Washington DC Solar, solar renewable Energy,
Written by Lisa Walsh

Washington DC Solar Owners and Selling Solar RECs Upfront

Solar Service ,Home Solar Panels

Before we dive into this conversation – let’s be clear that SRECs (Solar Renewable Energy Credits) can be the most confusing part of figuring out the economics of a solar project.  Let’s also be clear that – as with anything confusing, (as well as possibly boring) – the temptation is to remove the confusion as quickly as possible.   In the world of solar installation and selling SRECs this sometimes translates to simply selling up to 15yrs of SRECs all at once to a solar installation company, who then installs the system at a bargain price.  Buyer beware – the immediate gratification of selling all of your SRECs in one fell swoop could be misleading.   When it comes to How and When you get paid for your SRECs “…the Sooner the Better”  may not be a sound financial strategy.

That said…Let’s talk Solar Renewable Energy Credits in Washington DC.

Both Maryland and Washington DC, along with eight other states have enacted the Renewable Portfolio Standards which specify that a certain amount of the renewable energy generated within that state must come from solar.   Whether residential, commercial, or institutional, each time a solar system generates 1 Megawatt hour of energy – the solar system owner generates 1 SREC.  This SREC is then sold via aggregators to an  SREC market where it is bought by Power Companies to allow them to meet their share of the compliance obligation, or else pay a legislated fine (Alternative Compliance Payment, or ACP) for every SREC they are short.  Washington DC currently generates the highest SREC values in the country largely due to the fact that the District does not have the real estate to install large solar farms which can oversupply the market and drive down SREC prices.

How Much is an SREC worth?

The value of an SREC in a particular market is dynamic due to two primary factors

  1. by design, SRECs values are intended  to decline over time.  The legislated ACP which serves as a ceiling to the SREC price is usually scheduled to decline in future years. Among other factors, increased installations should lead to decreased system costs and less need for SRECs to help finance a solar system.
  2. The other reason for variations is due to market mechanisms.  Brokers buy and sell SRECs in order to help make a market for them.  When the market is undersupplied, SRECs trade high, at a price close to the penalty (ACP).  This is good for those selling SRECs.  If the market is oversupplied (like Maryland is currently), then SREC prices in that market will decline well below the penalty – not so good for those selling SRECs. Varying SREC payment options are intended to allow system owners to buy down their SREC price risk. The difference between an Upfront Payment option and a Brokerage Payment option (market price) can be many thousands of dollars to a solar system owner.  In an undersupplied market like DC, where there is very little price risk for SRECs, that upfront payment option leaves a lot of money on the table.

How many SRECs will my system generate?

The number of SRECs any given system will generate depends upon the output of your system.  For example, an optimized (as in good and sunny) 5.0 kW system in Washington DC would generate close to 6.0 SRECs/year.

How and When would I receive my SREC income?

SRECs are most commonly sold through an SREC aggregator/broker such as Washington DC-based SolSystems.  However, SRECs here in the District are so valuable – as well as stable – that solar panel contractors are also offering to buy your SRECs and simply deduct the upfront payment off the cost of your solar installation.  So THIS is the heart of this article:  Solar owners have 3 choices for how to get paid for their SRECs:

  1. Upfront Payment (all SRECs are forfeited for a 5yr or 15yr period)
  2. 3yr, 7yr or 10yr Annuity Contract (SREC prices Locked-in for a specific term)
  3. Brokerage (Current market price less broker commission).

Sticking with the aforementioned 5kW system example, the following table illustrates projected SREC values for the system, using current SREC prices (November 2016) offered by a competitive SREC aggregator).

System Size = 5kW                            SREC per Year = 6

So, reviewing the column above, this Washington DC Homeowner with a 5.0kW system has these financial options to choose from:

$$$$$:  Brokerage = $32,101.85 over 25yr life of systems (as warrantied)

$$$:  *Annuity =  $18,690 guaranteed then sign-up for another annuity or go Brokerage

$:  Upfront = $8025.60  SRECs cannot be sold again until 2032.

*Annuity is also available in 3 or 5 yr increments, as well as the 10yr

The Brokerage price is exponentially higher than the other prices, does that mean there’s a lot of risk?

