Solar Photovoltaics

Solar Photovoltaic systems use solar energy to create electricity. In 2010, the solar PV industry was the fastest growing industry in the US, with a growth rate is 69%.

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Click here to join our linkedin group “Best Practices for Financing Commercial PPAs Between 200kW and 5MW” and continue the conversation about best practices.

Click here if you want to see 60 minutes of videos answering 8 questions about best practices for financing commercial solar power purchase agreements.

If you’re brand new click here to learn what is NABCEP and wether or not you should need to get the certification. If you’re serious about the solar industry and you want to get the NABCEP Certification, but you need to understand how exactly to apply, you can read more about getting the NABCEP Certification here.

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Solar 101 Reading List for Beginners
Solar PV Basic Terms 101
How to Design a Solar Array
Finance 101 for Solar PV Pros
Free Course: What are Solar Renewable Energy Credits (SRECs)?
Free Course: How to use Solar Leases to Grow Your Business

Advanced Training
If you need to get in depth training on how to market, sell, design or installation solar PV project. Look at our solar trainings.

New Massachusetts Solar Bill H.4185 Would Destroy Community Solar Potential In the Commonwealth

This is a guest post from Sam Rust from SRECTrade about new solar legislation in Massachusetts.

(Editor Note: A note about the importance of community solar for lowering customer acquisition costs, something EVERYONE in the solar industry cares about. Everyone is talking about lowering customer acquisitions costs and soft costs and community solar has the potential to instantly drop acquisition costs by 50% to 80% for solar companies offering roof mounted and community solar projects. Why? It’s simple math. If you had 100 solar leads, a good conversion rate of leads to customers would be 10%. This equals 10 customers. Here’s the thing, in order to find 10 customers that WANT to invest in solar and HAVE a good roof, you must bump into 3 to 4 people that WANT solar but DON’T HAVE the roof space. If those 3 to 4 people could become community solar customers, then the conversion rate of those 100 leads would become 30% to 40% instead of 10%. This would then drop the acquisition costs because you’re getting more customers with the same marketing spend. Food for thought.)

Enter Sam Rust.

In 2013 Massachusetts was ranked 4th, behind California, Arizona, and New Jersey for most solar installed. Despite this success, legislation, officially known as H.4185 (An act relative to net metering), is pending at the Massachusetts State House that could drastically change the direction of the Massachusetts solar industry. Touted in the media as successful compromise between regulated utilities and the solar industry, H.4185 might be more of a step back, than a step forward. The bill could pass in both the Massachusetts House and Senate before the end of the legislative session on July 31st, despite the opposition of many solar owners, installers, and representatives of the community solar movement.

Here’s a short explanation of how we got here and what H.4185 is.

Currently there are limits on how much Massachusetts solar capacity can qualify for net metering in each utility territory. These limits, which only apply to larger solar facilities, are nearly maxed out for each utility and prevent the Commonwealth from meeting Governor Deval Patrick’s 1,600 MW by 2020 solar goal.  H.4185 would remove the net metering limits and put in statute Governor Patrick’s 1,600 MW target in exchange for a radical adjustment in the structure of Massachusetts solar policy of which the primary adjustments are:

  • The removal of annual capacity restrictions on large “solar farm” projects
  • The creation of yet-to-be defined minimum electric bills for all ratepayers
  • The reduction of the virtual net metering rate from compensation at the retail rate to the wholesale rate of electricity
  • A limit on the size of behind-the-meter projects to 100% of the on-site load
  • A transition away from the successful market-based SREC program to an unknown program managed by the Department of Public Utilities
  • Transfer of all of the “environmental” attributes of solar arrays to the utilities

In translation, H.4185, a bill that is ostensibly about net metering would remove or weaken most of the policies that have made the Massachusetts solar industry so successful. It is a bill that exchanges a set of known, highly successful policies, for a new set of untested policies.  The bill has not yet passed and many stakeholders are calling amendment language that would remove most of the major policy language in exchange for an incremental increase in the net metering caps and a formal commission to be convened next year to review the more contentious aspects of the legislation. This more cautious approach would stabilize an already jittery Massachusetts solar industry and ensure that all stakeholders are at the table the next time net metering limits need to be addressed.

How this could negatively impact solar installers.

  1. Anybody working to do community solar will be negatively impacted because the VNM credit is being reduced
  2. H.4185 removes the protections in place under the SREC-II program for incentivizing distributed/ rooftop/ carports/ general behind-the-meter projects
  3. The declining block incentive program will be set at the DPU, rather than at the DOER. This means that installers will need to lawyer up and deal with the regulated utility lawyers in order to argue for favorable incentive targets. Solar in Massachusetts goes from a decentralized system, where everyone and anyone can participate in the rule making process to a system where the big player have the negotiating advantage
  4. The utilities receive all of the attributes of the solar, including the RECs and will be able to lead the discussion on monitoring and other equipment requirements. This reduces the possibility for innovation in the solar space regarding capacity markets, battery storage, voltage regulation etc
  5. The minimum bill imposition will hurt anyone with a low electric bill, which means smaller projects will be most affected by the minimum bill
  6. Anybody doing business in Muni territory is left out. Currently the SREC program covers Munis
  7. Above all else this just adds more complication to the system. We just spent a year implementing SREC-II and now we have to work on implementing another program for which installers will need to fight to be part of the process for negotiating the declining block targets and minimum bill. This just adds more uncertainty, which is bad when you are trying to mature an industry.

