One of the biggest challenges facing supermarket proprietors is managing and controlling operational costs. Although labor makes up the biggest portion of those costs, energy use is the next largest expense item. According to an Xcel Energy report, energy accounts for 15% of a supermarket’s operating budget. Refrigeration and lighting consume the most electricity in supermarkets, with air and water heating, ventilation, and air conditioning also adding a significant amount to the monthly bill.
An ever-growing number of U.S. farmers and agribusiness owners have decided to integrate solar power systems into their operations. This movement has been fueled by a combination of factors, including significant price drops in solar installations; subsidies and other incentives available at the local, state and national levels; attractive financing options; and a general awareness of the long-term cost saving and sustainability benefits of producing your own energy.
In Puerto Rico, Solar Saves a Food Distributor Over 40% per Year in Electricity Costs
It used to be that Puerto Rico’s high utility rates were accepted as the cost of doing business on an island dependent on imported oil for electricity generation. But as solar energy prices have fallen, Puerto Rican businesses now have a way to significantly reduce their PREPA electric bills for 20 years—or longer—by installing a solar PV system.
A great example of a Puerto Rico business saving with solar is Ballester Hermanos. This food, wine & spirits distributor, established in 1914, had been paying nearly $72,000 a month in utility charges in 2014.
With a long history on the island, Ballester Hermanos was used to Puerto Rico’s high cost of energy, but it wanted to find ways to increase its profitability by reducing operating expenses. Since power was a significant cost, Ballester Hermanos researched installing solar and realized that it was not only affordable, but would reduce their annual electric bill by a projected savings of over $100k in 2015 and up to $200k per year by 2040.
Solar PPA Financing is Key
The biggest obstacle for most businesses wanting to go solar are the upfront costs. While solar can provide a positive ROI and IRR and a 5 to 10 year payback with a cash purchase or loan, many businesses prefer to preserve their capital and credit lines for reserves or for other building projects and capital investments.
For those businesses that want to go solar without the high upfront costs, many opt for a “solar power purchase agreement,” or “solar PPA.”
Working with Yarotek LLC, a solar PPA provider and solar project developer, Ballester Hermanos paid nothing upfront for their 874 kW DC solar system, which consists of over 2,500 high efficiency solar panels installed on the distributor’s expansive warehouse roof.
With the solar PPA, Ballester Hermanos doesn’t actually own the solar system. Instead, it’s actually purchased, owned, and maintained by the solar PPA provider. In exchange, Ballester Hermanos pays the PPA provider a significantly reduced kilowatt-hour rate for the solar electricity generated from the solar system for 20 years.
So, it’s as if Ballester Hermanos contracted with a less expensive utility, except this utility’s power plant is actually located on the company’s roof instead of at a diesel power plant miles away.
How much less expensive? Solar PPA rates will vary by project, but for Ballester Hermanos, after all incentives were applied, their solar PPA electricity rate came out to being over 40 percent less than the normal PERPA utility rate, and will offset about 37 percent of Ballester Hermanos’ old bill for next 20 years.
Because the solar PPA provider owns the solar system under the solar PPA arrangement, it also takes care of all of the solar system’s maintenance and repairs, though typically there are few. They will also pay the costs to remove the solar system after the 20-year contract has ended. Alternatively, Ballester Hermanos may elect to purchase the solar system for a pre-negotiated residual value price.
As the solar project’s owner is the solar PPA finance provider, it will apply for and receive all available rebates and tax credits, reducing its own upfront costs for financing the solar system.
Nevertheless, over the 25-year financing agreement, the solar installation is expected to save Ballester Hermanos millions of dollars over the life of the contract.
Other Considerations for Commercial Solar in Puerto Rico
While commercial solar PPA’s are very common today, other factors will determine whether a solar PPA or any solar installation is right for a particular business.
To qualify for the solar PPA and any associated incentives, the business will need to have a good credit history and as with Ballester Hermanos, have been operating for a reasonable number of years in Puerto Rico.
Also, solar PPA structures can vary by the business and by the rebate received from PREPA, as well as available U.S. tax credits. Your financier will incorporate these financial benefits into their rate, but keep in mind that Puerto Rico’s incentive system is complicated and has limited funding, so not every applicant will receive a rebate or have incentives incorporated into their solar PPA rate.
Business owners should also note that Ballester Hermanos is just one solar example. Your company’s solar system’s size, cost, and savings will depend on many factors, including available roof space, energy usage, rate structure, and the rebate awarded, which can vary by project.
Beyond the financial aspects of installing solar, there may also be physical considerations, such as the age and condition of the building’s roof and the building’s utility interconnection infrastructure.
