Powering Green:
An Overview of Issues in
Generating Solar Power on
Buildings and Sites
The material provided herein is for informational purposes
only and is not intended as legal advice or counsel.
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seminar
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Powering Green
Chris Stevenson, Esq.
Powering Green
Renewable Energy
• Class I - solar technologies, PV
technologies, wind, fuel cells,
geothermal, wave or tidal, and methane
from landfills or biomass
• Class II - resource recovery facility or
hydropower facility
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Powering Green
Market Growth/Potential
• Solar PV growing 45% annually
• Installations of solar PV doubling every 2 years expected to continue until at least 2020
• According to USDOE, the electricity needs of entire
U.S. could theoretically be met by a PV array within
an area 100 mi. x 100 mi. (10,000 sq. mi.), which is
equivalent to just under 0.3% of land area of U.S.
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Powering Green
Market Growth/Potential (cont.)
• Estimated that U.S. has 8,620 sq. mi. of building area
(roofs and facades) suitable for generating solar
power
• Estimated that one-half of that area could supply
almost 30% of U.S. electricity
• According to USDOE, PV power will be competitive
in price with traditional sources of electricity within
10 years
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Powering Green
Market Growth/Potential (cont.)
 NJ is No. 2 nationally for solar power
installations
 NJ solar 100+ MW as of October 2009
 Up to 2,200 additional MW in next decade
 RPS goal of up to 3% solar by 2020 and 7% by
2026
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Powering Green
Federal Legislation
• Climate Change / GHG Reduction
– Waxman-Markey Bill (American Clean Energy and Security
Act of 2009)
– Kerry-Boxer Bill (Clean Energy Jobs and American Power
Act)
– Kerry-Graham-Lieberman Framework for Climate Change
and Energy Independence Legislation
• The Stimulus (American Recovery and Reinvestment
Act of 2009)
– Extension of credit for electricity produced from certain
renewable resources
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Powering Green
Federal Legislation (cont.)
• 10 Million Solar Roofs and 10 Million Gallons
of Solar Water Heating Act of 2010 (S. 993)
– “use of solar photovoltaics on the roofs of 10
percent of existing buildings could meet 70
percent of peak electric demand”
– “the State of New Jersey is second in the United
States in installed solar photovoltaic systems and
has used incentive programs to achieve 90
megawatts of installed solar capacity”
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Powering Green
Federal Legislation (cont.)
• 10 Million Solar Roofs (cont.)
– “despite inventing solar technology, the United
States has fallen behind nations with less solar
resources because those nations have set in place
policies to promote solar energy, and the United
States now ranks fourth in installed solar behind
Germany, Spain, and Japan”
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Powering Green
NJ Legislation
• NJ Global Warming Response Act
• The Solar Energy Advancement and Fair
Competition Act
– Increasing RPS for solar
• Favorable siting legislation
NJ Programs
• EMP, BPU, Clean Energy Program
– RPS goals
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Powering Green
NJ Programs (cont.)
• EMP, BPU, Clean Energy Program (cont.)
– Helped to install 90+ MW of solar capacity during last eight
years
– From 6 installations to more than 4,000 in eight years
– Rebates, net metering, standardized interconnection, RPS for
solar, SREC trading system
– Clean Energy Fund ↓ ↓ ↓ ↓
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Powering Green
Innovations in Financing
• Power Purchase Agreement
• Solar Lease
• RPS/SACP
• SRECs
• Tax credits
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Powering Green
May 12, 2010
Solar Options for Buildings/Sites
Lyle Rawlings, P.E.
CEO, Advanced Solar Products
President, Mid-Atlantic Solar Energy Industries Association
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The Photovoltaic Effect
Phosphorous has
one more electron
than Silicon, and
Boron has one less.
When these
materials are
substituted into a
P
Silicon crystal, it
creates an electric
field that sweeps
electrons freed by
Si
light energy out of
the cell and to a
load. No material is
consumed and the
B
process could
continue
indefinitely..
The Photovoltaic Effect
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Solar is desired for Jobs and Economic Growth…
1.4
Among today’s
energy resources,
PV is the most
intensive job
creator per MWH
generated.