WANT TO HELP? Contact Sam

First. Here is Sam’s email address: contact@competitivesolar.org

Send him an email and he’ll figure out how you can help.

Massachusetts voters are encouraged to research this bill further and to contact their state legislators. Here is a link to a site that makes legislators searchable by zip code.

For more information please read this well written opinion piece in Commonwealth magazine and visit the Facebook page for the Massachusetts Stakeholders for Competitive Solar or www.competitivesolar.org.

 

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Free Solar Design Tool: String Sizing Tool For Commercial Solar Projects That Works with All Inverters

One of the most important aspects of designing a solar array is sizing module strings to operate within the parameters of the selected inverter. This is especially true for commercial and megawatt solar projects. To help in this process, we’re providing a free solar design tool to our readers.

Ryan Mayfield and Renewable Energy Associates has developed a free solar design tool to help in that process. Most inverter manufacturers offer some type of sizing tool, whether it’s simple or advanced, it’s usually limited to selecting only their products. The REA System Sizing Tool lets you select from a wide variety of products and manufacturer’s. Ryan is teaching a 10-week advanced solar design class with SolarPro called Megawatt Design.

You can click here to down the string sizing tool. 

Key Features of the Solar String Sizing Tool

A quick note. The tool now requires you to turn on macros. For those concerned about security we can not guarantee that the tool will work well, accurately or at all without macros enabled.

  • Thousands of modules.
  • Hundreds of inverters.
  • Add your own module or inverter.
  • World Wide ASHRAE locations. 5,000+
  • Create your own custom sites.
  • Dual MPPT’s configuration possible.
  • Voltage drop calculator.
  • Performance calculator.
  • Quick Printing features.

Screen Shots of the Solar Design Tool

Inserting Array Characteristics

Screen shot 2014-07-16 at 10.50.25 AM Inserting Weather Conditions

Screen shot 2014-07-16 at 10.30.36 AMLogging Other Project Specific Activities

userinput

Download the Solar Design Tool

You can click here to down the string sizing tool. 

Posted in Featured Designs, Products, and Suppliers, Solar Photovoltaics | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

How to Identify and Eliminate the 7 Forms of Waste in Residential Solar Installations

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This is a guest post by Pam Cargill. Pam is an expert at optimizing residential solar operations. She’s helped scale operations both at Alteris Renewables (now RGS Energy) and Sungevity. She knows all the secrets of the larger installers and is now running her consulting practice, Chaolysti, to spread what she’s learned.

Here are a few ways you can learn more from Pam.

Enter Pam Cargill. 

Soft costs. While analysts have been long on talk analyzing what they are and how they are impacting the industry, they have been short on solutions. Why? Because residential solar is, by nature of its need to interface with a varied landscape of regulatory and policy issues, a complex business. It is equal parts finance, construction, and high-tech. Since there is no common formula to apply to reduce soft costs nor a single soft cost category that installers should universally tackle first, installers should use a more individualized approach to evaluating their project delivery process to find out which areas would be most impactful to improve first.

This post, geared for owners and/or operations managers of residential solar installation companies, will teach you about the 7 Forms of Waste, a powerful categorization methodology you can apply in your operations to begin to learn where time, energy, and money is misspent, a leading causes of customer dissatisfaction. In residential solar, maximizing customer satisfaction is crucial because the leading source of low-cost leads is from the referrals of currently installed customers according to solar analyst Nicole Litvak, author of GTM Research’s U.S. Residential Solar PV Customer Acquisition: Strategies, Costs and Vendors.

What is the 7 Forms of Waste?

The 7 Forms of Waste is a framework used in proven cost reduction methodologies from the Toyota Production System (TPS), now commonly referred to as “Lean Production” or simply Lean. Using this framework, you can begin to reframe your operations in the language of what your customer considers valuable. By classifying all process activities into these two categories of “value added” and “non value-added” activities, you can begin to take action improving valuable parts and removing or reducing non value-added waste.

Who is the Customer?

In order to begin categorizing waste activities, employees must identify and understand their internal customers and the final customer. These relationships are key to meeting customer expectations. For example, design staff drafting plan sets must meet the needs of the AHJ, Utility, installers, and the final customer. Without seeing the AHJ, Utility, and installers as customers of their product, the designer could overlook important safety or design requirements in order to meet a customer-specified design constraint, which could cause rework and delays if in conflict with AHJ or Utility requirements or real-world installation practices. When each employee frames the recipient of their work as a customer, they are more likely to see how their activities could be value-added or non-value added. When framed in this way, management can also work more intelligently together to streamline handoffs and minimize or remove re-work related to misalignment of goals.

What Defines “Non Value-Added?”

A value-added process is an activity that a customer is willing to pay for that contributes to the end product they expect. Non value-added processes, on the other hand, fall into two categories – business requirements and pure waste. Business requirements comprise the overhead of the company: your fleet of vehicles, HR activities, compliance-related activities (especially if you deal with finance or credit). Examples of pure waste are excessive coordination meetings, generating reports that are not read or acted upon, multiple layers of approval, and any kind of rework. The 7 Forms of Waste are comprised by these two-types of non value-added activities.

7 Forms of Waste and Common Residential Solar Examples

Now that you understand how to identify your internal and external customers and know how to identify value-added and non value-added activities, let’s look at the 7 Forms of Waste: What they are, what they mean, and an example of each one so you can learn how to see them in your own company.

Transport

The unnecessary motion or movement of materials or information, including work-in-process, from one operation to another. This adds time to the process during which no one adds value.

