Getting commercial solar incentives requires readiness to take advantage of a swiftly-closing window of opportunity.
By Sam Lee, CEO, Alta Energy
With the dramatic decline in solar technology prices, more businesses and commercial property owners are taking a serious look at solar power. That brings more competition for a limited supply of commercial solar incentives offered by utilities or by government agencies – incentives that can make or break the economics of a solar power project.
To secure a rebate or other incentive, the applicant must be fully prepared to act swiftly when the program window opens. Losing the incentive usually means that the economics fall apart and the project will not be built. This amounts to significant wasted effort identifying the project, laying the groundwork and obtaining internal approvals -- all for nothing.
Competition for Solar Incentives High
Depending on the rate and structure of incentives, the cost of not obtaining incentives could be a five to seven percentage point reduction in the internal rate of return (IRR) on the proposed solar project, assuming a cash ownership model. For a typical commercial project of about 1 MW, failing to capture available incentives could add several years to the pay-back period and anywhere from $500,000 to $1 million to the net cost. This can make the difference between an economically viable solar project and a “no go” decision.
Consider another example – from a specific commercial solar incentive program.
Westfield, the leading owner of shopping centers in the U.S., recently secured a rebate from Los Angeles Department of Water & Power’s (LADWP) $20 million Solar Incentive Program to install a ~750KW solar system for its Century City mall in Los Angeles. The program has declining incentive levels as certain installed megawatt (MW) targets for LADWP are met, and the availability of incentives depends on an annual budget allocation.
The solar community widely assumed that the 2012 allocation could be the last round of commercial solar funding through this program. When the LADWP program window opened on July 2, 2012, no one really knew how long it would take to fill up the queue. In fact, the effective time window for the program was less than 48 hours.
Yes, that is correct. Word on the street is that within one hour of the window opening, $15 million in rebate applications were submitted – a whopping 75 percent of the entire program’s capacity. Within 48 hours, the program was oversubscribed by 50 percent.
Securing the LADWP incentive was critical to Westfield’s Century City project, and its success came thorough advance planning, under the guidance of Alta Energy, which began almost six months before the program opening.
Strategy To Win
Given the time critical nature of many of these incentives then, here’s a strategy for winning the commercial solar incentive prize.
1. Identify Viable Solar Project Locations Among Your Commercial Properties
This requires a methodical assessment of all your property locations, based on their site, utility and incentive characteristics.
Then you’ll need to prioritize the viable locations based on internal financial and/or other goals, and follow up with a detailed analysis of the locations that are viable in the near term. Westfield began by analyzing the solar potential of all the shopping centers in its portfolio, through Alta Energy’s comprehensive solar analytics model. It is crucial that you have reliable data and an objective model in order to make efficient, informed, actionable decisions about where, when and how to install solar systems that meet your financial and environmental goals.
Make sure that your internal decision-making process is complete to the highest level required, so that you have a “yes” to move forward – without any last-minute questions or reconsideration that can cost you valuable time and may result in missing out on the incentive and therefore probably the solar project itself.
2. Identify Incentive Programs That Fit Your High-Priority Projects
Some incentives may be in forms that do not meet your requirements. For example, solar renewable energy credit (SREC) programs and certain rebates do not allow the owner of the system to keep the “green credits” from generating renewable power. Also, in some cases, you may need long-term SREC contracts to satisfy certain financial or other structuring concerns – and in some states, long-term contracts may not be available.
In short, be aware of these complexities and select only those incentive programs that meet your needs. Lastly, if the incentive that you are banking on is time-limited, be careful to assess whether you can meet the deadline.
3. Complete the Application Fully & Correctly
Solar rebate applications are complex and require thorough details and accuracy – or they will likely be rejected. You have to get it right the first time, as you may not have the ability to fill in missing data or address open issues once your application is submitted. Even if you are given an opportunity to correct your (small) mistakes, you may lose your position in the queue, which could be fatal as well.
In the LADWP program, to “reserve” the incentive amount of $1.50/W CEC-AC (adjusted for expected performance) companies were required to:
- Retain a contractor;
- Submit to an energy audit and benchmarking by a third party (with a potential commitment agreement required if targets are not met);
- Complete numerous forms; and
- Put down a deposit.
Furthermore, applicants must meet project milestones for permitting, inspection, interconnection and operation, and must submit additional documentation, in order to claim the rebate.
4. Submit the Application Immediately After the Window Opens
You must submit your application at precisely the right time – no earlier and no later. Incentive applications are typically submitted electronically, meaning that you have to be ready to click “submit” when the program window opens to ensure that your application gets in while the incentives are still available.
In the solar incentives world, by the time you see an opportunity, it may already be out of reach.
The lesson is, in order to benefit from incentive programs, you have to monitor the marketplace and your portfolio continuously – and you absolutely must plan ahead. Having a trusted ally to help navigate the solar world and provide the framework for sound, timely decisions can set you up for success in the solar incentive game and push cost-effective solar projects across the starting line.
About the Author:
Sam H. Lee is Founder & CEO of Alta Energy, an independent solar analytics and procurement company that enables commercial property owners to identify and complete cost-effective solar energy projects at the right time, with the right vendors, on the best possible terms.