Commercial Solar Economics

Andy Black
“Commercial Solar Economics & Solar Financial Analyst
(408) 428 0808x1
Introduction to Financing with Leases & andy@ongrid.net
PPAs”
Solar Living Institute: April 20, 2008, Los Angeles, CA, 9am-5pm
Contact: Solar Living Institute: www.solarliving.org, 707 744 2017 to register

8:30 Check-in

9:10 Introductions

Commercial Tax & Incentive Issues

Break, Q & A, Networking

TOU & Demand Rate Choices & Case Studies

~12:00 Lunch, Q & A, Networking (~30 minutes if possible)

Choosing Rebates vs. PBIs

Commercial Financing In General

Break, Q & A

Financing with Leases

Financing with PPAs

~4:30 Formal Conclusion, Break, Q & A

Interactive Examples (for those who wish to stay)
Using the OnGrid Tool

We must be out by 5:00 (add’l questions outside)

Diligence:
Heights by great men reached and kept were not obtained by sudden flight, but
they, while their companions slept, were toiling upward in the night.
- Henry Wadsworth Longfellow

Andy Black
“Commercial Solar Economics & Solar Financial Analyst
(408) 428 0808x1
Introduction to Financing with Leases & andy@ongrid.net
PPAs”
Solar Living Institute: April 20, 2008, Los Angeles, CA, 9am-5pm
Contact: Solar Living Institute: www.solarliving.org, 707 744 2017 to register
Abstract:
This rigorous workshop is designed to help commercial systems integrators (dealers, installers, and
salespeople) understand and make the financial case for commercial PV systems including specifics
for the local/nearby utilities (depending on location), then understand how to finance them with
PPAs and Leases.
“Economics of Solar: Making The Financial Case for Residential Solar” or equivalent is a required
prerequisite.
This class includes:
 Economics of commercial & municipal systems, including the additional incentives (tax credits,
RECs, PBIs, depreciation), and utility tariff options (including TOU and demand charge rate
choices)
 PPAs: Understanding the basics, subtleties, complexities, risks, and opportunities
 Leases: Understanding the major types, how and when they are used
 A short list of financing, legal, tax, and accounting providers who specialize in solar

All students will receive a copy of the demo version of the OnGrid Tool (licensing agreement will be
required).

Biography:
Andy Black is a Solar Financial Analyst and the owner of OnGrid Solar. OnGrid Solar provides
financial analysis and sales education & software to solar installers to help them make a strong sales
case for solar electricity to their customers. Andy has more than a dozen years of design, consulting,
teaching, sales, and research experience in solar. He specializes in demonstrating the financial payback
of solar electricity systems. He is a former NABCEP certified solar installer.
Andy Black is a recent member of the Board of Directors of the American Solar Energy Society and
served as Chapters Representative. He is also a member of the Advisory Board of the Northern
California Solar Energy Association.
Andy’s formal education includes a Bachelor’s in Electrical Engineering from Penn State University, a
Master’s in Electrical Engineering from University of Southern California, and a Marketing Certificate
at the University of California. His training in solar electricity includes Solar Energy International’s
intensive photovoltaic coursework and more than a dozen specialty courses in solar electric and related
fields. He presents regularly on the financial analysis of solar electricity to audiences nationwide.
Andy is also the groundskeeper and servant for a cat at his home in San Jose, CA.
Contact Info: Andy Black, CEO
OnGrid Solar
4175 Renaissance Dr #4, San Jose, CA 95134
(408) 428 0808x1 andy@ongrid.net www.ongrid.net

COMMERCIAL SOLAR Introductions & Thanks
ECONOMICS & FINANCING
!  Solar Power International 09
Andy Black !  Solar Electric Power Association
Solar Financial Analyst "  Julia Hamm & Emily Brown, & Stuart Raper
& Sales Software Creator

!  Andy Black, OnGrid Solar
"  Solar Financial Analyst & OnGrid Tool Creator
Solar Power International 2009
!  You for coming!
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 2

Quick Survey -
Quick Survey - Who’s Here?
!  Existing integrators / dealer / installers
Your Goals for Today?
"  Managers & Owners !  Learn about economics for general knowledge
!  Salesperson for integrator / dealer / installer
!  Want to use economics for selling / grow
!  New or hopeful integrators / dealers / installers
!  New or hopeful salespeople
business
!  Government / Utilities !  Want to learn about / have the OnGrid Tool
!  Customers / consumers / end users
!  Want to increase your knowledge to develop
!  Manufacturers
your own tool
!  Others?
!  Who’s taken the Residential/Basic Payback Class?

© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 3 © 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 4

Quick Survey -
Instructor Background
Area(s) of Interest?
!  Came to learn specifically about: !  M.S. Electrical Engineering
"  Commercial Financial Analysis: IRR, Tax, etc !  SEI graduate & NABCEP Certified PV Installer

"  Commercial Lease Financing !  13 Years involved with Solar

"  Commercial PPA Financing !  9 Years studying, writing, & presenting about

# Use PPAs in selling Solar Financial Issues
# Create new PPA offering to market !  5 Years as Solar Salesperson

!  Other interests? !  Now a Solar Financial Analyst &

!  Networking list? Creator of the “OnGrid Tool” solar sales
software

Handout Resource List Decorum
!  Resources available at www.ongrid.net !  Questions: Please focus on Solar Economics
& Payback
" Articles & papers on solar “Payback”
!  No Side Conversations Please
" Upcoming classes & events
"  Hard for others to hear
# Sales & Marketing !  Cell phones to fun mode
# Slides from past classes !  Site Logistics & Breaks

"  Free demos of the OnGrid Tool "  Facilities

"  Lunch & 2 breaks: Networking

Agenda Installed System Costs - Size
!  Commercial Solar Financial Analysis !  Typical range $7-$11/ CEC AC watt thru 10/2008
"  Commercial Incentive, Tax, & Tariff Issues !  Commercial, Gov’t & Non-Profit: $7-$9/Watt CEC
AC
"  Four Financial Analysis Methods & Examples
"  $5.50-$7.50/Watt STC DC (1 W DC =~ .83 W AC)
!  Choosing Rebates vs. PBIs "  $5.50/W STC is typical for 500kW+

!  Financing with Leasing & PPAs !  Some economies of scale
!  Interactive Examples using the OnGrid Tool !  Price Trends 2003-2008

Questions preferred at points marked: "  Germany & Spain Questions?
"  Please focus on Economics Questions? !  Price Declines Since 11/2008 and Predictions
!  Down $1 by 5/2009; Down $1.50-$2 by 12/2009

PBI: Performance
CSI EPBB Rebate
Based Incentive
!  Systems under 50kW (30kW in 2010+) !  Systems over 50kW (30kW in 2010+)
!  EPBB: Expected Performance Based Buydown "  Optional for systems <50kW
"  Adjusted for Expected Performance: !  Paid for all kWh produced for first 5 years
# Tilt, Orientation, Shading, Location, Module "  Actual performance
Temperature (due to lack of air flow)
# EPBB Calculator: www.csi-epbb.com

Questions?

CSI Trigger Tracker
Step
Statewide
MW in Step
EPBB Payments (per Watt)

Residential Commercial
Government
/
PBI Payments (per kWh)

Residential Commercial
Government
/
Tax Benefit Overview
Non-Profit Non-Profit
1 50 n/a n/a n/a n/a n/a n/a
2 70 $2.50 $2.50 $3.25 $0.39 $0.39 $0.50
3
4
5
100
130
160
$2.20
$1.90
$1.55
$2.20
$1.90
$1.55
$2.95
$2.65
$2.30
$0.34
$0.26
$0.22
$0.34
$0.26
$0.22
$0.46
$0.37
$0.32
!  Federal Investment Tax Credit (ITC)/Grant
!  Federal & State Accelerated Depreciation
6 190 $1.10 $1.10 $1.85 $0.15 $0.15 $0.26
7 215 $0.65 $0.65 $1.40 $0.09 $0.09 $0.19
8 250 $0.35 $0.35 $1.10 $0.05 $0.05 $0.15
9 285 $0.25 $0.25 $0.90 $0.03 $0.03 $0.12

!  Only apply to taxable entities (not schools,
10 350 $0.20 $0.20 $0.70 $0.03 $0.03 $0.10

non-profits, gov’t, etc)
Disclaimer: I’m not a CPA or lawyer, and am not providing
tax advice. Seek qualified professional help

Trigger Tracker website: http://www.csi-trigger.com As of 10/19/09
Program Data & Statistics: http://csi.powerclerk.com

Federal Investment
Federal ITC “Grant”
Tax Credit - Commercial
- Commercial 2009-2010
!  30% Investment Tax Credit - Extended 10/2008
"  Must be “placed in service” in 2006-2016 !  30% ITC becomes (or optionally can be?) a Grant
"  10% if installed after 2016 !  Same general features and intended functionality as

