar throughout the country.

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The Solar Deployment Toolkits are designed to help regional councils conceptualize and incorporate solar into various planning initiatives. Learn how solar energy can contribute to local economic development, enhance transportation networks, increase public safety, and help meet environmental goals. Each toolkit contains specific information and resources for financing, planning, and implementing solar as it relates to each of these four issue areas.

The interactive Regional & National Conference Workshop Map provides access to workshop presentation materials from over 60 regional and national conference workshops held across the country since 2011. Presentation materials are available for download, and can be used to educate regional councils interested in solar energy adoption. Each point on the map represents a specific city where one or multiple workshops have been held. Users can click the markers to view presentation materials and host information.

Solar Outreach Partnership Finds Massive Untapped Solar Potential at K-12 Schools

June 1, 2015 by

In September 2014, The Solar Foundation – working under the U.S. Department of Energy’s SunShot Solar Outreach Partnership (SolarOPs) – published a first-of-its-kind study investigating the use of solar energy at K-12 schools across the United States. This report, entitled Brighter Future: A Study on Solar in U.S. Schools – found that 3,752 public and private K-12 schools in nearly all 50 states have installed solar energy systems. But the report did not stop at looking at the current state of solar on schools. Through an original analysis looking at all 125,000+ K-12 schools in the nation, the study found that between 40,000 and 72,000 additional schools could adopt solar cost-effectively (i.e., realize a positive net present value on an investment in solar energy over 30 years).

The vast majority of solar energy systems currently installed at K-12 schools are photovoltaic (PV) systems. Together, these systems represent 490 megawatts (MW) of installed solar capacity. To put this figure into perspective, if all the K-12 solar schools in the nation represented a single state, it would be the 7th-largest solar state, with more capacity than current top-ten states such as Hawaii, Colorado, New York, and Texas. The electricity generated by these systems on an annual basis (roughly 642,000 MWh) represents nearly $80 million per year in utility bills – an average of $21,000 per school. Not surprisingly, more schools have been going solar as installed costs have continued to decrease in recent years, with nearly two-thirds of all systems installed since 2010.

Though The Solar Foundation’s (TSF) database of solar schools (available for free download) is likely not exhaustive, it does represent the most comprehensive effort to collect data on these projects to date. Recognizing these limitations, TSF and its research partners developed an interactive pin map for users to check on the solar status of schools in their area, as well as a simple web form the public can use to provide information on solar schools not yet included in the database.

Perhaps of greater interest, however, is the untapped potential for still more schools to go solar cost-effectively. Assuming installed costs of $2 per watt, approximately 72,000 K-12 schools could save money by deploying solar energy systems. Fully tapping this potential would result in 5,400 MW of new solar PV capacity – just under one-third of the capacity currently installed throughout the entire nation. The 6.9 million MWh of electricity produced by these systems each year would be valued at nearly $800 million, and would offset annual greenhouse gas emissions equivalent to taking just over 1 million passenger vehicles off the road.

Recognizing this potential – and that schools often face challenges in tapping this potential – the SolarOPs team has developed a number of resources and services designed to help schools and their districts navigate the process of “going solar.” The SolarOPs Toolkit for Installing Solar on K-12 Schools was designed to provide public school officials with a starting point for pursuing their own projects, and includes resources for helping schools pre-screen sites for solar and understand the financial benefits of investing in solar, educating schools and districts on best practices for developing successful requests for proposals (RFPs) for solar projects, understanding financing options, and much more. The toolkit also provides links to resources and efforts outside of the SolarOPs program. Beyond these resources, SolarOPs provides complimentary technical assistance through which members of our team of solar experts can deliver customized solutions for schools seeking a hands-on approach in navigating the process of going solar or who need in-depth support in overcoming unique challenges hindering these efforts.

Excerpts from “Ask an Expert” – April and May 2015

May 13, 2015 by

Here is a sample of some of the submitted Ask an Expert questions from April – May 2015:

Please keep in mind when reviewing these responses that it is not the role of the Solar Outreach Partnership to provide legal or tax advice, and nothing herein should be construed as such. These responses are provided for educational purposes only, and should be verified by experienced legal counsel before any decisions or actions are taken.

Question: Solar advocates are trying to help citizens of North Richland Hills, Texas overcome their elected officials’ determination that solar panels are ugly and should not be seen on residential rooftops. Any suggestions to help keep them from continuing to erect unnecessary barriers?

