May 2017 Edition: On-Site Solar: Is it for you? Are you considering on-site solar to reduce costs and secure energy prices for the future? AEP Energy Customer Insights provides an overview of solar systems, factors to consider, and steps to get you started.
Provided by AEP Energy Trading and Managing Director of Energy Solutions
Power: PJM – Ohio
Commercial and industrial organizations are looking beyond energy efficiency measures to save on their energy bills. Businesses who own their building or land are turning to onsite solar to reduce their costs and secure energy prices for the future. If you are considering solar, now might be the right time. To help you get started, we have provided an overview of solar system options, factors to consider when siting your solar array and understanding your savings potential.
Solar System Options
There are several common systems options, including roof top arrays, carport canopy arrays, and ground-mounted arrays. While each of these share common panel and inverter systems, they differ by installation costs and production. There are several factors you should consider to ensure your system generates the best solar panel efficiency:
Once a location is determined, a solar potential analysis should be conducted to determine how much you can benefit from installing solar at your site.
Siting your Solar Potential
If you are serious about solar, you’ll want to understand your solar potential at your location. Consider conducting a site analysis to approximate the solar potential for the area and then compare that with your actual usage. It’s important you do not oversize the system. In general, most solar panels are roughly 20 square foot (ft2) in size and nearly 330 watts (w) per panel or 0.16 kilowatts per square foot (kW/ft2). These are estimated sizes and wattage for other types of systems:
For further assistance in estimating the solar potential for nearly any site in the U.S., visit pvwatts.nrel.gov to use “PV Watts,” a free tool from the U.S. Department of Energy (U.S. DOE) and the National Renewable Energy Laboratory (NREL).
Understanding your Energy Charges
It’s important to understand how your actual electric usage impacts charges on your local utility’s electric bill or your energy supply provider’s bill. or your
energy supply provider’s bill. Behind-the-meter solar offsets both energy and demand-based charges. Because solar production coincides with high loads and peaks across the energy grid, each kilowatt-hour (kWh) of energy produced reduces not only your net peak energy use, but also coincident peak demand components of your bill. The resulting savings are on the energy portion of the bill and the demand portion of your bill, such as PJM capacity, transmission peaks, and to a lesser extent, distribution demand. Since your total energy costs include these different components related to delivering electricity to your site, every solar kWh produced on site helps avoid those charges. Effectively, this decreases you average all-inclusive energy price on a per kWh basis. In many cases, the savings results in over a 50% effective reduction in your Power Purchase Agreement (PPA) $/kWh cost. Fixing your rate (either through a PPA or by investing the capital directly) will provide savings for as long as solar is producing energy and will enable you to avoid upward movements in the market.
In some markets, the renewable attributes, such as Solar Renewable Energy Credits (SRECs), generated by the system can be sold. If your project is in a qualifying area, this provides additional value that can offset system cost and/or your all-inclusive energy price. AEP OnSite Partners will help you determine if your project meets qualifying criteria to receive SRECs.
Plotting your Path Towards Solar: Ownership Options
Once you determine solar is physically and financially viable at your site, you need to develop your solar implementation plan. This plan includes how you will procure and finance the system. Generally, there are two ownership structures that dominate the U.S. market for business customers; direct ownership or third-party ownership:
Direct Ownership: When you finance the system yourself, you reap benefits such as the energy offset and BTM savings, as well as from federal (and in rare cases, state) tax credits and tax depreciation benefits. These benefits reduce the overall cost of the system, however, they do not relieve the owner of engineering, procurement, construction, production, operations, and maintenance costs and risks. If you do not have enough taxable income to offset these incentives or do not have the risk tolerance on the other aspects, thirdparty ownership is a great option. To see what incentives might apply at your location, the U.S. DOE maintains a great resource for doing so at dsireusa.org.
Third-Party Ownership (Power Purchase Agreement – PPA): Third-party ownership through a PPA requires the customer entering into a long-term agreement with a developer to purchase the energy produced by the solar array system. Some developers will also offer a lease option. In most cases, the developer will build, own, operate, and maintain the array for the term, as well as capture all the tax credits and depreciation benefits. A 20-25 year-term is typical for most projects. The customer will retain all the BTM savings, and also benefit from reduced risk through a partner aligned with maximizing system production. It is important to consider the history and qualifications of your PPA partner and to ensure they will be the owner throughout the term. A strong PPA partner will be equipped with a proven safety record and resources to take on risk and operations for the life of the system. The PPA partner should also be a one-stop shop to absorb tax credits and depreciation benefits without a third-party financing the debt or equity. This will ensure direct alignment with your goals and allow that value to be passed directly to you as the end user.
Solar photovoltaics (PV) has assisted many business customers across the country with their energy positions and created stability for the future of their organizations. AEP OnSite Partners has developed over 50 MWs of on-site solar during 2016 alone through long term PPAs with business customers like you. For more information on how AEP OnSite Partners can help you go solar at your site, please visit AEPenergy.com/commercial/request-a-quote. Select solar as the product and services you have an interest in.
About AEP OnSite Partners
AEP OnSite Partners provides behind the meter services and solutions to assist customers to reduce energy costs and risks. This is accomplished through collaboration with your team to understand specific operational needs and develop customized services and solutions to improve your physical and financial energy positions using our market knowledge, technical expertise and investment capital. We have a deep understanding of existing and emerging energy technologies and techniques that we use to develop, design, install, own, and operate customer-centric asset investments that reduce your overall energy spend and risk.
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