Example: Ordering from a vendor that cannot drop ship directly to the customer site or to your warehouse, hence product must move through several channels, adding time and potential for loss or damage in the process which could further delay the project.

Inventory

This refers to inventory that is not directly required to fulfill current Customer orders. Inventory includes raw materials, work-in-process and finished goods. Inventory all requires additional handling and space. Inventory is often closely associated with Waiting and Over-Production.

Example: Ordering more rails, mid-clamps, and wire than is necessary for the amount of projects currently in progress and run rate of equipment. This thinking compounds and causes company capital to become tied up unavailable for other uses and causes warehousing space to become crowded which can lead to demand to expand.

Motion

Built-in extra steps taken by employees to accommodate inefficient process, rework, reprocessing, overproduction or excess inventory.

Example: Developing and automating queues for plan set rework instead of reducing or eliminating the need for rework.

Waiting

This refers to downstream inactivity that occurs because previous activities are not delivered on time. Idle downstream resources are then often used in activities that either don’t add value or result in overproduction.

Example: Installers cannot perform installations because plan sets are not completed fast enough to pull permits and schedule jobs. These installers are then sent out on site evaluations or given warehouse “housekeeping” tasks.

Over-Production

Overproduction occurs when an operation continues after it should have stopped.

Example: Plan set is “overproduced” — it includes additional sheets, viewports, and data points above and beyond what the AHJ or Utility needs to approve the permit or installer needs to build the project.

Over-Processing

This occurs any time employees put more work on a project than required to satisfy the customer. This also includes using components that are more precise, higher quality, or expensive than absolutely required.

Example: A designer spends extra time on a project researching and specifying a non-standard piece of equipment deemed necessary due to site conditions that the customer did not pay extra money for.

Defects

This refers to products or services not conforming to the company’s internal specification or expectation of internal or that of the final Customer thus leading to Customer dissatisfaction.

Example: AHJ redlines and rejects a plan set because design did not follow a local municipal code unknown to or forgotten by the designer. The designer cannot work on a new plans and must now research the issue and schedule rework of old plan set.

Now that you understand how to see the 7 Forms of Waste, you can begin to categorize activities. In our next post, we will build on this understanding to cover the next step in process improvement: mapping your process using the Critical Path Method.

Pamela Cargill is Principal and Founder of Chaolysti, a strategic consulting firm that helps residential solar installers operate more efficiently through direct relationships and program development with solar services providers. Follow her on twitter: @chaolyst

 

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The Most Common Solar PPA Modeling Mistake, The Fix, and a Free Tool

solar modelling

This article will address the most common error that developers and EPCs make when modeling commercial solar PPAs. The video below will discuss the problem, the solution, and provide a free tool you can download so you can work through the answer yourself.

If you’re a developer interested in developing and owning your own solar project, click here sign up for the one hour webinar that Chris Lord will be running tomorrow at 2pm EST. The event is titled “How Commercial Solar EPCs can Develop and Own Their Own Solar Projects”.

This article is part of a series common topics and questions that professionals have about financing commercial solar projects. Past topics include how to price the risk of cash equity vs tax equity in a partnership flip and how to calculate the buyout process of a PPA.

This lessons will be on the most common modeling mistakes that Chris Lord see’s developers make. Chris Lord runs a consulting practice called CapIron and is a co-teacher of the Solar MBA (next course starts on April 14th). Tomorrow, Friday April 11th at 2pm EST, Chris will be hosting a webinar that will teach solar developers the 5 key issues they need to understand to develop and own their own projects.

The modeling problem has to do with properly discounting the tax benefits of a project. The result of that problem is two-fold. First, it’s an obvious beginners mistakes. If you want to look like a professional, you need to make sure that you’re not doing this. Second, if you do it improperly, it inflates project returns, which can hurt you when the investor does their due diligence.

Note: If you want to see what Chris is doing, click on the FULL SCREEN button on the bottom right of the video. You can also download the tool Chris is using by entering your email at the bottom of the article. 

We all know the importance of understanding and modeling the economics of a solar project, but what is the most common and easily corrected modeling mistake you see Developers make?

Failing to properly discount the federal tax benefits in a transaction, particularly the ITC. Most show the ITC as a direct and immediate reduction of the Capital Cost of a Project. In effect, developer is asking the tax investor to buy the tax credit by paying $1 for every $1 dollar of tax credit. Developers want to pay a discount. Sometimes the discount is expressed as a price per dollar, but the best way to account for the cost is show the purchase price paid in year zero and the ITC recovered in year 1. This ensures that the ITC will be discounted at least one year by the Investor’s discount rate.

How would you handle depreciation? 

Answer: You take the available depreciation for each year – let’s say that is the excess depreciation beyond what is needed to shelter the project’s current income – calculate the value of that depreciation as the amount of tax savings that such excess depreciation will generate. For example, if you had in year 2 $110 of depreciation and $10 of project income, you would have $100 of excess depreciation. For an investor with enough other qualifying income to use that $100 of excess depreciation, the value is equal to the applicable tax rate times $100. At a 35% federal tax rate, that would mean $35 of value in year 2. Discount that back to year 0 to determine today’s value of that $100 of excess depreciation in year 2.

Download The Sample Model

Enter your email to download the model to help your calculate the value of the ITC and MACRS on commercial solar projects.
  • This is where email where the model will be sent.

 

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Interview with Cory Honeyman, GTM Research Solar Analyst, on Emerging Trends in Residential and Commercial Solar

In this interview, GTM Research Solar Analyst Cory Honeyman provides some background on the U.S. Solar Market Insight Report and discusses trends in residential and commercial solar, including hard costs, important skills for salespeople, state incentives, common misconceptions, and financing. (The interview has been lightly edited for length and clarity.)