“There is no feast which does not come to an end.” the ITC, but better:
- Chinese proverb ! "  Paid < 60 days of “placed in service” or application
!  IRS Form 3468 (Sect 48 of Internal Revenue Code) "  Usable even if no tax appetite (effectively a
!  Unused credit can be carried forward 20 years refundable ITC or Federal Rebate)
!  Commercial !  Commercial systems only
"  Including home businesses > 20% sqf - with caution !  “Placed in service” in 2009-2010 only, or
!  Limited by AMT in 2008, No AMT limit 2009-2016 "  Construction Initiated 2009-10, completed by 2017
!  Vests at 20% per year (over 5 years) !  Treasury web application now Commercial Solar Economics & Financing
available
© 2009 OnGrid Solar, All rights reserved. Commercial Solar Economics & Financing - 15 © 2009 OnGrid Solar, All rights reserved. - 16

Federal ITC “Grant” Limitations “Placed In Service”
!  Commercial systems only SEIA “Guide to Federal Tax Incentives for Solar Energy”
"  Limited to IRC Sec 48 and some Sec 45 Available at: www.seia.org!
!  Pass-thru entities (partnerships, LLCs, S-corps) !  Equipment delivered and construction / installation

can use grant, as long as none of the recipients is completed!
non-taxable (and therefore disqualified) "  Minor tasks like painting need not be ﬁnished !
"  I.e. One disqualifies all, regardless of small % !  Taxpayer has taken legal title and control !

!  Allows transfer of ownership !  Pre-operational tests demonstrate the equipment

!  Recapture of Grant or ITC on permanent functions as intended !
cessation of production !  Taxpayer has licenses, permits, and PTO (permission

!  May be state taxable in certain cases to operate)!

“Placed In Service” Depreciation - Federal
!  Depreciation = tax deduction spread over time
POSTT:! !  MACRS 5-Year Accelerated Depreciation (1/2 yr conv.)
!  Permits & Permission to Operate signed off! MACRS: Modified Accelerated Cost Recovery System
" 

!  Operation Commenced!
IRS Form 4562
" 

!  Equivalent of tax deducting system’s ‘basis’ over 5.5 years
!  Synchronization with the Grid!
Net Value = Basis * Tax Rate
!  Testing Complete! Net Value = (System ITC basis - 1/2 ITC) * Tax Rate
Net Value = System ITC basis * 85% * Tax Rate
!  Turnover to the Customer!
!  Regular Schedule: 20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%
!  2008-09 Schedule: 60%, 16%, 9.6%, 5.76%, 5.76%, 2.88%
"  2008-09 Gets 50% “Bonus Acceleration of Depreciation”
!  Commercial (including home businesses >50% by sqf)
!  Up to 20 year carry-forward

Depreciation - CA State Financial Hazards & Gotchas
!  Corporate: 12 Year Straight Line method !  Federal Tax on Rebate
!  Non-Corporate: MACRS 5-Year !  1099 tax forms have been issued to
"  (Sole-Proprietors, LLP, etc) recipients
!  Section 136 applies only to residential
!  State Depr Basis is Top Line Cost minus
Rebate & State Tax Credit
!  Commercial (including home businesses)
Questions?

Rebate Tax Interactions Tax Credit & Depr. Example
!  If the rebate is non-taxable, the federal ITC
Non-Taxed Rebate
$150K System Cost
is on amount after rebate -$50K Rebate
$100K Net Cost After Rebate
!  If rebate is taxable, then federal ITC is on -$30K Tax Credit Value (30% of $100K)
amount before rebate -$35K Depr Value (85% of $100K * 41%)
=$35K Net Cost

!  Rebates are not state taxable in CA 41% = combined net federal & state tax rate
(35% Federal, 8.84% CA State)


Tax Credit & Depr. Example Tax Credit & Depr. Example
Taxed Rebate Non-Taxed Rebate Taxed Rebate
$150K System Cost
$150K System Cost $150K System Cost
-$50K Rebate -$50K Rebate -$50K Rebate
+17.5K Rebate Tax ($50K * 35% Fed Tax) +17.5K Rebate Tax
$100K Net Cost After Rebate
-$45K Tax Credit Value (30% of $150K)
-$30K Tax Credit Value -$45K Tax Credit Value
-$52K Depr Value (85% of $150K * 41%) -$35K Depr Value (85K * 41%) -$52K Depr Value (127.5K * 41%)
=$20.5K Net Cost =$35K Net Cost =$20.5K Net Cost
If commercial, want rebate taxable (no choice)
Then tax credit and depreciation are on amount before rebate
" 

Worth more to pay tax on rebate, then get 30% credit and
" 

