Economics of Solar Electric (PV) Systems

Transcription

1 Economics of Solar Electric (PV) Systems GEO Spring Workshop Dublin, OH May 18, 2013 Alan Frasz President Typical Questions Is solar really viable in Ohio? What s this going to cost me? What will it do for me? What will I save? How do I convince my management team (or spouse) that this is a good idea? How can we afford it? What are the important evaluation criteria? Copyright 2013 Dovetail Solar and Wind 1

2 Dovetail Solar and Wind Founded in one of Ohio s oldest & largest renewable energy design and installation firms Implement Solar Electric, Wind, & Solar Thermal systems throughout Ohio and surrounding states Offices in Athens, Cleveland, Columbus, Cincinnati, Toledo and Southern Michigan Over 300 systems installed (more than 5.1 MegaWatts) Sample Installations Raymond Ku home Sean Jones home Twenty First Century Energy Corp. Apple Hill Orchards Kilpatrick Farm Melink Corp. Cincinnati Zoo Schott Education Ctr. Copyright 2013 Dovetail Solar and Wind 2

3 Key Tenants Solar systems provide outstanding value Reliable, high quality systems Energy cost savings for 35+ years Sustainable business practices Support manufacturing with USA made components Create local direct and indirect jobs Utilize trained, NABCEP certified installers, licensed electricians and professional engineers Renewable Energy makes good economic sense for Ohio Does Solar Work in Ohio? Ohio Insolation: A measure of the amount of sun falling on a specific location Germany Even with less solar energy resource, Germany has 1,000 times more solar energy systems in production than Ohio. Copyright 2013 Dovetail Solar and Wind 3

5 Solar Electric Systems Photovoltaics (PV) Photovoltaic cells convert sunlight into direct current (DC) electric energy Inverter(s) convert to AC power compatible with your building & the grid Variety of types & styles Non-mechanical, maintenance free Work for 40+ years Copyright 2013 Dovetail Solar and Wind 5

6 Crystalline Silicon Modules Most common type of solar electric Efficiency: 15-21% Very Reliable, Long History year warranties Declining Costs Carol Bintz Residence 6.3 KW Solar PV Copyright 2013 Dovetail Solar and Wind 6

17 Thin Film Solar Multiple material types Amorphous Silicon Cadmium Telluride Copper-Indium-Gallium- Diselenide (CIGS) Efficiency: 6-10% Can Be Made Flexible Long-term Potential for Lower Cost Per Watt Ohio University, Innovation Center Copyright 2013 Dovetail Solar and Wind 17

19 Solar PV System Components Solar Array Power Inverter(s) Balance of System Wire, Conduit Fusing, Grounding Disconnects Meters, Monitors Charge Controller* Battery Bank* * Optional components Copyright 2013 Dovetail Solar and Wind 19

20 Solar s Time Has Arrived Very Reliable, Proven Technologies Improved Efficiencies Good Material Availability Dramatically Lower Prices Enhanced Federal Incentives Solar Renewable Energy Credits (SRECs) High Favorability and Desirably with Businesses & Consumers Solar Performance Has Improved Improved Module Efficiencies Example: 2006: Sharp 200 watt 12.3% efficiency 2012: SolarWorld 270 watt 16.1% efficiency 21% efficiency available in commercial products for premium $$$ Inverter Efficiencies Improved 2006: typically 93% to 95% efficient 2012 : typically 96% to 97.5% More energy extracted per watt Copyright 2013 Dovetail Solar and Wind 20

21 Solar Prices Have Dropped Dramatically Solar Prices Have Dropped Dramatically Typical Module Cost 2006: 200 watt module $5.00 per watt 2013: 260 watt module $0.85 per watt 30% more power at 83% lower cost! Installed System Cost 2006: ~ $8.30 per watt p 2013: ~ $3.20 per watt 62% reduction in 7 years! Copyright 2013 Dovetail Solar and Wind 21

