introduction to solar financing

Connect your Facebook account to check out what your friends are sharing on SlideShare Connect×

SlideShare

Search…

• Upload

• Go Pro• Login• Signup

• Browse

Email Like Save Embed

1414

‹›/58

0

Like

PPA Overview_5.10.2010

1896 views

Solar Sales & Marketing

4527 views

Ppa Overview Tioga Energy 2009 04 13 2 Ppa 1

4319 views

Commercial Solar Economics

895 views

Cutting Transaction Costs For Solar PPAs

89 views

pManifold Indis_Solar PV_IIES_Workshop_report

1736 views

Protecting Solar PPA From Foreclosure

95 views

Solar powering your community, a guide for local governments

2395 views

Solar powering your community guide for local governments

3286 views

Economics of Solar: Western Focus

908 views

Economics of Solar: PG&E Focus

756 views

Oct Issue

1361 views

Attracting and Maintaining Institutional Investment: Solar PV

493 views

Innovations In Wind And Solar Pv Financing

2135 views

Harnessing solar energy-options_for_india-full report

1601 views

Related More

of 112Introduction to Solar Financing

3/11/2013http://www.slideshare.net/OnGridSolar/introduction-to-solar-financing

Introduction to Solar FinancingDocument Transcript

1. Andy Black “Introduction to Solar Financing” Solar Financial Analyst (408)

428 0808x1Solar Living Institute: April 20, 2008, Los Angeles, CA,

[email protected] Contact: Solar Living Institute:

www.solarliving.org, 707 744 2017 to register Check-in (15 minutes before

listed start time) Introductions Overview of Basic Financing Principals

Residential Conventional Financing Break, Q & A, Networking PACE & State

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

Lease Basics and Commercial Leases Break, Q & A PPA Basics and

Commercial PPAs Residential Leases & PPAs ~4:30 Formal Conclusion,

Break, Q & A 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

2. Andy Black “Introduction to Solar Financing” Solar Financial Analyst (408)

428 0808x1Solar Living Institute: April 20, 2008, Los Angeles, CA,

[email protected] Contact: Solar Living Institute:

www.solarliving.org, 707 744 2017 to registerAbstract:This rigorous workshop

is designed to help commercial systems integrators (dealers, installers,

andsalespeople) understand and make the financial case for PV systems

including specifics for how tofinance them with PPAs and Leases.This class

includes:! 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 solarAll students will receive a copy of the demo version of the

OnGrid Tool (licensing agreement will berequired).Biography:Andy Black is a

Solar Financial Analyst and the owner of OnGrid Solar. OnGrid Solar

providesfinancial analysis and sales education & software to solar installers to

help them make a strong salescase for solar electricity to their customers. Andy

No comments yet

3 Favorites

Solar Enrgy Training and Classes Catalog 2011

1010 views

Irec solar market_trends_report_2009

709 views

Credit suisse midsummer latam conference

186 views

5 Emerging US Public Finance Models 2009

527 views

Large Scale Solar Power Legisaltion, Regulation & Policies Conference

2521 views

Dec 2008 Issue

717 views

Utility Scale Solar - Kerinia Cusick

480 views

Irec annual-trends-report-10-1-10 web

449 views

Utility Scale Solar - Kerinia Cusick

1227 views

Solar Tax Equity Due Diligence Tips

363 views

San Diego County Office Of Education ENERGY PLANNING GUIDE

1502 views

San diego county office of education epg June 2011

480 views

2nd Thin Film Solar Summit Europe- March 2010

2443 views

Own Your Power!

1148 views

Volume 1 - LGU PPP Manual

648 views

Haiti: "Open For Business"

2594 views

Create solar panels Its not difficult

130 views

Tessera brendan o’brien. sistema disco-stirling

1149 views

US Solar Market Insight Report Q3 2011

790 views



has more than a dozen years of design, consulting,teaching, sales, and research

experience in solar. He specializes in demonstrating the financial paybackof

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 andserved as Chapters Representative. He is also a member of

the Advisory Board of the NorthernCalifornia Solar Energy Association.Andy’s

formal education includes a Bachelor’s in Electrical Engineering from Penn

State University, aMaster’s in Electrical Engineering from University of

Southern California, and a Marketing Certificateat the University of California.

His training in solar electricity includes Solar Energy International’sintensive

photovoltaic coursework and more than a dozen specialty courses in solar

electric and relatedfields. 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

[email protected] www.ongrid.net

3. INTRODUCTION TO Introductions & Thanks SOLAR FINANCING !

Solar Power International ‘10 Andy Black ! Solar Electric Power Association

Solar Financial Analyst " Stuart Raper & Julia Hamm & Sales Software

Creator ! Yennie Solheim ! Andy Black, OnGrid Solar " Solar Financial

Analyst & OnGrid Tool Creator Solar Power International 2010 ! You for

coming! © 2010 OnGrid Solar, All rights reserved. Intro to Solar 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 business ! New or hopeful salespeople ! Want

to learn about / have the OnGrid Tool ! Government / Utilities ! Customers /

consumers / end users ! Want to increase your knowledge to develop !

Manufacturers your own tool ! Others? ! Who’s taken the Residential/Basic

Payback Class?© 2010 OnGrid Solar, All rights reserved. Intro to Solar

Financing - 3 © 2010 OnGrid Solar, All rights reserved. Intro to Solar

Financing - 4 Quick Survey - Area(s) of Interest? Instructor Background !

Came to learn specifically about: ! M.S. Electrical Engineering " Residential

Conventional Financing ! SEI graduate " Residential Lease & PPA

Financing ! NABCEP Certified Solar PV Installer Emeritus " Commercial

Lease Financing ! Involved with Solar since 1991 " Commercial PPA

Financing ! Studying, writing, & presenting about Solar " Use PPAs in selling

Financial Issues since 2000 " Create new PPA offering to market ! Solar

Salesperson 2001-2006 ! Other interests? ! Now a Solar Financial Analyst & !

Networking list? Creator of the “OnGrid Tool” solar sales software© 2010

OnGrid Solar, All rights reserved. Intro to Solar Financing - 5 © 2010 OnGrid

Solar, All rights reserved. Intro to Solar Financing - 6

4. Handout Resource List Decorum Resources available at www.ongrid.net !

Questions: Please focus on Solar Economics & Payback ! Articles & papers on

solar “Payback” ! Good environment: ! Upcoming classes & events " Cell

phones to fun mode " Sales & Marketing for Solar " Side conversations: Yes or

No? ! Slides from past classes " Please help each other ! Free demos of the

OnGrid Tool ! Site Logistics & Breaks " Facilities " Lunch & 2 breaks:

Networking© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing -

7 © 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 8 Agenda

Basic Financing Principals ! Overview of Basic Financing Principals !

Residential Conventional Financing with ! Several ways to finance Unsecured

Loans & Home Equity ! Financing enables sales to those who can’t or ! PACE

& State Loan Programs won’t buy with their own cash ! Lease Basics &

Commercial Leases ! Good customer credit important (lately, critical) ! PPA

Basics & Commercial PPAs ! Financing makes sense when the project basic !

2nd Concentrated Photovoltaic Summit USA

1809 views

Heat Your Water From The Sun

1768 views

ReportsnReports - Crystalline Solar Photovoltaics PV Panel Systems Market Shares…

1756 views

Heijunka iim ahmedabad-cleantech

1079 views

CSP Project Development Conference and Expo

615 views

GTM/SEIA U.S. Solar Energy Trade Balance Report 2011

913 views



Residential Leases & PPAs economics are favorable (good IRR) Questions

preferred at points marked: Questions? " Please focus on Financing &

Economics Questions?© 2010 OnGrid Solar, All rights reserved. Intro to Solar


Financing - 10 Ways to Finance Solar Sales Benefits of Financing +Reduced

Customer Risk - Benefits Shared with more Parties ! Offering Financing keeps

salesperson in control of - Cost to Consumer the sale ! PPA If the customer is

out looking for financing, you’ve +More Sales Control " ! Lease lost control of

the sale. " If you offer it, you can continue to control the sale. ! Loan ! Creates

more purchasing options, more chances at a ! Cash close ! Can use to

overcome objections ! Bringing the financing keeps you in control ! Gets

salesperson closer to decision maker & their (as much as you can in this

market!) real thinking© 2010 OnGrid Solar, All rights reserved. Intro to Solar


Financing - 12

5. Commercial Selling Realities Common Characteristics ! Only 3% of all

commercial quotes turn to sale ! Lower interest rate environment helps " Most

quotes are made to private companies # Can’t make >5 year commitment ! Can

improve initial customer cash flow " Salesperson doesn’t know tax &

accounting issues ! Requires good end-customer credit # Talks w/ building

manager, facilities, etc " Stricter credit environment hurts # Afraid to talk to

CFO, Controller, CEO, Outside Auditor & Banker ! Typically only large public

companies can go long (10-12 yrs) - even they hesitate 18-20 years ! Gov’t,

Schools, some non-profits have long vision© 2010 OnGrid Solar, All rights

reserved. Intro to Solar Financing - 13 © 2010 OnGrid Solar, All rights

reserved. Intro to Solar Financing - 14 “Good” or “Strong” Credit Risks in Solar

Finance ! Three C’s of Credit: " Credit scores & reports (Dun & Bradstreet) !

Compare to Real Estate " Collateral " Capacity or Cash Flow ! Residential:

FICO score ! Commercial: " >5 years in business " >$50 million revenue "

Positive trends (increasing revenue & profits) # Hard to find in 2009 & 2010 "

Standard ratios (cash flow, etc)© 2010 OnGrid Solar, All rights reserved. Intro

to Solar Financing - 15 © 2010 OnGrid Solar, All rights reserved. Intro to Solar

Financing - 16 Residential Rates of Return Requires Good IRR ! The basic

economics must be attractive ! What about non-profits & gov’t facilities? "

Economics are generally weak – no ITC " Use 3rd Party Financing (PPAs

mostly) " Need good IRR if analyzed as commercial© 2010 OnGrid Solar, All

rights reserved. Intro to Solar Financing - 17 © 2010 OnGrid Solar, All rights

reserved. Intro to Solar Financing - 18

6. Residential Rates of Return© 2010 OnGrid Solar, All rights reserved. Intro to

Solar Financing - 1 Commercial Rates of Return© 2010 OnGrid Solar, All

rights reserved. Intro to Solar Financing - 2

7. Commercial Rates of Return Commercially Attractive? ! IRR must exceed a

hurdle rate " > “Risk Free Rate” + ~1-2% = Risk Free Rate + Sum of Risks

(more later) # Source: Photon International, Aug 2007, p114 ! “Risk Free”

interest rates: " 1 Year LIBOR ~ 0.8% As of September 2010 " Treasury: 10yr

= 2.5%, 30yr = 3.4% As of 10/4/2010 ! ! Commercially Attractive >= 4-6%?©

2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 19 © 2010

OnGrid Solar, All rights reserved. Intro to Solar Financing - 20 Residential

Conventional Financing ! Unsecured Loan Addison Avenue FCU: 5.25%, 5

year, $5-50K Residential Conventional " Real Estate Secured Loan Financing

with Unsecured ! " Lowest interest rates (usually) Loans & Home Equity "

Tax deductible interest " HUD EEMs - Energy Efficiency Mortgages " “Home

Equity Loans” & “Home Equity Line of Credit” (HELOC) # E.g. New

Resources Bank© 2010 OnGrid Solar, All rights reserved. Intro to Solar


Financing - 22 Cash Flow Cash Flow with Loan ! Residential system offsetting



a large ! Compares the savings on the utility bill bill with the cost of financing

the system ! 8% 20 year loan ! At today’s rates (~5-8%) and including ! Many

Systems are rebate benefits, cash flow is often cash positive from positive

immediately Year 0 " Cost of borrowing is less than savings on ! Spike is

Inverter electric bill Replacement Cost " Stabilizes long term utility costs©


OnGrid Solar, All rights reserved. Intro to Solar Financing - 24

8. Solar Mortgage Cash Flow Analysis ! Like buying vs. renting, but better !

Calculate net cash required to buy ! House costs more up front " This is the

amount to be financed " Pays off over time ! Calculate monthly loan

payments ! Solar costs less up front " Based on loan rate, term & amount "

Pays off immediately & over time ! Subtract tax savings if loan interest is tax !