© 2009 OnGrid Solar, All rights reserved.
depreciation on rebate
© 2009 OnGrid Solar, All rights reserved.
Commercial Solar Economics & Financing - 25 Commercial Solar Economics & Financing - 26

Section 179 Not Available Small Business Carry-Back of NOL
!  Can’t use Section 179 Deduction (in lieu !  In 2009(+?), small businesses can carry
of depreciation) and also get ITC or back Net Operating Losses up to 5 years
Treasury Grant
"  $15 Million Gross Receipts limitation
"  Normally only 2 year carry-back
!  2009 Economic Stimulus


Tax Benefits System Variables in More Depth

!  ITC & MACRS reduce customer cost, but not !  Demand Charges
up-front !  RECs
!  Not available to all customers - affected by
!  Time-of-Use (TOU) Choices & Issues
AMT (before 2009 only)
!  Commercial Tax Issues
"  Ask about customers “tax appetite”
"  More in Lease & PPA section
!  Customers beware of optimistic sales claims


CPUC Loading Order
Least GHG, Least Total Cost Electric Rate Structures Overview
(including new power plants) 1a. Customer Awareness
via Energy Audits and
Analysis
1 - Energy Efficiency & Conservation
1b. Efficiency Rebates !  Options for Solar - Net Metering
Eg: programmable thermostats and
lighting controls, CFLs, etc.
2a. TOU & Super-Peak Rates !  3 Customer Classes (Res, Com, Ag)
2b. Demand Charges
2 - Demand Response
& Load Control
2c. Utility Control Systems
with large critical
!  2 Types of Rate (Flat, TOU)
Greater customers
System
2d. Advanced Metering
2e. “Flex Your Power” Ads
"  TOU: Time of Use
3 - Renewables
Reliability 2f. PV
3. California Solar Initiative (PV), !  Demand Charges for Commercial
& other RE programs
Overall 4 - Clean
Cost Fossil
Effectiveness


Time of Use with
Common Electric Rate Schedules
Annual Net Metering
Net Metering on an annual basis Common Commercial Rate
!  Utility Common Ag Rates
Schedules
Combined with
!  Time Of Use metering
CA - PG&E A1, A6, A10, E19, E20 AG1, AG4, AG5
CA - SCE GS-1, GS-2, TOU-GS-3, TOU-8 PA-1, PA-2
!  Sell at high rate, Buy at low rate
CA - SDG&E A, AL-TOU, A6-TOU, DG-R PA
!  2:1 or 3:1 in customer favor
!  Can reduce system size 0-30% NJ - JCPL GLP
"  Reduction depends on % on-peak usage & rate schedule NJ – PSEG GP
#  Commercial is usually small reduction
#  Shading and orientation AZ - APS E-32
Questions?

Time Of Use
Commercial Rates (PG&E) Commercial PG&E A6 & A10
Demand Commercial "A6" & "A10" Time-of-Use Pricing Periods
Rate Size Flat Rate TOU Rate
Charge
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
A1 <20kW 13-19¢ Flat None Midnight - 6am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
40¢ Peak 6am - 8:30am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
A6 Any* None 8:30am - Noon Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak
11¢ Off-Peak Noon - 6pm Off-Peak Peak Peak Peak Peak Peak Off-Peak
A10 <500kW 10-13¢ Flat High 6pm - 9:30pm Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak
15¢ Peak 9:30pm - Midnight Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
A10 TOU <500kW High
9-11¢ Off-Peak
14¢ Peak !  Use and/or Sell On-Peak @ up to 40¢/kWh on A6
E19**/E20 >500kW High
7-8¢ Off-Peak !  More usage on peak, less benefit from TOU
*If not required to be on another rate schedule
**Required schedule if measured demand is >500kW Questions?

SCE Commercial
Commercial Rates (SCE) Time Of Use
SCE Commercial Time-of-Use Pricing Periods
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
11pm - 5am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
5am - 8am Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak
8am - Noon Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak
Noon - 6pm Off-Peak Peak Peak Peak Peak Peak Off-Peak
6pm - 11pm Off-Peak Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak

!  Use and/or Sell On-Peak @ 24-32¢/kWh on Option R
"  Part-Peak @ 14-19¢/kWh

!  More usage on peak, less benefit from TOU
Questions?

Electric Rate Structures Overview Demand Charges
!  Usually applies only to Large users
Commercial and Agricultural
!  Options for Solar - Net Metering " 

!  On a per kW basis (load, not usage)
!  3 Customer Classes (Res, Com, Ag) "  Size of the wire, power plant for peak usage
!  2 Types of Rate (Flat, TOU)

"  TOU: Time of Use
!  Demand Charges for Commercial

!  Based on highest 15-30 minute peak load average any
time during the last 1-12 billing months
Questions?

