New Program Solves the Stranded Solar Meter Problem for California Farms

Net Ag MeteringSB 594, a law that went into effect in PG&E utility territory February 2014, now allows property owners to aggregate the electricity load of multiple utility meters scattered throughout a single parcel or multiple continuous parcels and credit the bills with a single “Net Metered” installation.

This new program is called ‘Net Meter Aggregation’ and reduces the cost of installation and increases flexibility for farmers that may alter individual electric meter consumption from year to year. This removes financial and technical barriers to going solar for farmers that have multiple utility meters on a single property or meters scattered throughout many parcels and were unable to take full advantage of  California’s net metering program.

The Old Net Metering Rules

Similar to rollover minutes on a cell phone, net metering allows  a solar  customers electric bill to be credited for any extra power produced by the solar array.

Before Meter Aggregation, however, regulations limited the net metering incentive to the meter that was directly connected to the solar installation. For homes and small businesses, that structure worked fine, but farms often have multiple meters and usage on those meters can change from year to year based on growing crops  on a particular parcel or not. This program now eliminates the cost that was previously required to connect all those meters to a solar system or the bill credits wasted if a water pump is not run for a year while solar is generating.

In the case of agricultural land, a single meter is often installed for each water pump across multiple acres of farmland. For factories, industrial facilities, and large government compounds such as an army base, a utility meter is often installed for each building on the compound.

Under the old rules, only a single meter connected to the solar installation could receive net metering credits. So, even if the solar installation could power all of the water pumps, the landowner would only receive credit for the single water pump tied directly to its meter and the nearby solar installation.

The New Net Metering Aggregation Rules Under SB 594

Under the new rules, multiple electrical accounts can now aggregate the electrical load of all the meters on the property where the solar system is located, or on property that is contiguous to the solar system.

Instead of building multiple solar systems for multiple meters on a large farm, solar companies can install a single  solar PV system in one area. From this single location, the solar power generated—and any net metering credits produced—will offset the electricity used by all of the farm’s various loads, such as water pumps, electric fences, cold storage facilities, etc.

Take for example Bowles Farming Company, Dos Palos, California.  They had over 20 meters scattered throughout hundreds of acres.  Under the old net metering system, a solar system would have to be built for each of those meters and would not be feasible.  Under the new aggregate net metering law, REC Solar will build a ~800 KW solar array to offset 100% of their expected kWh consumption throughout all meters.

The new aggregate net metering rules decrease installation costs for several reasons:

  • A single large solar installation requires less equipment, labor, and time to build than multiple smaller installations producing the same amount of energy.
  • A single solar array can now be installed in the most ideal location on the farm, potentially producing more power than multiple installations tied to individual meters that have less than optimal sunlight.
  • Extra equipment and engineering won’t be necessary to accommodate bad terrain or interconnection issues.
  • It’s now cost effective to build a larger solar array that offsets more utility power.
  • Similar to changing your allocation within an investment portfolio, Solar generation credits are allocated to meters and customers can easily change allocation percentages as usage patterns become different.

Similar to the farm’s meter issues, an industrial facility can now install solar on an adjacent empty plot of land or rooftop and be able to offset the power of all the property’s buildings.

SB 594 Meter Aggregation Limitations

While Meter Aggregation frees net metering’s restrictions, the CPUC did impose some limitations.

  • The maximum size of the solar system is 1 MW. So, if a farm needs to build a larger system, then  an alternative program for larger systems will apply .
  • Net metering is only applied to the maximum load (i.e., energy use) of all of the meters on site. So, if the solar system over produces and generates 110% of the farm’s energy needs, the extra net metering credits will not be as valuable. . Consequently, it’s important for a solar installer to design a system that is optimal and understand every aspect of the project.
  •  This program is only available for a limited time and will end once the current Net Metering program expires.

This last caveat is important. Currently, customers benefit from being  credited at the full retail rate for their solar net metering credits. However, with the passage of a similar piece of legislation, California’s AB 327; the CPUC is now in a process of redefining the value of net metering, effective Summer 2017 – or until 5% of the utility’s customers have Net Metering.

