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.
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.