Powering Green: An Overview of Issues in Generating Solar Power on Buildings and Sites The material provided herein is for informational purposes only

Powering Green:Powering Green:An Overview of Issues in An Overview of Issues in Generating Solar Power Generating Solar Power on Buildings and Siteson Buildings and Sites

The material provided herein is for informational purposes only and is not intended as legal advice or

counsel.

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Please help yourself to food and drinksPlease let us know if the room temperature is too hot or coldBathrooms are located past the reception desk on the rightPlease turn OFF your cell phonesPlease complete and return surveys at the end of the seminar

Powering GreenPowering Green

Chris Stevenson, Esq.

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Renewable Energy • Class I - solar technologies, PV

technologies, wind, fuel cells, geothermal, wave or tidal, and methane from landfills or biomass

• Class II - resource recovery facility or hydropower facility

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Market Growth/Potential• Solar PV growing 45% annually• Installations of solar PV doubling every 2 years

- expected to continue until at least 2020 • According to USDOE, the electricity needs of

entire U.S. could theoretically be met by a PV array within an area 100 mi. x 100 mi. (10,000 sq. mi.), which is equivalent to just under 0.3% of land area of U.S.

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Market Growth/Potential (cont.)• Estimated that U.S. has 8,620 sq. mi. of

building area (roofs and facades) suitable for generating solar power

• Estimated that one-half of that area could supply almost 30% of U.S. electricity

• According to USDOE, PV power will be competitive in price with traditional sources of electricity within 10 years

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Market Growth/Potential (cont.) NJ is No. 2 nationally for solar power

installations NJ solar 100+ MW as of October 2009 Up to 2,200 additional MW in next

decade RPS goal of up to 3% solar by 2020 and

7% by 2026

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Federal Legislation• Climate Change / GHG Reduction

– Waxman-Markey Bill (American Clean Energy and Security Act of 2009)

– Kerry-Boxer Bill (Clean Energy Jobs and American Power Act)

– Kerry-Graham-Lieberman Framework for Climate Change and Energy Independence Legislation

• The Stimulus (American Recovery and Reinvestment Act of 2009)– Extension of credit for electricity produced from

certain renewable resources

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Federal Legislation (cont.)• 10 Million Solar Roofs and 10 Million

Gallons of Solar Water Heating Act of 2010 (S. 993)– “use of solar photovoltaics on the roofs of 10

percent of existing buildings could meet 70 percent of peak electric demand”

– “the State of New Jersey is second in the United States in installed solar photovoltaic systems and has used incentive programs to achieve 90 megawatts of installed solar capacity”

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Federal Legislation (cont.)• 10 Million Solar Roofs (cont.)

– “despite inventing solar technology, the United States has fallen behind nations with less solar resources because those nations have set in place policies to promote solar energy, and the United States now ranks fourth in installed solar behind Germany, Spain, and Japan”

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NJ Legislation• NJ Global Warming Response Act• The Solar Energy Advancement and Fair

Competition Act– Increasing RPS for solar

• Favorable siting legislation

NJ Programs• EMP, BPU, Clean Energy Program

– RPS goals

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NJ Programs (cont.)• EMP, BPU, Clean Energy Program (cont.)

– Helped to install 90+ MW of solar capacity during last eight years

– From 6 installations to more than 4,000 in eight years

– Rebates, net metering, standardized interconnection, RPS for solar, SREC trading system

– Clean Energy Fund ↓ ↓ ↓ ↓

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Innovations in Financing• Power Purchase Agreement• Solar Lease• RPS/SACP• SRECs• Tax credits

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Powering GreenMay 12, 2010

Solar Options for Buildings/Sites

Lyle Rawlings, P.E.CEO, Advanced Solar Products

President, Mid-Atlantic Solar Energy Industries Association

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The Photovoltaic Effect

Phosphorous has Phosphorous has one more one more electron than electron than Silicon, and Silicon, and Boron has one Boron has one less. When these less. When these materials are materials are substituted into a substituted into a Silicon crystal, it Silicon crystal, it creates an creates an electric field that electric field that sweeps electrons sweeps electrons freed by light freed by light energy out of the energy out of the cell and to a load. cell and to a load. No material is No material is consumed and consumed and the process could the process could continue continue indefinitely..indefinitely..

