solar energy, renewable,
Written by Rick Peters

PACE Solar Financing in Maryland and Washington DC

Typical Commercial Challenges

As veterans of the small commercial solar market in this region, we are very familiar with the challenges of financing solar energy systems to this group of property owners.  Small businesses want solar as much or more than any other market segment, but they are capital-constrained like no others so they need affordable financing.

Third party solar developers have been the answer for other markets.  They can easily finance large systems because the cost of assessing the applicant’s credit is well worth the return.  In the case of residential systems, they can use universal tools like credit scores to help manage their risk.  For the small commercial and non-profit market, there hasn’t been a super-attractive  way to finance solar, until now!

Commercial Solar Systems Now Recognized as Public Benefit

Washington DC and Maryland now have laws and programs in place for commercial (and nonprofit) property owners to utilize PACE.  Property Assessed Clean Energy (PACE) is a vehicle that is used to finance energy improvements for buildings.  It operates under the recognition that energy improvements are considered to be a public benefit.  As such, PACE uses the property tax as a vehicle to structure the financing payments – much like we would finance a sewer extension, but in this case specific to one property.

PACE is very appealing to property owners because they can add significant value to their building on a cash-flow-positive basis without personal guarantees or the application of additional debt to the balance sheet.  The financing payment must be less than the savings and it’s paid in the form of a special assessment on the property tax bill over the term of the financing arrangement (5-25 years at competitive rates).  Multiple energy improvements (i.e. lighting, solar, new roof) can be bundled into one financing package.

The best thing about this approach to financing solar is that the property owner will own the system, not a third party.  The property owner gets all of the benefits, including the energy savings, the substantial incentives, the marketing value, and the satisfaction.  All it costs them is the interest on the financing which pales in comparison to the savings.

More info is available on your webpage on our PACE webpage but you may just want to pick up the phone and call us to see if your property is eligible.

Commercial Solar Energy Residential Solar Panels
Written by Rick Peters

SRECs in Maryland and DC

What Does the Future Hold?

Commercial Solar Energy, Residential Solar PanelsSolar Renewable Energy Credits (SRECs) have played a large part in the financing of solar energy systems in Maryland since the RPS (Renewable Portfolio Standard) was enacted in 2005. These market-based, tradable credits are the property of the solar system owner to resell, typically to brokers who bundle them for final resale to competitive energy suppliers in the interest of meeting their solar compliance goals. In Maryland (as well as Washington DC), these credits are generated by both solar electric (PV) and solar water heating systems.

The price of SRECs is supposed to reflect the over or under supply of these credits in the marketplace. Both Maryland and DC have very aggressive solar goals (2% by 2020 in MD and 2.5% by 2023 in DC) with steep adoption curves so we need lots of SRECs to meet compliance.

Maryland:

That said, the solar industry boomed for several years recently and we are currently going into an oversupply phase in Maryland. This has the effect of pushing down prices on SRECs in the near term.   There are many contributors to the oversupply and the industry and legislators are frequently working hard to promote policies that help to smooth out the supply, but in the end, SRECs are a market mechanism that is subject to “animal spirits.”

As solar prices decline it is fitting that SREC prices are declining too – after all, we should need less incentives as solar costs come down to “grid parity.” When Maryland’s SREC market was conceived, the designers planned for a declining value as more solar got on to the grid. In fact, the Alternative Compliance Payment (ACP) schedule – the amount energy suppliers have to pay if they cannot buy SRECs – is designed to decrease over time. The ACP is considered to be the maximum that an SREC would cost in a rational market. Recently SRECs have traded on the order of 35% of the ACP, but as high as 75% a few years ago. In Maryland, the ACP is scheduled to drop from $400 to $350 in 2015 and then down to $200 in 2017, $150 in 2019, and so on.

DC

Washington DC is a different market and one that is much better insulated from the shocks of large utility scale systems that flood SRECs onto the market. The sheer geography in DC does not lend itself to 10 MW solar farms and thus the SREC supply curve is a little smoother due to the requirement being fulfilled primarily with many smaller systems. As a result, DC SRECs have shown more consistency and maintained a higher price, benefitting system owners and prospective system owners.

What now?

