For years, renewable energy options have existed under a stigma: It sure would be a nice thing to do, but the up-front setup cost is just too high. When looking at these “nice” solutions like solar power, companies often consider the notion of “grid parity,” too. Is the cost of renewable energy on par with the cost of regular conventional electricity?
While not quite at grid parity, installing solar panels for onsite electricity generation has never looked as attractive as it does right now. The shale drilling revolution has brought energy costs down across the spectrum – including the cost of solar panels. We’re seeing prices at half of what they were in 2008 and more than 100 times lower than they were back in 1977. This is creating opportunities for local governments across the country to finally target two key goals with one stone: establishing low-cost, long-term, stable energy and being environmentally responsible while reducing their “carbon footprint.”
Looking at a Free Lunch?
Organizations pursuing solar solutions – and even those that have dismissed solar energy entirely in the past – may now find a number of incentives that make this renewable much more attractive. Programs at the federal, state, and even local utility level provide price incentives and grants to enable companies to consider onsite renewable electricity generation options.
The big draw is the idea that, once you’ve configured your solar panels, you can sit back and pull in tons of energy from a free source. And who doesn’t like the idea of “free energy?”
Of course, at this juncture, there’s really no such thing. But solar power could be the next best thing – if (and it’s a big “if”) you can satisfy a couple of very particular requirements. Before you rush out to buy roof panels or even start forecasting your sun-induced energy savings, you need to ask – and honestly answer – two questions:
1. Does your organization have the physical capabilities to accommodate solar?
2. Can your organization find financial arrangements for solar that make sense?
Can You Accommodate the Physical Requirements?
The first issue to evaluate when considering solar power for your organization is whether the physical logistics make sense. The physical aspect either works or it doesn’t. And if it doesn’t, you can stop right here. To produce enough solar power to have an effect on your operations, you must consider three main physical placement issues: geographical location, rooftop/land availability, and direction.
Your geographical location makes a huge impact: Assuming your buildings are in the US, it definitely matters how far south you are located. Regions closer to the sun naturally catch more sunlight. The closer you are to the equator, the more daylight you get – and the more electricity you can potentially generate. In conjunction with geography, your topography is another factor that could take you out of the running. Shade over your solar panels will prevent capturing much sunlight, so if your property is nicely wooded, you might have a problem.
You also need a large amount of either rooftop space or available ground on your organization’s premises to mount the solar panels. The ideal option is a large, flat roof that allows you to locate the panels where you want them and tilt them at the best angle for maximum energy capture. If you don’t have rooftop space, though, a significant amount of open land on your property can accommodate the panels. Just remember that solar is a long-term commitment! Make sure that your selected area isn’t slated for building, leasing, or other real estate development.
And wherever you’re planning to install your panels, it’s important to remember size: The average size of a commercial solar panel is more than 6 feet long and 3 feet wide, which means you need quite a bit of real estate for ground installation. And if your plan involves your building’s rooftop, you might need a structural analysis to calculate whether it can withstand the additional weight of, say, 100 panels that weigh 50 pounds each.
It often surprises consumers how many panels they need to produce much electricity. For a building or commercial enterprise, you need a lot of panels together to even notice. So it wouldn’t even make sense to consider solar options if your business cannot accommodate these physical requirements.
The direction that your rooftop or ground space faces is another critical element that can make or break your solar energy generation. The panels should be mounted south-facing to maximize the amount of sun exposure. And keep in mind that large-scale battery technology is still very limited. Because of a lack of efficient energy storage (which is, incidentally, viewed as the next major milestone in the development of renewable energy), solar remains an option that gives you power during the day but not at night.
How Will You Finance Solar?
If it is physically feasible to install panels to produce solar electricity for your organization, the next consideration must be whether you can afford it. Granted, it’s a huge undertaking with a substantial initial outlay of capital: The total price of your system will depend on the size of your roof, your region of the country, and your electricity needs, but US Solar Market Insight reports that the average installed cost for a commercial system is about $2.00 per watt. (Keep in mind that most of the expenses in going solar are the “soft costs” of installing, permitting, etc. rather than the solar panel cost.)
In some countries, the cost of panels and installation is almost 100% subsidized by the government. While that is not the case in the US, there are opportunities to lessen the cost of procuring and installing solar panels. In fact, we rarely see businesses laying out their own cash up-front to pay the full cost because there are so many available financing options that help pay for solar installation in the form of grants, utility incentives or rebates, and power purchase agreements.
You can apply for a number of different grants that provide partial funding for solar or other renewable energy projects. One resource for finding these is the online Database of State incentives for Renewable Energy (DSIRE) at www.dsireusa.org. You’re often competing against other organizations when applying for these energy grants, so be sure to craft a compelling argument for your solar wishes.
Another key aspect to investigate is whether your state or particular utility offers special incentives or rebates for either the buyer or seller of the solar panels. These incentives help lower the cost you pay for a particular solar project or installation – and can pay potentially a significant portion of the cost. Sometimes these take the form of an incentive from the person selling the panels, with funding coming from the state to the utility to encourage more “green” customers. While the environmental aspect to push for cleaner air is one benefit, the underlying rationale behind these incentives is likely the improved grid reliability that comes when more customers generate onsite energy, putting less strain on the grid.
Instead of paying up front for a solar system, you can enter in to a power purchase agreement (PPA) with a solar provider. Under a typical PPA scenario, you don’t pay the cash involved to purchase panels outright. Instead, you “lease” your rooftop area or ground space to a solar company for 15-20 years in return for agreeing to pay them a set fee for all electricity produced by the panels for the time period. When the agreement duration is over, you fully own the solar panels and now have a source of “free” electricity. PPAs are typically funded by banks that use the guaranteed revenue as collateral, and most of these financial arrangements are done behind the scenes – which means your organization likely won’t be required to do anything from a management or bookkeeping standpoint.
Because of the significant expense, the solar companies thoroughly investigate the credit of any organization before entering into a PPA. It is expected that you, as the customer, will be able to fulfill your end of the bargain and host their solar panels for the entire contract duration. The most favorable customers are stable organizations that aren’t going anywhere – like a government entity.
Not Free, but Free-ish?
“Free energy” sounds like it is too good to be true, but the reality is that every case is unique. You may pay slightly more for the solar power than for conventional power, but it can be done without any cash outlay while demonstrating environmental responsibility.
To decide whether a switch to solar is something that would work for your organization, start by asking questions. Enlist the help of a consultant who can launch the discovery process to determine if you satisfy the two key qualifications: whether the solution will work physically and whether it will work financially.
Although there’s really no free lunch, if you can lock down a good price for the electricity – with little or no out of pocket costs – “going green” through solar could be a very viable option to keep the future of your organization’s energy procurement looking bright.
Bob Wooten, C.P.M., CEP, is Director of National Accounts for Tradition Energy, and has over 20 years of experience managing commercial, industrial and governmental procurement programs for a wide variety of clients. Bob holds professional certifications from the Association of Energy Engineers and the Institute for Supply Management, as well as a B.A. from Texas A&M University, and a Masters in Public Administration from the University of Houston.