1.2
1
0.8
JOBS
CREATED:
PERSON-YEARS
PER 1000 MWH
0.6
0.4
0.2
0
PV
COAL
Sources: Renewable Energy Policy Project, “The Work That Goes Into Renewable
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Energy”, and Mid-Atlantic Solar Energy Industries Association
Creation of a Diverse Market:
A (partial) success story:
The New Jersey Solar Market
• Over 260 solar integrator companies in the state
• Plus…
+ Large engineering firms
+ Architectural firms
+ Electrical contractors
+ Financial Community
+ Brokers & Aggregators
+ Accounting firms
+ Law firms
+ Union locals
+ Real estate firms and developers
Etc., etc.
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What kinds of jobs are created?
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Engineers
Project managers
Marketing and sales
Upper management
Architects
Administrative
Manufacturing jobs
Installers
Electricians
Lawyers
Accountants
Brokers & Aggregators
Bankers
Etc., etc.
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Types of PV Arrays: Residential PV Systems
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Types of PV arrays: Flat Roof-mounted arrays
(Older Design: Less common today due to lower annual
output)
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Types of PV arrays: Tilted roof-mounted arrays
(Current Application10-15 degree tilt, higher
annual output)
Lawrence
High
School
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Types of PV arrays: Tilted ground-mounted
arrays
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Fixed-Tilt Ground Array – View from South
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Fixed-Tilt Ground Array – View from North
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Types of PV arrays: Trackers
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PV Power for Emergency Facilities:
Bayonne Midtown School
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A
D
V
A
N
C
E
D
S
O
L
A
R
P
R
O
D
U
C
T
S
3
PV
Inverter
1
2
Meter
Main
Distribution
Panel
Emergency
Power
Panel
T
R
A
N
S
F
E
R
S
W
I
T
C
H
Generator
1 In a power outage, the existing emergency power system
automatically disconnects from the outside electric grid
2 The Generator starts
The Inverter re-starts in a special “Generator Support Mode” and
3 automatically shares the building’s emergency power load with the
Generator, keeping fuel use to a minimum
• When power is restored, the Inverter goes back to normal mode,
supplying solar power to the building
• The entire process is fully automated
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Power conversion: Inverters convert DC power to
AC
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Current Trends
• In one year, PV module supply has gone from severe scarcity to
severe oversupply – and back to scarcity.
• Module prices and system prices have plummeted (economy, cuts in
Spain, more & cheaper silicon feedstocks) – but in last 6 weeks,
supply has become very tight and prices have risen.
• Thin-film PV has arrived as a low-cost alternative, but also low
efficiency.
• Requirements for Made in America for school and ARRA projects
• PV serving multiple purposes e.g., PV for emergency power /
homeland security
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Current Situation: the SREC structure is resulting in a ratepayer
burden that is far too high.
SREC Trade and NJCEP Prices
800
700
$/SREC
600
500
NJCEP
400
SRECTrade
300
15-Yr Contracts
200
100
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
NJ SREC Prices starting July 2008
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This was predicted BPU-Commissioned Summit Blue Study on the Cost of Different Models:
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Status Quo1:
•
SREC Market:
$0.67/KWH
•
PSEG Loan II:
$0.38/KWH
•
JCPL/ACE LT contracts:
$0.40/KWH2
•
Real Cost of Production:
$0.25/KWH3
Notes:
1. Prices do not include LSE markups (which apply to PSEG and JCPL/
ACE as long as SRECs are auctioned instead of retired & allocated)
2. Does not include JCP&L/ACE markup.
3. With a “reasonable rate of return” added
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Ratepayer Burden:
The Cost of High SREC Prices could amount to:
• $60 million to $160 million per year of additional costs
• $2.3 billion between 2010 and 2026 of additional costs
33
Additional Ratepayer Burden as long as SRECs are short:
SACP Payments:
• even higher than commodity market prices
• As an example, if we are 50% short on SRECs, then
the SREC cost burden effectively doubles due to SACP
payments.
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The Other Side of the Coin:
What if there is an SREC oversupply (e.g., two years from now)?