Tom McCormack (TM): Can you give some background on the U.S. Solar Market Insight Report?

Cory Honeyman (CH): The U.S. Solar Market Insight Report is a publication that we release with the Solar Energies Industry Association (SEIA) on a quarterly basis. The key takeaways from the report are a combination of understand installations across each state and market segment, our outlook on future installations, our forecast, by state and market segment on future installations through 2017. Within that, we break apart and identify the leading states and provide qualitative background on the key drivers and challenges to growth that are fueling or hampering installations across the top 10, and some of the newer state markets that are just beginning to hit the national radar. We also cover installation pricing trends, manufacturing and component pricing trends, and, finally, a breakdown of both PV and concentrating solar trends.

TM: What is the methodology for the report?

CH: The quantitative data comes from an extensive data collection effort that I take the lead on. We reach out to 60-80 sources, including utilities, incentive program administrators, and government program administrators, who provide figures on new installation capacity across the major market segments. One key element that sets this report apart from other reports that are tracking growth in the solar industry is the fact that I think we have the most robust coverage of actual utility interconnection data. We also conduct an extensive array of channel checks where we have discussions with people across the downstream value chain for solar about the major drivers of growth in the states where we’re seeing upticks in a given quarter.

TM: What is driving the increase in residential installations?

CH: Customer acceptance and the interest in going solar in the major state markets, especially in California, is increasing every year. When you see three of your neighbors go solar, it inevitably makes you want to go solar, too. Outside of the increased social acceptance, the economics for installing solar on the residential side have become increasingly attractive. The cost to install has gone down, but it’s also been driven by the introduction of a lot more innovative and attractive third-party financing options that have really scaled up growth. The entrance of companies like SolarCity that can enable homeowners to avoid a lot of the upfront costs of installing solar is driving a lot of the growth in the established state markets. We see, on the residential side, in most major markets, that third-party ownership accounts for two thirds to 85 percent of the market each quarter.

TM: What is making solar cheaper?

CH: On the upstream side, we’re seeing declining prices across both components and polysilicon. Combined with that is the fact that we’ve seen increased electricity retail rates for customers. Those two things together increase the value proposition for customers to go solar. Also, in many of the established state markets installers have fine-tuned their internal operational efficiencies, cutting down on a lot of soft costs and have also even focused on customer acquisition.

TM: Do the current solar trends suggest any new careers or skills that will be more in demand in the coming years?  

CH: Our partner SEIA recently released a report on the number of jobs that have been created within the solar industry, and that goes into the types of jobs the industry attracts and how that has evolved over time. As we’ve seen really impressive and continued growth across the entire market, obviously that requires a ramp-up in sales capacities. So, if you go on LinkedIn and type in “solar,” all of the leading companies have positions open for outside and inside sales consultants, and I think that is an area where there will be constant demand. Although it’s becoming increasingly heterogeneous, the U.S. market is still concentrated in the hands of a few state markets. However, the dynamics within those states is changing, so I think there’s a need for more and more roles that involve a strong understanding of where the market is heading both geographically as well as in terms of financing trends and other major trends that can lead to increased acquisition of customers.

TM: What types of skills would make a prospective solar employee marketable today?

CH: It’s a different conversation depending on whether you’re pitching to a residential or a commercial customer. The requirements for commercial are more technical and focused on the financial returns whereas with residential, you really just need to shore up what your elevator pitch is when you’re reaching out to potential customers. Regardless of what the customer acquisition strategies are for a given company, if you’re in a sales position, a lot of that is going to be external-facing and either on the phone or face-to-face work. So, it’s important to understand financing options and be able to explain the key metrics that homeowners care about. So, what is the payback period? Or, what is the discount I can expect based on what I am currently paying for my electricity bill?

TM: What do you consider to be an overlooked or not-well-understood element of the current solar market?

CH: I think one of the prevailing notions about installing solar is that you need to have incentives to make it work, and I think we expect any project to take advantage of the federal-level incentives, which means the federal investment tax credit along with another incentive or accelerated depreciation. That will continue to be the primary driver of growth for the next couple of years. When a lot of people think about the economics of solar working out, it has to go hand-in-hand with the availability of really strong state incentive programs. That does fuel a lot of growth across many smaller and middle-tier state markets. But we’re really beginning to see a number of the leading states, that account for 80 percent of the market begin to shift away from needing any state incentives to make projects work. Last quarter was a hallmark moment for California, where over half of all the residential installations that came online actually came online without any state incentives. The trend is getting closer to this notion of retail rate parity, where a project can work with only the federal-level incentives. The misconception that you need incentives to make projects work is an important one because if you’re interested in making sales pitches and becoming an attractive candidate for jobs, being able to talk confidently about where the industry is heading and how it’s becoming increasingly independent of these state-level incentives is important.

TM: What are the main drivers of solar growth? Is it the political landscape of the state, the incentives in the state, or simply the availability of solar based on state geography?

CH: I think they all work together and are weighted differently depending on the state. The underlying market fundamentals that need to be there are: “What are the current retail electricity rates in a particular state?” and “What are the solar resources for that state?” When you have those two questions factored in, the role of incentives plays an important role, but when you think about the roles governments and utilities play in helping to promote solar growth, I think it really varies. From an outsider’s perspective, it’s probably surprising to hear that, in a number of states where you wouldn’t expect to see meaningful investment in solar, it’s actually taking place. Yes, California has and will continue to be the #1 state market for solar, but recently, for example, within the utility-scale market segment, North Carolina is the #2 state right now. Also, even farther south, Georgia, and specifically the utility Georgia Power, has made significant efforts an investment to begin ramping up solar development within its territory.