It is unknown whether the new net metering  program will reduce its value to customers, but many insiders suspect it will. In order to take advantage of this opportunity before it expires,  customers must have a system installed  before the new program takes effect. Once your system is installed, you will be grandfathered under the current net metering rules for the next 20 years!

REC Solar will be hosting a webinar on the new net metering aggregation rules. To sign up for the webinar, contact REC Solar, and we’ll let you know the specific date and time.


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Three Key Commercial Solar Tax Incentives Fighting to be Extended in 2014

You can never truly predict what legislation will actually pass through Congress and get signed by the President. Nevertheless, there are several expiring solar tax benefits in the EXPIRE Act of 2014 that we hope will get extended and continue to benefit commercial solar installations.

The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act is a U.S. Senate bill that is meant to extend a slew of tax incentives for one last time, hence the purposeful “EXPIRE” acronym.

In terms of solar, there are three key pieces of expiring legislation that may or may not make it to the President’s desk:

30% Federal Investment Tax Credit Extension…or not

First, the bad news: As currently written, EXPIRE does not include extending the 30% solar investment tax credit (ITC). This very popular incentive allows tax paying solar owners to receive a federal tax credit that can be used to offset a commercial solar system’s cost by as much as 30%. U.S.Capitol.Building

While the ITC extension did not make it into EXPIRE, it may be included in future omnibus bills. As of right now, only solar projects completed by the end of 2016 will qualify for the 30% ITC. Senate supporters have been attempting to change the wording so that any solar project that is started by the end of 2016 will qualify for the 30% ITC credit. If successful, this “commence construction” wording could allow solar owners and developers to qualify  for the 30% tax credit for complex projects that may not finish completion before the end of 2016.

On the other hand, if the ITC law isn’t amended before 2016, the ITC will be reduced to 10% for solar projects that complete or start installation after December 31, 2016. Consequently, it’s important for large solar projects to begin construction as soon as possible to ensure beating the current 2016 deadline.

Section 179 Deduction Expense

The EXPIRE Act does include several provisions that improve the Section 179 deduction. From 2009-2013, the Section 179 deduction allowed eligible businesses to deduct up to $500,000 of a solar equipment purchase price of up to $2 million, from the taxpayers’ gross income in the first year. This additional tax deduction is on top of the 5 year accelerated depreciation schedule, allowing taxpayers to write off a significant portion their investment in the first year.  Some industry observers have referred to this provision as “super-secret 100% depreciation.”

If EXPIRE doesn’t get signed into law, for taxable years beginning in 2014 and thereafter, a taxpayer may only expense up to $25,000 of the cost of the solar property, up to a maximum $200,000 of the solar equipment’s price tag. These limitations, currently in place, significantly impact the benefit of this tax deduction.

However, if the EXPIRE Act is ultimately signed into law (as currently written by the Senate), it will do several things: First, through 2015, it will restore the maximum annual deduction amount and equipment cost phase-out threshold to $500,000 and $2 million, respectively.

Second, EXPIRE will allow tribal governments and non-profits to allocate the value of the 179 deduction to “the person primarily responsible for designing the property in the same manner as is allowed for public property.” In other words, a tribal government or non-profit can’t typically benefit form tax deductions, but under this provision, a non profit going solar will be able to transfer the equivalent 179 deduction value to a solar installer, who can deduct that value from the total cost.

That being said, non-profits may be more inclined to finance their solar installations with solar PPA financing and other new innovative financing methods. (Contact REC Solar for comparing the best options for non-profits.)

Bonus Depreciation

If EXPIRE is signed into law, one provision will also extend the 50% Bonus Depreciation provision for solar property purchased, installed, and connected to the grid by the end of 2015.

Under Bonus Depreciation, the taxpayer is able to deduct an additional 50% in the first year of the installation. There are no eligibility or project limits under this provision, opening this tax benefit up to all tax payers. So if a business is too large to qualify for section 179, they can still take the bonus depreciation and 5 year accelerated depreciation schedule creating a healthy reduction of their tax burden.

When the tax credit  is used with a solar project, , the owner must reduce the project’s depreciable basis by one-half the value of the ITC. So, this means the owner is able to deduct 85% of the tax basis with the ITC (30% ITC x ½ = 15% reduction in eligible basis).

