Economics of Solar: Making the Financial Case for Commercial & Residential PV

Transcription

1 Economics of Solar: Making the Financial Case for Commercial & Residential PV Andy Black Solar Financial Analyst (408) x1 Agenda (8-9 hours with lunch & breaks) Check-in (15 minutes before listed start time) Introductions Solar Financial Payback - Overview of the Variables: Incentives Rate Structures System Performance Solar Financial Analysis Methods: Payback Lifecycle Payback Return on Investment APY and IRR Increase in Resale Value Formal Conclusion, Break, Q & A Interactive Examples (for those who wish to stay) Diligence: Heights by great men reached and kept were not obtained by sudden flight, but they, while their companions slept, were toiling upward in the night. - Henry Wadsworth Longfellow

2 Economics of Solar: Making the Financial Case for Commercial & Residential PV Abstract: This class helps PV dealers, installers, and salespeople make the best and most accurate financial case to their customers to help them make more sales and open more eyes to the value of solar systems. Andy Black will provide an overview of solar electric (PV) system costs and savings for commercial & residential systems in an interactive adult learning environment. He will provide detailed information on state & federal incentives available (tailored to the local market) and how to use them. These include rebates, Feed-In-Tariffs, SRECs, performance based incentives, the Federal ITC, state tax credits, and MACRS depreciation. He will explain electric rate structures and how to choose the best alternative given the advantages of each relative to building load profile, system design, and site specifics (shading, orientation, etc). Andy will discuss the various methods of performing financial analyses in conjunction with the savings realized. Financial analysis methods presented will include Simple Payback, Total Lifecycle Payback, Return on Investment, Annual Percentage Yield (APY, using Internal Rate of Return or IRR), Modified IRR (MIRR), and Increase in Property Resale Value. Interactive examples of residential & commercial cases nationwide will be provided, including discussion of the salient differences and advantages of each method. The assumptions and variables that affect each analysis will also be presented including inflation, maintenance expenses, and interest rates. If time allows, the audience is invited to bring real world projects to analyze and discuss. This class qualifies for 7 to 8 NABCEP Continuing Education Credit Hours (depending on class length). All students will receive a one-month Free Trial to the OnGrid Tool to try their own scenarios. Biography: Andy Black is a Solar Financial Analyst and the founder of OnGrid Solar. OnGrid Solar provides financial analysis and sales education & software to solar installers to help them make a strong sales case for solar electricity to their customers. Andy has more than a dozen years of design, consulting, teaching, sales, and research experience in solar. He specializes in demonstrating the financial payback of solar electricity systems. He is a former NABCEP certified solar installer and is a holder of and the initiator of the NABCEP Technical Sales Certification. Andy Black is a recent member of the Board of Directors of the American Solar Energy Society and of the California Solar Energy Industries Association. He is a member of the Advisory Board of the Northern California Solar Energy Association. Andy s formal education includes a Bachelor s in Electrical Engineering from Penn State University, a Master s in Electrical Engineering from University of Southern California, and a Marketing Certificate at the University of California. His training in solar electricity includes Solar Energy International s intensive photovoltaic coursework and more than a dozen specialty courses in solar electric and related fields. He presents regularly on the financial analysis of solar electricity to audiences nationwide. Andy is also the groundskeeper and servant for a cat at his home in San Jose, CA. Contact Info: Andy Black, CEO OnGrid Solar 4175 Renaissance Dr #4, San Jose, CA (408) x1 andy@ongrid.net Andy Black Solar Financial Analyst (408) x1 andy@ongrid.net

3 SOLAR PV ECONOMICS: MAKING THE FINANCIAL CASE Andy Black Presented at: Solar Power International & PV America Conferences ASES Annual Conferences Solar Energy International Solar Living Institute PG&E s Pacific Energy Center California Center for Sustainable Energy Northeast Sustainable Energy Association North Carolina Solar Center Updated: Spring 2014 Facilitator Background M.S. Electrical Engineering SEI graduate NABCEP Certified Technical Salesperson NABCEP Certified Solar PV Installer Emeritus Involved with Solar since 1991 Studying, writing, & discussing Solar Financial Issues since 2000 Solar Salesperson Now a Solar Financial Analyst & Creator of the OnGrid Tool solar sales software 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 2 Handouts & Resources Slide Handouts Acronyms Feedback Form Resources available at Articles & papers on solar Payback Upcoming classes & events Sales for Solar (7-8 hour)* Marketing for Solar (7-8 hour)* Financing Solar Intro including PPAs & Leases (7-8hr)* Slides from past classes Free Trials of the OnGrid Tool 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 3 Decorum Questions: Please focus on Solar Economics & Payback Preferred at points marked: Good environment: Take care of your needs: Bio & Work Cell phones to fun mode Side conversations: Yes or No? Questions & Comments or just Please help each other 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 4 Agenda Overview of the Variables Financial Analysis Methods Solar Tools Interactive Examples Site Logistics & Breaks Facilities Lunch & 2 breaks: Networking Interactive exercises Q&A dependent 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 5 Prepare Interactive Examples Examples in Solar Financial Analysis Tool Please prepare some cases Parameters: Usage, System Size, Price Inflation Starting & Ending rate schedule % on-peak usage Free Demo - License Agreements 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 6

4 Financial Payback Solar Financial Payback Payback on solar isn t the most important thing it s the only thing the vast majority of potential solar purchasers care about 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 8 Right or Wrong 95% see energy as a commodity Few will pay more Must meet them on their terms: $$ FINANCIAL $$ Attractive Economics PV systems can be financially attractive to customers using enough electricity: Attractive defined as: Rate of Return > 5-10% Property Value Increase > System Cost Cash Flow Positive (Bill Savings > Loan Cost) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 10 If we re going to put solar on every roof, it needs to make $ense. Payback Analysis Why is it Needed? Courtesy Sharp Electronics 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 11 Net Metering High Rates Factors That Can Make Solar Viable Time of Use Rates Tiered Rates Low System Costs Incentives Sunlight More Important (in general) Less Important 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 12