Answer: The aesthetic concerns presented by decision makers in your community follow a familiar pattern of focusing primarily on the worst-case scenario when it comes to system design and appearance (as evidenced in the Solar Ordinance Facts document). In these cases, we have found it useful to present examples of current industry installation practices. This presentation, developed by a local speaker at a recent Solar Powering Your Community workshop provided by our team, provides visual examples of what is commonly understood to be the rule – rather than the exception – when it comes to aesthetics for rooftop solar installations. Though created with a homeowner’s association (HOA) audience in mind, the examples and some of the principles covered may be helpful in your case. Concerns about systems installed at “odd angles” also likely stem from an outdated understanding of installation practices. These days, solar photovoltaic (PV) systems on pitched roofs are nearly always done with the modules parallel to the roof plane. Installation firms now recognize both the aesthetic concerns of installing pitched-roof PV systems at angles other than that of the roof’s and – perhaps more importantly from standpoint of the solar company and customer – that the additional materials and installation costs required to install a system at an “odd angle” seldom make up for the small boost in energy production that might be achieved with such a system design. In addition, there are apparently some concerns about the amount of clearance that should be allowed between a PV system and the roof – with a maximum clearance of 6 inches included in the ordinance. Though systems mounted fewer than 6 inches from a roof are subjected to higher temperatures – resulting in decreased system output – the standard recommendation for these systems is that they are only installed with a 4 inch separation. For reference, both of these points – on systems at “odd angles” and clearance recommendations – were taken from the Solar Electric Handbook: Photovoltaic Fundamentals and Applications, a leading resource for training new solar PV installers.

In addition to the technical concerns, there seems to be some concern that HOAs lack the ability to enforce certain design requirements, and thus the local government should step in. In fact, many of the design elements restricted by the ordinance may be regulated by HOAs under the Texas solar rights law (HB 362 – 2011; now Section 202.010 of the Texas Property Code). For example, both systems that are placed higher than the roofline or peaks (§202.010(d)(5)(A)) and are not installed parallel with the roof plane ((§202.010(d)(5)(C)) – as well as those with other design features – may be regulated by HOAs.

In short, we feel that an approach centered on fact-based educational outreach designed to dispel misconceptions about solar energy and PV system installation practices would be effective. It is important to use this as a starting point for creating a dialogue with decision makers, and not see this effort as an end in itself. The aesthetic concerns implicit in the requirements of the current ordinance may be overcome through this educational approach, but there may be other issues that need to be addressed. It is important to recognize that there may in fact be other legitimate concerns regarding solar installations and to remain open to finding solutions that truly balance benefits to homeowners with potential community impacts.

Question: It seems many jurisdictions in CO require an installer to hold a variety of licenses (e.g., business license, contract license, community-specific license, and so on). What are some of the best practices around minimizing cost and time associated with the number of licenses required?

Answer: According to IREC and Vote Solar’s Best Practices for Residential Solar Permitting, (http://www.irecusa.org/solar-permitting-best-practices/), the national best practice is not to require community-specific licenses. If a locality does choose to require a license, the recommendation is that the community accept NABCEP PV installer and solar thermal certification, or the already existing state licensing requirements, if applicable.

Question: Cities and/or states may have a permit fee cap or a flat fee, however, such fee structures do not affect use taxes (which represents ~4.5% of the valuation in Boulder County Region). What could policymakers and local government officials do to address this issue?

Answer: Since use taxes are typically set by the state, local government officials have limited recourse in these situations, although they could attempt to influence state tax policy to have such taxes lowered or eliminated. Ultimately, the best practice (http://www.irecusa.org/solar-permitting-best-practices/) is for local governments to recover the costs of processing permits through flat permit fees. Lowering or eliminating local solar permit fees in an attempt to compensate for state-mandated tax costs can have the unintended consequence of depriving local governments of the funds necessary to process permits, thereby slowing or stalling the process and creating a bottleneck for solar installations. Instead, local officials wishing to encourage solar in their communities should focus on ensuring that their solar permitting processes are as simple and user-friendly as possible, in line with best practices. This will minimize the costs associated with their processes–due not just to permit fees, but also the time and resources required for the solar applicant to navigate and comply with the process–while still ensuring any safety or other local standards are met.

SunShot Catalyst Seeks Solar Software Solutions

April 6, 2015 by

The Department of Energy (DOE) launched SunShot Catalyst last May to propel the development of products that address problems and challenges seen in the United States solar industry. The program facilitates collaboration among solar experts, software developers, and entrepreneurs, and provides them with access to a multitude of tools, capabilities, and data sets to build software that eliminates barriers to greater solar deployment around the country.