Protects against inflation deductible. This is net monthly loan cost. ! Savings

grow over time ! Compare net loan cost to after tax value of net electric bill

savings (incl. maintenance)© 2010 OnGrid Solar, All rights reserved. Intro to

Solar Financing - 25 © 2010 OnGrid Solar, All rights reserved. Intro to Solar

Financing - 26 How Much To Borrow? Alt. 3: “Smart Financing” ! Efficient

pay-down of principal using tax benefits when ! How much should customer

borrow? received (using Line Of Credit - business or home equity) ! Alt. 1: Net

Cost after Rebate & Grants? ! Find ‘payment’ amount that pays off evenly over

term " Once ITC is received, have cash sitting around " Lower payments than

amortizing full “after-rebate amount” " Inefficient & expensive " Higher

payments than only amortizing the net “after-rebate, ! Alt. 2: Net Cost after All

Incentives (including tax after-tax-benefits amount” credits, depreciation, PBIs,

etc.)? ! No cash out of pocket waiting for ITC " Requires a bridge loan until

tax benefits & PBIs are " Doesn’t require ‘bridge loan’ received " Realistic

presentation of customer costs " Optimistically low monthly loan cost ! No

excess interest paid on “un-used” money " Doesn’t weaken sales presentation©


OnGrid Solar, All rights reserved. Intro to Solar Financing - 28 Commercial

Cash Flow Commercial Cash Flow Options ! High Cost Loan: Starting

Principal = Net Costs w/ Solar Utility Costs w/! Typical “Gross - Rebate” with

High Cost Loan o Solar Commercial System Loan ! Optimistic* Loan:! X% Y

year loan $25,000 Net Annual Savings Starting Principal = $20,000 “Gross -

Rebate - ITC - Depreciation” $15,000 Utility Costs w/ $10,000 o Solar

*Customer needs Net Annual Savings $5,000 $0 1 2 3 4 5 6 7 8 9 10 11 12 13

14 15 16 17 18 19 20 21 22 23 24 25 bridge loan until tax Net Costs w/ Solar

savings realized -$5,000 Year with Optimistic Loan -$10,000© 2010 OnGrid

Solar, All rights reserved. Intro to Solar Financing - 29 © 2010 OnGrid Solar,

All rights reserved. Intro to Solar Financing - 30

9. “Smart Financing” Timeline LOAN: Year:LOAN: Loan Balance Year: . 0

70,182 1 45,816 2 36,723 3 30,165 4 25,045 5 19,515 6 14,996 0 1 2 3 4 5

6Loan Balance Payment (monthly) 70,182 45,816 36,723 30,165 25,045 (356)

19,515 (356) 7 14,996 11,594 8 (356) 7,919 9 3,951 10 (356) 11 (356) (356)

(356)Payment (monthly) Interest (portion of payment) Paid (356) (356) (356)

(356) (356) (356) (356) (305) (356) (245) (356) (356) (201) (356) (167) (130)

(100)Paid Interest (portion of payment) (356) (305) (245) (201) (167) (130)

(100) (77) (53) (26)Unpaid Interest (added to Interest (added to loan principal)

Unpaid loan principal) (112) (112) Tax Deduction Benefit (monthly)Tax

Deduction Benefit (monthly)Net Monthly Loan Cost 205 (150) 134 (222) 107

(248) 88 (267) 73 205 57 (282) (298) 134 44 (312) 34 (322) 10723 (332) 12

(344) 88 73 57 44 Net Monthly Loan CostNet Tax Benefit Received (put

towards paying down 25,714 8,493 5,230 3,267 3,267 (150) 1,814 (222) 336

336 (248) 336 336 (267)336 (282) 336 (298) (312)the next years principal) Net

Tax Benefit Received (put towards paying downNet Annual Electric Bill before

Solar (with tax effects 25,714 8,493 5,230 3,267 3,267 1,814 336& including

Lifestylenext years principal) the changes, but not Energy 2,388 2,507 2,632



2,764 2,902 3,047 3,199 3,359 3,527 3,704 3,889 4,083Efficiency) Net Annual

Electric Bill before Solar (with tax effectsNew Net Annual Energy Cost (with

tax effects,including new& including Lifestyle changes, 755 electric bill,

maintenance, inverter but not Energy 800 847 897 9502,388 1,006 2,507 1,065

1,127 2,632 1,193 2,764 1,262 1,336 2,902 1,414 3,047 3,199replacement)

Efficiency)Net New Annual Cost (Loan plus New Net Energy 2,560 3,459

3,825 4,105 4,337 4,587 4,805 4,986 5,181 5,391 1,336 1,414Cost) New Net

Annual Energy Cost (with tax effects,Cash Flow (annual) (Old less new electric

bill, maintenance, inverter including New Net Costs) (172) (952) (1,193)

(1,341) (1,435) 755 (1,540) 800 (1,627) (1,605) 847 (1,654) (1,687) 897 2,553

950 2,670 1,006 1,065 replacement)Cash Flow (monthly) (14) (79) (99) (112)

(120) (128) (134) (136) (138) (141) 213 222ACCUMULATED LOAN CASH

FLOW: (172) (1,124) (2,317) (3,658) (5,094) (6,633) (8,239) (9,865) (11,519)

(13,206) (10,653) (7,983) Net New Annual Cost (Loan plus New Net Energy

2,560 3,459 3,825 4,105 4,337 4,587 4,805 Cost) Cash Flow (annual) (Old less

New Net Costs) (172) (952) (1,193) (1,341) (1,435) (1,540) (1,605) Cash Flow

(monthly) (14) (79) (99) (112) (120) (128) (134) ACCUMULATED LOAN

CASH FLOW: . (172) (1,124) (2,317) (3,658) (5,094) (6,633) (8,239) © 2010

OnGrid Solar, All rights reserved. Intro to Solar Financing - 3 “Smart

Financing” Timeline LOAN: Year: 0 1 2 3 4 5 6 Loan Balance 70,182 45,816

36,723 30,165 25,045 19,515 14,996 Payment (monthly) (356) (356) (356)

(356) (356) (356) (356) Paid Interest (portion of payment) (356) (305) (245)

(201) (167) (130) (100) Unpaid Interest (added to loan principal) (112) Tax

Deduction Benefit (monthly) 205 134 107 88 73 57 44 Net Monthly Loan Cost

(150) (222) (248) (267) (282) (298) (312) Net Tax Benefit Received (put

towards paying down 25,714 8,493 5,230 3,267 3,267 1,814 336 the next years

principal) Net Annual Electric Bill before Solar (with tax effects & including

Lifestyle changes, but not Energy 2,388 2,507 2,632 2,764 2,902 3,047 3,199

Efficiency) New Net Annual Energy Cost (with tax effects, including new

electric bill, maintenance, inverter 755 800 847 897 950 1,006 1,065

replacement) Net New Annual Cost (Loan plus New Net Energy 2,560 3,459

3,825 4,105 4,337 4,587 4,805 Cost) Cash Flow (annual) (Old less New Net

Costs) (172) (952) (1,193) (1,341) (1,435) (1,540) (1,605) Cash Flow (monthly)

(14) (79) (99) (112) (120) (128) (134) ACCUMULATED LOAN CASH

FLOW: (172) (1,124) (2,317) (3,658) (5,094) (6,633) (8,239) © 2010 OnGrid


10. Smart Financed Commercial Cash Flow “Smart Financing” Timeline!

“Smart Financed” LOAN: Year: Loan Timeline New Net Cost: Loan, New Bill,

Maintenance, etc. LOAN: Loan Balance Year: . 0 70,182 1 45,816 2 36,723 3

30,165 4 25,045 5 19,515! No bridge loan Loan Balance Payment (monthly)

Payment (monthly) Interest (portion of payment) Paid 0 70,182 (356) 1 45,816

(356) 2 36,723 (356) 3 30,165 (356) 4 25,045 5 (356) 19,515 (356) (356) (356)

6 (356) 7 14,996 11,594 8 (356) 7,919 (305) (356) (245) (356) (356) 9 3,951 10

(356) (201) (356) 11 (356) (167) (356) (130) needed Utility Bill w/o Solar Paid

Interest (portion of payment) Unpaid Interest (added to Interest (added to loan

principal) Unpaid loan principal) Tax Deduction Benefit (monthly) Tax

Deduction Benefit (monthly) (356) (112) 205 (305) 134 (245) 107 (201) 88

(167) (130) (112) 73 205 57 (100) 134 44 (77) 34 107 (53) 23 (26) 12 88 73 57

Net Monthly Loan Cost (150) (222) (248) (267) (282) (298) (312) (322) (332)

(344)! Not optimistic - Net Monthly Loan Cost Net Tax Benefit Received (put

towards paying down the next years principal) 25,714 Net Tax Benefit

Received (put towards paying down Net Annual Electric Bill before Solar (with

tax effects 8,493 5,230 3,267 3,267 (150) 25,714 1,814 (222) 336 8,493 336

(248) 336 5,230 336 (267) 3,267 336 (282) 336 3,267 (298) 1,814 fair to the &

including Lifestylenext years principal) Efficiency) the changes, but not Energy

2,388 Net Annual Electric Bill before Solar (with tax effects 2,507 2,632 2,764

2,902 3,047 3,199 3,359 3,527 3,704 3,889 4,083 customer New Net Annual



Energy Cost (with tax effects, & including Lifestyle changes, 755 not Energy

but including new electric bill, maintenance, inverter800 847 897 2,388 950

1,006 2,507 1,065 1,127 2,632 1,193 2,764 1,262 1,336 2,902 1,414 3,047

replacement) Efficiency) Net New Annual Cost (Loan plus New Net Energy

Assumes customer 2,560 3,459 3,825 4,105 4,337 4,587 4,805 4,986 5,181

5,391 1,336 1,414 Cost)! New Net Annual Energy Cost (with tax effects,

including new electric bill, maintenance, inverter 755 800 (1,627) 847 897 950

1,006 will be efficient w/ Cash Flow (annual) (Old less New Net Costs) (172)

(952) (1,193) (1,341) (1,435) (1,540) (1,605) (1,654) (1,687) 2,553 2,670

replacement) Cash Flow (monthly) (14) (79) (99) (112) (120) (128) (134) (136)

(138) (141) 213 222 tax benefits ACCUMULATED LOAN CASH FLOW:

(172) (1,124) (2,317) (3,658) (5,094) (6,633) (8,239) (9,865) (11,519) (13,206)

(10,653) (7,983) Net New Annual Cost (Loan plus New Net Energy 2,560

3,459 3,825 4,105 4,337 4,587 Cost)! Interest Tax Cash Flow (annual) (Old

less New Net Costs) (172) (952) (1,193) (1,341) (1,435) (1,540) Benefit Drops

so Cash Flow (monthly) (14) (79) (99) (112) (120) (128) Net Cost Rises Net

Annual Savings / Cost ACCUMULATED LOAN CASH FLOW: . (172)

(1,124) (2,317) (3,658) (5,094) (6,633)© 2010 OnGrid Solar, All rights


reserved. Intro to Solar Financing - 32 Commercial “Smart Financing” Timeline

Cash Flow LOAN: Year: 0 1 2 3 4 5 6 7 8 9 10 11 Loan Balance 70,182 45,816

36,723 30,165 25,045 19,515 14,996 11,594 7,919 3,951 Payment (monthly)

(356) (356) (356) (356) (356) (356) (356) (356) (356) (356) Paid Interest

(portion of payment) (356) (305) (245) (201) (167) (130) (100) (77) (53) (26)

Unpaid Interest (added to loan principal) (112) Tax Deduction Benefit

(monthly) 205 134 107 88 73 57 44 34 23 12 Net Monthly Loan Cost (150)

(222) (248) (267) (282) (298) (312) (322) (332) (344) Net Tax Benefit Received

(put towards paying down 25,714 8,493 5,230 3,267 3,267 1,814 336 336 336

336 336 336 the next years principal) Net Annual Electric Bill before Solar

(with tax effects & including Lifestyle changes, but not Energy 2,388 2,507

2,632 2,764 2,902 3,047 3,199 3,359 3,527 3,704 3,889 4,083 Efficiency) New

Net Annual Energy Cost (with tax effects, including new electric bill,

maintenance, inverter 755 800 847 897 950 1,006 1,065 1,127 1,193 1,262

1,336 1,414 replacement) Net New Annual Cost (Loan plus New Net Energy

2,560 3,459 3,825 4,105 4,337 4,587 4,805 4,986 5,181 5,391 1,336 1,414

Cost) Cash Flow (annual) (Old less New Net Costs) (172) (952) (1,193) (1,341)

(1,435) (1,540) (1,605) (1,627) (1,654) (1,687) 2,553 2,670 Cash Flow

(monthly) (14) (79) (99) (112) (120) (128) (134) (136) (138) (141) 213 222

ACCUMULATED LOAN CASH FLOW: (172) (1,124) (2,317) (3,658) (5,094)

(6,633) (8,239) (9,865) (11,519) (13,206) (10,653) (7,983)© 2010 OnGrid


All rights reserved. Intro to Solar Financing - 34 Smart Financed Residential

Residential Cash Flow Utility Bill w/o Solar Cash Flow ! 4 kW New Net Cost:

Loan, New Bill, Maintenance, etc. residential system ! 8% 20 year “Smart

Financed” Loan Net Annual Savings / Cost ! No bridge loan needed© 2010


Solar, All rights reserved. Intro to Solar Financing - 36 Examples

11. Commercial Cash Flow© 2010 OnGrid Solar, All rights reserved. Intro to

Solar Financing - 5 Residential Cash Flow© 2010 OnGrid Solar, All rights


12. Agenda Cumulative Cash Flow ! Overview of Basic Financing Principals !

Residential Conventional Financing with Unsecured Loans & Home Equity !

PACE & State/Utility Loan Programs ! Lease Basics & Commercial Leases !