5 Proformas Our goal today create a Proforma My first Proforma A 20 year financial timeline What does Proforma mean? As a matter of form or For the sake of form?? Practical meaning in business & sales: A What if? analysis 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 13 What if what? What if all the factors that affect the outcome, which are?: Cost After Incentives & over time Performance After System Losses & over time Value Created/Earned, based on Electric rates/net Metering/FIT/SRECs etc, over time Astute customers will ask a lot of Where does that number come from? 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 14 Proforma Analysis What type of analysis is a Proforma analysis? Cost/Benefit Costs?: Which variables? Their characteristics? Benefits?: Which variables? Characteristics? Lots of variables 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 15 Variable (& Information) Overload How to make useful? How to distill this down to a smaller, more useful (comparable) bit of info? year timeline Line by line inclusion of each $ factor Calculate a single number: APY - Annual Percentage Yield for Residential IRR - Internal Rate of Return for Commercial APY & IRR are comparable to other investments 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 16 A Model Proforma Year: Year 0 Year 1 Year 2 Year 3 Year X ( ) System -System Cost Cost +Incentives Rebate PBI 1 PBI 2 PBI 3 PBI X +Bill Savings Savings 1 Savings 2 Savings 3 Savings X -Maintenance Maint. 1 Maint. 2 Maint. 3 Maint. X Inverter +Fed Tax Credit Fed ITC +State Tax Credit State ITC -Fed Cost of State Tax Credit Fed Cost State ITC +Fed Depr. Fed Depr Fed Depr Fed Depr +State Depr. State Depr State Depr State Depr - Fed Cost of Fed Cost of Fed Cost of State Depr State Depr State Depr =Net Net 0 Net 1 Net 2 Net 3 Net X Net0 : Net25 line allows us to calculate the IRR or APY using the IRR function in a spreadsheet The APY or IRR % is comparable to other investments 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 17 Top Line Cost Incentives Electric Rates Usage & Patterns System Performance Agenda: Your Priorities? Net Cost Savings Calcs Financial Variables Financial Results: - Payback - Resale - Cash Flow - IRR - APY 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 18

6 Top Line Cost Incentives Electric Rates Usage & Patterns System Performance Net Cost Savings Agenda Calcs Financial Variables Financial Results: - Payback - Resale - Cash Flow - IRR - APY 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 19 Incentives Pre-Exercise Common up-front incentives (2): Common incentives received when taxes are filed (3): Common incentives received over time (3): 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 20 System Price & Cost Depend on: System size (per watt) Mounting: roof, ground, trellis Special factors System Price: Size Typical range $2.50-$7/ STC DC watt Includes parts, installation labor, profit, warranty Simplest composition shingle roofs: Doesn t include adders for harder jobs (tile, steep, etc). Commercial & Municipal: $2.00-$6.50 /STC DC watt <$2.50/W STC is typical for 500kW+ Most residential now: $3.50-$7/STC DC watt Some economies of scale 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 22 PV System Price Trends System Costs: Ongoing? Modules price leveled and trending up in 2013 & OnGrid Solar, All Rights Reserved. Economics of Solar PV - 23 Maintenance (routine): 0.5% of system gross cost per year, increasing with inflation It s in there one way or the other (cost of cleaning, vs. loss in performance from dirty system) Inverter Replacement: ~$700/kW at year ~15 Unscheduled Maintenance Property Tax Often exempt for original purchaser Fire/Loss Insurance Ask your insurer, sometimes = $ OnGrid Solar, All Rights Reserved. Economics of Solar PV - 24

7 Feed-In Tariffs PBIs & RECs Rebates Incentives Tax Benefits & Issues Net Metering (in Electric Rates section) For incentives in other states see the DSIRE database: OnGrid Solar, All Rights Reserved. Economics of Solar PV - 25 Financial Incentives for Solar PV. / November states, + Washington DC Puerto Rico & the US Virgin Islands, offer financial incentives for solar PV OnGrid Solar, Credit: All Rights DSIRE, Reserved. a project of the N.C. Solar Center and the Interstate Renewable Energy Council Economics (IREC) of Solar PV - 26 State / Province Rebate per W Residential Incentives West PBI per kwh SREC per kwh State ITC FIT per kwh AZ % to $1K - CA-IOUs - - ~$.01-$ Notes Last update: 3/7/14 CO-Xcel - - $.05 for Under 10kW HI % to $5K $0.189-$0.218 KS % - LA % to $12.5K - MN MO $1.5 to 25kW - $ year SREC (closed) NM % to $9K - NV $0 to 10kW OR $1.00+ to 10kW - - $2.1/W to 2.9kW - ITC over 4 years TX $0.00-$ DSIRE database: OnGrid Solar, All Rights Reserved. Economics of Solar PV - 27 State / Province Rebate per W Residential Incentives East PBI per kwh SREC per kwh State ITC FIT per kwh CT $1.25 to 5kW Notes Last update: 3/7/14 DE $1.25 to 5kW - $.02-$ SREC auction FL GA MA $0.40+ to 5kW - $.10-$.30 15% to $1K - SREC auction, 10 yr MD $1000 flat - $.12-$ SREC auction, 15 yr NC % to $10.5K $.10 for 5 NJ - - $.09-$ SREC auction, 15 yr NY LIPA $0.66 to 10kW % to $5K $.22 for 20 yrs Choose Rebate or FIT NY NYSERDA $1.00 to 25kW % to $5K - OH - - $.03-$ <10kW only, less for larger ON CAD$.396 for <10kW only, less for 20 years larger PA $.75 to 10kW $.02-$ SREC auction to 2021 WI DSIRE database: OnGrid Solar, All Rights Reserved. Economics of Solar PV - 28 Commercial Incentives State / SREC per Notes Rebate per W PBI per kwh State ITC FIT per kwh Province kwh Last update: 3/7/14 AZ % to $25K - $0.00-$0.25 to $0.00-$.032 ~$.06-$.205 for Choose one of rebate, CA-IOUs ~$.01-$.02-1MW for 5yrs 20 PBI, or FIT CO - - $0.05 for 10yr - - Up to 10kW GA HI % to $500K $0.189-$0.218 LA % to $12.5K - MA $0.40 to 5kW ~$.10-$ SREC auction, 10 yr $0.06 to MD - $.12-$ SREC auction, 15 yr 100kW MO $ NC % to $2.5M $.10 for 5 NJ - - $.09-$ SREC auction, 15 yr NM - $ % to $9K - NY LIPA $.66 to 10kW NY $1.00 to 50kW NYSERDA CAD$.345 for ON kW 20 $1.10-$1.40 to OR % to $20M - ITC over 5 years 35kW PA - - $.02-$ SREC auction to 2021 TX $0.00-$ OnGrid Solar, All Rights Reserved. Economics of Solar PV - 29 Performance Related Incentives Types of Performance Related Incentives: FITs Feed-In Tariffs PBIs Performance Based Incentives SRECs Solar Renewable Energy Certificates Incentives paid for actual kwh produced Missed production reduces incentive received Motivates attention on the system Monitoring A Must often required 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 30