TM: Can you explain why that’s surprising? Is it because we’d expect redder states to be more reluctant to embrace the technology, or is it a different reason?

CG: I don’t think it’s surprising. The value of going solar is not driven solely by altruism and doing right. That’s an important piece to the puzzle, but the economics are structured in a way that, both for utilities and end users, there are strong cases to be made for integrating solar into the mix. So in Georgia, Colorado, and even Minnesota, the value of adding solar not for compliance reasons, but, for example, as a hedge against natural gas prices inevitably rising again. For customers in states where the incentive landscape isn’t as strong, and as project economics become increasingly attractive, the value of avoiding energy costs altogether is something that I don’t think people always factor in to the evaluation of what role solar can actually play across the U.S.

TM: What are the factors that impact how a utility company participates in the market? You mentioned that it’s a hedge against the price of other energy sources.

CH: That’s a second-order driver at this point. The #1 factor has been that states have set renewable portfolio standards (RPS), and a lot of those have solar carve-outs where the utilities are required to procure a certain amount of solar to meet annual compliance obligations. Those pieces of legislation have launched a number of procurement programs and incentive programs across all market segments. There are a number of states where those RPS are set. The most recent one was established in Minnesota.

TM: So, if there’s new legislation in a state, that’s going to be a major driver, forcing the utilities to get on board whether they like the idea or not?

CH: The prospects for new RPS legislation are going to be few and far between. There are a few states where we’ve seen an extension or revision of these standards, but a lot of the standards have been set over the past few years, going back as early as the mid-2000s, so that legislation is not something that will create new demand. It will just sustain demand that’s been set into place over the past several years.

TM: What types of new commercial projects are we seeing on the horizon?

CH: On the commercial side, the market saw a downturn in 2013 and kind of flat-lined. I think the market has shifted toward smaller-scale commercial systems, sub 100 kilowatt. In the past, especially in New Jersey, which was, for a while, the leading driver of growth in the commercial market, you saw a ton of 5 to 10 megawatt, ground-mount systems that were driving a lot of growth there. And, that market fall apart for a bit because its primary driver is SRECs, and the demand for SRECs dropped once there was too much investment in that market. Looking forward, I don’t think you’re going to necessarily see a shift in the types of projects; it’s more about the way in which that market can become reinvigorated. A lot of it has to do with mirroring what has happen recently on the residential side: figuring out ways to unlock capital to start developing projects again. On the residential side, we’ve seen really innovative platforms for linking investors with developers and linking third-party ownership agreements with customers. Coming up with innovative online platforms to facilitate and then unlock investment for commercial customers is a really important strategy that’s been employed on the residential side. Revising the financing structures that are currently in place in commercial markets is a really important trend to keep in mind. But there’s isn’t one specific type of project we can expect to see. It really depends on the state market. In Massachusetts, which is well on its way to being the #2 commercial market, looking at 2014, that market still sees a number of 1 to 5 megawatt, ground-mount systems. So, it depends on which state you’re in, what incentives are in place, and what those incentives are targeting.

TM: If there was something I needed to learn or familiarize myself with, when you’re talking about the more innovative financing for commercial solar, is that just a matter of getting comfortable with the all the different options that are out there, or creatively bringing investors to the table, or exploring new crowdsourcing options? What would I want to key in on to be on the cutting edge of that change as it happens?

CH: That’s one of the million-dollar questions for 2014 with commercial solar. There are a few companies that are beginning to introduce innovative financing structures. There was an announcement from Wiser Capital that they’re introducing a platform for scaling up commercial solar. Topics you’d really want to understand are how a power purchase agreement (PPA) is structured and expected returns and requirements from different types of nonresidential customers. “Commercial” is often used interchangeably with “nonresidential,” but a lot of the developers who are developing commercial projects are also developing projects for municipal, government, and non-profit entities, too. So, it’s important to recognize that the types of financing available for school projects, for example, are different than what you can secure for a commercial customer. And, I think there are trade-offs and benefits to both types of projects, but really understanding what types of debt instruments you can take advantage of with school and government projects, it’s perhaps a little more niche, but some of those opportunities are really important to leverage. Good case studies to reference are a number of school projects that have been developed in California and Arizona where they have PPA documents available to the public that you can review.

We plan to do an interview like this one each quarter to stay on top of quickly-evolving trends in the solar industry. What topics would you like to see covered?

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If you’re looking for solar training taught by industry experts, check out these online options:

Solar Executive MBA – The Solar Executive MBA is technical, rigorous, and challenging. It’s the most intense six-week course you’ll ever find but also the most valuable. We developed it for leaders who are responsible for the financial details that drive solar projects. The course is taught by two instructors: Keith Cronin, who built and sold his solar installation business to SunEdison in 2007, and Christopher Lord, a lawyer with deep banking experience who works with solar companies to find viable projects and investors for those projects.

Megawatt Design – Spend ten weeks learning from Ryan Mayfield, the Solar PV Technical Editor at SolarPro Magazine. Ryan, along with help from other industry leaders, has developed this course to help experienced solar professionals get their projects permitted and installed faster and cheaper. This course goes beyond traditional solar training: it is technical, rigorous, and for experienced professionals only. We cover all types of large solar PV systems, with a heavy emphasis on commercial rooftop systems.