PPA Basics & Commercial PPAs ! Residential Leases & PPAs© 2010 OnGrid


All rights reserved. Intro to Solar Financing - 38Examples PACE / Community

Financing Programs ! PACE: Property Assessed Clean Energy Property



Assessed Clean ! PV system financing thru property tax assessment Energy

(PACE) Financing " Paid by increased property tax liability " Liability

attached to the property, not the individual " Transferrable to future owners #

Removes concerns about resale value # Possible issue regarding ITC recapture

vs. increased resale value within first 5 years© 2010 OnGrid Solar, All rights


reserved. Intro to Solar Financing - 40 Property Assessed Clean Energy (PACE)

PACE / Community Financing Programs (Berkeley FIRST, AB811)

www.dsireusa.org / October 2010 ME: 2010 OR: 2009 MN: 2010 NY: 2009

NH: 2010 VT: 2009 ! PACE Examples / in progress: 20 year, fixed interest

rates, tax deductible interest WI: 2009 " NV: 2009 CO: 2008 IL: 2009 OH:

2009 MD: 2009 # Berkeley FIRST: ~7.75% as of 3/2009 DC DC: 2010 " Palm

Desert CA, Santa Fe, Albuquerque, Austin, CA: 2008 VA: 2009 MO: 2010

NM: 2009 OK: 2009 NC: 2009 Babylon NY, San Diego, San Francisco TX:

2009 LA: 2009 GA: 2010 ! State level initiatives: 23 states + DC " CT, MD,

OR, TX, VT, VA, WI, … FL: 2010 authorize PACE (22 HI: Existing states

have passed " AB 811 allows all towns in CA to do same Authority legislation

and HI PACE financing authorized by the state* permits it based on " Listed in

DSIRE: http://www.dsireusa.org *The Federal Housing Financing Agency

(FHFA) issued a statement in July 2010 concerning the existing law) senior lien

status associated with most PACE programs. In response to the FHFA

statement, most local PACE programs have been suspended until further

clarification is provided. ! Interest nationwide - U.S. D.O.E. PACE Initiative ©

2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 42

13. Property Assessed Clean Energy (PACE) www.dsireusa.org / October 2010

ME: 2010 MN: 2010 NH: 2010 NY: 2009 OR: 2009 VT: 2009 WI: 2009 NV:

2009 OH: 2009 MD: 2009 IL: 2009 CO: 2008 DC DC: 2010 CA: 2008 VA:

2009 MO: 2010 NC: 2009 NM: 2009 OK: 2009 GA: 2010 TX: 2009 LA: 2009

23 states + DC FL: 2010 authorize PACE (22 HI: Existing states have passed

Authority legislation and HI PACE financing authorized by the state* permits it

based on*The Federal Housing Financing Agency (FHFA) issued a statement in

July 2010 concerning the existing law)senior lien status associated with most

PACE programs. In response to the FHFA statement, mostlocal PACE

programs have been suspended until further clarification is provided. State Loan

Programs for Solar Projects www.dsireusa.org / September 2010 U U U U U U

U U U U DC U U U U U U 29 states + USVI Loan Programs for Solar Projects

U.S. Virgin Islands offer loans for U Utility Incentive(s) solar projects

14. PACE Status ! Currently stalled almost everywhere " FHFA currently

blocking PACE activities State / Utility Loan Programs ! State lawsuits against

FHFA ! Legislation pending to allow PACE to continue ! … Stay Tuned.

Follow at the DSIRE database: www.dsireusa.org , VoteSolar.org© 2010


Solar, All rights reserved. Intro to Solar Financing - 44 State Loan Programs for

Solar Projects NJ - PSE&G Utility Loan Program www.dsireusa.org /

September 2010 U ! Residential: 6.5%, 10 year term ! Non-Residential: 11.3%,

15 year term U U U U U U U ! Typically 40-60% of system value U U DC !

Repayment via either: U U U U " SRECs (minimum value 35.0¢/kWh to 43.5¢/

U kWh based on size) U 29 states + " Cash USVI " Can change once per year

Loan Programs for Solar Projects U.S. Virgin Islands offer loans for U Utility

Incentive(s) solar projects © 2010 OnGrid Solar, All rights reserved. Intro to

Solar Financing - 46 Agenda Example State Loan Programs ! Texas Schools,

Local Government, State ! Overview of Basic Financing Principals

Government, Hospitals ! Residential Conventional Financing with " 3%, Must

have ~10 year average term Unsecured Loans & Home Equity ! PACE &

State/Utility Loan Programs ! Oregon: All Sectors ! Lease Basics &

Commercial Leases " $20K to $20 Million, 5-15 year terms ! PPA Basics &

Commercial PPAs ! For loans in other states see the DSIRE ! Residential



Leases & PPAs database: www.dsireusa.org© 2010 OnGrid Solar, All rights



15. Sales Tip ! Failure to “sign” is not likely due to price ! Suggest don’t even

quote a system price 3rd Party Financing of " Only quote a monthly payment

Solar Projects ! Ask if they are, or will become subject to AMT if they go solar

" If so, only consider Lease or PPA " And only discuss monthly payments "

Then comparable to current expense© 2010 OnGrid Solar, All rights reserved.

Intro to Solar Financing - 49 © 2010 OnGrid Solar, All rights reserved. Intro to

Solar Financing - 50 3rd Party Financing Options For Solar ! Leases - Ways of

paying for ownership and/or use over time, having tax and/or cash flow benefits

during term, usually with intention of purchasing or renewing at the end "

Renting system with intent to purchase, while Leases allowing transfer of tax

benefits ! PPAs - Power Purchase Agreements - Paying for just the energy

if/when delivered with possible intent to purchase Disclaimer: I’m not a CPA or

lawyer, and am not providing tax advice. Seek qualified professional help©


OnGrid Solar, All rights reserved. Intro to Solar Financing - 52 Returns for

Lessors CHECK W/ Baker & DaveLeases Clamage Check examples for

Typical cases too ! Was in ~6%-9% range before financial crisis, Ask for real

examples ! Several Types now in the low- to mid-teens " Finance / Capital

Lease ! Less money now available, so higher returns for those willing to deal "

True / Tax / Operating Lease " Tax-Exempt Lease Purchase ! Requires: "

Lessees with best credit ! Thanks: " Gene Beck, EnviroTech Financial "

Limited project risk " Baker Davenport, Davenport Group " Low transaction

costs via standard terms and " Scott Young, Sentry Financial “conforming”

projects© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 53

© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 54

16. What is a Lease Widely Used ! Finance contract between 2 parties ! Solar

Leases similar to other asset leases " Lessor & Lessee ! Well established

market " Vendor connects the 2 parties " 80% of companies and gov’t agencies

use leasing, rather than owning, for at least some ! Looks like either a loan or a

rental of their equipment ! Ability to transfer ownership benefits " Some

companies only use leasing, rather than " For Tax or Accounting purposes

purchasing ! Specified term & payment ! Lessor = Owner of system ! Lessee

= User (“renter”) of system© 2010 OnGrid Solar, All rights reserved. Intro to


Financing - 56 Lease “Flow” & Parties Benefits of a Lease Lessor ! Terms

more flexible than a purchase Lease Payments ! Allows for 100% financing PV

System " Covering freight, maintenance, fees, … # Which might not be

allowed in a loan Purchase Payment ! Doesn’t tie up capital and/or effectively

stretches Use of System line of credit " Considered “Off Balance Sheet” Initial

“sales” interaction Info on leasing resources " Keeps bank line of credit free

Lessee Vendor ! Solves AMT problems ! Can include Energy Efficiency

measures© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing -

57 © 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 58

Lease vs. Loan AMT - Alternative Minimum Tax ! Corporate AMT occurs for

business with large “tax preferenced” items " Depletion, state income tax, real

estate tax, non-solar Tax Credits, Accelerated Depreciation ! Some business are

or will become subject to AMT if they go solar: " MACRS Depreciation on

solar can cause limitation " Solar ITC no longer causes a problem - AMT

relief ! Tax Equity Investors (banks) not usually affected by AMT, so have a

tax “appetite” and can offer *courtesy Conergy Commercial Financing

presentation by Baker investment $ to get tax benefits others can’t use

Davenport & Tim Pedersen, Rockwell Financial Group© 2010 OnGrid Solar,

All rights reserved. Intro to Solar Financing - 59 © 2010 OnGrid Solar, All




17. Lease vs Loan Cost: Lease Term Set By: ! Loan/Cash: 100% Principal !

Price of project - larger is better " + Interest (or Time Value of Money if Cash

Purchase) ! Credit of customer " - ITC (30% if available) ! Structure of the

deal " - Depr (~30% if available) " = Net cost = 45-50% depending on interest

rates ! Lease: Total payments ~= 60% of principal (interest cost included), but

no ITC or Depreciation, therefore total cost is 60% net ! The (60% minus

~50%) difference is the Lessor’s profit© 2010 OnGrid Solar, All rights


reserved. Intro to Solar Financing - 62 Finance / Capital Lease Capital Lease

Typical Terms ! 5 year, $100-150K ! Same as bank loan ! 7 year, $500K !

Fully amortizing or with balloons ! Over 8yrs will have a longer amortization

period, but with a 7 year due date ! Lessee gets tax credit & depreciation "

Banks don’t lend over 7 yrs unsecured ! Interest is deductible # Ie. w/o cash,

real estate, or marketable securities ! Most commonly utilized for energy

projects ! 8 year, $1MM, 5-7 year due date (7 w/ balloon) ! 10 year typical

max, 7 year due date " Not useful for solar projects needing to ! Limits: Longer

= higher risk transfer tax benefits to Tax Equity Investor ! Easiest lease to

create wrt due diligence " Typically 2 page agreement plus boilerplate© 2010


Solar, All rights reserved. Intro to Solar Financing - 64 Accounting vs. Taxes

Operating Lease wrt True & Operating Lease (Accounting Perspective) ! Two

perspectives when reviewing leases ! Rental contract w/ fixed terms &

conditions " Tax vs. Accounting ! Lower effective interest rate than capital

lease " Two different sets of books & calculations " Lessor gets depreciation &

tax credits ! Accounting: must meet FASB 13 rules " Payments ~40% lower

for solar than capital lease " FASB - Financial Accounting Standards Board !

Lessee expenses monthly payments ! Tax: must meet IRS rules ! Lease

considered “off balance sheet” ! Most solar leases are " Operating Leases for

accounting purposes ! This is the typical accounting treatment of an True "

True Lease / Tax Leases for tax purposes Tax / Tax Lease© 2010 OnGrid Solar,



18. True Lease / Tax Lease True / Operating / Tax Lease CHEC Check (Tax

Perspective) Typical Terms Ask f ! Rental contract w/ fixed terms &

conditions ! E.g.: $500K+, 80kW+ system (as of 5/23/09) ! Lessee expenses

monthly payments ! Preferred: $3MM, 500kW+ system Get e ! Available to

non-profits & gov’t entities " 5-7-10yrs on strong credit for smaller projects To

se " ~10-15yrs on very strong credit & larger projects " Can do, but no transfer

of tax benefits # Credit requirements have gone up in 2009 " Use Tax Exempt

Lease Purchase ! End of lease: ! This is the one used for solar projects

suffering " Purchase equipment at Fair Market Value (more later) from AMT

tax benefit limits " Extend lease for add’l 12-60 months at fixed rental rate !

This is how Operating Leases are treated from Tax # Repeat indefinitely or sell

perspective " Return equipment to Lessor in good condition© 2010 OnGrid


All rights reserved. Intro to Solar Financing - 68 Cash Benefits of CHECK W/

Gene & Dave Clamage Operating Lease Docs Check examples for Typical

cases too True & Operating Leases Ask for real examples ! More difficult,

more due diligence than Capital Lease, ! Lessor offers lower monthly cost of

solar Less than PPA Get examples of Common lease because of and processing

costs system to end user paperwork enjoyed tax ! 10-15 pages basic lease:

benefits To set up a deal " 5% custom language, 95% boilerplate ! Lessor gets

lower taxes " Roof lease " Waivers ! Lessee gets lower cost PV system (lower

" Terminal Value Schedule & Purchase payments) " Master Lease, Equipment

Schedule " + other docs " = total of ~15-30 pages© 2010 OnGrid Solar, All


reserved. Intro to Solar Financing - 70 Loan Lease Payment Options Electric



Bill Various Leases Loan Electric Bill ~50% are Cash Positive in 2009 w/

Lease Larger more likely to be cash positive if over 10 years© 2010 OnGrid



19. True & Operating Lease Term Purchase Options: FMV ! Best IRS clarity:

purchase >6 years for FMV ! Typically >= 6 years to get all depreciation "

May be okay to have limited purchase options benefit and vest all of the tax

credit at set anniversaries at FMV " Should not be open ended option ! End of

Lease options: ! Fair Market Value (FMV) " Purchase at greater of Fair Market

Value (FMV)* or predetermined price " Best IRS clarity: Determined by

independent appraiser at time of exercise " Return to Lessor upon notice " May

be okay to come to agreement among " Auto-renewal for shorter term parties at

time of exercise *Critical to avoid tax violation " Should not be bargain fixed

price© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 73 ©

2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 74 Typical

Lease Terms Tax Exempt Lease Purchase ! Lease can’t exceed 80% of life of

asset ! Primarily for State & Local governments " Must have a residual value "

Includes public schools & universities ! Lessor owns, but takes no operating

risk " Longer terms: 10-20 yrs by project size (>20kW) " Hell or high water -

Lessee must pay for system ! Current debt obligation for lessee regardless of

performance " Incentive on Lessee to maintain system ! Non-profits qualify for

larger projects (> $1MM) ! Property tax, insurance, maintenance is " Must

have gov’t sponsor responsibility of lessee ! Special structuring - more

“complicated” lease ! May require tax indemnity if tax benefits aren’t ! “Tax

Exempt” means the lessor doesn’t pay Fed tax transferable to Lessor on income:

Reduces interest ~ 300 basis points© 2010 OnGrid Solar, All rights reserved.