8 FITs: Feed-In Tariffs FITs are the only ongoing payment for owning the system No Net Metering savings (no savings on the electric bill, which makes FITs different from PBIs and SRECs) FITs do combine with the Federal Investment Tax Credit Very popular in Europe, Ontario. Becoming popular in U.S. (FL,VT, HI, national?) CA CREST program Risk losing Net Metering 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 31 PBIs & RECs PBI: Performance Based Incentive REC: Renewable Energy Credits (Green Value), usually called SRECs Paid in addition to Net Metering savings on the bill (which makes them different from FITs) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 32 SRECs, Green Tags, TRCs SRECs = Solar Renewable Energy Credits/Certificates TRC = Tradable Renewable Certificates Green Tags = RECs = TRCs = SRECs What are these? The green value part of a solar kwh The legal rights to greenness Electricity (kwh) Generating Plant (kwh) Green Tags (kwh) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 33 REC / SREC Value SRECs have value to other consumers Those who can t/won t get solar directly Green-e Certified RECs: Utilities who need to get into compliance with government RPS requirements Programs or government authorized trading boards Value ranges from 1 to 30 /kwh Depends on location, type & term Depends on state mandate for S-RECs 1kW produces around 1,100-1,600 kwh At 1, worth $11 to $16 per year per kw Requires: aggregation, monitoring, verification 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 34 State / Province Rebate per W Residential Incentives West PBI per kwh SREC per kwh State ITC FIT per kwh AZ % to $1K - CA-IOUs - - ~$.01-$ Notes Last update: 3/7/14 CO-Xcel - - $.05 for Under 10kW HI % to $5K $0.189-$0.218 KS % - LA % to $12.5K - MN MO $1.5 to 25kW - $ year SREC (closed) NM % to $9K - NV $0 to 10kW OR $1.00+ to 10kW - - $2.1/W to 2.9kW - ITC over 4 years TX $0.00-$ DSIRE database: OnGrid Solar, All Rights Reserved. Economics of Solar PV - 35 State / Province Rebate per W Residential Incentives East PBI per kwh SREC per kwh State ITC FIT per kwh CT $1.25 to 5kW Notes Last update: 3/7/14 DE $1.25 to 5kW - $.02-$ SREC auction FL GA MA $0.40+ to 5kW - $.10-$.30 15% to $1K - SREC auction, 10 yr MD $1000 flat - $.12-$ SREC auction, 15 yr NC % to $10.5K $.10 for 5 NJ - - $.09-$ SREC auction, 15 yr NY LIPA $0.66 to 10kW % to $5K $.22 for 20 yrs Choose Rebate or FIT NY NYSERDA $1.00 to 25kW % to $5K - OH - - $.03-$ <10kW only, less for larger ON CAD$.396 for <10kW only, less for 20 years larger PA $.75 to 10kW $.02-$ SREC auction to 2021 WI DSIRE database: OnGrid Solar, All Rights Reserved. Economics of Solar PV - 36

9 SREC Stability Compliance SRECs often purchased by utility 1 year at a time Longer-term contracts emerging: NJ 3-year contracts ~$.57-$.60/kWh NJ 4 th & 5 th year pricing ~ $.40-$.45/kWh NJ 6 th & 7 th year pricing ~ $.20-$.30/kWh No known contracts signed over 5 years Contracts & sales to aggregators: Pros & Cons 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 37 Rebates Up-Front Reductions in System Cost Rebates are paid in addition to savings on the bill Typically received days after inspection Sources of Rebates: Utility State City U.S. Dept. of Ag or U.S. Dept. of Interior 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 38 Rebate Programs for Renewables. / January States, + Washington DC and 2 territories offer rebates for renewables. Residential Incentives West Notes: This map does not include rebates for geothermal heat pumps, daylighting or other energy efficiency technologies. DSIRE database: OnGrid Solar, Credit: All Rights DSIRE, Reserved. a project of Council Economics (IREC) of Solar PV - 39 the N.C. Solar Center and the Interstate Renewable Energy 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 40 State / Province Rebate per W PBI per kwh SREC per kwh State ITC FIT per kwh AZ % to $1K - CA-IOUs - - ~$.01-$ Notes Last update: 3/7/14 CO-Xcel - - $.05 for Under 10kW HI % to $5K $0.189-$0.218 KS % - LA % to $12.5K - MN MO $1.5 to 25kW - $ year SREC (closed) NM % to $9K - NV $0 to 10kW OR $1.00+ to 10kW - - $2.1/W to 2.9kW - ITC over 4 years TX $0.00-$ State / Province Rebate per W Residential Incentives East PBI per kwh SREC per kwh State ITC FIT per kwh CT $1.25 to 5kW Notes Last update: 3/7/14 DE $1.25 to 5kW - $.02-$ SREC auction FL GA MA $0.40+ to 5kW - $.10-$.30 15% to $1K - SREC auction, 10 yr MD $1000 flat - $.12-$ SREC auction, 15 yr NC % to $10.5K $.10 for 5 NJ - - $.09-$ SREC auction, 15 yr NY LIPA $0.66 to 10kW % to $5K $.22 for 20 yrs Choose Rebate or FIT NY NYSERDA $1.00 to 25kW % to $5K - OH - - $.03-$ <10kW only, less for larger ON CAD$.396 for <10kW only, less for 20 years larger PA $.75 to 10kW $.02-$ SREC auction to 2021 WI DSIRE database: OnGrid Solar, All Rights Reserved. Economics of Solar PV CA State Incentive Programs CEC < 30kW Rebate CPUC / SelfGen > 30kW Rebate CSI IOUs Commercial, Gov t / Non-Profit, & Residential Retrofits CPUC supervised ~$2 Bil 3,000 MW Total CSI Municipal Utility Incentive Programs Self Run ~$800 Mil CEC Pilot PBI CEC NSHP Residential New Construction in IOUs CEC run/supervised $350 Mil 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 42

