Valuing The Return on Solar Projects for Businesses and Government Agencies

Valuing The Return on Solar Projects for Businesses and Government Agencies

EXECUTIVE SUMMARY With rising grid electricity prices and declining solar technology costs, the economic benefits of solar power are becoming increasingly difficult for leading businesses to ignore. Transitioning to solar can save money on energy today and hedge against rising utility rates tomorrow. However, before moving forward with solar, it is important to determine the total energy and savings available over the life of a photovoltaic (PV) installation. Understanding the true value of any business decision requires that you weigh the total benefit against the total cost of that decision, whether you are upgrading machinery, purchasing land, or installing solar technology. In effect, you must determine which option delivers the greatest possible return on your investment. To properly make such an assessment, you need to answer two fundamental questions: How much electricity will your solar installation generate over the lifetime of the system? This is a measure of the total benefit. How does the lifetime cost of the solar electricity produced compare to what you would pay your current provider over that same period? This is a measure of the total cost. Given a choice between utility electricity and solar electricity, conventional wisdom suggests that you go with whichever option or combination of options yields the most energy at the lowest price. This white paper is designed to help you make that assessment, allowing you to determine whether or not a solar installation is the right choice for your facility based on the following considerations: Section 1 Maximizing the Total Energy Output from a Solar Project 2 Calculating the True Cost of a Solar Project 3 Achieving the Greatest Return on a Solar Project 4 The Sunpower Advantage EXECUTIVE SUMMARY 2

MAXIMIZING THE TOTAL ENERGY OUTPUT FROM A SOLAR PROJECT SECTION 1 Which solar technology you choose dramatically impacts the amount of electricity produced using your facility s available space. The following topics highlight potential barriers to optimal performance and different ways to boost the electricity your system generates once installed on your rooftop, parking lot, or unused land. Ideally, you should implement a solution that produces the most energy from the space and resources available. Panel Efficiency Different solar technologies yield different energy outputs. The higher a solar panel s efficiency, the more power generation capacity it has for any given area. Conventional solar technologies typically convert only 12% to 14% of available sunlight to usable electricity. By selecting panels that exceed this efficiency average, you achieve much higher and faster returns. With conversion rates approaching 20%, SunPower panels are up to 50% more efficient than conventional solar and as much as 100% more efficient than thin-film technologies. The table below illustrates the annual electricity you can produce on a 80,000 ft 2 roof in Southern California for varying technologies using standard installation techniques. Light-induced Degradation Standard solar cells typically experience an oxidation reaction when first exposed to light, meaning they lose. up to 3% production capacity within days of being installed 1. The amount of light-induced degradation has a substantial impact on the total electricity that a system can produce over its lifetime. By using high quality silicon with fewer impurities, SunPower cells eliminate light-induced degradation, allowing your system s performance to remain unchanged over time. Low-light Response Sensitivity to light is critical to solar electricity generation. Highly responsive panels capture more energy since they literally wake up earlier in the morning and stay up later in the evening. Every second of daylight that your panels lay dormant represents a missed opportunity to generate power. SunPower s monocrystalline cell substrate boosts sensitivity to very low levels of light, ensuring that your system makes optimal use of precious daylight hours. 1,532,685 kwh 933,977 kwh 796,884 kwh SUNPOWER 1,000 kw DC CONVENTIONAL 615 kw DC THIN FILM 518 kw DC SUNPOWER T5 SOLAR ROOF TILE 318W SUNPOWER PANELS 5 TILT FIXED TILT RACKING SYSTEM 376 CONVENTIONAL 13.3% PANEL EFFICIENCY 10 TILT FLAT MOUNTING SYSTEM THIN FILM CdTe 10.1% PANEL EFFICIENCY 0 TILT 1. A Call for Quality: Power Loss from Crystalline Module Degradation Causes a Big Headache for the Industry, Photon International, March 2008. MAXIMIZING THE TOTAL ENERGY OUTPUT FROM A SOLAR PROJECT SECTION 1 3