Regardless of the trends for solar return on investment (ROI), we all want to maximize our incentives for our own benefit. SRECs are no different. While there are many more new solar customers every day, there are also many solar system owners now approaching the end of 3 or 5 year SREC contracts (aka “strips”) and they too need to decide how to proceed going forward. Do I want to sign up for another strip (3 or 5 year term contract) and accept a large discount on my SREC price for that price security or do I want to maybe float with the market for a while? I’ve got no crystal ball, but I do know that there are many efforts underway in Maryland, some legislative and some not, to help to smooth the SREC supply and thus maintain a reasonable value for SRECs to continue to help incentivize solar. For that reason, I believe we will see some recovery of SREC prices in Maryland in the next year or two and thus maybe it is better to hold off on a term contract. In DC, I would personally opt for more surety and take a term contract with the discount price, but that is my risk averse nature. Others might like to bear more risk and float in hopes of higher SREC values in the future.

Either way, we are lucky to have these incentives in Maryland and DC. They are working to increase solar installations and jobs and they are also helping to drive down the installed price of solar in our region.

Written by Lisa Walsh

Solar Saves in Anne Arundel County

Pictured: Matt, Jessica and family in front of their newly installed solar hot water and solar electric systems.

The cost of the residential solar system has come down dramatically in the past five years. With 4 separate grants and incentives, Anne Arundel County residents are catching on.

LET THE SUNSHINE IN – Residential solar energy systems are being installed every day in Anne Arundel County where local business owners Roger Perry and Rick Peters are working hard to keep up with rising demand. Their rapidly growing 18 person firm, Solar Energy Services, Inc. (SES) installs and services solar electric, solar water heating, and solar pool heating systems in Maryland and DC, with the majority of their residential customers located within AA County. When asked why he thinks solar has taken off even in these tough times, SES president Rick Peters said there are many drivers, but economics lead the way. “Rising utility bills, decreasing cost of solar panels and generous financial incentives all combine to give homeowners the opportunity to pay off 25yrs worth of BGE energy in about 6 years, not to mention the environmental and societal benefits.”

One House – two solar systems:

Most solar shoppers are unaware that there are two types of solar energy for the home. Whole house solar electric, commonly referred to as PV (Photovoltaic), is what most people think of as solar energy. However, a solar water heater can offset 75% of your annual hot water energy. Roger Perry quickly points out that if you have a large sunny roof, there is plenty of room for both systems. He and Peters both have solar water heating and solar electric on their homes.

The clock is ticking…

Each of the 4 different substantial incentives for a residential property owner in Anne Arundel County currently has a limited life-span, with the idea that solar can be competitive without them in the future. Peters notes that the current average payback on a solar electric system is about 6 years, for a system that lasts 25 – 30 years. With solar hot water, a 4 year average payback with a similar system lifespan. The payback is even faster if you have a large family (lots of hot water use) or if you need to replace your water heater anyway. Rick Peters leaves us with some food for thought, “You can invest your money in a lot of different places these days, but most are very uncertain, or producing a very low return. On an annual basis, the return on solar energy is quite predictable, and the economic return is hard to beat with any financial investment strategy.”

TYPICAL 5kW SOLAR ELECTRIC (PV) SYSTEM
Estimated System Cost$27,500
Federal Tax Credit$8,250
MD State Grant$2,500
AA County Property Tax Credit @ 75%$1,875
SREC Payments$10,000
Total Incentives$22,625
Net Cost to Homeowner$4,875
Payback in Years6.09 yrs
25 yr Annual Energy Savings+800 per year
25 yr Lifetime Return on Investment>250%

 

Written by Taryn Faulkner

Two Solar Systems Installed at Cherry Hill Campground

COLLEGE PARK, MD:  Earlier this week Solar Energy Services, Inc. completed the installation of two separate solar energy systems at the Cherry Hill Campground.

The solar domestic hot water system consists of 10 panels, for a total of 400 square feet of collectors integrated with four, 120 gallon solar storage tanks, each with dual heat exchangers. On the same roof, SES installed a 22-panel solar pool heating system (920 square feet) designed to heat the main swimming pool during the spring and fall, saving Cherry Hill Management a tremendous amount of energy and money.

As part of the installation, SES also replaced the existing inefficient boilers with high efficiency modulating, condensing boilers (natural gas) integrated with the solar system to provide backup energy for domestic water heating. SES also installed crossover valves to allow Cherry Hill to divert solar energy to the secondary pool when the main pool reaches desired temperatures.

Post Install Info and Pics