22 Sample Pricing for Commercial Systems System Payback Depends on client specific parameters: System size, orientation, tilt angle, efficiency Solar irradiance or average wind speed at turbine Current electric usage & Utility rate(s) Tax rates Financed amount & loan interest rate Any planned efficiency improvements or increased electric usage Copyright 2013 Dovetail Solar and Wind 22

23 Impact of Electric Rates A key element in calculating payback for a solar system is the impact of future electric rate increases Wide range of utility rate structures across country 6.5 up to over 25 per kwh Usually assume conservative 4% annual rate increase for financial projections In Ohio, some users have seen >8% annual increase as we transition to new regulations Compounding effect has major impact on your future electric rates Solar generation profile offsets the most expensive (mid-afternoon) utility power Copyright 2013 Dovetail Solar and Wind 23

24 Federal Tax Incentives Available Federal Investment Tax Credit (ITC) 30% Tax Credit on Reimbursed System Cost Must be installed by 2016 No Cap on size of system and credit Residential and Commercial Solar Electric, Solar Thermal, and Wind systems Copyright 2013 Dovetail Solar and Wind 24

25 Federal Tax Incentives Available Federal Modified Accelerated Cost Recovery System (MACRS) for Solar & Wind 5 year Depreciation Schedule for Commercial 50% Bonus 1 st year Depreciation available for systems commissioned in 2013 Depending on tax bracket, can cover up to 42% of system cost Solar Renewable Energy Credits Sell Environmental Attribute of solar energy generation to utility that t is required to produce quantity of clean power or equivalent offset This is in addition to savings from the electricity produced by the solar system SRECs are commodities prices fluctuate based on supply available Can represent significant value for larger commercial systems in Ohio Ex KW Solar System produces 48,134 kwh/yr = Earns 48 x $150 = $8,000 in one year Copyright 2013 Dovetail Solar and Wind 25

27 Solar Renewable Energy Credits SRECs are commodities. Risk versus Reward Spot market short term contract prices higher than long term guaranteed prices Ohio produced SRECs are worth more to Ohio based utilities Currently $28 to $50 per SREC (2.8 to 5.0 per kwh) for 5 year contract Spot market prices range from $38 to $70.00 per SREC AEP REC Purchase Program For American Electric Power customers only Must be in AEP Owned Utility Area Ohio Power, Columbus Southern Copyright 2013 Dovetail Solar and Wind 27

28 AEP Solar PV Residential Incentive For American Electric Power customers only Must be in AEP Owned Utility Area Ohio Power, Columbus Southern Incentive based on system size $1.50 per watt Minimum 2,000 watts Maximum $12,000 or 50% of cost Example: 6,000 watts = $9,000 Incentive is in exchange for 15 years of SRECs System must be installed by June 30, 2013 AEP Solar PV Non-Residential Incentive For American Electric Power customers only Must be in AEP Owned Utility Area Ohio Power, Columbus Southern Incentive based on system size $1.50 per watt Minimum 10,000 watts Maximum $75,000 or 50% of cost Example: 40, watts = $60, Incentive is in exchange for 15 years of SRECs System must be installed by June 30, 2013 Fund Is No Longer Available Copyright 2013 Dovetail Solar and Wind 28

29 Renting Vs. Owning Renting Advantages Minimal Commitment of Funds Minimal Maintenance obligations Easily walk-away Disadvantages No control over pricing always increases No lasting value here today, gone tomorrow Renting Vs. Owning Owning Advantages Not subject to rate increases Creating Equity/Wealth Disadvantages Capital/Payment Commitment Responsible for upkeep & insurance Copyright 2013 Dovetail Solar and Wind 29