Si

P

B

The Photovoltaic Effect

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Solar is desired for Jobs and Economic Growth…

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PV COAL

JOBSCREATED:PERSON-YEARSPER 1000 MWH

Among today’s energy resources, PV is the most intensive job creator per MWH generated.

Sources: Renewable Energy Policy Project, “The Work That Goes Into Renewable Energy”, and Mid-Atlantic Solar Energy Industries Association

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Creation of a Diverse Market:A (partial) success story:The New Jersey Solar Market

• Over 260 solar integrator companies in the state

• Plus…+ Large engineering firms+ Architectural firms+ Electrical contractors+ Financial Community+ Brokers & Aggregators+ Accounting firms+ Law firms+ Union locals+ Real estate firms and developers

Etc., etc.

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What kinds of jobs are created?

• Engineers• Project managers• Marketing and sales• Upper management• Architects• Administrative• Manufacturing jobs• Installers• Electricians• Lawyers• Accountants• Brokers & Aggregators• Bankers• Etc., etc.

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Types of PV Arrays: Residential PV SystemsTypes of PV Arrays: Residential PV Systems

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Types of PV arrays: Flat Roof-mounted arrays Types of PV arrays: Flat Roof-mounted arrays (Older Design: Less common today due to lower annual (Older Design: Less common today due to lower annual

output)output)

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Types of PV arrays: Tilted roof-mounted arraysTypes of PV arrays: Tilted roof-mounted arrays(Current Application10-15 degree tilt, higher (Current Application10-15 degree tilt, higher

annual output)annual output)

Lawrence High School

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Types of PV arrays: Tilted ground-mounted Types of PV arrays: Tilted ground-mounted arraysarrays

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Fixed-Tilt Ground Array – View from South

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Fixed-Tilt Ground Array – View from North

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Types of PV arrays: TrackersTypes of PV arrays: Trackers

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PV Power for Emergency Facilities:PV Power for Emergency Facilities:Bayonne Midtown SchoolBayonne Midtown School

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In a power outage, the existing emergency power systemIn a power outage, the existing emergency power system automatically disconnects from the outside electric gridautomatically disconnects from the outside electric grid The Generator startsThe Generator starts The Inverter re-starts in a special “Generator Support Mode” andThe Inverter re-starts in a special “Generator Support Mode” and automatically shares the building’s emergency power load with theautomatically shares the building’s emergency power load with the Generator, Generator, keeping fuel use to a minimumkeeping fuel use to a minimum• When power is restored, the Inverter goes back to normal mode,When power is restored, the Inverter goes back to normal mode, supplying solar power to the buildingsupplying solar power to the building• The entire process is fully automatedThe entire process is fully automated

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PVInverter

MainDistribution

Panel

EmergencyPower Panel

T R S

A W N I S TF CE HR

Generator

Meter1 23

ADVANCED

SOLAR

PRODUCTS

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Power conversion: Inverters convert DC power to Power conversion: Inverters convert DC power to ACAC

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Current Trends

• In one year, PV module supply has gone from severe scarcity to severe oversupply – and back to scarcity.

• Module prices and system prices have plummeted (economy, cuts in Spain, more & cheaper silicon feedstocks) – but in last 6 weeks, supply has become very tight and prices have risen.

• Thin-film PV has arrived as a low-cost alternative, but also low efficiency.

• Requirements for Made in America for school and ARRA projects

• PV serving multiple purposes e.g., PV for emergency power / homeland security

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Current Situation: the SREC structure is resulting in a ratepayer burden that is far too high.

SREC Trade and NJCEP Prices

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NJ SREC Prices starting July 2008

$/SR

EC

NJCEP

SRECTrade

15-Yr Contracts

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This was predicted -BPU-Commissioned Summit Blue Study on the Cost of Different Models:

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Status Quo1:

• SREC Market: $0.67/KWH

• PSEG Loan II: $0.38/KWH

• JCPL/ACE LT contracts: $0.40/KWH2

• Real Cost of Production: $0.25/KWH3

Notes:1. Prices do not include LSE markups (which apply to PSEG and JCPL/ ACE as long as SRECs are auctioned instead of retired & allocated)2. Does not include JCP&L/ACE markup.3. With a “reasonable rate of return” added

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Ratepayer Burden:

The Cost of High SREC Prices could amount to:

• $60 million to $160 million per year of additional costs

• $2.3 billion between 2010 and 2026 of additional costs

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Additional Ratepayer Burden as long as SRECs are short:

SACP Payments:

• even higher than commodity market prices

• As an example, if we are 50% short on SRECs, then the SREC cost burden effectively doubles due to SACP payments.