Solar Financing - 76 Non-Profits w/o Gov’t Sponsors Lease Contract Costs !

Non-Profits not eligible for True / Operating ! Were long & complicated (50-60

pages and Leases $10Ks) " Can’t pass tax benefits to lessor " Now have 8-9

page standard lease agreements " Instead - Capture via a 3rd party ownership

structure: PPA ! Need a common set of terms " Current diversity of lease

names & approaches confuses & slows the sale " Increases sales cost© 2010



20. Get Lessor, Lender or Financing Options For Solar Broker Involved Up

Front ! They can help present and sell the deal - ! Leases - Ways of paying for

ownership and/or include them early on use over time, having tax and/or cash

flow ! Helps and increases sales person’s control benefits during term, usually

with intention of purchasing or renewing at the end ! Helps get the right

questions asked up front " Speeds the sale ! PPAs - Power Purchase

Agreements - Paying for just the energy if/when delivered " Or determines

early that this is a no-go " Determine which type is best© 2010 OnGrid Solar,


rights reserved. Intro to Solar Financing - 80 Power Purchase Agreement -

PPA ! A Type of Offering or Proposal " Contract for the sale of energy (kWh)

PPAs " Not sale of a PV system ! A financing alternative to leasing ! Recently

very popular (75%+ of large) ! Thanks: " Keith Martin, Chadbourne & Parke,

LLP " Colin Murchie, SunEdison© 2010 OnGrid Solar, All rights reserved.


Solar Financing - 82 3rd-Party Solar Power Purchase Agreements (PPAs)

www.dsireusa.org / July 2010 Parties to the Transaction ! Agreement between

" PPA Provider / Vendor aka “Developer” Off-Taker / End User of Energy UT:

limited to certain sectors " AZ: limited to NM: effective " Building Owner

(might be End User) certain sectors 1/1/2011 At least 17 states + PR " System

Vendor / Installer / Integrator authorize or allow 3rd-party " 3rd Party Investor /

Financier (might be solar PPAs Authorized by state or otherwise currently in



use installer and/or Developer) Apparently disallowed by state or otherwise

restricted by legal barriers Status unclear or unknown Puerto Rico Note: This

map is intended to serve as an unofficial guide; it does not constitute legal

advice. Seek qualified legal expertise before making binding financial decisions

related to a 3rd-party PPA. See following slide for authority references. © 2010


21. 3rd-Party Solar Power Purchase Agreements (PPAs) www.dsireusa.org /

July 2010 UT: limited to certain sectors AZ: limited to NM: effective certain

sectors 1/1/2011 At least 17 states + PR authorize or allow 3rd-party solar PPAs

Authorized by state or otherwise currently in use Apparently disallowed by

state or otherwise restricted by legal barriers Status unclear or unknown Puerto

Rico Note: This map is intended to serve as an unofficial guide; it does not

constitute legal advice. Seek qualified legal expertise before making binding

financial decisions related to a 3rd-party PPA. See following slide for authority

references. PPA “Flow” PPA Developer PPA Investment Cash Financier /

Vendor ROI & Tax Benefits / Investor Monthly Energy PV System Building

Access / Payments Maintenance kWh Purchase Energy Payment Permission

Building Occupant / System Owner Off-Taker / Vendor/Installer Energy User©


22. PPA “Flow” PPA Developer Investment Cash PPA Financier Party

Responsibilities / Vendor ROI & Tax Benefits / Investor ! Developer (might

also be installer) oversees: Monthly " Construction Energy " Operation &

maintenance of equipment Building PV System Access / Payments

Maintenance kWh Purchase " End User & Investor relationships & payments

Energy Payment " Execute the 80-100 ‘To Do’ items ! End-User Permission "

Receives energy from system Building Occupant / System Owner " Makes

predetermined payments for energy if/as it is Off-Taker / Vendor/Installer

Energy User produced© 2010 OnGrid Solar, All rights reserved. Intro to Solar


Financing - 86 Financier-Developer Relationships Sale-Leaseback ! Financier

is Tax Equity Investor ! Property Sold to Tax Equity Investor & " Has Tax

appetite Leased back to Developer/Operator " Doesn’t want to build or operate

projects - " Important that this lease is back to the same needs

developer/operator party that placed the property in service ! Sale-Leaseback or

Partnership-Flip " Tax benefits stay w/ Tax Equity Investor© 2010 OnGrid


All rights reserved. Intro to Solar Financing - 88 Partnership-Flip Sale-

Leaseback Time Flexibility ! Tax Equity Investor & Developer/Operator are !

Allows “Place-In-Service” date up to 3 months partners with unequal

ownerships before closing Sale-Leaseback " For initial period, Tax Equity

Investor owns 99% " More time flexibility in getting financing (max) and

receives 99% of benefit (tax and income) ! To qualify, delay In-Service as

needed: until “target” return is achieved " Construction completion # Must be

>5 years for full vesting of ITC " Asset conveyance " Entering second phase,

ownership “flips” so that # Sale to Tax Equity Investor Developer/Operator

owns up to 95%. # Use of asset by site user " Developer/Operator can buy

remaining share at FMV (or more, FMV decided at that future date) " Permits

signed off " Testing and customer signoff© 2010 OnGrid Solar, All rights



23. Sale-Leaseback Benefits & Drawbacks End-User/Off-Taker Benefits + 3

extra months to close financial of deal ! No up-front costs, down payment or

deposit + 100% Tax Benefit Capture (vs. 99%) required ! Lower initial energy

costs - No “Limited Use” property (can’t be removable) ! Potentially lower

long term energy costs - 80% of useful life limit on lease term ! Future discount

purchase of system - Repurchase at end of term more expensive ! Reduced PV



cost even if no tax appetite - Tax Indemnity required - Developer/Operator can’t

be a non-profit© 2010 OnGrid Solar, All rights reserved. Intro to Solar


Financing - 92 Energy Expense Comparison Investor/Owner Benefits !

Guaranteed stream of income from energy Utility Electric Rate including

estimated escalation at 5% sold 15¢ ! Tax benefits Cost 14¢ PPA Electric Rate

including Per contracted escalation at 3% ! No inflation/escalation risk kWh !

Keep or sell Green Tags / RECs 2007 2017 2027 Year© 2010 OnGrid Solar,


rights reserved. Intro to Solar Financing - 94 User Energy and Performance

Terms Capacity Payments ! Most are Energy Payments only: $/kWh !

Performance Guarantees delivered " Annual & Project life " Sometimes

indexed to electric or gas markets " Actual Energy / Power delivered ! Some

also include a “Capacity” payment " Efficiency & Availability of Equipment "

Fixed $/kW/month based on average “availability” of PV equipment !

Liquidated Damages for failure to perform / " Comparable to Demand Charges

provide power or energy # Depends on profile # Recover some lost hidden

value© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 95 ©


24. Performance Terms cont’d End User Risks PPA Electric Rate including !

REC / Green Tag ownership contracted escalation at 3% 15¢ " Usually retained

by system owners Cost 14¢ Per Utility Electric Rates may not rise or stay "

Potentially valuable as AB32 kicks in kWh above PPA Contract Rate !

Metering " Costs & Billing Systems 2007 2017 2027 Year ! Rights to Excess

Power ! Inverse of Electricity Escalation " If rates don’t rise, might cost more

" Use of and Value ! Might not get Green Tags/RECs " Additional cost if

desired© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 97

© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 98 2010

Average Upside Down Deals? Residential Electric Rates & Escalation (West,

partial) 14¢ PPA Electric Rate including 2008 U.S. Average Retail Price per

kWh is 9.74 Cents Cost contracted escalation at 3% Per 13¢ kWh Utility

Electric Rates assumed to rise at 5% and eventually go above PPA Contract

Rate ! Why take 10 years of guaranteed losses to maybe get 10 2007 2017 2027

Year future years of savings (consider Time Value of Money)? ! Is the hedge

worth that much? " Chances of rates not rising at 5%? Average Retail Price

(Cents per Kilowatt-hour) " U.S. Average: Rates Grew 3.8% /yr from 2001-

2010 " Large 2009 U.S. Natural Gas discoveries may limit escalation Source:

DOE Energy Information Administration.© 2010 OnGrid Solar, All rights


reserved. Intro to Solar Financing - 100 *+,-+."/"&01" California Electric Rates

asa s Residential 1970 to 2001 plus 2001 to 2010 tiers asf sf • Deregulation in

1995 froze Tier 1 & 2 • AB1X during 2001 Power Crisis created Tier asdf

23+4"&"5"67"&%1" Investor/Owner Risks 3-5, which have risen 5x faster than

‘average’ f 23+4"87"#01" rates needed to rise to compensate for Tier 1&2

System Performance f • SB 695 (Kehoe) unlocks and raises Tier 1 & 2 ! rates

1% faster than ‘average’, up to 5% per year " Maintenance over 15+ years •

Tier 3,4,5 might now drop )$%" df ! End-User default or vacancy of property )

&$%" 23+4"#7")8$61" Good credit end-users required !"#$%&"(&)*+,-./01,2

(& Residential asf 23+4")7"))$01" " )#$%" a *95:"#%)%" )%$%" ($%" 1982

sdf " Require host supply another site or pay term. Fee $%" Be cautions about

" Lots of “due diligence” required - high transaction &$%" future rate hikes –

#$%" 2-3% max costs !" 9:;8& 9:<7& 9::=& 9::<& 3456&7889& 23+4"67"#1"

3456&7898& 23+4"67"&01" ! Incentive Receipt Certainty 23+4"&7"#&1"

23+4"&7"&)1"Source: California Public Utilities Commission, EIA, PG&E

23+4"87");1" 23+4"#7")81" 23+4"87"#;1" 23+4"#7")81" " Must have

confirmation of qualification/allocation "#$#1" <+=3.+>?,@" ";$;1" "))$1" "))

$81"" 23+4")7"))1" 23+4")7"))$61"© 2010 OnGrid Solar, All rights reserved.



Intro to Solar Financing - 101 © 2010 OnGrid Solar, All rights reserved. Intro

to Solar Financing - 102

25. 2010 Average Residential Electric Rates & Escalation (West, partial) 2008

U.S. Average Retail Price per kWh is 9.74 Cents Average Retail Price (Cents

per Kilowatt-hour) Source: DOE Energy Information Administration.© 2010

OnGrid Solar, All rights reserved. Intro to Solar Financing - 11 *+,-+."/"&01"

California Electric Rates asa s Residential 1970 to 2001 plus 2001 to 2010 tiers

asf sf asdf • Deregulation in 1995 froze Tier 1 & 2 23+4"&"5"67"&%1" •

AB1X during 2001 Power Crisis created Tier 3-5, which have risen 5x faster

than ‘average’ f 23+4"87"#01" rates needed to rise to compensate for Tier 1&2

f • SB 695 (Kehoe) unlocks and raises Tier 1 & 2 rates 1% faster than

‘average’, up to 5% per year • Tier 3,4,5 might now drop )$%" df )&$%"

23+4"#7")8$61" !"#$%&"(&)*+,-./01,2(& Residential asf )#$%" a 23+4")7"))

$01" *95:"#%)%" )%$%" 1982 sdf ($%" $%" Be cautions about &$%" future

rate hikes – #$%" 2-3% max !" 9:;8& 9:<7& 9::=& 9::<& 3456&7889&

3456&7898& 23+4"67"#1" 23+4"67"&01" 23+4"&7"#&1" 23+4"&7"&)

1"Source: California Public Utilities Commission, EIA, PG&E 23+4"87");1"

23+4"87"#;1" 23+4"#7")81" 23+4"#7")81" "#$#1" <+=3.+>?,@" ";$;1" "))$1"

"))$81"" 23+4")7"))1" 23+4")7"))$61"© 2010 OnGrid Solar, All rights


26. Investor Access to Tax Benefits PPA Contract Documents ! Tax Equity

investor must have “unfettered” use of ! Total: 100-200+ pages valuable asset

after deal is over ! Standard Off-taker Contract Segments: " Will panels still be

valuable in 15+ years? " The PPA: 20-35p " Value can’t be stated now - must

be set at that time # Sale of Power/Energy: Output vs. Requirements " Term

can’t go over 80% of “useful life” # Metering & REC ownership ! Must not be

“Limited Use” or “Personal” property " Installation Contract: 20-50p w/

exhibits " Must be “attached” and not easily moved - non- # Equipment Supply

& Construction penetrating systems? " Operations & Maintenance Agreement:

10-15p ! Purchase Options: Fair Market Value (FMV) only " Site Lease gives

provider rights & protections " Dates can be set, but not value # O&M Access;

Transfer to new site owners© 2010 OnGrid Solar, All rights reserved. Intro to


Financing - 104 PPA Contract Costs PPA Developer & ! High (long &

complicated) but dropping Investor Contract Documents rapidly for “generic”

& standard ! Additional agreements for Developer & Investors " Basic

Standard Agreements: $3K-20K " LLC w/ Partnership Flip: 40p + 15p exhibits

including tailoring w/ desired terms " Purchase Agreement: 24p + 7p of

“definitions” ! Moving to pre-approved deal checklists ! Covers the multi-year

legal structure to allow Tax ! SolarTech.org “Standard PPA” Equity Investor to

reap tax benefits as 99% initial " $395, free to members owner, then “flips”

ownership to Developer to reap ! SEIA “PPA Template” free for members long

term operating benefits. ! Per-Deal (legal) costs are now low(er): ! Flips occur

anywhere from Year 6 to Year 17 " Quick review (if standard & good basic "

Rebates/PBI, Host Payments, Tax Benefits (vesting) agreements are used)©


OnGrid Solar, All rights reserved. Intro to Solar Financing - 106 Equipment

Supply & Complications - Legal & Tax Construction Agreement ! Product

Supply ! Long contracts - 40-60 pages ! Installation terms, timeline, etc ! High

initial transaction costs " In-Service Date not < 3 months before closing Sale-

Leaseback or not before closing Partnership Flip " Reduced with

standardization ! Warranty (5-10 yrs, useful terms to satisfy) ! Building

access / maintenance costs ! Performance Guarantee or Warranty !