During the first months of the program, stakeholders in the industry and the general public were invited to identify major problems that could be solved through algorithms, automation, and software applications. The most pressing and compelling issues were selected for the business innovation phase. Some of these included the increase in home electricity usage after solar installation, lower solar panel efficiency in sub-optimal temperatures, and high solar farm inspection costs.

Teams of innovators from around the country were then enlisted to form business plans for products and services that would solve these problems. In January, DOE awarded seventeen teams with $25,000 worth of support to hold coding competitions through a crowdsourcing development platform. Currently, around 700,000 coders, developers, and data scientists are participating in this virtual hackathon to help build software prototypes. Here are a few of the selected projects:

  • Rating system to show value of a solar system to potential buyers: Similar to CarFax, Savenia Solar Ratings will allow solar installers and homeowners to easily communicate the value of their systems to potential buyers. Owners will be able to input their system’s data online and then download informational materials that show the value of the system. The company behind the software, Savenia Labs, believes that if prospective buyers can clearly see the market value of particular solar installations, then more will be inclined to purchase a system.
  • Peer to peer energy sharing: Gridmates is a cloud based platform for energy transactions. It allows individuals and companies to send units of energy around the country with a phone or computer. Through the system, rooftop solar owners have the ability to send excess electricity generated by their systems to family and friends or donate it to people living in energy poverty.
  • Automation of utility bill acquisition for solar companies: One major challenge for solar companies during the customer acquisition process is collecting utility billing history – it’s a manual process that can take up to three weeks. UtilityAPI automates this process so solar sales people will be able to gather billing history in under 10 minutes. The software collects historical data and regularly monitors usage so companies can easily show customers their savings.
  • Comprehensive solar project design tool: Even though it typically takes one or two days to complete a residential solar project, it can take several months for the installation to begin to take place after a contract is signed. PVComplete aims to simplify the site assessment, underwriting, design, and permitting processes through a single, comprehensive software platform. The tool will automate these time consuming tasks so that final design proposals and permit packages can be quickly generated online.

After the prototyping process, teams will present their software to a panel of investors and judges. DOE will award up to $500,000 in additional funds to the highest performing projects to aid in commercialization of developed products and services.

Making Solar Accessible: Addressing Split-Incentives in Multi-Unit Buildings

February 13, 2015 by

By Kate Daniel and Ben Inskeep

Imagine an American city, and you’re likely to think of large, high rise apartment and office buildings. What you may not think of, however, are solar panels on the top of these buildings.  Multi-unit buildings offer great potential for hosting solar energy systems:  there are lots of them, they often have large, un-shaded rooftop space, and they use a lot of energy. Yet even as solar gets cheaper by the day, multi-unit buildings still face significant challenges to going solar.

One key obstacle to installing solar on multi-unit buildings (as well as making energy efficiency improvements) is the problem of split incentives, which happens when the costs and benefits of a building improvement fall on different parties. In the case of solar energy, a split incentive occurs in sub-metered buildings where occupants pay their own individual electricity bills. Some of these occupants desire the bill-savings and other benefits of going solar, but do not have the capability to install solar on the property. The building owners do have that capability, but may not be motivated to incur the costs of installing the system in order to defray electricity bills paid by tenants.

In the latest factsheet from the NC Clean Energy Technology Center, produced under the Solar Outreach Partnership, we explore policy options for overcoming the split-incentive barrier when it comes to installing solar on multi-unit buildings. Local governments can play a crucial role in tackling this challenge by implementing policies that help align the costs and benefits so that both accrue to the same party.

One way to do this is to change the rules so that multiple customers, who otherwise aren’t able to install solar on their own rooftops, can reap the financial benefits of one solar energy system. Enhanced net metering (ENM) policies expand traditional net metering, where a customer with a solar energy system receives bill credits for any electricity the system produces over what the customer consumes. ENM policies, specifically virtual net metering or community net metering, allow occupants of a multi-unit building to receive a share of bill credits from a single solar energy system.

While ENM aligns the primary financial costs and benefits to fall on the building occupants, a feed-in tariff (FIT) takes the opposite approach. Under a FIT, the building owner receives payments for the electricity produced through a long-term purchase agreement, usually at attractive rates that reflect the cost of the technology.