Some risk – yes, because you’re not locked-in to a static price.   But remember – historically DC SREC pricing has remained stable (the geography does not accommodate  huge solar farms that can flood the DC SREC market).  You can receive an email monthly that allows you to check on current pricing AND should the price start to decline – you can, at any point in time, switch to an Annuity.  .

If I choose the 10yr Annuity Option and lock-in my SREC pricing, what happens at the end of that time period?

You simply choose another payment option being offered at the time of contract experation.  Maybe you’ll opt for brokerage – or another annuity, up to you.  Same with the Upfront Payment, after 15 years.

How do I receive my SREC income?

Via check from the SREC aggregator which most pay quarterly (except with the Upfront Payment option which would be one-time).   This generally starts around two months after your system has been interconnected by your Utility and the SREC contract set-up.   We do advise that the contractual SREC relationship be kept between a professional broker/aggregator and the solar system owner.  Third parties, such as the solar panel installation company, may find themselves in a conflict of interest.

If the solar system installer is not buying my SRECs, who sets up the contract?

Most reputable solar panel installation companies will coordinate the initial set-up of your SREC contract with an SREC aggregator, as they have immediate access to the documents required for the initial set-up (Passed Building Permit, Interconnection Approval etc.).  Many installers have one or two aggregators they’re used to dealing with – or you may choose your own.

Solar Service ,Home Solar Panels
Written by Lisa Walsh

DC Property Owners: Big Hot Water load = Big Solar Incentives

Commercial Solar Service, Annapolis MD

A growing number of building owners, developers and condo associations in the District of Columbia have come to realize that their building happens to be located in the most solar-friendly city in the USA .  Solar contractors, investors and financing vehicles are falling over each other to get solar panels on District roofs and start generating  the lucrative solar renewable energy credits (SRECs).   Whether via Direct Purchase, or $0 solar leases – SRECs are undoubtedly the reason for the solar season in DC (more to follow on those below).

However, before you sign on the dotted line and fill your roof with a 25-year solar PV (electric) system, as offered by 9 out of 10 solar professionals, make sure that you’re not losing the opportunity to vastly increase your return on investment with a Solar Thermal System.

Solar Water Heating Feasibility

The pre-qualification for a Solar Thermal System involves three questions:

  1. Does your building have a substantial, daily (365 day) hot water need? (i.e. apartment building/condos, restaurant, laundry, brewery, health center)
  2. Does your building have a centralized water heating system (as opposed to individual units throughout the building)?
  3. Can the building accommodate additional storage tanks?

If you answered YES to these three questions you really (really) should first consider a Solar Water Heating system either before – or at a minimum – in tandem with, a solar PV system.  (Shopper Beware – unless your solar contact has experience with solar thermal – which many do not – you’re going to have to be prepared to shop further).

What is Solar Water Heating (or Solar Thermal)?

Other than using the sun for energy generation, Solar Water Heating Systems operate entirely differently from their electron-shaking PV counterparts.  These time-tested, technologically mature systems are mechanical in nature and relatively simple.

Moreover, a solar thermal panel is 60 – 70% efficient; whereas a solar PV (electric) panel is typically 17 – 24% efficient.  Therefore, solar thermal panels generate substantially more energy per square foot than PV panels,  monetizing many more SRECs.

Solar Service , Home Solar Panels, Solar Renewable Energy

 

Let’s Review SRECs…

SRECs (Solar Renewable Energy Credits) – along with the 30% Federal Tax Credit and 100% Year 1 depreciation– are what drive the tremendous economic benefits of solar in Washington DC; one of several jurisdictions that have enacted a Renewable Portfolio Standard requiring that a specific percentage of electricity consumed must come from solar.   Whether residential, commercial, or institutional, each time a solar system generates 1 Megawatt hour of energy – the solar system owner generates 1 SREC.  This SREC is then sold via aggregators to an SREC market where it is bought by competitive energy suppliers to allow them to meet their share of the compliance obligation, or else pay a legislated fine (Alternative Compliance Payment, or ACP) for every SREC they are short.  Washington DC currently generates the highest SREC values in the country, largely due to the fact that DC does not have the real estate to install large solar farms which can rapidly oversupply a market and drive down SREC prices.