Repossession / aftermarket value " Based on independent data & measurable

parameters ! Termination tax issues? - terminal price? ! Can installation be

subcontracted? " Must be at FMV or greater for tax benefits© 2010 OnGrid





27. Complications - Terms Common Mistakes ! Power Contract Form: !

Purchase Options: Fair Market Value (FMV) only " Value can’t be stated now -

must be set in future " Selling kWh? " No declining schedules of

value/purchase price # At what price? # TOU & Demand saving / costs !

Rebates are taxable to Host? # Who takes remaining utility bill? " Host signs

over rebate, but is stuck w/ tax liability? " Simpler but vague sales

presentation ! Usually no “Tax Indemnification” (unlike leases) ! Max length

<= 80% of expected life " May leave lots on table in customer’s ! Host can’t

share in upside benefit ! Host can’t be charged for electricity not received©


OnGrid Solar, All rights reserved. Intro to Solar Financing - 110 PPA Deal

Sizes Aggregation ! Tax Equity Investors looking for big deals ! Collect 5 to

50 $3-$5million+ size projects " $25-$40 million minimum ! Master

Agreements: “All Deals …” " Keith Martin’s typical: $75-$150 million " In by

X date " Desirable $100-$200 million " Meet 10-12 item checklist " ? 5 to

50MW PV systems ? ! Standard checklist reduces due diligence & !

Aggregation legal costs per deal " Collect $3-$5million+ size projects© 2010

OnGrid Solar, All rights reserved. Intro to Solar Financing - 111 © 2010

OnGrid Solar, All rights reserved. Intro to Solar Financing - 112 Tax Equity

Investors & Lenders Investor Returns ! Recently Active (changes frequently):

" Union Bank of CA ! Financial Returns for Tax Equity Investors " US Bank

(U.S. Bancorp) ! Was High 6% to Low Teen % after tax " Deutsche Bank "

Now? – 14-18% depends on project " John Hancock ! Much less money now

available, so " Rabobank " Morgan Stanley demanding higher returns " Wells

Fargo ! Leveraged? " National City Bank (leaving the business?) " Increases

risk & complication ! Goldman Sachs invests in PPA companies to buy " Too

small to bother? & flip for profit© 2010 OnGrid Solar, All rights reserved. Intro

to Solar Financing - 113 © 2010 OnGrid Solar, All rights reserved. Intro to

Solar Financing - 114

28. Cash Flows at PPA Typical Terms Various Phases MN+4,?G>"

P3."5"QG>E" CD43>E" JD=H"KL+4" MN+4,?G>" 2+4O"R,L+4" !

$2.5Million+ (>350kW+) *A,=+" *4+!B,@+" FG>=H4DI?G>" FG>=H4DI?

G>" BAG4H"2+4O" S3NT" ! 15-20-25 yr commitment BGD4I+=" $

C+W+@GN+4" $ C+W+@GN+4" $ 24+,=D4^" $ V+."Z2F"R3U" $

C+N4+I3,?G>" GU"VD>.="" XB,@+="<3=-Y" F,=A"X=-3>"3>" 94,>H"

>GH"D=3>E" $ *]Z=" ! End of term: BH,4HDN" HA+"E,O+Y" $ BH,H+"5"

24+,=D4^" $ B<:F=" Z>W+=HO+>H" [#%" QGI,@"<+_,H+=" 94,>HT" "

Renew PPA $ *G`+4"B,@+=" $ ],>-" G4"94,>H=" $ BH,H+"Z2F" $ ],>-

"QG,>"HG" " Purchase of system FG>=H4DI?G>" $ Z>W+=HG4" $

PKF<B" +>."GU"P3." 2+4O"QG,>" F,N3H,@" C+N4+I3,?G>" # At greater of

FMV or pre-determined price 2+4O" $ ],>-"QG,>" R6%"_G>D=" ,II+@+4,?

G>T" $ C+W+@GN+4" Pay termination & have system removed " $ ],>-

"QG,>" _D^GDH"I,=A" HG"_D^GDH",H" ! Significant due diligence on

customer req’d HA+"S3N"© 2010 OnGrid Solar, All rights reserved. Intro to


Financing - 116 PPA vs. Lease Dealing with PPA Developers Electric Bill !

Greed has set in: " Not really a “partner” with installers " Not trying to save

customers money Typical PPA " Working each as hard as possible Typical

Lease ! Shop around - help your customer find the best deal " Good service

gets you the repeats and installation work© 2010 OnGrid Solar, All rights


reserved. Intro to Solar Financing - 118 Lease vs. PPA PPA Leasing Cash

Buyer vs. Lease vs. PPA Ease for Operation, Maintenance, Return Almost No

Effort Customer Inspection ! Profit / Reward - shared among the parties

Operating Risk PPA Vendor End User " Lessee: more risk, may get more of



profit than with Long Term May Be Higher, to May Be Lower, Except Upon

PPA unless the PPA willing to take more risk than Costs Compensate for Risks

Return of Equipment the bank for the same returns Costs on Removal of

Equipment, Functional Termination Usually None Verification, Return

Shipment " Cash buyer: all risk, gets all profit Opportunity None None # Uses

up working capital - opportunity cost Costs ! Energy Efficiency REC Benefits

Stays w/ PPA Vendor End User " Cash buyers & Leases can enjoy add’l

savings Cash Flow Cash Neutral or Often Negative Up-Front, Positive Savings

Positive Whole Term Over Term " Typically not part of PPA deals (directly)

Include E. Hard to sell “negawatt-hours” More Difficult Yes # Efficiency #

May be able to sell kWh for higher value w/ EE© 2010 OnGrid Solar, All rights



29. Cash Flows at Various Phases 89%#41.& <-=&>&?1./& +,-./& 5,$2&67%

& 89%#41.& :%;&@#7%& !"#$%& !%()#*%& 01.$2,341.&

01.$2,341.& )"12&:%;& A-9B& )1,3%$& ! +%E%*19%& ! +%E%*19%

& ! :%#$,P& ! D%=&J:0&@-C& ! +%9%3-#41.& 1C&D,.=$&& F)#*%

$&G-$HI& 0#$"&F$H-.&-.& Q#.2& .12&,$-./& ! !OJ$& )2#2,9& 2"%&/#;%

I& ! )2#2%&>& :%#$,P& ! )GT0$& J.E%$2;%.2& KLMN& ?13#*&G%

R#2%$& Q#.2B& ! !1U%&)#*%$& ! O#.H& 1&Q#.2$& ! )2#2%&J:0& !

O#.H&?1#.&21& 01.$2,341.& ! J.E%$21& ! <60G)& :%;&?1#.&

%.=&1C&<-=& 0#9-2#*& +%9%3-#41.& :%;& ! O#.H&?1#.&

@SMN&R1.,$& #33%*%#41.B& ! +%E%*19%& R,P1,2&3#$"& ! O#.H&?

1#.& 21&R,P1,2&#2& 2"%&A-9&© 2010 OnGrid Solar, All rights reserved.

Intro to Solar Financing - 13 Lease vs. PPA PPA Leasing Ease for Operation,

Maintenance, Return Almost No Effort Customer Inspection Operating PPA

Vendor End User Risk Long Term May Be Higher, to May Be Lower, Except

Upon Costs Compensate for Risks Return of Equipment Costs on Removal of

Equipment, Functional Usually None Termination Verification, Return

Shipment Opportunity None None Costs REC Benefits Stays w/ PPA Vendor

End User Cash Flow Cash Neutral or Often Negative Up-Front, Positive

Savings Positive Whole Term Over Term Include E. More Difficult Yes

Efficiency© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing -

14

30. Which Product Is Right? PPA Vendors / Providers Not tax restricted, Cash,

Loan, Offer PPAs to 3rd Parties (may be looking for deals): wants to own

system Finance Lease " Sun Run Generation: Residential pseudo PPA (large

initial fee) Tax restricted, deal Tax/Operating " Renewable Ventures: 250kW+

under ~$3,000,000 Leas e " Tioga Energy Tax restricted, deal Tax/Operating "

Recurrent Energy (now owed by Sharp) over ~$3,000,000 Lease, PPA " Sun

Edison: 250kW+ # Vertically integrated on many sales, installation &

ownership Tax-Exempt Lease Many others available & more coming

Government entity " Purchase, PPA Non-profit PPA Uses PPAs on their own

projects only: " SunPower (former Powerlight): 250kW+ Deal w/ Energy

Usually Not PPA Efficiency Component© 2010 OnGrid Solar, All rights


reserved. Intro to Solar Financing - 122 PPA and/or Lease Agents PPA/Lease

Legal Services Gene Beck Baker Davenport Keith Martin Stoel Rives LLP

Davenport Finance Company EnviroTech Financial, Inc Chadbourne & Parke,

LLP [email protected] [email protected]

[email protected] (202) 974-5674 (800) 88-STOEL 804-323-6061 714-

532-2731 [email protected] www.etfinancial.com Wrote SEIA Fed

Tax Manual. Charles Gerni Please call only to hire, not just National Lease

Financial Services questions David J. Clamage 858-546-4888 Saulsbury Hill

Financial Edwin F. Feo Jigar Shah [email protected] Milbank

[email protected] 303-629-8777 x102 Scott F. Young 213-892-4417,

[email protected] (202) 250 3651 Sentry Financial Teaches at Solar Power



Founded SunEdison. Now consults (801) 303-1111 International and other on

“more unconventional” PPA/ [email protected] conferences finance

deals© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 123 ©


Agenda ! Overview of Basic Financing Principals ! Residential Conventional

Financing with Residential 3rd Party Unsecured Loans & Home Equity

Financing with ! PACE & State/Utility Loan Programs ! Lease Basics &

Commercial Leases PPAs & Leases ! PPA Basics & Commercial PPAs !

Residential Leases & PPAs© 2010 OnGrid Solar, All rights reserved. Intro to


Financing - 126

31. Sun Run Generation SolarCity “SolarLease” Residential Pseudo PPA

Residential Pseudo Lease ! Residential Pseudo PPA ! Residential Pseudo

Lease " Deposit or “installation fee” reduces per kWh price " $0-$2.25/Watt

down " Per kWh savings w/ performance guarantee " $0 to escalating monthly

payment w/ perf. guarantee ! 20 yr term & unknowable? buyout charge at end !

Otherwise could be ~ same as SunRun: ! Very small deal size needs low “due

diligence cost” " 15 yr term & unknowable buyout charge at end " FICO

score / credit check & large deposit " Very small deal size needs low “due

diligence cost” # No risk if Deposit >25% of gross cost # FICO score / credit

check " Risk spread over many customers # Risks spread over many customers

" Much higher relative savings on Residential Tiered # Much higher relative

savings on Residential Tiered TOU rates compared to commercial rates/PPAs

TOU rates compared to commercial rates/leases " Issues: Rate escalators &

ITC Basis ! Issues: Rate escalators & ITC Basis© 2010 OnGrid Solar, All


reserved. Intro to Solar Financing - 128 Unknowable Buyout Charges Tools To

Analyze Deals ! IRS rules around Fair Market Value discussed earlier prevent

stating the buyout ! CEI - Competitive Energy Insight value – what could it be?

" Complements OnGrid ! No obligation to purchase " More detailed,

sophisticated, expensive ! Minimum - $0 " Helps you (or your finance partner)

take ! Maximum – less than the future new system the deal to the next step

after-incentives net cost ! OnGrid ! If provider sets it too high, customers will

walk away, must be low enough to attract© 2010 OnGrid Solar, All rights


reserved. Intro to Solar Financing - 130 The Economics of Stakeholders are

Linked CEI’s EconExpert Software Suite Bank / ! Universal Financial Pro

Forma Lessor Gas " For PV, Wind, CSP, Fuel Cells, CHP & other Construction

Loans Project Supplier ! Economics and Tax Benefit Monetization Finance !