While ENM and FIT policies are important first steps to removing the split incentive, paying for a solar energy system can still be a significant challenge. Some financing mechanisms not only cover the upfront costs, but also provide ways to recover costs from the parties that realize the benefits. In the case of systems utilizing a FIT, the financing would be the responsibility of the building owner. The building owner could utilize property assessed clean energy (PACE) financing, which allows the owner to pay the costs of the system over time as an assessment on the building’s property tax bill.  On-bill financing allows the owner to pay for the system over time on its electricity bill. Both of these financing tools are attractive because they tend to offer lower interest rates and can be shown as expenses, rather than debt, on a company’s books.

If the system utilizes ENM, both of these financing mechanisms could also allow the building owner to distribute system costs to occupants. Property taxes may be passed through to tenants, so tenants in a building could pay their share of a PACE-financed system through higher rent; with on-bill financing, the costs would simply need to be distributed amongst the occupants’ electricity bills. In the case of an ENM system that is financed with a more traditional method, a Green Lease could allow building owners to include the costs of the solar energy system in a lease that also articulates and protects the benefits to tenants.

The following table from the factsheet, which was inspired by one created on energy efficiency split incentives by Stephen Bird and Diana Hernandez in a 2012 Energy Policy paper, highlights these options and their potential benefits and limitations.

Table 1: A Summary of Policy and Financing Options for Addressing the Split-Incentive Problem with Solar on Multi-Unit Buildings

Policy

Description

Benefits

Limitations

Enhanced Net Metering One rooftop solar energy system offsets electricity use by multiple occupants via separate monthly bill credits – Allows multiple occupants to directly receive the financial benefits of one solar energy system – Policy is set through state legislation or state regulators for customers of investor-owned utilities

– May be difficult for smaller cooperatives or municipal utilities to implement

Feed-In Tariffs Requires utility to buy electricity generated by solar energy systems at a fixed rate ($/kWh) for a specified number of years – All costs and benefits accrue to building owner

– Reduced financial uncertainty by creating secure, stable market
– Hedge against future electricity prices

– Requires funds or increased electricity rates when tariff is higher than the utility’s avoided cost

– Difficult to determine appropriate tariff rate

On-Bill Financing Customers pay for the costs of solar energy systems over time on their utility bills – Addresses split incentive for residential sector by allowing occupant to both bear costs and accrue benefits of solar
– Payment can be tied to electricity account rather than the occupant
– May be administratively difficult to set up with multiple customers
– Utilities must be willing and able to participate
Property-Assessed Clean Energy (PACE) Customers pay for the solar energy systems over time on their property tax bills, and a third-party (e.g., local government) pays the immediate upfront costs of the system – Property tax increase on owner can be passed on to tenants through rent payments
– Payment can be tied to property rather than owner or tenant
– Low-cost financing
– Not available in all jurisdictions
– Residential PACE programs have been limited in the past due to objections from FHFA
– Many programs require consent of a mortgage holder
Green Leases A clause is added to a property lease to pass on the costs of an energy upgrade to tenants, based on expected energy savings – Allows for cost-recovery from tenants
– Can strengthen landlord-tenant relationship
– Traditionally used in commercial settings
– Voluntary, requiring the cooperation of both the landlord and tenant(s)

 

In addition to describing the policies in more detail, this factsheet also guides local governments through the process of identifying which options are feasible and how to implement them. While these are all effective tools for addressing the split incentive problem, not all of them are available in every jurisdiction. For example, cities with a municipal utility will have more freedom to change rates and payments for solar customers than those served by investor-owned utilities, whose rates are controlled by a state public utilities commission. PACE programs are only possible in the 31 states (and DC) that have passed PACE-enabling legislation.

Even when local governments are unable to implement a FIT, ENM, or financing policy, they can still work with building owners to create customized solutions for their properties. Local governments also have the ability to encourage solar adoption through solar-friendly zoning and planning, streamlined permitting and interconnection processes, and targeted outreach and technical assistance. In all cases, local governments are key stakeholders in helping multi-unit buildings go solar, providing much-needed access to clean energy for even more of its residents and businesses.

Ask and Expert for the week of January 5th, 2015

January 7, 2015 by

Here is a sample of some of the submitted Ask an Expert questions for the week of January 5th, 2015:

Please keep in mind when reviewing these responses that it is not the role of the Solar Outreach Partnership to provide legal or tax advice, and nothing herein should be construed as such. These responses are provided for educational purposes only, and should be verified by experienced legal counsel before any decisions or actions are taken.

Question: I am on the board of a 60 unit condominium in Western Massachusetts.   We are trying to establish a solar policy since a number of our residents would like to install solar panels.  Do you know of any existing HOA in Massachusetts that have solar power installed.

