DISTRIBUTED PV PRICING Trends and Challenges

TECL # 25739

Eric Cotney – VP of Sales and Marketing

January 18, 2017

PRESENTED TO:

PRESENTER:

DATE:

NTAEE

DISTRIBUTED PV PRICINGTrends and Challenges (From an Installer’s Perspective)

AGENDA

• Who is Axium Solar?• What are the Current Trends in PV Pricing?• What will Drive Distributed PV Pricing in the Future?• Why is the Range of Market Pricing So Wide?• Is Overpricing a Problem?• What Strategies Can be Employed to Protect

Consumers?• Should Utilities Design Incentives to Protect Consumers

from High Priced Vendors?

WHO IS AXIUM SOLAR?

• North Texas based renewable energy Engineering, Procurement, & Construction company

• Specialized in the design and construction of grid connected solar electric systems for both commercial and residential clients

• Founded out of Axium Electric, (dba Automated Controls), a low voltage, building automation subcontractor serving the commercial market for the past 26 years

• 20 MW of Installed Capacity

Presenter

Presentation Notes

Axium Solar is a solar contractor based out of Plano Texas. We design, procure and construct solar PV systems for residential, C&I as well as utility. We focus our project development mainly in Texas and work as either a turnkey provider or as a labor and BOS only contractor. Axium Solar was founded in 2008 out of a nearly 30 year old electrical contracting company, Axium Electric. Axium Electric provides installation services for building automation systems and access control. Axium Electric and Axium Solar are separate companies but share the same owners and labor force. Together, both companies employ about 75 licensed electricians, most of whom work across both companies as needed.

CURRENT TRENDS IN PV PRICING?

YEAR RESIDENTIAL COMMERCIAL

2010 17.68% 16.63%

2011 3.4% 17.04%

2012 12.56% 17.17%

2013 29.77% 9.77%

2014 Flat 12.69%

2015 Flat Flat

2016 5.26% 24.06%

2017 (Projected) 5% 10%

Chart Shows % Decrease From Previous Year in Turnkey Project Cost

$3.52 $2.94

$3.34 $2.23

Presenter

Presentation Notes

I ran a SFDC history on sold projects since 2009. This chart shows the percentage decrease from the previous year in both residential and commercial. I did my best to remove outliers from the data set to get a better picture of pricing trends. In our business we have seen residential remain relatively flat to declining only modestly while commercial has continued to decline significantly.


What Are the Current Trends in Texas for Residential and Commercial PV Pricing? Rapid Decline in C&I. Modest Decline in ResidentialFactors in Decline:• Module Pricing – decreased ~20-30% this year.• Technological Advances

• Higher module power ratings/efficiencies• 1000V Inverters• Racking

• Labor Efficiencies – Better labor strategies

Presenter

Presentation Notes

The reason for the declines in pricing are closely correlated with the decline in module pricing. PV modules make up 30 to 40% of the total project cost, so cost adjustments in module pricing make a significant impact. We have also seen panel wattage ratings continue to rise which have had positive impacts on labor…resulting in decreased module count and decreased installation time to install an array. Cost declines in C&I have also happened because of advances in other technologies. A few years ago, when designing a system for 3 phase power, we were limited to large central inverters, complete with inverter re-combiner, equipment pad and expensive combiner boxes on the roof. Now with small three phase string inverters and 1000V architecture, there are significant cost and labor savings. Racking companies have also worked to make their systems lighter and more minimalistic/easier to install. Our installation team is always working to improve installation strategy and efficiency.


What Are the Current Trends in Texas for Residential and Commercial PV Pricing? Rapid Decline in C&I. Modest Decline in ResidentialReasons for Only Modest Decline in Residential Pricing• AHJ requirements and process• Majority of our customers are wanting the latest and greatest

technology• Rapid Shutdown – State of Texas adopted NEC 2014 on September 1,

2014• Economies of scale• Shape of residential rooftops

Presenter

Presentation Notes

Pricing in our residential business has remained relatively flat over the past three years. This is due to several factors… Add in installation aesthetics…flashed penetrations and routing conduit through the attic.

FUTURE DRIVERS?