How much are SRECs Worth?

Washington DC SRECs are currently trading at $395/SREC.  To provide a frame of reference, a 6000 sq ft rooftop in Washington DC outfitted with a 75kW solar PV (electric) system could generate around 90 SRECs/year (over $35,000/year).   Depending on variables such as system size, corporate tax rate and and project site attributes, this SREC income – combined with a 30% Federal Tax Credit and 100% Year 1 depreciation, typically result in IRR’s between 30% – 60% and a Simple payback of 3 – 5 years.    Assuming solar thermal is applicable, this same roof outfitted with a Solar Thermal System could fit a kWh equivalent of a 150kW+ system, generating 180 SRECs/year – and see an IRR of 50 – 80%, with a simple payback in the 1 – 2 year range.

Solar Service ,Home Solar Panels, Residential Solar PanelsMaintenance

Although Solar PV (electric) clients often opt for an O & M (operations and maintenance) contract through their solar installer, Solar PV Systems  have relatively minor maintenance needs; usually an annual inspection along with ongoing monitoring.    Solar thermal (water heating) requires a little more maintenance including a 3 – 5 yearly service which, at a minimum, includes a replacement of the propylene glycol/energy transfer fluid that can degrade with time.  Nonetheless, the impact of service costs on the overall IRR is relatively small and easily absorbed by the increased SREC income.

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 Anonymous

Solar Energy for Frederick County Detention Center

FREDERICK, MD:   Solar Energy Services, Inc., (SES) a leading solar energy products and services provider, announced today that it will begin work this week on a large solar water heating system for the Frederick County Adult Detention Center in Frederick, Maryland.

The renewable energy system, equivalent to approximately 130kW of power, will consist of 57 Apricus (AP-30C) evacuated tube solar thermal collectors, collecting thermal energy to deliver to the building’s water heating system. With each collector holding 30 tubes, the completed system will generate more than 2,500 gallons of hot water per day for the facility, using a total of more than 1,700 solar tubes.

SES Vice President and founder Roger Perry noted that prisons make excellent applications for solar water heating. “The occupancy is constant and all the hot water needs for laundry, bathing, cooking and cleaning are substantial.  Aside from the environmental benefits, this system will pay for itself in a short period of time.”

The solar project is funded in part by ARRA funds, but also from the sale of Solar Renewable Energy Credits (SRECs). In 2011, Governor O’Malley signed a bill into law to include solar water heating in the state’s solar goals, thus allowing solar water heating systems to benefit from the sale of SRECs.

About Solar Water Heating

A very mature solar technology, solar water heating is 3 to 4 times as efficient as solar electric (photovoltaic) technology and therefore can be very cost effective where there is a regular, daily requirement for hot water. Residential, multifamily, prisons, hotels, dormitories, military barracks, industrial processing, health clubs, car washes and restaurants are all very good candidates for solar water heating systems. The solar systems are designed to provide preheating for all domestic hot water, allowing the traditional heating source to provide any supplemental thermal energy as required.

About Solar Energy Services, Inc. and Solar Water Heating:

With more than 30 years of experience, Solar Energy Services (solarsaves.net) is a leading solar firm in the mid-Atlantic, with a unique expertise on commercial scale solar water heating. Based in Millersville MD, SES provides design, installation and service for commercial, institutional and residential applications.

solar energy, solar power, installation
Written by Anonymous

The Capital: Solar Power Expo 2011

“Energy touches every aspect of our lives, from the cost of heating our homes to sustaining our resources for future generations.” O’Malley said. “We’re all here today because we understand that we are in a fight for our children’s future. Maryland is leading the nation’s efforts in clean energy and sustainability, and our state’s growing ‘green’ sector is vital to our ability to create jobs and compete globally in the new economy.”

The governor’s appearance, coupled with a growing vendor and visitor base, was seen by Lopez as a good sign.

“It’s good to see the governor is paying attention to these issues,” Lopez said. “The face that we have more than 500 people here shows the public is starting to take notice, as well. Now we just have to take the things we’ve learned and apply them. We need to make these things mainstream.”

One of the vendors was Millersville-based Solar Energy Services. Founded by Roger Perry in 2006, the company analyzes homes and installs solar panels for electricity, hot water and pool heaters, among other uses.