30 Financing Evens Out Cash Flow Financing Options: Bank Loan either short or long-term Capital Lease Operating Lease Power Purchase Agreement (PPA) PACE financing Overview of Customer Finance Options Pays for Construction Integrator Pays for Construction Leasing Company (e.g., Key or PNC) PPA Provider Owns Project Lease Payments Pays for Construction PPA Payments Owns and maintains Project Host/Building Owner Owns and maintains Project Offtakes Power Offtakes Power Maintains Project Offtakes Power 1. System Purchase 2. PPA 3. Lease Provides quickest payback time for companies that are able to absorb the tax incentives Fixed power prices over year term provides hedge against increases in electricity Good option to avoid a capital outlay but still enjoy a quick path to ownership Copyright 2013 Dovetail Solar and Wind 30

31 Solar Financing Options Yes Capital Budget and Tax Appetite? Yes System Purchase Operating Lease Power Purchase Agreement Yes OK with Performance Risk? No Credit Capacity and Rating? No No * * Assuming capital budget is available and performance risk is acceptable Summary of Features System Purchase Operating Lease Power Purchase Agreement System Owner You Asset Leasing Company Energy Services Provider Typical Term Life of equipment 7-10 years years Exposed to System Performance Risk? Yes electricity savings depend on system performance Lease payments are fixed. Savings subject to system performance. No Pay only for PVgenerated electricity Tax Benefits You 3 rd Party Owner + 3 rd Party Owner + O&M Responsibility You You 3 rd Party Owner Path to Ownership? Immediate ownership Option at end of lease Option at end of PPA Transaction Complexity Minimum Moderate Higher + Tax benefits flow through to end customer through lower lease/ppa contract prices Copyright 2013 Dovetail Solar and Wind 31

32 Example: 156 kw Commercial System System Cost per Watt $4.07 per STC DC Watt Federal Tax Bracket: 35.0% Location's Avg Peak Sun Hours: 4.0 (Akron area at 10 tilt) Estimated Annual Production: 170, kwh/yr Starting Average Utility Rate: 9.6 /kwh List System Installed Cost $635,000 Federal 30% 1603 Treasury Grant -$190,500 MACRS 5 yr Accelerated Depreciation -$217,805 System Cost After Tax Incentives $226,695 Payback 7.5 yrs. IRR over 25 years is 8.9% Example: 156 kw Commercial System Starting Average Utility Rate: 9.6 /kwh with 4% annual increase System Cost After Tax Incentives $226,695 Savings in First 5 years Utility Savings: $16,324 in 1 st year; for five years: -$94,000 SREC income: $39,100 per year for years 1 to 5: -$195,500 Savings in Second 5 years Utility Savings: $21,724 in 6 th year; for five years: -$116,494 SREC income: $20,040 per year for years 6 to 10: -$102,000 Payback 7.5 yrs. IRR over 25 years is 8.9% Copyright 2013 Dovetail Solar and Wind 32

34 Environmental Impact Example A 156 kw Solar Array over 25 years avoids: 1,328,000 lbs of CO 2, the leading greenhouse gas 4,263 lbs of NO x, which creates smog 3,859 lbs of S0 2, which causes acid rain 263 lbs of particulates which cause asthma Air quality has a direct impact on our healthcare costs Tangible Benefits of Solar PV Lock In The Cost of Electricity Reduce Impact of Electric Rate Increases on Business Cash Flow (or your home budget) Move a portion of operational expenses to depreciable capital costs Provide more predictable operational costs Extra SREC income after reach break-even Copyright 2013 Dovetail Solar and Wind 34

35 Other Tangible Benefits Increased Property Value A Solar PV System Increases the Resale Value of Your Property Government funded study found that home Resale Values increased by $20 for every $1 of reduction in annual utility cost Example A 3.7 KW Solar System produces 4,168 kwh per year = $542 per year Increase in Property Value = 20 x $542 = $10,840 Increases as Utility Electric Rate increases Going Green Has Market Value We at Johnson & Johnson take our corporate responsibilities seriously. By investing in solar electric generation, we make active our commitment to the environment. John Subacus Director, Facility Management Janssen Pharmaceutica Products, L.P. Copyright 2013 Dovetail Solar and Wind 35