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The Other Side of the Coin:

What if there is an SREC oversupply (e.g., two years from now)?

• SREC prices are likely to crash

•100’s of schools who have issued bonds to build solar systems cannot pay off their bonds

• Tens of thousands of homeowners, hundreds of municipal buildings, thousands of business, churches, farms, etc., all of whom have built solar power systems, are losing money.

Result: large-scale political turmoil and unhappiness

William Amann, P.E., LEED APChairman: USGBC, NJ ChapterChairman: Somerset County Energy CouncilPresident: M&E Engineers, Inc.

Green Power –

Funding & Incentives

ENERGY & ATMOSPHERE

• Building Design

• Building Operations & Maintenance

• Renewable Energy

• Energy Modeling

• Energy Audits

• Commissioning

• Investment Tax Credit– (Section 179D)

• Renewable Energy Credits

• Energy Incentives (“Rebates”)

• Federal Funding

Energy Incentives

• Funded since 2001 from “Societal Benefits Charge” on utility bill

• Provides opportunities for energy projects in three sectors:– Residential (Energy Star)– Renewable (Solar, Wind, Biomass)– Commercial & Industrial

New Jersey’s Clean Energy Program

2010 Funding Levels:Energy Efficiency-– Residential $113,899,902– C&I $119,963,654

Subtotal $233,863,556Renewable $183,343,174

Total $417,206,730

New Jersey’s Clean Energy Program

• Renewable Energy Incentive Program (REIP)– </=10 kW residential solar projects up to

$1.35 per watt with Home Performance with ENERGY STAR audit

– </= 50 kW commercial/municipal solar projects up to $.80 per watt

– Wind rebates based on estimated energy production, from $0.50 up to $3.20

– Sustainable biomass projects from $0.15 up to $4.00 per watt

2010- Renewable Energy Programs

Ferreira ConstructionBranchburg, NJ

Renewable Energy

Solar is delivered at $0.21/Kwh +/-

“The cheapest, cleanest energy is the energy you don’t use”

Energy Efficiency is delivered at $0.03/Kwh or $0.30/therm

• Before considering solar or wind alternatives, take steps to reduce energy consumption in buildings with measures that address…

• Building envelope – insulation, air sealing, windows

• Lighting and lighting controls

• Heating, ventilation, air conditioning, water heating

• Variable frequency drives and motors

Energy Efficiency vs. Renewable Energy

• NJ SmartStart Buildings

Design AssistancePrescriptive Equipment Rebates

Custom Measures Program

• Direct Install (< 200 kW Peak Demand)

• Pay for Performance (includes Combined Heat & Power)

Commercial & Industrial Programs

Eligibility• New Construction, Renovation, and Equipment Replacement• Commercial & Industrial Customers Served by a Public Utility• Municipalities and Government-Owned Facilities

Features• Financial Incentives to Reduce Capital Cost (Prescriptive and

Performance)• Comprehensive Design Support for Larger Projects (≥ 50,000 sq. ft.)• Technical Assistance for Other Projects (Walk-through analysis)• Up to $500,000 per utility account per calendar year

NJ SmartStart Buildings Program

• Small and Medium-Sized Businesses and Government-Owned Facilities with ≤200 kW Peak Load

• Designated Contractor (+/or PSE&G) Provides Walk-thru Energy Audit, Recommendations and Installation

• 80% of Material and Labor Costs Paid Directly to Contractor

• Facility Owner Pays Remaining 20%

• No Cap on Measure Installations (as long as measures hit savings criteria)

Direct Install Program

The greater the savings, the greater the incentives… • Buildings over 200 kW Peak Demand

• Network of Trained Program Partners

• Whole-Building Approach – Minimum 15% Performance Threshold

• Incentives up to $1 Million/Meter – Natural Gas and Electricity

• Additional Incentive up to $1 Million for Combined Heat & Power

• Staged Incentives

Pay for Performance (P4P)

Energy Reduction Plan Development $ 25,000Energy Reduction Design Incentive $ 150,000Post Construction Verification $ 300,000 (or 75% of project incremental cost)Up to $475,000 of potential incentives for this project, not including additional CHP incentive