Batteries in Solar PV Systems – Six-week intensive training with solar legend Christopher LaForge. PV systems that employ batteries require significant design considerations. Whether using batteries to “back-up” your utility grid or having them as the basis of a “stand-alone off grid system,” choosing the correct battery and sizing it correctly is challenging. This workshop will be an in-depth analysis of the issues surrounding the use of batteries for PV applications.

40-Hour Advanced Solar PV Installer Training – For experienced solar professionals looking to take the NABCEP Installer Exam and advance within the industry. Includes 40 NABCEP approved hours of training on advanced solar PV topics. We’ll cover electric code, installation, design, commissioning, sales, and begin to prepare you for the NABCEP Installer Exam.

Solar PV Installer Boot Camp + NABCEP Entry Level Exam Prep – The best way into the solar industry. This ISPQ-accredited, 40-hour solar training teaches you to design, install, and sell solar PV (electric) systems and helps you pass the NABCEP Entry Level Exam.

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How to Price the Risk of Cash Equity vs Tax Equity Positions in Solar Partnership Flips

This article is part of a series common topics and questions that professionals have about financing commercial solar projects. Chris Lord of CapIron provided some insights into pricing certain types of investor risk in partnership flips. Chris is a co-teacher of our Solar MBA which starts on Monday April 14th. Chris will also be presenting a webinar on Friday the 11th titled “How Commercial Solar EPCs can Develop and Own their Own Solar Assets”.

Now onto the question.

In a partnership flip, just how much riskier is the Cash Equity position, compared to the Tax Equity position? How do you put an IRR or Discount on that?

In a partnership flip, the cash equity’s return is subordinated to the tax equity’s return. In other words, the lion’s share of all cash and tax benefits for a project are allocated to the tax equity, with only a small allocation to the cash equity. This continues until the tax equity achieves its target return. That target return could range from an upper single digit return for the best of the best projects, and more typically in the low to mid double digits for typical mid-sized DG projects. This allocation favoring tax equity could extend for anywhere from 3 to 10 years depending on the strength of the project’s economics. Only after the tax equity realizes its target return, does the allocation of cash (and tax) benefits swing back to strongly favor the cash investor. This means that cash equity returns are pushed back later into a project’s lifecycle, and that longer term and subordinated role mean a cash equity position is always “riskier” than a tax equity investor and ought to receive a return greater that than the tax equity investor.

How do you put an IRR or Discount on that?

Hard for a developer to put a price on it, but the real test is what kind of a return does the market require.

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SolarPro, HeatSpring, Ryan Mayfield Launch Megawatt Solar Design Class

 The online technical training experts at HeatSpring have teamed up with photovoltaic design and instruction professional Ryan Mayfield and technical media specialists SolarPro to launch a 10-week online course in megawatt-scale solar PV system design. To learn more about the course, register for one of two premium webinars being offered:

The Megawatt Design class is a technically rigorous and challenging 10-week course. Click this link for a complete commercial solar design training description and to claim one of thirty $500 bird discounts that are available.

The course has been developed for professionals who are responsible for designing, specifying, permitting, and managing the construction of megawatt-scale large-commercial solar projects and who need to stay current on equipment selection, design, budgeting, and code compliance. It is tailored to professionals with previous experience in large-commercial PV system design as well as those seeking to expand into the commercial market from a base of experience in residential PV system design. Students will use computer aided drafting, industry specific design tools and spreadsheet tools to complete the course.

Graduates of the Megawatt Design class will:

  1. Submit a complete set of drawings, equipment, budget, code references, and calculations for an actual megawatt PV system design project.
  2. Understand how to design projects that are cost effective, structurally sound, high performance and code compliant.
  3. Understand the current best practices for line side connections, grounding, rapid shutdown, fire regulations, and other complex and common design challenges for large projects.
  4. Be confident that their permitting package will be Code compliant the first time.

Course Outline

  • Project Qualification: In this opening week, we will review best practices for technical sales on large-scale commercial projects. Topics include: Establish major project goals, array location possibilities, rooftop/carport/ground mount, roof loading considerations, electrical infrastructure.
  • Equipment Selection: In this module we dive deeply into equipment selection. Pricing and equipment change rapidly in our industry. We’ll make sure you’re up to speed on the latest thinking. Topics include: Product selection thresholds, first cost, warranty, manufacturer service, module considerations including warranties and PID, inverter considerations, dc-to-ac ratio, micro/string/central inverter options, tracked and fixed racking, and system BOS.
  • Site Selection: This week we’ll cover requirements and best practices for siting your projects, covering both ground mount and rooftop systems. Topics include: Permissible shading allowances and  grading requirements for ground mounted arrays.
  • Software Tools: What software should you use to design large commercial solar projects? We’ll review the available options and help you to get the most out of your current or future program of choice, enabling fast, efficient design.
  • Designing Systems for Different Criteria: Every system design requires trade-offs. This week will cover how to optimize your designs for different criteria and how to minimize the downside of the trade-offs you make. Topics include: Lowest first cost, maximized energy production and targeted energy production.
  • NEC Considerations: Code, Code, Code. We could spend the entire course covering code, but we’re going to assume everyone in this course has a firm grasp of the NEC. This week we’ll discuss some of the 2014 updates and nuanced details to help you make fewer mistakes and get your jobs permitted faster.
  • Fire Code Considerations: Large-commercial rooftop systems require an in-depth understanding of fire codes and techniques for coordinating with fire departments, inspectors and owners.2012  International Fire Code (IFC) requirements will be covered.
  • Operations & Maintenance: Develop a detailed O&M plan that can be refined and re-used on your next large-commercial PV project.
  • Permitting: How do you get your permitting done faster and cheaper? That’s the multi-million dollar question. In this module we’ll provide tips and tools for getting your projects permitted more easily than your competitors.
  • Capstone Project: Students will receive all the inputs for a large-commercial rooftop installation, and develop and submit drawings, equipment and budgets to get the project installed as quickly and inexpensively as possible without compromising performance. Data for the capstone project comes from a real job. We’ve masked the identity of the project, but you’ll get to see all of the choices that were made and discuss the pros and cons of each as you do the work of designing your own system.