To heat enough water for an average family of four, Solar Energy Services installs two 4-foot by 8-foot solar panels at a cost of approximately $10,000, Perry said. But residents will receive Solar Renewable Energy Credits, along with other state and federal incentives, that will allow the panels to “pay for themselves” in just over two years, Perry said.

Both Perry and Solar Energy Services President Rick Peters say business has been exploding recently.

“We’re growing 80 percent a year, ” Peters said. “We’re growing and we just hired mroe people, so we’re also creating jobs.”

Another Millersville company, Kenergy Solar, also was at the expo. Though the company is only 2 years old, it already has installed solar panels throughout Anne Arundel and Montgomery counties, Coordinator Julia Sullivan said.

Sullivan praised O’Malley and the state’s legislators who are pushing for new, innovative renewable energy policies.

“They’re helping us create a sustainable industry,” Sullivan said.

Lopez is putting putting on another expo in Pennsylvania next month and hopes to eventually expand to Ohio, New York and beyond. He also hopes to add more to the expo in Timonium to a point where the parking lot is full of vendors and visitors alike, he said.

“We haven’t even scratched teh surface of what we can do.” Lopez said.

Maryland Energy Administration Director Malcolm Woolf shared similar sentiments.

“Maryland ahs emerged as a national leader in energy innovation, thanks to the smart choices we’ve made over the last five years,” Woolf said. “Today’s energy summit futher underscores Maryland’s commitment to accelerating our transition to a clean energy future.”

Written by Anonymous

Press Release: Solar Bill Signed!

MARYLAND GOVERNOR SIGNS BILL TO INCLUDE SOLAR WATER HEATING IN ITS RENEWABLE ENERGY DIVERSITY REQUIREMENTS

Annapolis, MD – May 20, 2011. Maryland Governor Martin O’Malley signed into law yesterday a bill that makes solar water heating systems eligible to produce Solar Renewable Energy Credits (SRECs), making the proven technology more affordable to homeowners, businesses, nonprofits, and government agencies.

Under the new provision, owners of solar water heating (SWH) systems will now be able to sell the SRECs or “green attributes” of the energy they produce, just like solar photovoltaic (PV) systems. The new law will reduce system owners’ utility bills, improve the environment by reducing pollution from power plants, diversify our energy supply, and create additional green jobs in Maryland. Several other states and the District of Columbia already include solar water heating as a means to meet their renewable energy requirements.

“The passage and signing of the solar hot water bill brings great opportunity to the solar industry and to the residents of Maryland, ” said Delegate Sally Jameson, D-Charles County, who sponsored the bill. “Jobs will be created while helping to meet our energy needs and Maryland’s solar requirements under the Renewable Portfolio Standard. It’s a good thing for families and it’s a good thing for Maryland!”

Maryland utilities are required to buy an increasing amount of SRECs to meet their requirements under the state’s Renewable Portfolio Standard. Businesses and homeowners with solar PV and solar water heaters generate SRECs that are sold to utilities, ultimately making solar technology more affordable. Maryland taxpayers do not fund SRECs, but utilities pay for these through very small surcharges in electric rates. The new law will substantially boost markets for solar water heating while creating much-needed jobs across the state.

The first patent for a device using solar energy to heat water was issued to a Baltimore inventor in 1891, and solar water heating is used extensively across Europe and China.

“By including solar water heating in the RPS, Maryland will increase access to this proven technology,” remarked Maryland Senator Rob Garagiola, D-Montgomery Co., another bill sponsor. “This law will help homeowners, small businesses, non-profits and government agencies alike finance solar water heating systems and in turn allow many more Marylanders to participate in the benefits of solar energy.”

Mike Healy, partner at Skyline Innovations and the head of MDV-SEIA’s solar thermal division commented: “This is an exciting time for the solar water heating industry. The Maryland legislation is already creating new solar installation jobs among firms in our membership. We are very grateful to Maryland legislators for acting on this enormous opportunity.”

Gov. O’Malley signed another solar energy bill into law, making changes to the state’s “net metering” rules allowing owners of photovoltaic systems to sell electricity back to their electric utility.