As a very simple example, if EXPIRE passes and a solar installation’s tax depreciation cost basis after applying the ITC is $650,000, an eligible taxpayer could deduct up to $500,000 in the first year under section 179.

The remaining cost, $150,000, would be subject to the 50% Bonus Depreciation. Thus, the taxpayer would receive an additional $75,000 bonus tax deduction in the first year, resulting in significant tax savings, a reduction in the payback period, and a nice boost to the Return On Investment for a solar project…if EXPIRE makes it to the President’s desk.

The above notwithstanding, the U.S. tax code is very complicated and this is not official tax advice. For the sake of brevity, we’ve simplified explaining these potential solar incentive extensions, so please contact REC Solar for more details about how these proposed solar incentives and other financing options might apply to your solar project.

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Believe it or not, solar is getting hot … in Minnesota? Yes, Minnesota.

Costco.SLO_opt_logoYou might think that a northern state like Minnesota wouldn’t be a hot market for solar energy, but solar works great in northern and colder climates. To capture that solar potential, Minnesota recently enacted several policies and incentives to inspire more Minnesota businesses, municipalities, non-profits, and residents to install solar and reduce their energy costs.

The main driver behind Minnesota’s solar push is the state’s Renewable Portfolio Standard (RPS), which requires the state’s investor owned utilities to generate around 30% of their total retail electricity sales from wind, solar, and other renewable sources by 2020. On top of that, 10% of utility retail electric sales are required to come from solar by the year 2030.

To meet these goals, the state and its major utilities have created several programs targeting both large and small installations:

Growing Community Solar Gardens

Community solar gardens, sometimes known as “shared solar,” lets developers create large solar farms and allow individual “subscribers” to invest in a portion of the farm. By purchasing a subscription, each subscriber gets to offset their utility bill with their portion of the solar power generated by the solar installation.

The program is a huge benefit for those who have homes or businesses that can’t go solar because of shading issues, or because they lease their property, or because there are location or utility interconnection issues.

In a related opportunity, if you have a large plot of un-shaded land or large commercial rooftop and want to host a community solar garden, solar developers can lease your land or rooftop for a potential solar garden installation. (Contact REC for more details.)

As for the incentive, solar garden subscribers receive a payment based on their solar power generated.  Currently, Minnesota regulators have set an interim rate of about 12 cents kilowatt-hour (kWh), but that rate may be replaced when Minnesota’s Value of Solar Tariff (VOST) is set. (See below.)

Community solar gardens are truly meant to be shared, not subscribed by a single individual. Consequently, the law mandates that each solar garden have a minimum of 5 subscribers and that no single subscriber own more than 40% of an array.

Taking Advantage of the Extra Made in Minnesota Solar Incentive

In addition to the above incentives, small commercial, non-profit, and government solar installations up to 40 kW in size may receive an additional production incentive for 10 years when the installer uses officially designated “Made in Minnesota” solar panels. The annual payment will vary based solar production, the solar panel brand and model, and whether it’s a business or government or non-profit installation. Another requirement is that the solar installation has to be within the territories of Xcel Energy, Minnesota Power, Alliant Energy, or Ottertail Power utilities.

Depending on the solar panel chosen, businesses can receive 13 to 18 cents/kWh, and non-profit and government entities can receive 20 cents to 27 cents/kWh generated.

As an example, a business that installs a 30 kW commercial array of Made in Minnesota certified modules and generates 42,516 kWh in the first year would be paid $5,527.07 (42,516 kWh x .13/kWh). If the panels produce the same number of kWh in each of the following 9 years, the business would receive a total of $55,270!  For another Minnesota solar panel brand that qualifies for the 18 cents/kWh incentive rate, that payment could be $7,652 per year or $76,528 after 10 years!

While specific program details are still being worked out, it’s important for interested parties to get involved early to ensure they are ready once these programs go live; new solar incentives tend to reach capacity quickly.

Contact REC Solar to get more details about how these Minnesota solar programs specifically apply to your Minnesota business or organization.