ZERO LIGHT-INDUCED DEGRADATION Most common solar cells because they use boron-doped p-type silicon experience an oxid when the cell is first exposed to light. This means the energy production capacity for the solar pa these cells will drop by about 3 percent within the first few days after installation 1. Not the case products. We use n-type silicon that contains fewer impurities and uses a phosphorous dopant, e initial light-induced degradation. ER CAPTURES SECTION 1 MORE, EVEN IN LOW LIGHT Broader Spectral Response ME HEAT CONDITIONS. Not surprisingly, solar technology works best when the sun is at its brightest. However, even during cloudy days, it is possible to capture energy when using cells designed to harness the shorter wavelengths (blue) and longer wavelengths (red) of the solar spectrum. RADATION use they use boron-doped p-type silicon experience an oxidation reaction ight. This means the energy production capacity for the solar panels that use ercent within the first few days after installation 1. Not the case with SunPower s hat contains fewer impurities and uses a phosphorous dopant, eliminating the Overcast skies do not prevent solar radiation - anyone who has sunburned on a cloudy day understands this phenomenon implicitly. Because SunPower designs its cells to capture as much of the solar spectrum as possible, your system is able to produce more electricity, regardless of the weather. NSE re more light, but they also make use of a wider range of the sunlight spectrum. of the photons to electricity in the short wavelengths (blue) and long wavelengths nventional solar cells. This means that in wintertime and on cloudy days when the npower panels continue to produce high levels of electricity. ORE ENERGY BY CAPTURING UM. VENTIONAL CELL GLOBAL SPECTRUM let and long infrared wavelengths. Temperature and Performance When SUNPOWER exposed CELL to the sun, all solar panels become hot and experience a temporary reduction in the efficiency with which they convert sunlight to energy. Panels with a lower temperature coefficient run cooler, allowing them to generate more electricity even on the hottest days. Because SunPower panels have a lower Normal Operating Cell Temperature (NOCT) 2, they consistently produce more energy, even at higher temperatures. The hotter it becomes outside, the better they perform relative to other solar panels. NUMBER OF SUNLIGHT PHOTON (M -2 S -1 MICRON -1 ) E + 19 6 BROADER SPECTRAL RESPONSE Not only do SunPower cells capture more light, but they also make use of a wider range of the su SunPower solar cells convert more of the photons to electricity in the short wavelengths (blue) and (red) of the solar spectrum than conventional solar cells. This means that in wintertime and on clou sunshine isn t postcard-perfect, SunPower panels continue to produce high levels of electricity. SUNPOWER GENERATES MORE ENERGY BY CAPTURING A BROADER LIGHT SPECTRUM. EXCELLENT LOW-LIGHT RESPONSE RELATIVE EXTERNAL QUANTUM EFFICIENCY, % SUNPOWER CELL SunPower cells offer exceptional performance, even in low-light environments. SunPower s premiu cell substrate enables the cell to be very sensitive to very low levels of light. The advantage is that wake up the inverter earlier in the morning, and the system is still generating energy later in the technologies. Simply put, you CONVENTIONAL get more solar CELL electricity every day from a SunPower solar system. HIGHER PERFORMANCE AT HIGHER TEMPERATURES All solar panels get hot. And AM when 1.5 GLOBAL they SPECTRUM do, power production falls due to loss of voltage. Su perform better in higher temperatures than conventional PV panels by having a lower tempera and a lower Normal Operating Cell Temperature (NOCT) 2. With our technology, the reductio is roughly 0.38 percent per degree Celsius rather than the typical 0.48 percent for convention WAVELENGTH, MICRONS In addition, SunPower panels run cooler than conventional solar panels given the same ambie SunPower cells use more short ultra-violet and long infrared wavelengths. The hotter it is outside, the bigger the difference between SunPower and conventional PV prod AS THE AMBIENT TEMPERATURE RISES, SUNPOWER S ADVANTAGE INCREASES. 1 From A Call for Quality: Power Loss from Crystalline Module Degradation Causes a Big Headache for the Industry, Photon International, March 2008 % ADDITIONAL ENERGY PRODUCTION FROM BETTER HEAT RESISTANCE NUMBER OF SUNLIGHT PHOTON (M -2 S -1 MICRON -1 ) E + 19 AMBIENT TEMPERATURE ( F) ne Module Degradation Causes a Big Headache for the Industry, Photon International, March 2008. 2 NOCT is measured at continuous sunlight exposure of 800W/m2, 20 C ambient, and wind speed of 1m/second. 2. NOCT is measured at continuous sunlight exposure of 800W/m2, 20 C ambient, and wind speeds of 1m/second. MAXIMIZING THE TOTAL ENERGY OUTPUT FROM A SOLAR PROJECT SECTION 1 4