Some buildings in Puerto Rico might not meet the island’s latest 2014 building codes, so a structural capacity check will be performed before moving forward with the installation. Additionally, because strong winds are a threat to solar systems during Puerto Rico’s hurricane season, quality solar installers like REC Solar should design and engineer systems that can withstand hurricane-force winds up to at least 150 mph and ensure that the roof is not only structurally sound, but also water proofed around any solar-related roof attachments.
Overall, installing commercial solar in Puerto Rico can generate substantial cost savings with solar PPA financing and an experienced solar installer. Consult with REC Solar to get a physical and financial evaluation to find out if installing solar is a good match for your Puerto Rican business.
We are very excited to announce that as of February 6, 2015, REC Solar and Duke Energy, the nation’s largest electric power holding company, have partnered to bring you more affordable, simple solar solutions for your business. Together we have launched a $225 Million project investment fund to finance solar projects nationwide. This enables REC Solar to be a one-stop source for Engineering, Procurement, Construction AND Financing of your solar projects.
REC Solar is now in a strategic position to own and operate commercial solar energy systems, selling energy to business, non-profit and government organizations throughout the United States.
Although the 30% business investment tax credit (ITC) for installing solar expires at the end of 2016, the window for taking advantage of the ITC is actually much sooner. Unless Congress extends the ITC—which is an open question at this time—business owners should begin planning now for solar projects to be completed by the end of 2016. Combined with lower costs than ever before, businesses are seeing a perfect storm of conditions that make now an ideal time to go solar.
You might think that 2 years is a long time to pull the trigger on going solar, but like any large commercial or industrial upgrade, solar projects can take 1 to 2 years to complete and go online. Here’s why:
When a retail store, winery, or factory thinks about going solar, they often finance through a solar power purchase agreement (solar PPA). Both allow your business to go solar with no up front costs. But if you’re in California, there’s new way to finance solar with no upfront cost, and it’s called Property Assessed Clean Energy or “PACE.”
PACE is a win-win for both the business that wants to go solar and the PACE lender. It’s a win for the business because it can own a solar system with no upfront costs, get free electricity for 20 years, plus receive any available solar rebates and tax incentives. It’s a win for the lender because the PACE loan is paid back through a special tax assessment on the business’s property, which makes the loan extremely secure, even from bankruptcy.
Here’s a rundown of all that’s happening at REC Solar’s Booth 850 at Solar Power International, as well as other events at the show.
Tuesday, October 21 – Thursday October 23
Just like the solar business, trade shows can be both exciting and intense, but REC Solar has you covered.
- Relax with REC Solar. From finance to construction, you’re in great hands with REC Solar… so stop by Booth 850 and enjoy a free 5 to 7 minute chair massage on us!
The Red Sox may not win the Pennant again in 2014, but there’s still some good news if your business or municipality wants to install solar in Massachusetts: In a last-minute legislative compromise with utilities, the state’s net metering cap has been raised to 5% of grid capacity for government entities and 4% of grid capacity for private businesses.
12/18/Update: As expected, the California Public Utilities Commission has finally approved a settlement with solar advocates to increase the cap on its Option R rate from 150 megawatts (MW) to 400 MW, allowing more medium and large commercial and industrial customers to go solar. Below, we've described two examples that show how the Option R rate significantly increase the ROI of going solar in the SCE utility territory.
If you’re a business or a non-profit, your utility rate can be a crucial factor in your overall annual savings from installing solar. Now, thanks to a recent settlement between solar advocates and the Southern California Edison (SCE) utility that should be finalized by January 2015, commercial businesses and non-profits that go solar in SCE territory will once again be able to select the financially advantageous “Option R” Time of Use (TOU) rate that has been limited.
What’s Option R?
Option R is an alternative to SCE’s “Option B” TOU rate, which could still reduce commercial electricity costs by installing solar panels, but … the Option B rate did not affect demand charges, a significant portion of commercial and industrial electric bills. The reintroduction of Option R would simplify SCE’s rate structures so that demand charges are reduced, and as a result, it can increase annual solar savings by around 25% over the Option B rate.
Before we get into a couple of examples, let’s get onto the same utility bill page. Your non-residential SCE utility rate bill is broken up into several components:
REC Solar recently participated in a webinar on Renewable Energy World that invited several experts to discuss the U.S. landscape for solar PV with microgrids, and energy storage for business. The panelists included:
Peter H. Asmus, Principal Research Analyst at Navigant Research. Peter is a leading global expert on microgrids and virtual power plants and the author of four books on energy and environmental issues.
Ben Peters, who serves as Director of Solar Finance & Policy at REC Solar. Ben provides strategic guidance on the commercial and utility sector, and he also manages REC’s economic analysis group, which helps REC customers to develop projects based on relevant regulatory and policy changes.
John Wood, Chief Executive Officer of Ecoult, an energy storage solution company. John first joined the energy storage community in 2008, having previously launched technologies globally in security, identity, payment technology, and telecommunications.