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[Interview] How to Provide Solar Financing to Any Non-Profit Solar Project Larger Than 50kW

solar crowdfunding

Lee Barken and his team at Collective Sun have figured out the holy grail of commercial solar financing.

Collective Sun can provide solar financing to non-profit solar projects from 50kW and up. Currently, they’re offering their product in California but are interested in doing the securities and legal work to open up shop in other states, if there is a non-profit that has serious interest in working with them.

Listen to the interview below to learn more about Collective Sun (CS) and how, specifically, their underwriting process is different than a traditional investor. Their key advantage is their unique underwriting process. It’s a really interesting strategy. Their process has more to do with selecting investors that see specific non-profits as low risk, rather than finding the non-profits that meet the stringent constraints of a tradition solar investor’s risk profile.

Why focus on non-profits?

There are several reasons why there has been such focus on non-profit clients.

  1. Non-profits operate on small budgets and they always need cash. Having lower and predictable operating expenses is very valuable to these organizations. It’s an easy sell to get your foot in the door.
  2. Non-profits have a social mission that tends to fit well with solar.
  3. There’s A LOT of non-profits! So the potential target market is huge. According to NCCS, there are 1.4 million non-profits in the US. Figuring this problem out will result in a huge increase in sales for the firms that provide this service.
  4. They can’t purchase a system in cash, because they don’t have a tax appetite, so financing is a natural fit for them.

A few months ago, we did a live Q+A that was specifically on performing due diligence, using crowd-funding,  and finding investors for financing non-profit solar projects. You can see the 50 minutes of video answering 5 question here. If you want to learn how to finance commercial solar projects from start to finish including all of the legal contracts, financial modeling tools, click here to read more about Solar MBA that starts on Monday April 14th. You’ll walk through the financing of a project in 6 weeks. Click here to enter your email and get one of the 30 discounts to the class.

Listen to the Interview

In this interview, here’s what you’ll learn.

  • How many projects Collective Sun (CS) has financed.
  • The types of non-profits that CS is focused on.
  • The size of non-profit that CollectiveSun will work with.
  • The spark that made CS decide to focus on financing non-profits.
  • Lee Barken’s background and how that led him to CS.
  • Why financing non-profits is more than a tax problem.
  • How CS deals with non-profit risk by working with a very specific type of investor.

Continue reading

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5 Perspectives for Using Solar Subcontractors for Residential PV Installation

This is a guest post by Fred Paris. Fred teaches our 6 week Solar Startup Accelerator where students get the tools (budgeting, planning, pricing, project management) and business plan they need to start new solar business or solar division within an existing company, in 6 weeks. You can read more about the Solar startup class here. You can enter your email to get 1 of the 30 discounts available here. Fred is also hosting an awesome webinar on “How to Profitably Price Residential Solar” on Tuesday April 1st at 1pm EST. 

Enter Fred -

1. Define the Skills Needed of a Solar Subcontractor. 

To sell, design, and install PV without employees, you will need to work with subcontractors (subs) that have skills, tools, and construction savvy to implement PV projects to your specifications. Sounds a lot simpler than it is.

We sell, design. and install residential systems between 2 and 15kW. We need to hire three professional trades: electrician, roofer, and a general construction contractor. The electrician and roofer are required for most rooftop projects, while the construction contractor will work with the electrician for ground and pole mounts. We also use the construction contractor to reinforce trusses or roof rafters – as may be defined by a structural engineer.

Define the skills you need and specialize. Be careful of the subcontractor that says they can do it all. Perhaps they can, but as the PV project owner, you need to understand the detailed costs of the individual tasks. Only by understanding, the granularity of cost can you negotiate with contractors with clearly defined ‘scope of work’ statements.

2. Apply People Management skills

As the PV systems integrator, you may not have direct employees, but you will have vested interests in how the subs get along with each other. Having a clear scope of work is a good start, but you also need to see a working relationship develop between the subs. Subs need to work with each other ‘practically’ to determine that they will not be in each others way, and ‘financially’ to capitalize on such common needs as renting a lift. Both the electrician and the roofer might rent a single lift for roof top equipment and modules.

There is a need to recognize that installing rooftop solar energy requires ‘working on the roof’. There are good electricians that do not like high steep rooftops. In these instances, the roofer is ‘supervised’ by the electrician from a safe position or from the lift, bringing the electrician into visual and audible range of the roofer.

It is important the subs know how to work with each other and the management skills of the PV integrator is critical.  Help the contractors work with each other. Make sure they understand the scope of their individual tasks and how they integrate with the other trades. If your trades cannot work together, or are having inter-trade conflicts, find a new mix of subs.

Beyond the roofer and electrician, you will need access to general construction.  A general construction crew will build all the reinforcement for ground systems, ballast, or foundation, and will install pole-mounted systems. This contractor installs any rafters and truss reinforcement that may be required on a project.