300,000 Sq Ft building with a 21% energy reduction plan

USGBC-NJChapter Coordinator: Marianne [email protected]

www.usgbcnj.org

US Green Building Council – New Jersey Chapter

4th Annual Gala – May 20th, New Brunswick

Funding and Tax Funding and Tax Incentives for Green Incentives for Green

EnergyEnergyMelinda Fellner Bramwit

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An Update Since Last We An Update Since Last We MetMet

• American Recovery and Investment Act of 2009 gave us credit vs. grant option

• Payout on grants- over $1 billion?• Predictions

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Grant Eligible BasisGrant Eligible Basis

• Costs incurred in connection with tangible property which is an integral part of a “qualified facility”

• Eligible projects- windfarms, biomass facilities, geothermal, solar, kinetic and others

• Certification of Grant Eligible Basis• Commencement of Construction

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ITC and Treasury GrantITC and Treasury Grant

Compare and Contrast- what works for your project

Partnership issues- entity of choice

Seminar IntermissionSeminar Intermission

Power Purchase Power Purchase AgreementsAgreements

James Laskey

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When is a Power Purchase When is a Power Purchase Agreement (PPA) Agreement (PPA)

Needed?Needed?A. Whenever the producer and consumer of

electricity are not the same1. Most common situation is when the on-site

generating equipment is owned by one party but the host itself wants to use the electricity

2. Also comes into play if the electricity is being generated at one location and consumed at a second “off-site” location

B. Is not needed if the user of the generating equipment will be using the electricity itself

C. PPA–related provisions are often inserted into agreements that address other issues, such as sale or lease of equipment, installation, and maintenance. These latter issues must be addressed even if a PPA is not required.

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Example Where PPA Is Not Example Where PPA Is Not NeededNeeded

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Example Where PPA Is NeededExample Where PPA Is Needed

PV System Owner

Host

PV System Owner generates electricity and earns SRECs.

Host consumes and purchases electricity from PV

System Owner.

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What Issues Do PPAs What Issues Do PPAs Address?Address?

A. Quantity1. Usually the full output of the facility2. Typically provides for minimum guaranteed output

at least on an annual basis3. Accurate metering is important to determine both

amount to be paid by user and also whether minimum guaranteed output has been achieved

4. Note that this metering is separate from the metering that the local utility will use to determine how much energy has been delivered to the site (or, in a net metering situation, how much energy has been delivered back to the grid).

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B. Price1. Can be expressed either as a flat amount

per kilowatt-hour (KwH) or as a percentage of the local utility’s otherwise applicable rate (e.g., 85%, meaning a guaranteed 15% savings)

2. Even if the first year is a flat amount, it is common to provide for annual escalations, either flat percentage, or tied to an index such as the CPI, or tied to the increase in the local utility’s rates

3. Large installations will often also include a fixed capacity charge, either annual or in monthly installments

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C. Allocation of Environmental Attributes1. Solar renewable credits (SRECs) initially

belong to the generator but can be transferred to the host

2. Often the generator will keep SREC proceeds up to a certain threshold, and then share additional proceeds with the host on a prenegotiated basis

3. SRECs can either be sold in the spot market or sold to wholesale power producers under long term contracts

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D. Compensation for Shortfall of Production

1. Usually based on cost for replacement power from the utility

2. True-up usually annual, but sometimes guarantee is stated over longer period of time

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E. Length of Contract1. Developer wants a sufficiently long

period to recover its investment: 15 years is not unusual

2. Provisions for early termination payment are common

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F. Other Provisions1. The generator’s rights under a PPA are often

assigned to a lender as security for repayment of the loan needed to procure the equipment. In such event, the host needs assurance that in the event of foreclosure any operational covenants of the generator will continue to be observed

2. Force majeure – note that typical “acts of God” provisions may affect performance under PPAs more often than in other commercial settings

3. Regulatory uncertainty or “change of law” can be significant point of negotiation

Solar and Wind Power in New Solar and Wind Power in New Jersey: Legislative Jersey: Legislative

Accomplishments and Accomplishments and Objectives and How Businesses Objectives and How Businesses

and Individuals Can Support and Individuals Can Support ThemThem

NJ State Senator Bob SmithChair, Senate Environment and Energy Committee

Questions & Answers Questions & Answers SessionSession

Thank you for coming!

Documents

Powering Green: An Overview of Issues in Generating Solar Power on Buildings and Sites The material provided herein is for informational purposes only