10 CEC NSHP California Energy Commission New Solar Home Partnership (CEC NSHP) Residential new construction only NSHP Incentive $1.50/watt base if standard feature in development $1.25/watt base otherwise $2.20/watt for Affordable Housing Adjusted for performance via: NSHP calculator Declines over time as MW targets are reached Must exceed Title 24 efficiency Applications & Guidebook at: California Solar Initiative (CSI) Utility connected systems only Stand alone not eligible Incentives proportional to performance Must have monitoring / metering on system Applications & Guidebook at: OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 43 EPBB Rebate Required for <10kW Optional for 10-30kW CSI for IOUs PG&E, SCE, SDG&E Customers Commercial, Gov t / Non-Profit, Residential Retrofits IOU/CCSE administered CPUC supervised 33% Res, 67% Non-Res PBI Required for >30kW Optional for 10-30kW 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 45 CSI EPBB Rebate EPBB: Expected Performance Based Buydown Adjusted for Expected Performance: Tilt, Orientation, Shading, Location, Module Temperature (due to lack of air flow) EPBB Design Factor Calculator: Design Factor allows up to 100% of base incentive Upfront rebate payment to reduce initial cost Only CSI incentive for systems under 10kW Popular option for systems 10kW to 30kW Energy Efficiency Audit required 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 46 CSI PBI: Performance Based Incentive Paid for all kwh produced for first 5 years Actual performance (risk) Does not reduce upfront cost (in lieu of rebate) Still get savings on electric bill Optional for systems 10-30kW Only CSI incentive for systems over 30kW 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 47 CSI Metering & Monitoring Requirements Metering: All systems must have meter <10kW: Inverter built-in (5% accurate) >10kW also requires monitoring Monitoring: Required for systems >10kW and all PBI systems, even with rebate, regardless of cost Performance Monitoring Reporting Service (PMRS) 2% accurate meter (+ $1,000-$2,000 for meter) On-going costs: $15/mo for PRMS service $15/mo for cellular data service 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 48

11 CSI Incentive Levels & Steps CSI Trigger Tracker EPBB Payments (per Watt) PBI Payments (per kwh) EPBB Payments (per Watt) PBI Payments (per kwh) Government Government Government Government Statewide Statewide Step Residential Commercial / Residential EPBB Commercial Payments / (per Watt) MW in Step Step Residential Commercial / Residential Commercial Non-Profit / Non-Profit MW in Step 1 50 n/a n/a n/a n/a n/a n/a Gover Non-Profit 2 70 $2.50 Statewide $2.50 $3.25 Non-Profit $0.39 $0.39 $ n/a n/a n/a Step $2.20 $2.20 $2.95 n/a n/a Residential $0.34 $0.34 n/a Commercial $0.46 / $1.90 MW $1.90 in Step $2.65 $0.26 $0.26 $ $1.55 $1.55 $2.30 $0.22 $0.22 $ $2.50 $2.50 $3.25 $0.39 $0.39 $0.50 Non $1.10 $1.10 $1.85 $0.15 $0.15 $ $2.20 $2.20 $ $ $0.65 $ $0.34 $1.40 $0.46 $0.09 n/a $0.09 $0.19 n/a n 8** 250 $0.35 $0.35 $1.10 $0.044 $0.044 $ $1.90 $1.90 $2.65 9** 285 $0.26 $0.25 $0.25 $0.26 $ $0.37 $0.032 $0.032 $0.114 $2.50 $2.50 $3 10** 350 $0.20 $0.20 $0.70 $0.025 $0.025 $ $1.55 $1.55 $2.30 $ $0.22 $0.32 $2.20 $2.20 $ $1.10 $1.10 $1.85 $0.15 $0.15 $ $1.90 $1.90 $ $0.65 $0.65 $1.40 $0.09 $0.09 $ $1.55 $1.55 $ $0.35 $0.35 $1.10 $0.05 $0.05 $ $0.25 $0.25 $0.90 $ $0.03 $0.12 $1.10 $1.10 $ $0.20 $0.20 $0.70 $ $0.03 $0.10 $0.65 $0.65 $ $0.35 $0.35 $ $0.25 $0.25 $ Trigger Tracker 10 website: $0.20 As of 11/26/13 $0.20 $ Program Data & Statistics: OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 50 Step CSI Trigger Tracker EPBB Payments (per Watt) PBI Payments (per kwh) Government Government Government Government Statewide EPBB Payments (per Watt) Statewide Residential Commercial / Residential Commercial / Step Residential PBI Payments Commercial (per / kwh) Residential EPBB Commercial Payments / (per Watt) MW in Step MW in Step Non-Profit Non-Profit Non-Profit Non-Profit Government1 50 n/a n/a n/a Government n/a n/a n/a Gover Statewide 2 70 $2.50 Statewide $2.50 $3.25 $0.39 $0.39 $0.50 Step Residential Commercial / 3 Residential 100 Step $2.20 Commercial $2.20 $2.95 Residential $0.34 / $0.34 Commercial $0.46 / MW in Step $1.90 MW $1.90 in Step $2.65 $0.26 $0.26 $0.37 Non-Profit $1.55 $1.55 $2.30 $0.22 Non-Profit $0.22 $0.32 Non $1.10 $1.10 $1.85 $0.15 $0.15 $ n/a n/a n/a n/a 1 $0.65 $ n/a $1.40 $0.09 n/a n/a $0.09 $0.19 n/a n 8** 250 $0.35 $0.35 $1.10 $0.044 $0.044 $ ** 285 $0.25 $0.25 $0.90 $0.032 $0.032 $ $2.50 $2.50 $3.25 $ $0.39 $2.50 $0.50 $2.50 $3 10** 350 $0.20 $0.20 $0.70 $0.025 $0.025 $ $2.20 $2.20 $2.95 $ $0.34 $2.20 $0.46 $2.20 $ $1.90 $1.90 $2.65 $ $0.26 $1.90 $0.37 $1.90 $ $1.55 $1.55 $2.30 $ $0.22 $1.55 $0.32 $1.55 $ $1.10 $1.10 $1.85 $ $0.15 $1.10 $0.26 $1.10 $ $0.65 $0.65 $1.40 $ $0.09 $0.65 $0.19 $0.65 $ $0.35 $0.35 $1.10 $ $0.05 $0.35 $0.15 $0.35 $ $0.25 $0.25 $0.90 $ $0.03 $0.25 $0.12 $0.25 $0 Trigger Tracker 10 website: $0.20 As of 3/6/13 $0.20 $0.70 Trigger Tracker $ website: $0.03 $0.20 $0.10 As of 2/10/13 $0.20 $0 Program Data & Statistics: Program Data & Statistics: n/a n/a n/a n/a n/a n/a 2 70 $2.50 $2.50 $3.25 $0.39 $0.39 $ $2.20 $2.20 $2.95 $0.34 $0.34 $ $1.90 $1.90 $2.65 $0.26 $0.26 $ $1.55 $1.55 $2.30 $0.22 $0.22 $ $1.10 $1.10 $1.85 $0.15 $0.15 $ $0.65 $0.65 $1.40 $0.09 $0.09 $0.19 8** 250 $0.35 $0.35 $1.10 $0.044 $0.044 $ ** 285 $0.25 $0.25 $0.90 $0.032 $0.032 $ ** 350 $0.20 $0.20 $0.70 $0.025 $0.025 $ OnGrid Solar, All Rights Reserved. Economics of Solar PV - 51 CSI Trigger Tracker EPBB Payments (per Watt) PBI Payments (per kwh) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 52 Tax Benefit Overview State Tax Credits Federal Investment Tax Credit (ITC) Federal & State Depreciation Only apply to taxable entities (not schools, non-profits, gov t, etc) Disclaimer: I m not a CPA or lawyer, and am not providing tax advice. Seek qualified professional help 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 53 State & Local Tax Incentives Tax Credit vs. Tax Deduction $1,000 Federal tax credit reduces tax owed by $1,000 $1,000 Federal tax deduction reduces income by $1,000 which reduces taxes owed by $1,000 * tax rate = $1,000 * ~28% = $280 State Tax Credits are worth about 65-80% of face value due to reduced federal deduction of the now reduced state taxes Effectively federally taxed Property Tax Exemption: CA - Com & Res to OnGrid Solar, All Rights Reserved. Economics of Solar PV - 54