Early Screening to Financial Closing Suppliers Project Tariffs ! From the

Viewpoint of Every Stakeholder Competing Developer/ Electric Equipment

O&M Suppliers Owner/ Utility Operator ! Before and After-Tax Discount Cash

Flow Tax Accelerated ! Book and Cash / Levered and Unlevered Credits

Depreciation * CEI is not a licensed legal, brokerage or accounting firm. You

are recommend to also consult licensed advisors Tax Monetization© 2010

OnGrid Solar, All rights reserved. Intro to Solar Financing - 131 © 2010


32. Competitive Energy The OnGrid Tool Insight, Inc. ! Sales Tool !

Specializing in: TM " Quickly Identify & Screen Leads " Energy Project

Ownership and Asset " Organizes Client Info Management " Financing !

Design Tool " Business and Contract Development " Size Systems Optimally

Steve Provol, President ! Proves the Payback www.CEInsight.com !

Automatically Creates Quotes & Proposals (858) 566 0221 ! Prepares

Documents & Paperwork [email protected]© 2010 OnGrid Solar, All


reserved. Intro to Solar Financing - 134 OnGrid Calculates Rates & Incentives

Cost & Performance ! Commercial, Residential, Agricultural ! West: CA, AZ,



CO, HI! Costs, Adders, all Incentives, Net Cost ! East: PA, NJ, NY, DE, CT,

MA, OH! System Performance including Shading Data Upload: ! Southeast:

NC, FL, GA! TOU kWh Performance $12,000 Annual Savings Before and

After Payback ! Coming soon: TX, OR, NV, MI, WA,! Electric Bill $ savings

$10,000 MN, IL $8,000 Annual Savings $6,000 $4,000 Performs Financial

Analyses: $2,000! $- 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

22 23 24 25 Year Annual Savings Before Payback Payback Year (Occurs at 9.7

Years) Annual Savings After Payback " Simple & Lifecycle Payback " Rate of

Return analysis " Cash Flow when financing $250,000 $200,000 Resale Value

$150,000 " Increase in Appraisal Valuation $100,000 $50,000 $- Years 1 3 5 7

9 11 13 15 17 19 21 23 25 Provides spreadsheet proof Effective Resale Value

(lesser of 20x annual or remaining 25yr savings) 20 times Annual Savings!

Remaining savings within 25 years Intro to Solar Financing - 135 © 2009

OnGrid Solar, All Rights Reserved. Economics of Solar PV - 18 Intro to Solar

Financing - 136© 2010 OnGrid Solar, All rights reserved. © 2010 OnGrid

Solar, All rights reserved. Scenario Options Agenda ! User Customizable to

Any Situation: " Commercial, Residential, Government & Non-Profit !

Overview of Basic Financing Principals " Any size system: 0-1000MW !

Residential Conventional Financing with " Any Rate Structure Unsecured

Loans & Home Equity " Any Incentive: FIT, Rebate, PBI, REC, Tax ! PACE

& State/Utility Loan Programs Credits & Depreciation ! Lease Basics &

Commercial Leases " Any Insolation Location ! PPA Basics & Commercial

PPAs ! Excel-based: Fast, Portable, non-web ! Residential Leases & PPAs !

Free Trial Available - License Agreement ! Conclusion Class Special – 15-Day

Bonus Use© 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing -

137 © 2010 OnGrid Solar, All rights reserved. Intro to Solar Financing - 138

33. Conclusion - Review Conclusion - Review ! Looked at the Basic Financing

Principals " Importance of Credit Quality ! Looked at " Lease Basics &

Commercial Leases " Must be a fundamentally good deal " PPA Basics &

Commercial PPAs " Tradeoff of Risk vs. Reward " Residential Leases &

PPAs ! Then Residential Conventional Financing ! Discussed the importance

of getting the " Unsecured Loans finance partner involved early to help you

Home Equity & Smart Financing " ! PACE & State/Utility Loan Programs©


OnGrid Solar, All rights reserved. Intro to Solar Financing - 140 Learn More

Goal: Benefit You! Help you sell more: Resources available at

www.ongrid.net ! Understand the topic better ! Articles & papers on solar

“Payback” ! Be more confident in front of the customer ! Know which

questions to ask, so you know ! Upcoming classes & events which customers to

target, and avoid time- " Sales & Marketing for Solar (8 hour) wasters "

Economics of Solar (8 hour) ! Make the best case to each customer, avoid !

Slides from past classes mistakes, don’t present marginal info and weak

analyses ! Free demos of the OnGrid Tool Gain more trust and confidence of

your boss …so please go out and close loads more business!© 2010 OnGrid


All rights reserved. Intro to Solar Financing - 142 Thanks Andy Black The

OnGrid Tool ! Solar Power International ‘10 Solar Financial Analysis & Sales

Software ! Solar Electric Power Association " Stuart Raper & Julia Hamm !

Yennie Solheim ! Contact me with any questions or concerns ! Please turn in

your feedback forms (408) 428-0808x1 " What you did/didn’t you like/want

changed? [email protected] ! Thank you for coming! www.ongrid.net - Tools,

Classes, Articles & Papers© 2010 OnGrid Solar, All rights reserved. Intro to


Financing - 144

34. !"#$#%&"(#)(*#+,-(!+."/-&"(*0/.%()#-(1#$2%.-3( 4,05,"6(,$7(#/8.-

(9&$,$"&,+(:./( By Andy BlackSolar electric systems can be a good financial

WHY DOES SOLAR PAY OFF NOW?investment for homeowners and



businesses, Good system performance, high electric rates, Net

Meteringdepending on a variety of factors including system and Time-Of-Use

rate structures, Solar Renewable Energyperformance, electric rates, favorable

utility rate Certificates (SRECs) and government incentives havestructures, and

incentives. Several US states have the contributed to the financial viability of

solar electricity. Howright combination of conditions to strongly encourage

these factors come together varies significantly by location.end-consumer

investment in solar electric systems Some locations have the combination of

factors that yieldbased on economics alone. excellent results; in others, it makes

no economic sense to go solar, especially when including the maintenance and

inverter In places where solar is economically attractive, rates of return

replacement costs.from 9% to 15% or better are common. If financed, the

monthly The key element for most analyses is the ongoing valuenet loan cost is

usually less than the monthly utility bill savings. generated by the solar system

(the savings on the electric utilityAnd if the home is sold, the solar system

should increase the bill or the monetary value of system output that can be

sold). Aresale value by more than the system cost to install. properly sited,

sized, designed, and installed solar system can The above claims are big, so

rigorous treatment and critical usually eliminate most or all of a customer’s total

annualanalyses from several angles including Compound Annual Rate electric

bill.of Return, Cash Flow, Lifecycle Payback, and Appraisable The next pages

will discuss system performance, electric rateResale Value need to be

considered to do a fair assessment. structures, and incentives. The pages

following will detail howUsing the above analysis methods helps compare the

solar the economics can then be analyzed using Rate of Return,investment to

other investments on an even basis. Payback and Lifecycle Payback, Property

Value Increase, and Cash Flow when Financing.IN THIS ARTICLE: SYSTEM

PERFORMANCE: ! What factors need to be considered to determine the Lots

of Sunlight is just one of the many factors that must beeconomic payoff of

solar, including rates, rate structures, included in a system performance

calculation. Across much ofsystems performance, solar RECs, and incentives

the United States, the amount of available sunlight is ! How to test the

economic value in the ways listed above surprisingly uniform, with most areas

within ± 20% of the This article also includes “Policy Discussion” paragraphs

to sunlight level of Miami, Florida, as can be seen in Fig. 1. Thehelp individuals

and policy makers in locations without strong National Renewable Energy

Laboratory (NREL) has data oneconomics understand the issues around

creating solar-friendly 239 locations across the U.S. and its territories available

at:policies, which motivate and leverage individual investment.

http://rredc.nrel.gov/solar/pubs/redbook/ and its PVWatts calculator will

determine performance for a user specified PV Equivalent Noontime Sun Hours

per Day (Annual Average): Portland, OR 4.0 Buffalo, NY 4.1 Chicago, IL 4.4

Newark, NJ 4.5 Boston, MA 4.6 Baltimore, MD 4.6 Raleigh, NC 5.0 Miami,

FL 5.2 Austin, TX 5.3 San Francisco, CA 5.4 Boulder, CO 5.5 Los Angeles,

CA 5.6 Phoenix, AZ 6.5 Fig. 1. Most U.S. locations are ± 20% of Miami’s

sunlight level. Sources: NREL: http://rredc.nrel.gov/solar/pubs/redbook/ and

http://www.nrel.gov/gis/solar.htmlEconomics of Solar Electric Systems ! 2009,

Andy Black. All rights reserved. July 2009 - 1 of 19

35. system: http://www.nrel.gov/rredc/pvwatts/. related problems (long wires

can have a kind of ‘voltage buildup’ in the wiring causing the inverter to think

the utility is There are numerous loss factors that affect real system not safe to

connect with, requiring it to shut down for at least 5performance including

component performance, wire losses, minutes). The only way to know if a

system is operatingsoiling, module degradation, module mismatch, system

uptime reliably is to monitor it as often as possible. Monthlyand reliability,

manufacturer production tolerance, and system observations via the electric bill

savings are a crude minimumdesign factors such as tilt, orientation, shading,



and air flow. but can take 45 days or longer to make even a simple problemThe

California Energy Commission has produced “A Guide To (sometimes only

requiring a simple reset of the inverter) visible,Photovoltaic (PV) System

Design And Installation” available at: resulting in over 12% of a year’s energy

to be lost. Activehttp://www.energy.ca.gov/reports/2001-09-04_500-01-

020.PDF continuous real-time monitoring and automated alertingand is an

excellent overview of system design considerations. solutions are available that

should more than pay for themselvesFig. 2 lists performance loss factors, and

the significance of in increased savings, peace of mind, and owner

satisfaction.potential relative losses from tilt, orientation, and shading. System

Performance Factors Policy Discussion: Including Inverters aren’t 100%

efficient, with most achieving 94-96% predicted or actual system performance

in determining the levelefficiency. Similarly, PV modules in operation put out

of incentive to be paid (then actually verifying compliance withapproximately 7

-14% less power at realistic operating the approved design) is an excellent way

for incentive agenciestemperatures compared to the Standard Test Conditions

(STC) to improve system quality. Before California adopted thecommonly

measured in factory or laboratory settings. The State requirements of the new

California Solar Initiative (CSI)of California provides lists of module and

inverter ratings at: program, a significant fraction of sold and installed

systemshttp://www.gosolarcalifornia.org/equipment. had major shading or other

site-selection design problems, Soiling, module degradation, and module

mismatch also must often only disclosed to the customer with a hand-wave ofbe

accounted for. The designer and installer have some control “you’ll lose a little

performance due to shading…” The CSI hasover wire losses, but by code, must

not exceed 5%. received a lot of criticism because of the increased level

ofManufacturer production tolerance losses result from some paperwork,

scrutiny and repercussions for “failures” frommodules having a performance

specification of +X%, -Y%. If those who would rather do things the old, easy,

loosey-gooseythere is a negative tolerance, the customer can be sure she will

way, but in the author’s opinion, the new level of accountabilitybe on the losing

end of that bargain to at least some extent. is the best thing that could have

happened to raise the quality of installations in the state. This higher level of

quality is nothing The system designer in coordination with the property owner

new to those in some other states such as Colorado and in somehas control over

how the modules are mounted, especially how municipal utilities like SMUD.

Going forward, the author hasfar off the roof, affecting how much airflow

occurs. Thermal grave concerns about the quality of systems that will

bestagnation starts to occur with less than 6” clear airflow space installed as a

result of the expansion of the federal Investmentbehind the modules and can

reduce performance up to 10% at Tax Credit, which has no performance or

quality safeguards.0” air gap. Typical Loss and Performance Factors: The

designer and property owner also have control of solarsystem orientation (tilt

angle or ‘altitude’ above horizontal and Loss Performance Variabledirection or

azimuth), and usually some control over shading. Factor FactorShading and/or

orientation are usually the #1 9-12% 88-91% Module

Temperatureunderestimated system performance loss factors except inlocations

where incentive programs specifically (directly or 3-11% 89-97% Inverter

Efficiencyindirectly) include these in the calculation of the incentive to be 1.5-

5% 95-98.5% Wiring (AC & DC combined)paid. It is critical that the site

analyst / installer use a shadeanalysis tool to accurately determine shade.

Quality shade tools 5-15% 85-95% Dust & Dirtinclude the Solar Pathfinder

(http://www.solarpathfinder.com/), Module Degradation over 20Solmetric

SunEye (http://www.solmetric.com/), and the Wiley 5-10% 90-95%

yearsASSET (http://www.we-llc.com/ASSET.html). It is impossible 1.5-2.5%

97.5-98.5% Module Mismatchto estimate shading by eye, and even a few

percent can besignificant. Avoiding shading is often the most important

Manufacturer Production 0-5% 95-100%criteria, even over selecting a south-



facing roof. Tolerance ~27-33% ~67-73% Typical Totals for the System

availability (uptime) is dependent on system Best Systemsreliability and

monitoring. A well-designed system withknown reliable components

(particularly the inverter) is Additional Design-Dependent Factors:important.