• SREC prices are likely to crash
•100’s of schools who have issued bonds to build solar
systems cannot pay off their bonds
• Tens of thousands of homeowners, hundreds of municipal
buildings, thousands of business, churches, farms, etc.,
all of whom have built solar power systems, are losing
money.
Result: large-scale political turmoil and unhappiness
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Green Power –
Funding & Incentives
William Amann, P.E., LEED AP
Chairman: USGBC, NJ Chapter
Chairman: Somerset County Energy Council
President: M&E Engineers, Inc.
• Building Design
• Building Operations
& Maintenance
• Renewable Energy
ENERGY & ATMOSPHERE
• Energy Modeling
• Energy Audits
• Commissioning
Energy Incentives
• Investment Tax Credit
– (Section 179D)
• Renewable Energy Credits
• Energy Incentives (“Rebates”)
• Federal Funding
New Jersey’s
Clean Energy Program
• Funded since 2001 from “Societal Benefits
Charge” on utility bill
• Provides opportunities for energy projects
in three sectors:
– Residential (Energy Star)
– Renewable (Solar, Wind, Biomass)
– Commercial & Industrial
New Jersey’s
Clean Energy Program
2010 Funding Levels:
Energy Efficiency– Residential
$113,899,902
– C&I
$119,963,654
Subtotal
$233,863,556
Renewable
$183,343,174
Total
$417,206,730
2010- Renewable
Energy Programs
• Renewable Energy Incentive Program (REIP)
– </=10 kW residential solar projects up to
$1.35 per watt with Home Performance
with ENERGY STAR audit
– </= 50 kW commercial/municipal solar
projects up to $.80 per watt
– Wind rebates based on estimated energy
production, from $0.50 up to $3.20
– Sustainable biomass projects from $0.15
up to $4.00 per watt
Renewable Energy
Ferreira
Construction
Branchburg,
NJ
Solar is delivered at $0.21/Kwh +/-
“The cheapest, cleanest energy
is the energy you don’t use”
Energy Efficiency is delivered at
$0.03/Kwh or $0.30/therm
Energy Efficiency vs.
Renewable Energy
• Before considering solar or wind alternatives,
take steps to reduce energy consumption in
buildings with measures that address…
• Building envelope – insulation, air sealing,
windows
• Lighting and lighting controls
• Heating, ventilation, air conditioning, water
heating
• Variable frequency drives and motors
Commercial &
Industrial Programs
• NJ SmartStart Buildings
Design Assistance
Prescriptive Equipment Rebates
Custom Measures Program
• Direct Install (< 200 kW Peak Demand)
• Pay for Performance (includes Combined
Heat & Power)
NJ SmartStart
Buildings Program
Eligibility
• New Construction, Renovation, and Equipment
Replacement
• Commercial & Industrial Customers Served by a
Public Utility
• Municipalities and Government-Owned Facilities
Features
• Financial Incentives to Reduce Capital Cost
(Prescriptive and Performance)
• Comprehensive Design Support for Larger
Projects (≥ 50,000 sq. ft.)
• Technical Assistance for Other Projects (Walkthrough analysis)
• Up to $500,000 per utility account per calendar
year
Direct Install Program
• Small and Medium-Sized Businesses and
Government-Owned Facilities with ≤200 kW Peak
Load
• Designated Contractor (+/or PSE&G) Provides
Walk-thru Energy Audit, Recommendations and
Installation
• 80% of Material and Labor Costs Paid Directly to
Contractor
• Facility Owner Pays Remaining 20%
• No Cap on Measure Installations (as long as
measures hit savings criteria)
Pay for Performance (P4P)
The greater the savings, the greater the incentives…
• Buildings over 200 kW Peak Demand
• Network of Trained Program Partners
• Whole-Building Approach – Minimum 15%
Performance Threshold
• Incentives up to $1 Million/Meter – Natural Gas
and Electricity
• Additional Incentive up to $1 Million for
Combined Heat & Power
• Staged Incentives
300,000 Sq Ft building
with a 21% energy
reduction plan
Energy Reduction Plan Development $ 25,000
Energy Reduction Design Incentive
$ 150,000
Post Construction Verification
$ 300,000
(or 75% of project incremental cost)
Up to $475,000 of potential incentives for this
project, not including additional CHP incentive
US Green Building Council –
New Jersey Chapter
4th Annual Gala – May 20th,
New Brunswick
USGBC-NJ
Chapter Coordinator: Marianne Leone
Coordinator@usgbcnj.org
www.usgbcnj.org
Funding and Tax Incentives for
Green Energy
Melinda Fellner Bramwit
An Update Since Last We Met
• American Recovery and Investment Act
of 2009 gave us credit vs. grant option
• Payout on grants- over $1 billion?