12 Personal tax credit(s) only Corporate tax credit(s) only Tax Credits for Renewables / January 2013 Puerto Rico DC 24 states offer tax credits for renewables Residential Incentives West Personal + corporate tax credit(s) Notes: This map does not include corporate or personal tax deductions or exemptions; or tax incentives for geothermal heat pumps OnGrid Solar, Credit: All Rights DSIRE, Reserved. a project of the N.C. Solar Center DSIRE database: Council Economics (IREC) of Solar PV - 55 and the Interstate Renewable Energy 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 56 State / Province Rebate per W PBI per kwh SREC per kwh State ITC FIT per kwh AZ % to $1K - CA-IOUs - - ~$.01-$ Notes Last update: 3/7/14 CO-Xcel - - $.05 for Under 10kW HI % to $5K $0.189-$0.218 KS % - LA % to $12.5K - MN MO $1.5 to 25kW - $ year SREC (closed) NM % to $9K - NV $0 to 10kW OR $1.00+ to 10kW - - $2.1/W to 2.9kW - ITC over 4 years TX $0.00-$ State / Province Rebate per W Residential Incentives East PBI per kwh SREC per kwh State ITC FIT per kwh CT $1.25 to 5kW Notes Last update: 3/7/14 DE $1.25 to 5kW - $.02-$ SREC auction FL GA MA $0.40+ to 5kW - $.10-$.30 15% to $1K - SREC auction, 10 yr MD $1000 flat - $.12-$ SREC auction, 15 yr NC % to $10.5K $.10 for 5 NJ - - $.09-$ SREC auction, 15 yr NY LIPA $0.66 to 10kW % to $5K $.22 for 20 yrs Choose Rebate or FIT NY NYSERDA $1.00 to 25kW % to $5K - OH - - $.03-$ <10kW only, less for larger ON CAD$.396 for <10kW only, less for 20 years larger PA $.75 to 10kW $.02-$ SREC auction to 2021 WI DSIRE database: OnGrid Solar, All Rights Reserved. Economics of Solar PV - 57 NC Incentives 35% State Tax Credit (max $10,500 Res, $2.5mil Comm) Duke SRECS $.03/kWh for 5-15 years Progress Rebate: $1/WAC + $4.50/mo/kW (~$.036/ kwh) up to 10kW based on 1500 kwh/kwac/yr Progress PBI: $.18/kWh for kWDC NC Green Power: $.10 FIT + ~$.04 PPA = $.14/ kwh but not guaranteed. Bids req d over 5kW OnGrid Solar, All Rights Reserved. Economics of Solar PV - 58 Other Tax Credits LIHTC Low Income Housing Tax Credit HTC Historic Rehabilitation Tax Credit NMTC New Markets Tax Credit Agricultural Apply in special cases check DSIRE, IRS, tax specialists Might be additive to other tax incentives 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 59 Federal Investment Tax Credit - Residential % Investment Tax Credit (ITC), Sect 25D No Cap (unlimited) Residential not eligible for conversion to Section 1603 Treasury Grant treatment Systems placed in service in IRS Form 5695 Received on next year s tax return (1 year delay) Unused credit can be carried forward thru at least 2016 Not limited by AMT (Alternative Minimum Tax) Important negative tax interaction with Rebates 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 60