Placing inverters in shaded, well-ventilated locations 0-10% 90-100% Air

Flowthat won’t accumulate ventilation-inhibiting debris willeliminate many

common overheating-related problems (reduced 0-40% 60-100% Orientation &

Tiltpower output due to thermal protection or shortened component 0-100% 0-

100% Shadinglifetime). Placing the inverter close to the utility connection 2-

100% 0-98% System Availability (uptime)point will eliminate many common

utility interconnection Fig. 2. Summary of Performance and Loss

FactorsEconomics of Solar Electric Systems ! 2009, Andy Black. All rights

reserved. July 2009 - 2 of 19

36. 2007 U.S. Average Retail Price per kWh is 9.13 Cents 2008 2004- 2001-

1990- State Rate 2008 2008 2008 ¢/kWh CAGR CAGR CAGR US 11.4 6.1%

4.1% 2.1% AZ 10.3 4.9% 3.1% 0.7% CA 14.4 4.2% 2.5% 2.1% CO 10.1 4.8%

4.5% 2.1% CT 19.4 13.6% 8.5% 3.7% DC 12.7 12.2% 7.2% 4.1% DE 13.9

12.2% 7.1% 2.8% FL 11.7 6.8% 4.5% 2.3% GA 10.1 6.4% 3.4% 1.7% HI 32.5

15.8% 10.3% 6.6% MA 17.5 10.5% 5.0% 3.4% MD 13.8 15.4% 8.8% 3.7%

MN 9.8 5.4% 3.7% 2.0% NC 9.7 3.6% 2.6% 1.2% Average Retail Price (Cents

per kWh) NJ 16.0 9.2% 6.6% 2.4% NM 10.0 3.7% 2.0% 0.6% NV 11.9 5.3%

4.0% 4.2% NY 18.8 6.6% 4.3% 2.8% OH 10.1 4.6% 2.8% 1.3%Fig. 3. The

graphic above shows the 2007 U.S. average electric rates for all OR 8.5 4.4%

4.4% 3.3%sectors. The table at right shows 2008 average residential electric

rates for PA 11.4 4.4% 2.4% 1.2%selected states and their Compound Annual

Growth Rates (CAGR) for threetime periods before 2008. Source: U.S. Energy

Information Administration: TX 12.8 7.2% 5.4% 3.3%

http://www.eia.doe.gov/fuelelectric.html WA 7.6 4.4% 4.2% 3.1%ELECTRIC

RATE STRUCTURES: efficient with how she uses electricity is to charge more

for it, High Electricity Rates are an expensive fact of life in a but there are

limits to how this can be appliednumber of US states and can be worse still in

other countries. without disadvantaging lower incomeHawaii has the highest

electric rates in the U.S. topping out at consumers. Many utilities have adopted

a32¢/kWh for the average residential consumer (certain islands tiered pricing

structure, as can been see in Fig.are higher), however, rates are also very high in

Connecticut, 5, where the first part of a consumersCalifornia, New York and

other states (Fig. 3). consumption is charged at a lower rate, but if the consumer

uses more than a Rates have risen fast across the land since 2001 and especially

“baseline” allocation (an amount deemedfast since 2004 (Fig. 3). Electric rate

increases will likely be to be required to cover a consumer’stempered by the

Great Recession of 2009. Future rate hikes can “basic needs”) she will pay more

foronly be guessed at, as they depend on many factors. the next part of her

usage. The In comparison, the Consumer Price index (CPI-U) has been more

she uses, the more eachincreasing at 3.1% on average since 1982. One might

ask, how kWh costs. The more tiers thereis it that electric rates have

continuously increased faster than are in the system, the more thethe CPI –

wouldn’t electricity become a bigger and bigger ratesportion of our

consumerexpenses, until eventuallysomething brought it intocheck? The answer

lies inthe fact that we arecontinuously getting moreefficient with how we

useelectricity, so we are ableto produce more economicvalue per unit of

electricity.We are therefore able tospend more per kWh. Fig. 4. Residential

electric rates in California from 1970 to 2001 increased at a 6.7% compound

One of the ways consumers annual rate (source: CPUC “Electric Rate

Compendium” Nov. 2001 from EIA data). Since 2001,can be motivated to be

more there has been no change in Tiers 1 & 2, but an exaggerated increase in

Tiers 3-5. Enactment of AB413 and expiration of AB1X may alter these trends.



Note: this graphic is to scale.Economics of Solar Electric Systems ! 2009, Andy

Black. All rights reserved. July 2009 - 3 of 19

37. $269/mo $127/mo $59/mo $43/mo bill at top of Tier 1 Fig. 5. Progressive

tiered rate pricing penalizes large users most with a marginal electricity cost at

ever increasing rates. In these cases, solar offsets the highest tier usage first,

making the solar customer look like a smaller user with a lower marginal cost.

The graphic on the left indicates which tier a user is in for a given monthly

electric usage (1650 kWh) and bill ($499) in San Jose, CA. On the right, the

green area represents how much is offset by solar (1225 kWh and $463 out of

$499).can be fine-tuned, but also, the more complicated billing Rates in Tier 3,

4 & 5 have gone up and down dramaticallybecomes. Fig. 5 illustrates a

“progressive” pricing model for since 2001, with a recent average rate of

increase that has beenrates (similar to progressive tax structures), which

attempts to very high (double digit). This high average will not

continuediscourage large use while protecting smaller using consumers. forever

because of the eventual expiration of California AB1XThe progressive model

encourages conservation, efficiency, and (the date of this is unknown for a

variety of complicatedconveniently for the solar industry, solar installations as

well. reasons, but may be soon, depending on what happens withThe graphic in

the right half of Fig. 5 shows how a solar system AB413). When this happens, it

is anyone’s guess how themakes a user look like a smaller consumer (the green

area is politics will fall, but one of three possibilities is likely: 1. Ratessolar

generation, the red area is the remaining net usage), and in all tiers will move in

lock step at a more normal rate ofoffsets the most expensive electricity first,

yielding the greatest escalation, 2. Rates in Tier 3-5 will be frozen while Tier 1

& 2savings first, boosting the economics of solar. This particular catch up, or 3.

Rates in Tier 3-5 will be reduced and rates incase is saving 44¢/kWh for the

first set of production, 38¢/kWh Tier 1 & 2 will move up to compensate.for the

next set, and so on. Not all utilities use the above A conservative approach to

electricity escalation suggests a“progressive” pricing model. Some utilities offer

discounts for 5% annual escalation – anything more than that might bebuying in

bulk – the larger the use, the less expensive the cost of viewed as “optimistic”

which may cause customers to becomethe next kWh. This may be rational in

some utility cost models, concerned. The scenario examples depicted later will

assumebut it doesn’t encourage conservation, energy efficiency or solar 5%

except as noted. The goal of this article is to provide ainstallation. conservative

set of assumptions and a “bullet-proof” analysis Fig. 4 shows the California rate

history since 1970. From 1970 methodology, that if followed, will be acceptable

to the broadto 2001, rates increased at a compound annual average rate of

majority of serious potential customers, and provide them and6.7%, as can be

seen in the lower left portion of the graphic. their financial advisors a solid basis

for making an informedThings got considerably more complicated in 2001

because of decision.the California Power Crisis in conjunction with the

deregulation Tiered Rate Policy Discussion: Progressive Tiered Rates

areprocess that affected rates starting in 1996. excellent motivators of

conservation and energy efficiency (and During the power crisis California’s

AB1X legislation froze conveniently, solar), but they may also be the

government andthe rates for residential users using at or below the average

utility officials ‘public relations friend’ as well. By creatingusage for their local

climate zone (which equals usage at or multiple tiers, policy makers can shift

some of the burden ofbelow the top of Tier 2), but at the same time, created

Tiers 3, 4 future rate increases to the larger (above average), moreand 5 at much

higher rates (17-26¢/kWh). The users using well wasteful users (residential

only) and thereby lighten the burdenabove average found their bills almost

doubled upon on the users who are at or below average consumption.

Thisimplementation of the change. It had the desired effect: high works well for

residential usage, because it is easy to quantifyusing residential consumers



quickly became motivated to the average consumption per typical household,

howeverreduce their usage by conservation, efficiency, and some turned

average consumption per business would be meaningless in thisto solar

systems, dramatically increasing the solar market. context, since most

communities want their local business to grow (efficiently) from year to year,

so penalizing ever growing Rate escalation in California got more complicated

thereafter usage would be counterproductive.as well. Because state law AB1X

prohibits changes to the ratesfor Tier 1 and Tier 2, all the increase must be

borne in Tiers 3, 4 High electric rates are among the most important factorsand

5. If revenue needs to increase by 10%, Tier 3, 4 & 5 rates determining who

will have the best economics with solar,must increase approximately 50%. That

happened on January however, high rates are only valuable if the customer can

also1st, 2006 to PG&E residential customers, as seen in Fig. 4. enjoy Net

Metering, a regulatory structure set up for solarEconomics of Solar Electric

Systems ! 2009, Andy Black. All rights reserved. July 2009 - 4 of 19

38. Time-Of-Use (TOU): Most residential electricity is billed to customers on a

flat (or time independent) rate schedule, where electricity costs the customer the

same at any time of the day. However, utilities often have increased demand for

electricity during certain times of the day and certain days or months of the

year. When this “Peak” demand occurs usually depends on local climate

factors. For example, Arizona and California have their peak times near 4-6pm

Monday thru Friday during the summer, because that’s the overlap of the

workday and home activity, which both use air conditioning, which is one of

the largest loads. At night and in the morning, because of the dry climate, it

cools off, so the load is less. Eastern U.S. utilities see their peak demand all day

long because the humidity keeps consumers using their air conditioning 24/7 in

the home, and during the workday at work, so a typical peak period is 9am-

9pm. To solve the increased demand regardless of when it occurs, utilities could

build more power plants, but those plants would only run during peak times,

which is only a relatively few hours of the year, and would therefore be an

expensive solution on a per kWh produced basis because of the capital costs.

Another solution is to encourage conservation during or load-shifting away

from those “Peak” time periods. To create this encouragement, some utilities

offer Time of Use Fig. 6. Net Metering allows the exchange of electricity

(TOU) or Time of Day (TOD) rates, where the cost of produced or purchased to

be valued at retail rates allowing electricity depends on the time of day and

sometimes on the the grid to act like a 100% efficient battery for the consumer

season of year. The TOU time periods and rates are usually to “store” her

excess production during the day or over a labeled something like “Peak”, “Part

-Peak” and “Off-Peak” and season until she needs it at night or during another

season. often have a “Summer” and a “Winter” season.electricity producers

(and sometimes certain other renewable The upper graphic in Fig. 7 shows the

TOU pricing periodsproducers depending on the state) in 42 of the 50 U.S.

states. for the PG&E E6 rate in California illustrating peak, part-peak, Under

Net Metering, full retail value is credited when excess and off-peak time

periods. Notice that there are also part-peakelectricity is produced and “sold”

back to the utility, offsetting rates on weekends. The lower graphic shows the

typicalthe customer’s electric bill (Fig. 6). There are a variety of Net

(approximate) time periods of many Eastern U.S. utilities, suchMetering forms,

the implementation of which vary by state and as in New Jersey, New York,

and Pennsylvania.utility. An older form is “Monthly Net Metering,” whereby a

High rates during peak periods encourage consumers to usesolar producer can

eliminate her monthly electric bill, and any less or to change behavior and

instead, consume the electricityexcess production would typically be paid to the

producer at the during off-peak periods. Easy ways to shift usage are

changingutility’s “avoided cost” or “fuel cost” per kWh (approximately what

time of day laundry is done or when the pool filter pumps1-3¢/kWh). The



problem is that solar production varies run at home. Small business sometimes

have choice oversubstantially by season, so it is hard to design a system that

whether to take service under a TOU rate schedule, and if so,balances a user’s

needs in each of the 12 months without under- they may be able to save money

by shifting how or when theyproducing in one season (usually winter) and over-

producing in do things, such as change to 2 or 3 shifts of work hours, orthe

other. Under-production results in large bills charged at high change when they

make ice or pump water or do other energyretail costs of electricity. Over-

production creates small credits intensive activities. Large businesses and many

agriculturalbased on the “avoided cost” value of the excess energy. (pumping

and refrigeration) operations have no choice and must The solution is the newer

“Annual Net Metering,” which take TOU service, so are always encouraged in a

financial way.allows summer excess production to offset winter shortfalls, TOU

rate differentials between Peak and Off-Peak can rangewith the goal of allowing

the customer (or her knowledgeable from just a cent or two, to up to 20¢/kWh

or more, dependingand experienced designer/installer) to right-size the system

to on the utility’s need to motivate change. In PG&E territory infully offset the

annual electric bill, but not over-size it. With California, a further twist is that

the tiered rate structure isannual Net Metering, the utility ends up looking like a

100% applied on top of the TOU rates (residential only), so off-peakefficient

battery that can store energy for up to a year at no loss Tier 1 rates are as low as

9-10¢/kWh depending on season, butor penalty. The other half of this

compromise is that any excess the summer peak Tier 5 rate can be over

61¢/kWh. That sounds thproduction credit after the 12 month is given to the

utility, expensive, and it is, and one might question the wisdom of

evendiscouraging over-sizing of systems and simplifying the utility’s

considering switching to a TOU rate schedule, but there is aaccounting and

saving them the processing costs of sending a convenient opportunity that solar

customers can apply in theircheck or carrying a credit. favor.Economics of

Solar Electric Systems ! 2009, Andy Black. All rights reserved. July 2009 - 5 of

19

39. Residential PG&E "E6" Time-of-Use Pricing Periods Sunday Monday

Tuesday Wednesday Thursday Friday Saturday Midnight - 6am Off-Peak Off-

Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak 6am - 10am Off-Peak Off

-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak 10am - 1pm Off-Peak

Part-Peak Part-Peak Part-Peak Part-Peak Part-Peak Off-Peak 1pm - 7pm Off-

Peak Peak Peak Peak Peak Peak Off-Peak 7pm - 9pm Part-Peak Part-Peak Part-

Peak Part-Peak Part-Peak Part-Peak Part-Peak 9pm - Midnight Off-Peak Off-

Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Eastern U.S. Typical

Residential Time-of-Use Pricing Periods Sunday Monday Tuesday Wednesday

Thursday Friday Saturday Midnight - 9am Off-Peak Off-Peak Off-Peak Off-

Peak Off-Peak Off-Peak Off-Peak 9am - Noon Off-Peak Peak Peak Peak Peak

Peak Off-Peak Noon - 9pm Off-Peak Peak Peak Peak Peak Peak Off-Peak 9pm

- Midnight Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak Off-Peak

Fig. 7. Time-of-Use rate structures showing typical peak, part-peak and off-

peak time periods for Western and Eastern U.S. utilities. Combining Net

Metering with TOU allows a solar customer between peak and off-peak, the

more motivated the user will beto take advantage of the benefits of Net

Metering on a TOU rate (solar or not) to conserve during peak pricing periods.