• Predictions
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Grant Eligible Basis
• Costs incurred in connection with
tangible property which is an integral
part of a “qualified facility”
• Eligible projects- windfarms, biomass
facilities, geothermal, solar, kinetic and
others
• Certification of Grant Eligible Basis
• Commencement of Construction
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ITC and Treasury Grant
Compare and Contrast- what works for
your project
Partnership issues- entity of choice
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Seminar Intermission
Power Purchase Agreements
James Laskey
When is a Power Purchase
Agreement (PPA) Needed?
A. Whenever the producer and consumer of electricity
are not the same
1.
2.
B.
C.
Most common situation is when the on-site generating
equipment is owned by one party but the host itself wants
to use the electricity
Also comes into play if the electricity is being generated at
one location and consumed at a second “off-site” location
Is not needed if the user of the generating
equipment will be using the electricity itself
PPA–related provisions are often inserted into
agreements that address other issues, such as sale
or lease of equipment, installation, and
maintenance. These latter issues must be
addressed even if a PPA is not required.
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Example Where PPA Is Not Needed
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Example Where PPA Is Needed
PV System
Owner
Host
PV System Owner generates
electricity and earns SRECs.
Host consumes and purchases
electricity from PV System
Owner.
61
What Issues Do PPAs Address?
A. Quantity
1.
2.
3.
4.
Usually the full output of the facility
Typically provides for minimum guaranteed output at
least on an annual basis
Accurate metering is important to determine both amount
to be paid by user and also whether minimum guaranteed
output has been achieved
Note that this metering is separate from the metering that
the local utility will use to determine how much energy
has been delivered to the site (or, in a net metering
situation, how much energy has been delivered back to
the grid).
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What Issues Do PPAs Address?
B. Price
1. Can be expressed either as a flat amount per
kilowatt-hour (KwH) or as a percentage of the
local utility’s otherwise applicable rate (e.g.,
85%, meaning a guaranteed 15% savings)
2. Even if the first year is a flat amount, it is
common to provide for annual escalations,
either flat percentage, or tied to an index such as
the CPI, or tied to the increase in the local
utility’s rates
3. Large installations will often also include a fixed
capacity charge, either annual or in monthly
installments
63
What Issues Do PPAs Address?
C. Allocation of Environmental Attributes
1. Solar renewable credits (SRECs) initially belong
to the generator but can be transferred to the
host
2. Often the generator will keep SREC proceeds up
to a certain threshold, and then share additional
proceeds with the host on a prenegotiated basis
3. SRECs can either be sold in the spot market or
sold to wholesale power producers under long
term contracts
64
What Issues Do PPAs Address?
D. Compensation for Shortfall of
Production
1. Usually based on cost for replacement
power from the utility
2. True-up usually annual, but sometimes
guarantee is stated over longer period of
time
65
What Issues Do PPAs Address?
E. Length of Contract
1. Developer wants a sufficiently long
period to recover its investment: 15 years
is not unusual
2. Provisions for early termination payment
are common
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What Issues Do PPAs Address?
F. Other Provisions
1. The generator’s rights under a PPA are often
assigned to a lender as security for repayment of
the loan needed to procure the equipment. In
such event, the host needs assurance that in the
event of foreclosure any operational covenants
of the generator will continue to be observed
2. Force majeure – note that typical “acts of God”
provisions may affect performance under PPAs
more often than in other commercial settings
3. Regulatory uncertainty or “change of law” can
be significant point of negotiation
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Solar and Wind Power in New Jersey:
Legislative Accomplishments and
Objectives and How Businesses and
Individuals Can Support Them
NJ State Senator Bob Smith
Chair, Senate Environment and Energy Committee
Questions & Answers Session
Thank you for coming!