13 Federal Investment Tax Credit - Commercial 30% Investment Tax Credit Must be placed in service during % if installed There is no feast which does not come to an end. - Chinese proverb IRS Form 3468 (Sect 48 of Internal Revenue Code) Unused credit can be carried forward 20 years & back 1 Commercial Including home businesses > 20% sqf - with caution Not limited by AMT (Alternative Minimum Tax) Vests at 20% per year (over 5 years) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV Federal Treasury Grant Closed ITC can be converted to Treasury Grant Section 1603 Grant in ARRA (Recovery Act) Same general features and intended functionality as the ITC, but better: Paid < 60 days of placed in service or application Usable even if no tax appetite (effectively a refundable ITC or Federal Rebate) Commercial systems only Placed in service in only, or Construction Initiated , completed by % non-refundable cost spent by 2011 Treasury application: OnGrid Solar, All Rights Reserved. Economics of Solar PV Treasury Grant Limitations Commercial systems only Limited to IRC Sec 48 and some Sec 45 Pass-thru entities (partnerships, LLCs, S-corps) can use grant, as long as none of the recipients is nontaxable (and therefore disqualified) I.e. One disqualifies all, regardless of small % Blocker C-Corporations can allow Allows transfer of ownership Recapture of Grant or ITC on permanent cessation Grant may be state taxable in certain cases, see: papers/rg1078_section1603_state_matrix.pdf 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 63 FMV: Fair Market Value for Grant/ITC Should not be bargain fixed price (at termination) Determined by independent appraiser at time of exercise or tax valuation: Method 1 - Cost-Based: Actual cost to build, including profit & soft costs including only eligible property* Typically 10-20% markup allowed for Sale-Leasebacks Developer fee in basis shouldn t be more than 3-5% Method 2 - Market Based: Estimated thru comparable sales of eligible property Method 3 - Income Based: Discounted value of future cash flow not considered reliable, but is used regularly in leasing and PPAs *Most preferred 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 64 FMV: Fair Market Value for Grant/ITC Determined by independent appraiser: Method 1 - Cost-Based: Actual cost to build, including profit & soft costs, only for eligible property (most preferred by IRS) Method 2 - Market Based: Estimated thru comparable sales of eligible property Method 3 - Income Based: Discounted value of future cash flow not considered reliable, but is used regularly in leasing and PPAs 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 65 Treasury 1603 Cost Basis Analyses for FMV Residen(al SizeRange <10kW Residen(al/ Small Commercial 10=100 kw Commercial 100=1,000 kw Large Commercial /U(lity >1MW TypicalSize 5kW 25kW 250kW 2MW Turnkey Priceper WaG +/=$7 +/=$6 +/=$5 +/=$4 Treasury Guidance Paper: N%20Evaluating_Cost_Basis_for_Solar_PV_Properties%20final.pdf June OnGrid Solar, All Rights Reserved. Economics of Solar PV - 66

14 Placed In Service IRC: Ready & available for its intended use SEIA Guide to Federal Tax Incentives for Solar Energy (Available free to SEIA members at: ): Equipment delivered and construction / installation completed Minor tasks like painting need not be finished Taxpayer has taken legal title and control Pre-operational tests demonstrate the equipment functions as intended Taxpayer has licenses, permits, and PTO (permission to operate) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 67 Rebate Tax Interactions Sec 136(b) - No Double Benefit If the rebate is non-taxable, the federal ITC is on amount after rebate If rebate is taxable, then federal ITC is on amount before rebate CA PV Rebates are not state taxable in CA, may vary in other states; check w/ enacting law, local SEIA chapter, state energy office 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 68 Rebate May Be Federally Taxable 1099 tax forms have been issued to recipients Section 136(a) of IRS Code: Utility (ratepayer funded) direct or indirect rebates for energy conservation for dwellings (i.e.. residential) are not taxable PV is energy conservation by precedent IRS hasn t publicly ruled on PV rebates from: CCSE & CEC Oregon private letter ruling (PLR) isn t precedent Residential rebates from ratepayer funds may be tax exempt because of Section 136 Rebates/grants from state/local general funds probably taxable If rebate requires transfer of RECs, it s probably taxable (IRS PLR ) Info courtesy Mark Bolinger, LBL 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 69 Rebate Tax Residential Exercise Is it better to have a taxable or non-taxable residential rebate? Why? What does it depend on? 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 70 Tax Credit Example 1 30% Tax Bracket (Residential) Non-Taxed Rebate $100K System Cost -$20K Rebate $0K Rebate Tax $80K Net Cost After Rebate -$24K ITC Tax Credit Value* =$56K Net Cost *30% federal ITC rate **30% federal marginal tax rate (30% tax bracket) Rebate Tax Due even if rebate goes to the installer Taxed Rebate $100K System Cost -$20K Rebate +$6K Rebate Tax** $86K Net Cost After Rebate -$30K ITC Tax Credit Value* =$56K Net Cost 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 71 Tax Credit Example 2 20% Tax Bracket (Residential) Non-Taxed Rebate $100K System Cost -$20K Rebate $0K Rebate Tax $80K Net Cost After Rebate -$24K ITC Tax Credit Value* =$56K Net Cost *30% federal ITC rate **20% federal marginal tax rate (20% tax bracket) Taxed Rebate $100K System Cost -$20K Rebate +$4K Rebate Tax** $84K Net Cost After Rebate -$30K ITC Tax Credit Value* =$54K Net Cost 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 72