Demand Profile vs.
Reducing Demand Charges
Solar Production
!  Difficult for solar to offset demand
TYPICAL "  Clouds, spikes in usage not during solar hours,
BUILDING
DEMAND inverters tripping offline
DEMAND
&
!  Add control systems ~$30K+
IDEAL
PRODUCTION
SOLAR !  Some rates have no/low demand charges
PRODUCTION
"  And sometimes high peak (sell) rates
7am 12noon 5pm "  Benefits depend on Size: Usage ratio and demand &
HOUR
usage patterns with respect to rate schedule hours


Reducing Demand Charges RECs, Green Tags, TRCs
!  RECs = Renewable Energy Credits
!  TRC = Tradable Renewable Certificates

!  Green Tags = RECs = TRCs = S-RECs

!  What are these?

"  The green value part of a solar kWh
"  The Legal Rights to Green-ness Electricity (kWh)

Generating Plant
(kWh)

Green Tags (kWh)
Questions?

REC Value CA REC Value
!  RECs have value to other consumers !  REC sale value can be added to other value
generated by the system to calculate payback, etc.
" Those who can’t get solar directly "  Not included in any examples here
" Utilities who need it to get into "  Likely 1¢ to 5¢/kWh in California - same as Wind

compliance with emissions "  Must give up “Green Attributes” & claims
requirements. !  Challenges in aggregating from small systems
!  The best performing systems produce the most
!  Value ranges from 1¢ to 68¢/kWh
RECs
"  Depends on location, type & term !  Double counting in sales
Questions?
"  Depends on state mandate for S-RECs
!  Green-e Certified RECs: www.green-e.org

NJ REC Value Commercial Cost / Value Overview
- System Cost
!  REC sale value can be added to other value + Rebate / PBI
generated by the system to calculate payback, etc. - Tax on Rebate / PBI
"  15 year producible life + 30% Fed Tax Credit
"  Assumption in examples at 48¢ for 1 year, 30¢ for + ~41% Depreciation * 85%
12 more years, and 10¢ for the final 2 years + Savings & Inflation
!  Challenges in aggregating from small systems - Lost Electric Bill Tax Deduction
"  Estimated/calculated RECs used - Maintenance & Inflation
- Inverter Replacement Cost
!  The best performing systems produce the most
+ REC Value, Green Marketing, Morale
RECs ------------------------------------------
Questions? = Net Cost Questions?

Financial Analysis
Agenda
Methods & Tests Overview
!  Commercial Solar Financial Analysis !  Simple Payback: In reasonable time
"  Commercial Incentive, Tax, & Tariff Issues !  Total Lifecycle Cash Flow

"  Four Financial Analysis Methods & Examples "  Gives back lots more than cost over time
!  Choosing Rebates vs. PBIs !  Rate of Return analysis: 6-15+% returns
!  Financing with Leasing & PPAs !  Cash Flow when financing: Cash Positive

!  Interactive Examples using the OnGrid Tool !  Increase in Appraisal Valuation

"  Appraises for more than it cost


General Commercial Utility Specific
Variables & Assumptions Commercial &
!  35% federal tax bracket, corresponding state tax bracket Muni/Non-Profit Assumptions
!  Facing south, 14° pitch, simple composition shingle roof by Staring/Ending Rate
AC kWh
~2008 Cost per Schedule
full service provider, no complications Utility Insolation Production per
rated kW per year
rated Watt Peak%/ PP%
Incentives
Demand
!  Slightly conservative real system performance, no shade A1 / A6
CA - PG&E San Francisco 1540 / CEC kW $1.10/W Rebate
47%/35%
!  Final Net Cost = total installed system costs - Rebate (if any) - GS2B / GS2A
10kW: $8.50 CEC
CA - SCE Los Angeles 1590 / CEC kW 48%/43% $1.55/W Rebate
2009 Fed 30% ITC + $800 Permit + $0 Utility Fee 25kW: $8.25 CEC
50kW: $8.00 CEC
2x Min Demand
AL-TOU / DG-R
!  System maintenance cost is 0.25% of gross system cost per CA - SDG&E San Diego 1700 / CEC kW 39%/51% $1.55/W Rebate
2x Min Demand
year, adjusted for inflation SRECs: 48¢/1yr,
NJ - JCPL Newark 1100 / STC kW 50kW: $6.50 STC GP 30¢/12yrs, 10¢/12yrs
!  5.0% electric inflation (2.2% in CO) $1/W Rebate