SECTION 1 System Mounting Technology Even with the best cell technology, your solar panels will fail to deliver peak performance if they are not properly aligned with the sun. Consequently, many installers try to maximize solar exposure by mounting panels at high-tilt angles. Unfortunately, this requires spacing the panels far apart to prevent any module from shading the ones behind it. The higher the tilt, the more space is needed to avoid shadowing. SunPower solutions are designed to achieve maximum energy production at the system level by carefully balancing panel tilt with total system power density. This allows your SunPower solution to optimize precious solar real estate: Choose from Three Levels of Performance. SunPower s newest rooftop product, the SunPower T5 Solar Roof Tile combines solar panel, frame, and mounting system into a single, pre-engineered unit that maximizes power density on your available roof space. When choosing the SunPower service package that best suits your needs and protects your solar investment, consider the features that will provide the necessary peace of mind that your system is meeting performance expectations. Performance Monitoring For ground-mounted installations, the SunPower T0 Performance Tracker Monitoring provides delivers the single-axis Performance Basic rotation, includes all allowing services needed to ensure effective services in Performance Monitoring the panels to follow the sun s path throughout the day, yielding more energy production per acre than any other tracking technology. monitoring and reporting of system performance and energy output. This offering is best for customers who want the peace of mind that their system is being watched and Performance Basic plus SunPower industry-leading preventive maintenance to identify problems before they happen. Ideal for customers who are looking to leverage existing staff and where The bottom line is that with a SunPower solution, it is possible notification to when generate a problem occurs. more maximum energy system in availability less space. and Ongoing Maintenance and Operation Like any other investment, solar installations require regular upkeep in order to consistently operate at peak performance. System monitoring, preventative maintenance, and regularly scheduled repairs are crucial if you hope to avoid downtime and derive maximum value over the lifetime of your installation. Unfortunately, such costs necessarily delay payback periods, scaring away many would-be solar converts. However, you can minimize these costs by identifying problems before they even arise. SunPower s Energy Management Services was designed to do exactly that, providing warranty protection and preventative maintenance to ensure uninterrupted power generation. production is not essential. How Performance HOW Products PERFORMANCE Compare * PRODUCTS COMPARE 3 % Output Improvement 25% 20% 15% 10% 5% 0% Performance Monitoring Monitoring and Reporting Performance Basic Preventive Maintenance Service Offering * Based on standard 1MW system after 5 years of operation Minimum Improvement Performance Plus Performance Plus Performance Plus includes all services in Performance Basic and additional key programs for increased performance, including module cleaning and prompt corrective maintenance. Ideal for customers who are looking for full service and where maximum solar power system availability and production is essential. Maximum Improvement Range of Potential Performance Improvement Module Cleaning Corrective Maintenance 3. Performance improvements from SunPower Energy Management Services are based on standard 1MW systems after 5 years of operation. MAXIMIZING THE TOTAL ENERGY OUTPUT FROM A SOLAR PROJECT SECTION 1 5

CALCULATING THE TRUE COST OF A SOLAR PROJECT SECTION 2 The second consideration in optimizing the return on your solar installation involves determining the total cost of electricity produced over the system s lifetime. Answering this involves estimating the lifetime cost of a solar installation and comparing this to what you would spend with your current electricity provider during that same period. How Affordable is Solar? Why pay top dollar for a solar installation when federal, state, and utility incentives exist to help you bring down the cost? Failure to include such rebates and subsidies into your purchasing decision overstates the true price of any solar project you may be exploring. For example, the Federal Solar Investment Tax Credit (ITC) essentially subsidizes up to 30% of the cost of a commercial solar project. Even for organizations that cannot directly use the ITC, it is often possible to incorporate incentives through third party financing arrangements such as a Power Purchase Agreement (PPA) 4. At the local level, you can find even more savings. Below is a partial list of states that consistently offer attractive incentives for commercial solar installations: Is Your State Not on This List? Consult the Database of State Incentives for Renewables and Efficiency (DSIRE) for up-to-date information about available federal, state, and local rebates specific to your facility. You may also be able to tap into SunPower s network of utility partnerships to take advantage of incentives not available to the average solar consumer. 4. The tax provisions referenced are for discussion purposes only. SunPower does not warrant, guarantee, or otherwise advise its partners or customers about specific tax concerns. You should consult your tax advisor to discuss how local provisions and laws apply to your specific circumstances. CALCULATING THE TRUE COST OF A SOLAR PROJECT SECTION 2 6