15 Tax Credit Example 3 40% Tax Bracket (Residential) Non-Taxed Rebate $100K System Cost -$20K Rebate $0K Rebate Tax $80K Net Cost After Rebate -$24K ITC Tax Credit Value* =$56K Net Cost *30% federal ITC rate **40% federal marginal tax rate (40% tax bracket) Each 1% shift in tax bracket changes the rebate 1% Taxed Rebate $100K System Cost -$20K Rebate +$8K Rebate Tax** $88K Net Cost After Rebate -$30K ITC Tax Credit Value* =$58K Net Cost 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 73 PBI & REC Taxation: Residential PBI probably taxable* If not, IRS may require NPV of future PBI payments to calculate reduction in ITC basis? Unknown - How to calculate? RECs, SRECs probably also taxable Neither is likely to affect the ITC/1603 basis *Suggested by Mark Bolinger, LBL 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 74 PBI & REC Taxation: Commercial PBI & RECs probably taxable Section 136 is for residential dwellings only No known commercial exemptions Federal Depreciation Depreciation = Commercial tax deduction spread over time MACRS 5-Year Accelerated Depreciation (1/2 yr conv.) MACRS: Modified Accelerated Cost Recovery System IRS Form 4562 Can choose 12 year straight-line depreciation Equivalent of tax deducting system s basis over 5.5 years Net Value = Depreciation Basis * Tax Rate Net Value = (System ITC basis - 1/2 ITC) * Tax Rate Net Value = System ITC basis * 85% * Tax Rate Regular Schedule: 20%, 32%, 19.2%, 11.52%, 11.52%, 5.76% Commercial only (including home businesses >50% by sqf) Up to 20 year carry-forward 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 76 Depreciation - CA State Corporate: 12 Year Straight Line method Non-Corporate: MACRS 5-Year (Sole-Proprietors, LLP, etc) State Depr Basis is Top Line Cost minus Rebate & State Tax Credit Commercial only (including home businesses) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 77 Rebate Tax Commercial Exercise Is it better to have a taxable or non-taxable commercial rebate? Why? What does it depend on? 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 78

16 Tax Credit & Depreciation Example (Commercial) Non-Taxed Rebate $150K System Cost -$50K Rebate $0K Rebate Tax $100K Net Cost After Rebate -$30K ITC Tax Credit Value -$35K Depr Value (85K * 41%*) =$35K Net Cost *41% = combined net federal & state tax rate (35% Federal, 8.84% CA State) Taxed Rebate $150K System Cost -$50K Rebate +17.5K Rebate Tax (35% Fed rate only) $117.5K Net Cost After Rebate -$45K ITC Tax Credit Value -$52K Depr Value (127.5K * 41%*) =$20.5K Net Cost If commercial, want rebate taxable (no choice) Then tax credit and depreciation are on amount before rebate Better to pay tax on rebate, and get more tax credit and depreciation 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 79 Section 179 Expense Section 179 converts some small business depreciable property into 1st year expense (deduction) Deduction limit: $500K for 2010 & 2011 Enhanced in 2010 Small Business Jobs & Credit Act of 2010 Drops to $25K in 2012 (unless extended) Phase-out begins at 4x limit: ~$2,000,000 in $1 for $1 reduction, so at 5x, Sect. 179 has no value Phase-out basis is sum of all 179 eligible property put in service in that year If sum > 5x (>$2.5million), then can t use 179 at all Can including PV in Home Businesses if >50% business use of asset (ie > 50% of sqf is for business) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 80 Problems with Section 179 Conflicting language, not 100% clear if available with ITC or Treasury Grant Few project & customers qualify Must fit within limits & Aren t already using it for other property Can hurt customer too could cause loss of Sec. 179 on other eligible property Examples that don t qualify: Already Section 179 using for other purchases Projects over $500K depending are limited Phased out if total of all is >$2,500,000 Kept out of OnGrid to stay conservative 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 81 Small Business Carry-Back of NOL In 2009(+?), small businesses can carry back Net Operating Losses up to 5 years $15 Million Gross Receipts limitation Normally only 2 year carry-back Part of 2009 Economic Stimulus 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 82 Tax Benefits ITC & MACRS reduce customer cost, but not up-front Not available to all customers MACRS Depr. is affected by AMT Ask about customers tax appetite Customers - beware of optimistic sales claims Agenda Overview of the Variables Costs & Incentives Electric Rate Structures System Performance Financial Analysis Methods Solar Analysis Tools Interactive Examples 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 84

17 . Agenda Top Line Cost Incentives Electric Rates Usage & Patterns Net Cost Savings Calcs Financial Results: - Payback - Resale - Cash Flow - IRR - APY Electric Rate Structures System Performance Financial Variables 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV OnGrid Solar, All Rights Reserved. Economics of Solar PV - 86 Electric Rate Structures Overview Net Metering Options for Solar - Net Metering Customer Classes Types of Rate 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 87 Sell Power to the Utility by Day Buy Power at Night and Winter Exchange at Retail 100% Efficient Battery Annual Cycle $0 minimum bill* *Different with Calif. AB OnGrid Solar, All Rights Reserved. Economics of Solar PV - 88 Net Metering Average monthly usage Net Metering Average monthly usage kwh/mo 750 Roll over PV system production kwh/mo $/mo 750 The surplus covers the shortfall, and your yearly bill is zero. PV system production May October April SUMMER WINTER Slide courtesy Pete Shoemaker, PG&E Pacific Energy Center 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 89 May October April SUMMER WINTER Gets more complicated with TOU and Net Metering and AB920 Slide courtesy Pete Shoemaker, PG&E Pacific Energy Center 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 90