!  Module degradation: 0.5% per year

!  Inverter replacement costing $700/kW occurs in year 15

!  Solar only - no Energy Efficiency included

General Gov’t/Non-Profit
Variables & Assumptions
!  Facing south, 14° pitch, simple composition shingle roof by
full service provider, no complications
!  Slightly conservative real system performance, no shade
Final Net Cost = total installed system costs - Rebate (if
Watt’$ the Payback?
! 
any) + $800 Permit + $0 Utility Fee
!  System maintenance cost is 0.25% of gross system cost per
year, adjusted for inflation
!  5.0% electric inflation (except CO is 2.2%)

General Commercial
Variables & Assumptions
!  35% federal tax bracket, corresponding state tax bracket
!  Facing south, 14° pitch, simple composition shingle roof by
full service provider, no complications
!  Slightly conservative real system performance, no shade

!  Final Net Cost = total installed system costs - Rebate (if any) -
2009 Fed 30% ITC + $800 Permit + $0 Utility Fee
!  System maintenance cost is 0.25% of gross system cost per
year, adjusted for inflation
!  5.0% electric inflation (2.2% in CO)




Utility Specific
Commercial &
Muni/Non-Profit Assumptions
Staring/Ending Rate
AC kWh
~2008 Cost per Schedule
Utility Insolation Production per Incentives
rated Watt Peak%/ PP%
rated kW per year
Demand
A1 / A6
CA - PG&E San Francisco 1540 / CEC kW $1.10/W Rebate
47%/35%
GS2B / GS2A
10kW: $8.50 CEC
CA - SCE Los Angeles 1590 / CEC kW 48%/43% $1.55/W Rebate
25kW: $8.25 CEC
2x Min Demand
50kW: $8.00 CEC
AL-TOU / DG-R
CA - SDG&E San Diego 1700 / CEC kW 39%/51% $1.55/W Rebate
2x Min Demand
SRECs: 48¢/1yr,
NJ - JCPL Newark 1100 / STC kW 50kW: $6.50 STC GP 30¢/12yrs, 10¢/12yrs
$1/W Rebate


Commercial Total
Total Lifecycle Payback Lifecycle Payback
kWh PV System Final Net Cost w/ Cumulative Savings Lifecycle Years
Pre-Solar
Utility Usage per Size & Tax Benefits & Over First 25 Years Payback To
Bill
Month Rating Rebate (including inflation) Ratio Payback
PG&E $346 2000 10 kW CEC $23K $68K 2.9x 11
PG&E $853 5000 25 kW CEC $56K $172K 3.1x 10.6
PG&E $1,696 10000 50 kW CEC $107K $344K 3.2x 10.3
SCE $333 2000 10 kW CEC $20K $27K 1.3x 21.1
SCE $695 5000 25 kW CEC $48K $75K 1.5x 19.1
SCE $1,297 10000 50 kW CEC $92K $156K 1.7x 18.2
Total Savings SDG&E $371 2000 10 kW CEC $20K $55K 2.7x 11.6
SDG&E $840 5000 25 kW CEC $48K $137K 2.8x 11.2
Initial Cost SDG&E $1,621 10000 50 kW CEC $92K $274K 3.0x 10.9
NJ - JCPL $692 10000 50 kW STC $91K $116K 1.3x 8.1
NC - Progress $800 10000 50 kW STC $47K $88K 1.9x 17.9
CT - UI $2,309 10000 50 kW PTC $133K $310K 2.3x 13.1
AZ - APS $906 10000 50 kW STC $60K $127K 2.1x 16.4
!  Total Savings (whole area) is much larger than Initial Cost HI - HECO $2,144 10000 50 kW STC $47K $368K 7.9x 5.1
CO - Xcel $805 10000 50 kW STC $109K $57K 0.5x 40.2

Gov’t/Non-Profit
Total Lifecycle Payback Total Lifecycle Payback
PV System Final Net Cost w/ Cumulative Savings Lifecycle