What will drive distributed PV Pricing in the Future? • Code Requirements – Module Level Shutdown • Increased competition• Module Tariffs

Presenter

Presentation Notes

There are probably others that I am missing, but these are the areas that are on our radar. State of Texas will probably adopt NEC 2017 in September so this means module level shutdown…which will make all rooftop installations more expensive In discussions with several Texas utilities, there is a lot of discussion and desire for the ability to control and curtail PV power production based on grid conditions, site load and prevention of backfeeding energy to the grid Texas is an attractive state for a lot of national companies because of the great irradiance and pockets of utility incentives. Increased competition keeps pencils sharp and overpricing in check.

WHY SWINGS IN PRICE?

Why is the Range of Market Pricing So Wide?• Economies of scale• Premium vs standard technology • Mounting application• Site specific conditions• Inefficient project procurement • Bad actors and solar novices


Premium module adds $.50/watt or more

RESIDENTIAL PRICING TEMPLATE

Canopy adds $3500-$5000


All figures are pre-tax

COMMERCIAL PRICING

$/WATT RANGE TYPICAL SIZE

Ballasted Roof Mount 1.50-1.90/Watt 100-500 kW

Ground Mount 1.40-1.80/Watt 500-1MW+

Canopy 2.25-2.80/watt 100-500 kW

Attached System (SlopedRoof)

1.50-1.90/watt 100-500 kW

CASE STUDY

TAYLOR STREET MOB – 99.99 kW Sherman, TX ~1.93/Watt

CASE STUDY

TAYLOR STREET MOB – 99.99 kW Sherman, TX

CASE STUDY

TAYLOR STREET MOB – 99.99 kW Sherman, TX

CASE STUDYTAYLOR STREET MOB – 99.99 kW Sherman, TX

CASE STUDYSYSTEMkW DC 99.99

FINANCIALSystem kW 99.99$/kW $1,923.67TOTAL PROJECT COST $192,347.80Utility Incentive $83,380.72Other Incentive $0.00NET $108,967.08Federal Investment Tax Credit (30%) $32,690.12MACRS Depreciation $32,417.71NET (Out of Pocket) $43,859.25Income Tax on Utility Incentive $0.00TOTAL Out of Pocket with Tax $43,859.25

CASE STUDY

ENERGYAnnual kWh Consumed 3,300,682Annual Energy Production (kWh) 142,758AVG Monthly PV Production (kWh) 11,89725 Yr PV Production (kWh) 3,362,801% Offset 4.3%

PAYBACKEstimated Savings (Annual) $7,835.36Simple Payback (YRS) 5.2425 year Energy Cost /kWh $0.013