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Learn About Three New Finance Models for Non-Profits Wanting to Go Solar

non-profit solar

There have generally been two main financial challenges for non-profits interested in going solar. First is the lack of funds or credit availability for purchasing a solar system. The second issue is taxes—or rather their tax-exempt status. Because non-profits don’t pay income and property taxes, they’re often barred by legislation from taking advantage of local and federal tax incentives, such as solar’s 30% Investment Tax Credit (ITC).

Having dealt with these customer issues in the past, REC Solar has developed new solar financing partnerships that are tailored to the needs of non-profits, such as churches, hospitals, HOA’s, and charitable organizations. All three finance solutions address solar’s upfront costs and the ability to indirectly capture tax incentives, while each is also designed to significantly reduce a non-profit’s electricity bills.

Financing Option #1: Solar Power Purchase Agreements (Solar PPAs) for Non Profits

Solar Power Purchase Agreements (Solar PPAs) have become the most popular option chosen by homeowners who install solar and have been used by businesses and utilities on large scale projects for many years. While non-profits are ideal candidates to benefit from PPAs, the size of many non-profit solar projects often doesn’t meet the minimum size requirements of most PPA providers. However, now there’s a new solar PPA model that both removes the size barrier and meets specific finance needs for non-profits.

As with typical solar PPAs, there are no upfront costs to the non-profit and any local or federal tax benefits are incorporated into a discounted rate for energy. In addition, the installation’s solar energy production is precisely metered, so the organization only pays for the amount of power that the solar panels generate. More importantly, the solar PPA’s kilowatt-hour (kWh) rate is always designed to be lower than the utility’s rates, and all maintenance is included.

Among the innovations, this new non-profit solution has a shorter term, typically 15 years instead of 20 to 25 years. It also provides organizations with flexibility in annual rate escalation and early buy-out options. All in all, this new solar PPA model provides a simple, turnkey solution that will allow non-profits to go solar for $0 down and still reduce their operating costs.

Financing Option #2: Commercial PACE Tailored for Non-Profits

As with solar PPAs, PACE (Property Assessed Clean Energy) programs for commercial businesses have been available for some time. With traditional PACE programs, the upfront cost of the solar system is added to a property owner’s property taxes and paid over 20 years through a special tax assessment. Typically, annual energy savings from the solar system is far greater than annual PACE payments. However, churches and other non-profits don’t pay property taxes, so PACE financing is often assumed to be unavailable, which is actually not true.

In fact, non-profit organizations in California may ‘opt-in’ to a PACE program and fund their solar installations via a voluntary property tax assessment.

The organization can structure the payments over 20 years, dividing payments into small chunks, and then own the system at the end of the term. Additionally, third-party ownership options such as a PACE solar PPA or solar lease are also available, allowing non-profits to increase their savings by indirectly capturing available local and federal tax incentives and receiving the lower long-term energy payments and all-included maintenance benefits of a PPA.

Financing Option #3: Crowd Funding for Solar Projects

Churches, temples, and other religious organizations often fund building improvements with specific fund-raising campaigns that rely on donations. Now there’s an innovative financing option that allows members of these organizations to crowd-fund a solar installation—and receive a return on their investment.

With this finance solution, the finance company works directly with the organization’s leaders to facilitate the ‘heavy lifting’ of educating and engaging their member base. Then, they structure and execute an agreement in which the organization receives a $0-Down solar system and a lower monthly payment via a PPA-style agreement.

This win-win scenario allows the organization to go solar and reduce their energy costs and engage its members with a mutually-beneficial investment opportunity over the term of the solar agreement. The arrangement also helps all participants to feel great about reducing the organization’s operating expenses while demonstrating environmental stewardship of their local community and the earth.

In addition to these three no-money-down solar options, REC Solar can also offer non-profits other financially beneficial alternatives to cash solar purchases, including prepayment solutions and long term solar system monitoring and management.

The above is a simple overview of these new solar finance solutions for non-profits. If you have questions or would like more details, contact REC Solar. We’ll go over each option and help you to determine the best solution for your organization.

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Is the Solar Microgrid Future Already Here?