SECTION 2 Considering Total Lifetime Costs When comparing different electricity alternatives, do not make the mistake of focusing solely on short-term expenses. As with any other business purchase, you must factor in all relevant variables that may increase or decrease the lifetime cost of whichever energy solution you choose. Below are just a few examples of commonly overlooked factors: Today s utility prices are a poor reflection of what you might have to pay five or ten years from now. Historically, grid electricity prices have risen 3% to 4% every year, depending on the location. Any option that delivers low cost energy production in the short-term but quickly depreciates over time is a potentially unwise investment. Gross system price or price per watt can be deceptive measures of cost since they do not include total operating and maintenance expenses over a system s lifetime. Avoid solar installations that rapidly lose generation capacity or require significant, long-term maintenance to achieve forecast energy output. Be wary of first-year Power Purchase Agreement rates, poorly structured warranties, or high interest financing arrangements that mask the true lifetime cost of your solar installation. CALCULATING THE TRUE COST OF A SOLAR PROJECT SECTION 2 7

ACHIEVING THE GREATEST RETURN ON A SOLAR PROJECT SECTION 3 Section 1 covered how to derive the most electricity from your solar installation, and Section 2 explained what to consider when forecasting the lifetime cost of that installation. With this information, you can now assess the total potential savings that a solar energy solution will provide. Comprehensive analysis of any solar energy solution should include all installation, operating, maintenance, and hardware expenses as well as the total amount of electricity that will be produced over the lifetime of that solution. Once you factor in all of these variables, calculating the Net Present Value (NPV) of your solar installation is the best method for understanding total potential savings in real dollar terms. The NPV financial calculation captures all project costs and savings as they occur over time and conveniently converts them into a single dollar amount. The larger the NPV, the greater the total savings you can expect. Your NPV analysis should include any electricity options you may be considering, including differing solar technologies. The illustrative example below shows NPV comparisons for various solar projects on an 80,000-ft 2 roof 5. Note that while the SunPower system is initially more expensive, it yields a significantly higher total return because it produces more energy over the lifetime of the installation. With more than 25 years of experience in solar project costing, financing, and planning, SunPower has the requisite tools to help you properly assess the lifetime cost of any solar installation you may be considering. If your facility needs assistance calculating NPV or sourcing solar incentives, contact SunPower for a consultation. SUNPOWER 1,000 KW CONVENTIONAL SILICON 615 KW THIN FILM 518 KW NPV = $590,000 (Gross price = $4.0MM) NPV = $375,000 (Gross price = $2.4MM) NPV = $367,000 (Gross price = $1.9MM) 5. Sample NPV calculation is for example purposes only and is based on the following assumptions: $0.12 current rate of electricity, 3 % annual rate escalation, $0.01 REC value, $0.05 performance based solar incentive over 5 years, 8% discount rate, 25 project life cycle. ACHIEVING THE GREATEST RETURN ON A SOLAR PROJECT SECTION 3 8

THE SUNPOWER ADVANTAGE SECTION 4 You may be asking yourself whether it is worth the time and effort to make such a comprehensive assessment of your solar options. After all, grid electricity is familiar and reliable. Why research solar technology at all if what you have currently works? The answer is simple. In today s increasingly competitive business landscape, success favors those who acquire the best resources at the lowest costs. If you find a supplier who offers comparable value at a lower price or better value at the same price, business logic favors this supplier. The economics of energy follow the same reasoning. Why pay more for electricity than you have to? Done correctly, a transition to solar yields cheaper and cleaner energy, helping you reduce costs, boost profits, and become more competitive. SunPower is committed to helping you make this transition successfully. Because SunPower specializes in nearly every aspect of the solar value chain, we can help you make realistic and financially sound decisions regarding any upcoming installations you may be exploring. In addition to continuous support from installation to operation to maintenance, SunPower offers: Unparalleled panel efficiency, allowing your installation to capture more sunlight over longer periods, regardless of heat, weather, or location Industry-leading warranties and maintenance support to ensure that your system consistently delivers optimal performance year after year Assistance in sourcing solar incentives and rebates to help make your PV system as affordable as possible Financing and planning consultations to help you accurately assess costs, payback periods, and ROIs THE SUNPOWER ADVANTAGE SECTION 4 9

SECTION 4 By partnering with SunPower, you are choosing the number one provider of commercial solar projects in North America. With more design, installation, and maintenance experience than any other provider in the country, SunPower offers unmatched forecasting and consultation expertise. We will arm you with every tool you need to successfully lead your organization towards a solar future, including financial analysis, site evaluations, financing options, and a host of other resources and support to help you implement your solar project. Contact us today to request a free solar consultation and begin taking control of your energy future. THE SUNPOWER ADVANTAGE SECTION 4 10

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