18 California AB 920 Excess Net Metering Credit Net Metering. / July 2013 Payment for excess kwh production Can apply as soon as notification is received ~$.04/kWh, adjusted periodically Excess SRECs go to the utility Properly designed systems going for $min bills should never be able to take advantage of this if PV & EE are designed/analyzed up front and inconsideration of each other 43 states, + Washington DC & 4 territories,have adopted a net metering policy. Note: Numbers indicate individual system capacity limit in kilowatts. Some limits vary by customer type, technology and/or application. Other limits might also apply. This map generally does not address statutory changes until administrative rules have been adopted to implement such changes. Credit: DSIRE,Reserved. a project of the N.C. Solar Center and the Interstate Renewable Energy Council (IREC) of Solar PV Economics 2014 OnGrid Solar, All Rights 91 Electric Rate Structures Overview Three Customer Classes Residential, Commercial, Agricultural Usage Types of Rate Penalizes larger residential users Flat: Simple rate, not time or usage dependent Tiered: Rates increase with usage Time of Use (TOU): Rate varies during day depends on when energy is used Tiered-TOU: Varies with usage & time of day Demand Economics of Solar PV OnGrid Solar, All Rights Reserved. Residential Tiered Usage Before Solar Excellent motivator of efficiency, conservation & PV Tiers cause Tears 788, Tier , Tier 2 Residential only (in general) 375, Tier 1 93 Economics of Solar PV OnGrid Solar, All Rights Reserved. PG&E Baseline Territories Cancelling Revised Revised Cal. PUC Sheet No. Cal. PUC Sheet No. MAP SHOWING BASELINE REGIONS FOR DETERMINING BASELINE QUANTITIES Sheet 1 SCE Baseline Territories Variations: Location: P-Z Season: Summer or Winter Type: Electric Only or Both Electric & Gas Baseline = Tier 1 = Coast to High Desert Season: Summer or Winter Type: Electric Only or Both Electric & Gas Baseline = Tier 1 = 50-70% of average user s use Tier 1 + Tier 2 Avg Avg Economics of Solar PV - Variations: Locations: 5-10, % of average user s use 2014 OnGrid Solar, All Rights Reserved E 8314-E Tier 1 + Tier 2 Usage (kwh/mo at top of tier) & Tier - of Joy Southern California Edison Rosemead, California (U 338-E) 92 Residential Tiered Rates Cents per kwh Economics of Solar PV OnGrid Solar, All Rights Reserved. 95 Economics of Solar PV OnGrid Solar, All Rights Reserved. (To be inserted by utility) Advice 2386-E Decision D10 Issued by Akbar Jazayeri Vice President (To be inserted by Cal. PUC) Date Filed Sep 30, 2009 Effective Resolution 96

19 SCE Baseline Quantities (kwh/day) OnGrid Solar, All Rights Reserved. Economics of Solar PV - 97 SDG&E Baseline Territories Variations: Locations: Coast Inland Mountain Desert Season: Summer Winter Type: Electric Only Both Electric & Gas Baseline = Tier 1 = 50-70% of average user s use Tier 1 + Tier 2 Avg 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 98 PG&E Residential Tiered Rates Cents per kwh , Tier 1 Residential Tiered Usage Before Solar Usage 488, Tier 2 788, Tier 3 23 /kwh surcharge 13 /kwh base charge Usage (kwh/mo at top of tier) & Tier Tiered Rates: Base is 13 /kwh Examples Top is 36 /kwh (Surcharge currently +23 /kwh for Tier 4) 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 99 SDG&E Residential Tiered Rates Residential only Penalizes larger residential users Excellent motivator of efficiency, conservation & PV Surcharge currently +14 /kwh for Tier 4 Base is 14 /kwh Top is 28 /kwh Cents per kwh , Tier 1 Residential Tiered Usage Before Solar Examples 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV Usage 389, Tier 2 629, Tier 3 14 /kwh surcharge 14 /kwh base charge Usage (kwh/mo at top of tier) & Tier NJ Residential Tiered Rates Cents per kwh Residential Tiered Usage Before Solar 25 Usage Reverse Tiers Commercial rates: NY ConEd: $0.20,$0.17 PA Allegheny Power: $0.12,$0.09,$0.08,$.07 PA PECO GS: $0.25,$0.13,$0.09,$ Residential xx Tiered Usage Before Solar Usage JCP&L 0 600, Tier 1 Usage (kwh/mo at top of tier) & Tier Base is 15.3 /kwh (summer only, 16.7 /kwh winter) Top is 21.1 /kwh (summer only, 16.7 /kwh winter) PSE&G and ACE are also tiered on Residential Examples 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV Cents per kwh OnGrid Solar, All Rights Reserved. Economics of Solar PV - 102

20 PG&E Tiered Rate System NJ: JCPL Tiered Rate System Residential Tiered Usage Before Solar Usage Net Usage Residential Tiered Usage With Solar Production 25 Residential Tiered Usage Before Solar Usage 25 Net Usage Residential Tiered Usage With Solar Production Cents per kwh Cents per kwh Cents per kwh Cents per kwh , Tier 1 488, Tier 2 788, Tier 3 Usage (kwh/mo at top of tier) & Tier Use/Bill Before Solar Marginal Use at OnGrid Solar, All Rights Reserved. Economics of Solar PV , Tier 1 488, Tier 2 788, Tier 3 Usage (kwh/mo at top of tier) & Tier Small Net Use After Solar Marginal Use at Solar systems offset the most expensive usage first Examples 0 600, Tier 1 Usage (kwh/mo at top of tier) & Tier Use/Bill Before Solar Marginal Use at OnGrid Solar, All Rights Reserved. Economics of Solar PV , Tier 1 Usage (kwh/mo at top of tier) & Tier Small Net Use After Solar Marginal Use at Solar systems offset the most expensive usage first Examples Cents per kwh SDG&E Tiered Rate System 299, Tier 1 Residential Tiered Usage Before Solar Usage 389, Tier 2 629, Tier 3 Usage (kwh/mo at top of tier) & Tier Use/Bill Before Solar Marginal Use at 28 Residential Tiered Usage With Solar 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV Cents per kwh Net Usage 299, Tier 1 389, Tier 2 Production 629, Tier 3 Usage (kwh/mo at top of tier) & Tier Small Net Use After Solar Marginal Use at Solar systems offset the most expensive usage first Examples Typical Customers & Loads What kind of customers are: High in the tiers? Low in the tiers? What types of loads, appliances, & devices cause high tiers? How do we profile our customers for Target Marketing? 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV Simplified Time of Use (TOU, East) Total kwh Usage in each Time Period Simplified Time of Use (TOU,West) Total kwh Usage in each Time Period Peak rates are Summer All Day - high cost Off-Peak rates are Nights & Weekends - low cost Hours are usually Daylight Savings (vs. Solar Time) Types vary, and not available for all utilities or customers 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV Peak rates are Summer Afternoons - high cost Off-Peak rates are Nights, Mornings & Weekends Hours are Daylight Savings (vs. Solar Time) Types vary, and not available for all utilities or customers 2014 OnGrid Solar, All Rights Reserved. Economics of Solar PV - 108