Yes, we live in a utility grid dominant world right now that is mainly powered by fossil fuels and nuclear power. And yet, more and more microgrids powered by solar and other renewable technologies are coming on line or are under development today. In fact, Navigant Research recently stated that the microgrid is moving into full-scale commercialization and that the global microgrid market will grow from $10 billion in 2013 to more than $40 billion annually by 2020.

As of the beginning of the second quarter 2014, Navigant has identified a total of 4,393 MW of total microgrid capacity throughout the world. As with the rise of solar PV installations in the United States, microgrids are heading into the mainstream, and both utilities and customers wanting more electricity independence and security will benefit.

What is a microgrid?

microgrid_Concept_optThere are many technical definitions for a microgrid, but let’s just keep it simple: A microgrid independently generates electric power, 24/7, to a small community—as well as plugs into the utility grid. So it has the ability to “island” and be completely off grid, or it can integrate itself into the wider grid, if needed.

Today’s microgrids don’t have to include solar energy, but they often do. In fact, microgrids typically combine different sources of renewable energy with fossil fuel based generators and energy storage (batteries). That may seem like a lot to manage, but these microgrids are smart—unlike older utility power management infrastructure.

Microgrids use modern “smart grid” technology to know when to distribute each microgrid energy source and when to store it. Its smart grid technology can even automatically feed in or turn off connected energy sources by the minute or even by the second. That kind of energy versatility stabilizes the local microgrid and it helps balance out any renewable energy surges feeding into the utility grid.

Who benefits from the microgrid?

First, the community that hosts the microgrid benefits. That community may be a rural area, such as Borego Springs, California, where it’s expensive and technically difficult to build power lines and transmit power without energy loss. Or it could be a Hawaiian island owned by billionaire Larry Ellison, who wants to significantly decrease importing expensive fossil fuels to his island. More commonly, a large university campus, such as UC San Diego, can benefit by protecting its important 24/7 buildings and research facilities from blackouts and by reducing utility expenses:

 

Moreover, entire states are now beginning to benefit from microgrids. The power outages caused by super storms Irene and Sandy have inspired the state of Connecticut government to implement a series of microgrids. Doing so will enable Connecticut cities to preserve essential services while downed power lines that are miles away are being repaired.

Similarly, military installations and other essential government facilities, such as the US Food and Drug Administration, benefit from the safety and security of an independent power source that is separate from an insecure and aging utility grid. And if you’re Google or Ebay with power hungry datacenters that need reliable power, rain or shine? They too will benefit from their own hands-on microgrid that includes non-fuel reliant wind and solar and batteries.

Although being an independent source of power may seem like a financial threat to the utilities, they can also benefit. Not only can utilities avoid building expensive infrastructure to support a rural community, they can also benefit from having an extra power source for peak times and for emergencies, such as hurricanes or other outages. Additionally, because microgrids often include renewable power sources like solar and wind, utilities can help meet their state mandated renewable energy portfolio standards.

Can microgrids save money?

As with all new technology, the initial price of microgrids is going to be expensive, but as they build to scale and the levelized cost of solar, wind, and other renewables continue to fall, microgrids will become increasingly cost-effective as well as efficient.

According to the above UC San Diego video, their microgrid has already saved the university “millions of dollars.” With island nations that rely on a constant supply of expensive imported oil, gas, and propane, solar and wind and its unlimited non-polluting clean power can easily see an ROI over the 20 to 30 year life of the microgrid.

In addition, it’s the costs of not having a microgrid during blackouts and natural disasters that is making Connecticut, universities, and government facilities invest in microgrid infrastructure. As microgrids are tested in the coming years, it’s inevitable that studies will show their true cost-benefit. That being said, the fact that microgrid projects are projected to grow exponentially within the next 10 years indicates that microgrid customers are already projecting an ROI.

Current microgrid challenges

While microgrids are expected to grow in the next decade, it won’t be without challenges. Its new energy dynamic has to adapt and integrate with the existing grid. In addition, while the microgrid technology may prove to be sound, local regulations may prevent microgrids from competing with utilities that have state-mandated monopolies.

Nevertheless, as utilities see the smart grid benefits and eventual cost savings of microgrids, they’re likely to get behind changing the regulations and adjusting their business models.

If you’d like to know how solar can be integrated with the new age of microgrids, contact REC Solar for a free consultation.

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