Gov’t/Non-Profit vs. Commercial
Pre-Solar kWh Usage
Utility Size & Tax Benefits & Over First 25 Years Payback
Bill per Month
Rating Rebate (including inflation) Ratio
PG&E $346 2000 10 kW CEC $68K $122K 1.8x
PG&E $853 5000 25 kW CEC $162K $306K 1.9x
PG&E $1,696 10000 50 kW CEC $311K $613K 2.0x !  Differerences between Gov’t/Non-Profit
SCE $333 2000 10 kW CEC $63K $48K 0.8x
SCE $695 5000 25 kW CEC $150K $134K 0.9x & Commercial? - Taxes!
SCE $1,297 10000 50 kW CEC $285K $278K 1.0x
SDG&E $371 2000 10 kW CEC $63K $97K 1.6x !  Tax deduction for electricity
SDG&E $840 5000 25 kW CEC $150K $244K 1.6x
SDG&E $1,621 10000 50 kW CEC $285K $488K 1.7x !  Commercial tax deduction lowers the
NJ - JCPL
NC - Progress
$692
$800
10000
10000
50 kW STC
50 kW STC
$301K
$351K
$318K
$150K
1.1x
0.4x
value of a kWh saved by solar
CT - UI $2,309 10000 50 kW PTC $336K $539K 1.6x
!  Commercial gets tax credit & depreciation
AZ - APS $906 10000 50 kW STC $276K $218K 0.8x
HI - HECO $2,144 10000 50 kW STC $351K $628K 1.8x
CO - Xcel $805 10000 50 kW STC $351K $95K 0.3x Questions?

IRR Timeline
Year X
Year: Year 0 Year 1 Year 2 Year 3 … …
(12-15-20)
System
-System Cost
Cost
+Incentives Rebate PBI 1 PBI 2 PBI 3 … PBI X …
+Bill Savings Savings 1 Savings 2 Savings 3 … Savings X …
Maint. X
-Maintenance Maint. 1 Maint. 2 Maint. 3 … …

Watt’$ the Rate %f Return?
Inverter
+Fed Tax Credit Fed ITC
+State Tax Credit State ITC
-Fed Cost of Fed Cost
State Tax Credit State ITC
+Fed Depr. Fed Depr Fed Depr Fed Depr …
+State Depr. State Depr State Depr State Depr …
- Fed Cost of Fed Cost of Fed Cost of
…
State Depr State Depr State Depr
=Net Net 0 Net 1 Net 2 Net 3 … Net X …
!  IRR is function of Net0 : Net25 line
!  Inverter replacement: $700/kW in yr 12-20
!  PBI, Savings, Maintenance adjust for inflation and/or module degradation

Commercial Total
Lifecycle Payback
kWh PV System Final Net Cost w/ Cumulative Savings Lifecycle Years
Pre-Solar
Utility Usage per Size & Tax Benefits & Over First 25 Years Payback To
Bill
Month Rating Rebate (including inflation) Ratio Payback
PG&E $346 2000 10 kW CEC $23K $68K 2.9x 11
PG&E $853 5000 25 kW CEC $56K $172K 3.1x 10.6
PG&E $1,696 10000 50 kW CEC $107K $344K 3.2x 10.3
SCE $333 2000 10 kW CEC $20K $27K 1.3x 21.1
SCE $695 5000 25 kW CEC $48K $75K 1.5x 19.1
SCE $1,297 10000 50 kW CEC $92K $156K 1.7x 18.2
SDG&E $371 2000 10 kW CEC $20K $55K 2.7x 11.6
SDG&E $840 5000 25 kW CEC $48K $137K 2.8x 11.2
SDG&E $1,621 10000 50 kW CEC $92K $274K 3.0x 10.9
NJ - JCPL $692 10000 50 kW STC $91K $116K 1.3x 8.1
NC - Progress $800 10000 50 kW STC $47K $88K 1.9x 17.9
CT - UI $2,309 10000 50 kW PTC $133K $310K 2.3x 13.1
AZ - APS $906 10000 50 kW STC $60K $127K 2.1x 16.4
HI - HECO $2,144 10000 50 kW STC $47K $368K 7.9x 5.1
CO - Xcel $805 10000 50 kW STC $109K $57K 0.5x 40.2

Gov’t/Non-Profit
Total Lifecycle Payback
PV System Final Net Cost w/ Cumulative Savings Lifecycle
Pre-Solar kWh Usage
Utility Size & Tax Benefits & Over First 25 Years Payback
Bill per Month
Rating Rebate (including inflation) Ratio
PG&E $346 2000 10 kW CEC $68K $122K 1.8x
PG&E $853 5000 25 kW CEC $162K $306K 1.9x
PG&E $1,696 10000 50 kW CEC $311K $613K 2.0x
SCE $333 2000 10 kW CEC $63K $48K 0.8x
SCE $695 5000 25 kW CEC $150K $134K 0.9x
SCE $1,297 10000 50 kW CEC $285K $278K 1.0x
SDG&E $371 2000 10 kW CEC $63K $97K 1.6x
SDG&E $840 5000 25 kW CEC $150K $244K 1.6x
SDG&E $1,621 10000 50 kW CEC $285K $488K 1.7x
NJ - JCPL $692 10000 50 kW STC $301K $318K 1.1x
NC - Progress $800 10000 50 kW STC $351K $150K 0.4x
CT - UI $2,309 10000 50 kW PTC $336K $539K 1.6x
AZ - APS $906 10000 50 kW STC $276K $218K 0.8x
HI - HECO $2,144 10000 50 kW STC $351K $628K 1.8x
CO - Xcel $805 10000 50 kW STC $351K $95K 0.3x