The electrician is always positioned as the primary trade. The licensed electrician will often be the point of contact for rebate communication and relations with the state.

3. Define the Scope of Work

You will get to a point where you can call your electrician and say something as simple as: “Hi Joe, I have a new 7500 watt rooftop system going in downtown. They have 200 Amp service and I am planning on two inverters. When can you look at the project for me?”  You then make the same call to the roofer.

After a few projects the electrician and roofer know where one trade stops and the other starts.  For rooftop projects, the roofer and the electrician work it out to see who will install the mounting system and modules. In some instances, the roofer will install the mounting system and the electrician the modules. Understanding the details of work for each of the trades can avoid misunderstanding or ‘change of scope charges’

It’s key that you provide a very specific and detailed scope of work for each party involved and a process to verify that the work was done, and done how it was specified.

4. Make Payment Arrangements and Cash-flow Management

You need to be right up front with your subs about when they can be expected to be paid and how much. As the PV System provider, you may likely arrange a three-payment schedule with your customer. Perhaps you get some money up front, a payment when construction begins, and a final check when the system is turned on and all documentation completed.

That incoming revenue is part of your project cash flow. The other part is what is being paid out for hardware and services. Tracking “Cash Flow” on a project basis and plotting the payments to subs when they expect to be paid is important. Your payment arrangements with the customer need to cover hardware, software, labor, and fees. Your cash flow objective is to stay on top and in the green.  This is cash-flow management.

5 Document all Insurance

As we hire subcontractors (subs) you need to be sure they have the proper insurance coverage.  You need to ask the contractor for proof of liability insurance and workmen’s compensation coverage.  In many jurisdictions, if the subcontractor does not have workmen’s compensation you may be required to pay a premium for the people on your project.

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Part 1 – Loopholes. A step by step story of a 14.25kW community solar project in Maine

FarmLayout.001

This is the first article in what will become a series about a 14.25kW community solar project that I’m building in Maine for my friends. In Maine, community solar is technically allowed, but the regulations around it make it functionally impossible.  But, there’s a nice loop hole that does make it possible.

This article will briefly explain the project details, the economics, and the loop hole that I found that allows for a community solar project. In following articles I’ll share the three line diagram, specific equipment bills of materials and costs, a video walkthrough of the installation.

Experienced solar professionals will chuckle at the loop I’ve found and laugh at the maze of policy craziness that we still have to go through. Professionals that are new to the solar industry will find the methodical step by step process with pictures, tools, very specific examples to be very useful. If you’re brand new, I’m not going to go over the details of a lot of the definitions, so you want to to read some basics before reading this. Don’t worry, I have you covered. If you need technical information start reading this article on Basic Solar Terms, if you need to understand the financial terms that I’m using, start with Finance 101 for Renewable Energy Professionals then move on to Finance 101 for Solar Professionals. If you’re looking to start a solar business, download the solar startup guide. Lastly, if you’re looking to write your solar business plan, get all of the quoting and project management tools that you need, click here to get a discount on our Solar Startup Accelerator.

The background – The Building and the Situation

  •  I’m doing this project for super close friends in Maine. They own a farm and two separate building in Monroe, Maine. I no longer work in the field doing EPC work, so my rule now is that I’ll only do this work for family and friend that I really like, for free. This way it’s a gift (a pretty badass one at that!) and not a chore.
  • They are farmers that are committed to reducing any and all fossil fuel use. While Maine has a relatively clean electricity supply, thanks to hydro, solar is even cleaner.
  • They have a lot of land, so I expect to be electrifying their cars and trackers over the next 5 to 10 years with ground mounted solar.
  • They own their land and plan on living there for the rest of their life. Also, being farmers they’re used to thinking really long term anyway.
  • We’ll be doing all of the work ourselves. This impacts equipment selection, because we want the simplest possible installation. But it will also impact economics. We’ll be able to get gross installed costs at around $2/watt and and get net installed costs after the ITC to 30% less of that. I will provide in-depth cost analysis in follow up posts.
  • The system will produce around 19MWh AC per year. At $160 per MWh ($.16/kWh) that’s around $3,040 of electric production per year. I’ll show a more in-depth PV watts analysis later as well.

The Policy Landscape in Maine. This is where the fun starts.

In the past Maine had a small cash grant program but this has lapsed and not been renewed. Systems are still being installed due the drop in equipment costs, labor costs being very cheap and expensive power.

Maine has a community solar pilot project program. At first, thought “perfect!”, we want to do a community solar project and it could fit into the program. The program provided an addition $.10/kWh payment so it would have made the economics amazing. So, I called the Maine PUC and tried to get an application into the program. The specific program was created under Chapter 325. You can read more about and download the project specifications here, just looked for Chapter 325 and download the word document.

It’s turns out the program is not so easy to use and was almost filled out. However, the gentleman that I spoke with told me that under Maine’s Net Energy Billing legislation “share ownership” is allowed. You can read more about the Net Billing Legislation from Central Maine Power here.

You can read more about the Maine’s shared ownership here. Here’s the basics

  • “Shared ownership” allows for community net metering, where several people invest in an eligible system and are therefore allowed to benefit
  • Shared ownership customers must maintain ownership interest in an eligible facility. These customers share the responsibilities and costs of the facility and resulting proportional benefits. Up to 10 meters can be net metered against a single eligible facility. The shared ownership customers must designate one contact person to serve as the liaison between the owners and utility.

Continue reading

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