CASE STUDYCASH FLOW MODELYEAR COST ENERGY OFFSET INCENTIVES PAYBACK

SYSTEM O&M kWH PRODUCED OFFSET RATE TOTAL OFFSET$ UTILITY TAX ITC DEPRECIATION USDA REAP CUMULATIVE CASH FLOW NPV IRR0 ($192,347.80) 0.055$ 83,380.72$ 32,690.12$ 32,417.71$ $0.00 (108,967.08)$ (108,967.08)$ 1 $0.00 142,758 0.055$ 7,835$ -$ -$ 32,690.12$ 17,019.30$ (51,422.30)$ 57,544.78$ (51,572.65)$ -47.19%2 $0.00 142,044 0.056$ 7,952$ -$ -$ 6,159.36$ (37,310.82)$ 14,111.48$ (39,027.60)$ -28.96%3 $0.00 141,334 0.057$ 8,071$ -$ -$ 3,695.62$ (25,544.60)$ 11,766.22$ (28,969.79)$ -16.30%4 $0.00 140,627 0.058$ 8,191$ -$ -$ 2,217.37$ (15,136.38)$ 10,408.22$ (20,414.99)$ -8.05%5 $0.00 139,924 0.059$ 8,313$ -$ -$ 1,773.25$ (5,050.24)$ 10,086.14$ (12,443.77)$ -2.26%6 $0.00 139,225 0.061$ 8,437$ -$ -$ 1,552.81$ 4,939.32$ 9,989.56$ (4,852.52)$ 1.89%7 $0.00 138,528 0.062$ 8,562$ -$ -$ 13,501.78$ 8,562.46$ 1,403.99$ 4.54%8 $0.00 137,836 0.063$ 8,690$ -$ -$ 22,191.83$ 8,690.04$ 7,509.50$ 6.61%9 $0.00 137,147 0.064$ 8,820$ -$ -$ 31,011.35$ 8,819.53$ 13,467.65$ 8.23%10 $0.00 136,461 0.066$ 8,951$ -$ -$ 39,962.29$ 8,950.94$ 19,282.01$ 9.50%11 $0.00 135,779 0.067$ 9,084$ -$ -$ 49,046.59$ 9,084.31$ 24,956.04$ 10.52%12 $0.00 135,100 0.068$ 9,220$ -$ -$ 58,266.25$ 9,219.66$ 30,493.13$ 11.34%13 $0.00 134,424 0.070$ 9,357$ -$ -$ 67,623.29$ 9,357.03$ 35,896.58$ 12.00%14 $0.00 133,752 0.071$ 9,496$ -$ -$ 77,119.74$ 9,496.45$ 41,169.63$ 12.54%15 ($9,999.00) 133,083 0.072$ 9,638$ -$ 3,499.65$ 80,258.34$ 3,138.60$ 42,845.35$ 12.69%16 $0.00 132,418 0.074$ 9,782$ -$ -$ 90,039.90$ 9,781.56$ 47,866.94$ 13.08%17 $0.00 131,756 0.075$ 9,927$ -$ -$ 99,967.20$ 9,927.30$ 52,767.34$ 13.41%18 $0.00 131,097 0.077$ 10,075$ -$ -$ 110,042.42$ 10,075.22$ 57,549.46$ 13.68%19 $0.00 130,442 0.078$ 10,225$ -$ -$ 120,267.76$ 10,225.34$ 62,216.17$ 13.91%20 $0.00 129,789 0.080$ 10,378$ -$ -$ 130,645.46$ 10,377.70$ 66,770.26$ 14.10%21 $0.00 129,140 0.082$ 10,532$ -$ -$ 141,177.78$ 10,532.32$ 71,214.43$ 14.27%22 $0.00 128,495 0.083$ 10,689$ -$ -$ 151,867.04$ 10,689.26$ 75,551.34$ 14.41%23 $0.00 127,852 0.085$ 10,849$ -$ -$ 162,715.56$ 10,848.53$ 79,783.58$ 14.52%24 $0.00 127,213 0.087$ 11,010$ -$ -$ 173,725.73$ 11,010.17$ 83,913.68$ 14.63%25 $0.00 126,577 0.088$ 11,174$ -$ -$ 184,899.95$ 11,174.22$ 87,944.10$ 14.71%

RESULTSPAYBACK (YRS) 5.24COST OF ENERGY $0.013NPV (25 Years) $87,944.10IRR (25 Years) 14.71%

CASE STUDYRichardson Homeowner – 10.335 kW

CASE STUDY

CASE STUDY

CASE STUDYWest Texas Food Bank – 73.405 kW Midland, TX

CASE STUDY

CASE STUDY

IS OVERPRICING A PROBLEM?

Is Overpricing a Problem? Deterrents to Overpriced Solar:• Increased market competition• Educated consumers• Waning pool of incentives and low utility rates

Presenter

Presentation Notes

We have already talked about the impact of increased competition Consumers are more educated about solar than in the past. Most of our customers are getting 2 or 3 bids and are much more educated about technology and market pricing. Solar still has to make economic sense for most customers…as incentives continue to decrease and utility rates remain low, it is always a struggle to hit our customer’s financial requirements

STRATEGIES TO PROTECT CONSUMERS?

What Strategies Can be Employed to Protect Consumers? Education is key.• Grassroots consumer advocacy groups• Licensing and certification• Multiple bids, references• Company rating systems (BBB, Angie’s List)

STRATEGIES TO PROTECT CONSUMERS?

Should Utilities Design Incentives to Protect Consumers Against High Priced Vendors? We would like to see utilities increase the requirements for program participation but not get involved in setting pricing caps.• NABCEP Certification• Electrical license• Minimum insurance requirements• Local vs. non-local

Presenter

Presentation Notes

Add number of years in business…

CONCLUSIONS

• Axium Solar remains optimistic about the trajectory of PV pricing, but concerned about the future impact of code changes and possible tariffs.

• Other than a few bad actors, swings in price are largely due to project specific factors and not to PV contractors trying to take advantage of consumers.

• Increased competition, consumer education and a declining pool of incentives have created a market that discourages overpricing.

• Utilities can play a positive role in protecting consumers by ensuring that all PV contractors applying for funds meet minimum quality requirements.

THANK YOU!

Documents

DISTRIBUTED PV PRICING Trends and Challenges