Commercial Analysis Commercially Attractive?
!  Ideal commercial customers can see after- !  IRR must exceed a hurdle rate
tax IRRs in the 3% to 8% range "  > “Risk Free Rate” + ~1-2%
= Risk Free Rate + Sum of Risks (more later)
"  Comparable to other business investments #  Source: Photon International, Aug 2007, p114

"  Plus has green marketing and morale !  Current “Risk Free” interest rates:
benefits "  LIBOR = 1.25% As of October 2009
"  10yr = 3.5%, 30yr = 4.4% As of 10/29/2009
"  Depends heavily on system cost
!  ! Commercially Attractive >= 6-7%?
!  Must properly factor all benefits and costs !  PPA & Lease investors were getting 6-8%
"  More on this later, due to recent financial market

Complete Commercial Analysis Commercial Rates of Return
PV System After-Tax
Pre-Solar kWh Usage System Gross Final Net Cost w/ Tax
Utility Size & Annual
Bill per Month Cost Benefits & Rebate
!  Proper commercial analysis is after-tax PG&E $346 2000
Rating
10 kW CEC $85K $23K
Return
7.4%
!  A. Extra incentives: PG&E $853 5000 25 kW CEC $206K $56K 7.8%
PG&E $1,696 10000 50 kW CEC $399K $107K 8.2%
"  Federal Tax Credit & Depreciation SCE $333 2000 10 kW CEC $85K $20K 1.8%

!  B. Loss of electric expense tax deduction SCE
SCE
$695
$1,297
5000
10000
25 kW CEC
50 kW CEC
$206K
$399K
$48K
$92K
2.8%
3.4%

!  A & B approximately offset each other SDG&E $371 2000 10 kW CEC $85K $20K 6.6%
SDG&E $840 5000 25 kW CEC $206K $48K 7.0%
"  Net results are comparable to residential, but SDG&E $1,621 10000 50 kW CEC $399K $92K 7.4%
are “after tax” values, so sometimes appear NJ - JCPL $692 10000 50 kW STC $350K $91K 6.9%
NC - Progress $800 10000 50 kW STC $350K $47K 3.5%
smaller. CT - UI $2,309 10000 50 kW PTC $375K $133K 5.9%
AZ - APS $906 10000 50 kW STC $350K $60K 4.6%
HI - HECO $2,144 10000 50 kW STC $350K $47K 14.4%
Questions? CO - Xcel $805 10000 50 kW STC $350K $109K -3.7%

Gov’t/Non-Profit Analysis Gov’t/Non-Profit Rates of Return
PV System Pre-Tax
Pre-Solar kWh Usage System Gross Final Net Cost w/ Tax
Utility Size & Annual
Bill per Month Cost Benefits & Rebate
!  Ideal government & non-profit customers PG&E $346 2000
Rating
10 kW CEC $85K $68K
Return
4.2%
can see non-tax IRRs in 1% to 5% PG&E $853 5000 25 kW CEC $206K $162K 4.6%
PG&E $1,696 10000 50 kW CEC $399K $311K 5.0%
"  Comparable to funding costs (muni bonds) SCE $333 2000 10 kW CEC $85K $63K -1.7%
SCE $695 5000 25 kW CEC $206K $150K -0.7%
"  Long term thinking, modest returns OK SCE $1,297 10000 50 kW CEC $399K $285K -0.2%
SDG&E $371 2000 10 kW CEC $85K $63K 3.1%
"  Has green societal and moral benefits SDG&E $840 5000 25 kW CEC $206K $150K 3.5%
SDG&E $1,621 10000 50 kW CEC $399K $285K 3.8%
!  Simpler analysis of benefits and costs NJ - JCPL $692 10000 50 kW STC $350K $301K 0.5%
NC - Progress $800 10000 50 kW STC $350K $351K #NUM!
CT - UI $2,309 10000 50 kW PTC $375K $336K 3.3%
AZ - APS $906 10000 50 kW STC $350K $276K -1.5%
HI - HECO $2,144 10000 50 kW STC $350K $351K 4.2%
CO - Xcel $805 10000 50 kW STC $350K $351K #NUM!

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