We are trying to come up with a policy that ALL our residents can live with, whether or not they want solar.

Answer: Though we were unable to identify specific community associations in Massachusetts where solar energy systems have been installed, the fact that over 100 megawatts of residential solar capacity – enough to power over 16,000 Massachusetts homes – have been installed in the state since 2010 makes it very likely that some of these installations are occurring in association-governed communities. While we do not have any examples to share of design guidelines for solar from Massachusetts community associations, there are a few basic best practices you can observe in ensuring the guidelines you draft and adopt meet the needs of everyone in your community.

  1. Understand Your State’s Solar Access Laws.  These laws can take the form of either solar rights provisions (designed to protect the rights of property owners to install solar) or solar easements (which increase the likelihood that properties will receive sunlight and reduce the risk that a system will be shaded after installation), or both. Massachusetts solar access law pertaining to community associations can be found in Massachusetts General Laws ch. 184 § 23C. While this law prevents outright prohibitions on solar installations, associations are able to place certain limits on these systems, provided these rules do not “unreasonably restrict” solar development. Unfortunately, the law does not define what is considered “unreasonable”. In the few legal disputes that exist on these matters, the state courts have looked to cost increases or performance decreases to determine reasonability.
  2. Consider Waiving Design Rules that Significantly Increase Cost or Decrease Performance. Given that impacts on system cost and/or performance have typically been used to determine whether association design standards for solar are “unreasonable”, it would be prudent to waive design restrictions that significantly increase cost or decrease performance. You can find an example of this language the model design guidelines we developed for North Carolina associations (see the final paragraph on the second page). Note that NC and MA have different solar access laws, so language or restrictions that work in one state may not apply in others.
  3. Provide Clear, Unambiguous Design Guidelines.  Too often, we see design guidelines for solar that simply state something to the effect of “solar energy systems must receive architectural review committee approval before installation” without providing any guidance on which factors will be considered in approving or denying an application. This lack of transparency can create a lot of hassle for both the homeowner and the committee, as the homeowner may wish to appeal a decision or reapply for a new system, when these subsequent steps may have been avoided by simply describing the system design elements that will be considered in the HOA guidelines.
  4. Provide a List of All Required Documents. Related to the recommendation above, providing a list of all documents that will be required for system review (e.g., application form, site plans and system drawings, photos or literature on system components, etc.) will help reduce requests for additional information and speed along the decision making process.
  5. Post Rules and Requirements Online. All homeowners should have easy access to these guidelines so that no one is confused or in the dark about these requirements.
  6. Allow Exceptions from Tree Removal Rules for Solar. A common motivation for HOA restrictions on solar is to promote tree preservation and growth. However, there does not necessarily have to be conflict between these two legitimate interests, provided a handful of best practices are observed. For existing developments, pruning should be considered before removal. If removal is necessary, guidelines could require or encourage the replacement of removed trees, and the HOA itself can track tree removal and replacement to ensure there is no net loss of trees in the community. In general, the guiding principle should be planting the right tree in the right place for the right reason. When selecting the “right tree”, consider how tall the tree is likely to grow and what its eventual height may mean for system shading. The “right place” can mean planting a tree on the west side of a home to provide shade in the summer, but avoiding planting trees to the south where solar access is needed. And finally, make sure you have a good understanding of the reason for the trees. For example, if the community is primarily concerned about aesthetics, consider whether these goals can be met with a shorter tree or shrub that will be less likely to affect the solar installation.

For additional resources on these issues, please see A Beautiful Day in the Neighborhood from The Solar Foundation and Balancing Solar Energy Use with Potential Competing Interests from the American Planning Association.

Question: What are the biggest and best batteries available to store solar
energy?

Answer: The choice of storage technology and capacity for PV (or any other application) depends on many factors (application type – rooftop/distribution/microgrid or transmission levels, cost of energy, types of service provided by storage, reliability requirements, environmental conditions, etc.). This is a very comprehensive area, and is hard to cover by one single document.

EPRI has number of publications that give detailed explanations of energy storage options for different renewable energy applications. Here are some links for your reference:

http://www.epri.com/abstracts/Pages/ProductAbstract.aspx?ProductId=000000003002004462

http://www.epri.com/search/Pages/results.aspx?k=Uses%20for%20Distributed%20Photovoltaic%20and%20Storage%20Systems

There is also the Energy Storage Handbook by Sandia that provides lots of info on energy storage options (see the link at the bottom of this page): http://www.epri.com/Pages/Understanding-the-Cost-Effectiveness-of-Energy-Storage.aspx