Effectiveschedule and, if timing and consumption patterns allow, “sell” TOU

rate implementations help flatten out the utility’s loadenergy to the utility

during peak periods at the high rate, then profile, requiring fewer “peaker”

power plants which operatebuy energy during off-peak hours. The customer

gets credited or at very high cost per kWh delivered (once capital

costs/debtcharged for the value of the electricity when it is bought or sold

service are included), because such plants run only a few hours(at its prevailing

retail rate at that time). The utility then looks per year. In the right locations,



solar can provide some of thislike a >100% efficient battery because in many

cases, most “peaker” benefit. Solar advocates can use this to encouragesolar

electricity is produced during peak hours, and most is their Public Utility

Commissions and Legislatures to adopt pro-consumed in a residence during part

-peak and off-peak hours. TOU policies.The customer gets more value for the

same kWh produced, and Rate Structure vs. (Cash) Incentives Policy

Discussion:therefore needs a smaller solar system to offset her electric bill.

Economically viable solar systems are incentivized thru bothThe greater the

differential in peak to off-peak rates, and the cash or cash equivalent (tax

saving) payments and electric rate-better the solar production matches peak

hours, and the better based (or regulatory) savings. Solar-friendly rate structures

arethe homes consumption matches off-peak hours, the greater the incentives

because they provide a higher value benefit to solarbenefit of opting for the

TOU rate schedule upon adding the customers compared to the “commodity”

value of the electricitysolar system. producers could otherwise sell into the

power pool at This approach often (but not always) works well in utility

commodity rates (as QFs or Qualifying Facilities). Using cashareas that have

large daytime summer peak loads (often due to incentives to encourage solar is

easy to understand, but it isair conditioning load), such as in the Eastern,

Southern, and also highly visible, and there are several drawbacks

comparedSouthwestern U.S., because this usually matches solar with solar-

friendly rate structure incentives. Cash and cashproduction well. However,

some northern utilities are winter equivalent incentives can and do come and go

depending on thenight peaking because their peak load is caused by electric

political winds. Even long-term incentive programs, such asheating loads of

homes. In these cases, solar is a poor match. German EEG law or the California

Solar Initiative could be overturned or modified with a change in government or

its TOU Net Metering works best if the customer can mount her attitude. Spain

is learning this the hard way after the summersolar array in a way that

maximizes production during the peak and fall of 2008. The U.S. solar market

became painfully awareperiod, for example facing southwest or south at an

angle near of its dependence on the extension of the 30% Federal25 degrees up

from horizontal (equal to a 6:12 roof). Slopes Investment Tax Credit which was

due to expire at the end offrom 5 to 40 degrees and southeast and west arrays

generally 2008 but was passed at the last moment as part of thealso work quite

well. Note: it is usually not economically Emergency Economic Stabilization

Act of 2008. Regulatoryfeasible to tilt a solar array away from parallel with the

roof’s incentives are much more difficult to achieve, however, oncesurface to

optimize performance, because the gain in production won, they are also much

more difficult to lose. Any state with(bill savings) is often not worth the

additional mounting Net Metering, TOU, or Tiered rates is likely to have them

for ahardware and labor cost or the aesthetic penalty. long time and it will be a

huge battle to take them away. TOU Policy Discussion: Time-of-Use rates are a

powerfultool to motivate customers to voluntarily use less power

duringpredictable times of shortage. The greater the differentialEconomics of

Solar Electric Systems ! 2009, Andy Black. All rights reserved. July 2009 - 6 of

19

40. INCENTIVES: ! Equipment delivered and construction / installation There

are several ways the government (in its various forms) completed. Minor tasks

like painting need not be finishedcan provide incentives for solar. Already

discussed were the ! Taxpayer has taken legal title and controlregulatory forms

of incentive via favorable rate structures. Here, ! Pre-operational tests

demonstrate the equipment functionswe discuss the various “Cash” or “Cash

Equivalent” incentives, as intendedwhich include: ! Taxpayer has licenses,

permits, and PTO (permission to ! Tax Credits and the U.S. Treasury Grant

operate) ! Accelerated Depreciation Both the residential (Sec. 25D) and

commercial (Sec. 48) ITC ! Sec. 179 Tax Deduction interaction with the ITC &



Grant are one-time credits received when filing taxes for the year the ! Cash

Rebates and Buy-downs system was placed in service. If not completely useable

in the ! Performance Based Incentives (PBIs) system installation tax year, in

theory, the residential ITC can be ! Feed-In Tariffs carried forward indefinitely

but may run into the practical ! Tax abatements (waivers of sales and/or

property taxes) difficulty that the 5695 tax form may no longer exist after the !

SRECs (Green Tags) mandated by state law 2016 tax year unless the IRS makes

it available. SEIA is The Database for State Incentives for Renewable Energy

(The working to address this with the IRS. The ITC can be carriedDSIRE

database, http://www.dsireusa.org/solar/) is a database forward only by

necessity, and must be claimed as soon asof all state and federal incentive

programs around the country possible (i.e. can’t be carried forward simply for

convenience).for all types of renewable energy and also energy efficiency, The

business credit can be carried forward 20 years and may beand provides specific

details and links state by state and at the able to be carried back for certain

businesses under the Netfederal level. Operating Loss rules. The Solar Energy

Industries Association (SEIA) has put As part of the American Recovery and

Reinvestment Act oftogether an excellent and well researched “Guide to

Federal Tax 2009 (ARRA), in order to stimulate the economy, and inIncentives

for Solar Energy”, available free to members as a particular, the solar industry,

commercial solar systems (Sec. 48membership benefit. Learn more at:

http://www.seia.org/. ITC only) are able to convert the ITC that would normally

be received at the end of the tax year, and only if there was tax Tax Benefits

such as Tax Credits and Depreciation may be appetite, into a U.S. Treasury

Grant that can be received asavailable to certain taxpayers who install solar

energy early as 60 days after project completion or applicationequipment. The

information in this article regarding taxes, tax (whichever is later). Only

projects placed in service in 2009 orcredits and depreciation is meant to make

the reader aware of 2010, or projects started in 2009 or 2010 and placed in

servicethese benefits, risks and potential expenses, and help avoid before the

end of 2016 are eligible for Grant treatment. Thisoverblown claims by

aggressive salespeople. It is not tax solves the lost “time value of money” due to

lengthy carry-advice, and the author is not a qualified tax professional. forwards

for taxpayers with limited ability to use the ITC.Please seek professional advice

from a qualified tax advisorto check the applicability and eligibility of

incentives for a Most of the rules and eligibility for the Grant are the same

asparticular situation. for the ITC, except as noted above. More information is

available at: http://www.treasury.gov/recovery/ and Tax Credits come in several

forms: Federal, State and Local.

http://www.treasury.gov/recovery/1603.shtml.Thru the end of 2008, the Federal

Investment Tax Credit(ITC) for Residential (individual tax filers) was 30% of

system Although the ITC is received effectively “up-front” when thecost basis,

capped at $2,000 for systems installed before the end system is installed (or at

the end of that tax year), it is actuallyof 2008. From 2009 thru 2016 it is a full

30% (without cap). earned over 5 years in equal 20% increments. If the

propertyThe residential ITC can be found in Sec. 25D of the Internal becomes

ineligible for the ITC (is disposed of or sold by theRevenue Code (IRC) and can

be claimed using IRS form 5695. taxpayer, taken out of service, or taken

outside of the U.S.), IRC Sec. 50(a)(1) stipulates that the taxpayer must repay

the The residential ITC will expire at the end of 2016 if not unearned portion

via the recapture mechanism. For example, ifextended. Federal taxability of

state, local, or utility rebates the taxpayer sells the system after 2.8 years of

ownership, sheaffect the ITC system cost basis significantly, so please see the

has only earned 2 of 5 years (40%) of the ITC, and must repay“No Double

Benefit” section of this article (below) that 60%.discusses Sec. 136(b) of the

IRC. The U.S. Treasury Grant has the same recapture mechanism, The Federal

Investment Tax Credit (ITC) for Business but is slightly more relaxed. If the

property is sold to anotherowned systems (IRS Schedule C business tax filers)



is 30% of eligible party, the original party receiving the grant is notnet system

cost with no cap for systems that are “placed in subject to recapture as long as

the receiving party maintains theservice” by the end of 2016 (IRC Sec. 48).

After 2016, if not property’s Grant eligibility for the remainder of the 5 years.

Ifextended, the tax credit will revert to the previous permanent they don’t, the

original party will suffer the recapture event.level of 10%. The IRS current

federal form is 3468 available athttp://www.irs.gov/formspubs/. In 2008, home-

based businesses (if >20% business allocation of the home) typically qualified

for the ITC as well. Because the “Placed in service” as defined by the SEIA

“Guide to Federal credit applies on both individual (residential) and business

taxTax Incentives for Solar Energy” occurs when all of the returns, but was

capped on residential, it needed to be properlyfollowing have

occurred:Economics of Solar Electric Systems ! 2009, Andy Black. All rights


41. apportioned on each part of the tax return to ensure the right $85K ($100K

minus one half of the $30K ITC). If thecredit amount is claimed. Home-based

businesses are typically customer’s federal tax rate were 28%, the federal

depreciationapportioned based on percentage of square footage attributed

benefit would be approximately $24K ($85K times 28%).exclusively to the

business. To figure the credit, one typically The state depreciation benefit is the

state tax rate times theapplies the percentages to the two separate calculations

then state depreciation basis, which may be different from the federalsums the

results. From 2009 to 2016 with the uncapped ITC, depreciation basis, and may

be affected by any state rebatesthis distinction is probably no longer relevant.

received. Unfortunately, for the same reasons that state income Beginning in

2009 taxpayers (individuals and businesses) will tax credits aren’t really worth

their face value, similarly, thebe able to claim the federal ITC even if they are

subject to the state depreciation net benefit must factor in the effective

federalAlternative Minimum Tax (AMT). Systems placed in service taxation

effect of reducing state taxes.before the end of 2008 can suffer AMT limitation

because the Federal depreciation for solar uses the MACRS 5-yearsolar ITC

(and Accelerated Depreciation discussed in the next Accelerated Depreciation

schedule and is calculated on IRSsection) are ‘Tax Preference Items’ that can

cause AMT and form 4562. MACRS stands for Modified Accelerated Costlimit

the enjoyment of the ITC benefit, even if the taxpayer Recovery System, and is

a way of allowing businesses towasn’t subject to AMT before getting the solar

system. Even depreciate some property more quickly than the normalwith the

ITC “AMT relief” starting in 2009, the Accelerated schedule, to receive the

write-off sooner (accelerate the benefit).Depreciation may still cause an AMT

situation for businesses. Though it is called “5 year MACRS” it generally uses

the “half- There is an open question in the solar industry about the year

convention” assuming the property is placed in service inapplication of the ITC

to “property used for lodging”. Sec. the middle of the tax year, which allows a

lesser share of the50(b)(2) indicates that the Federal ITC is not available for

write-off in the first year and extends the write-off into the 6th“property used

for lodging”. This sentence has created a fair bit year. Different numbers may

apply if the property was placed inof concern for the solar industry, because it

appears to exclude service late in the tax year. Home-based business systems

mayhotels/motels and rental property. However, Sec. 50(b)(2)(D) also qualify

for proportional depreciation (if the business use ofseems to exempt “Any

energy property” (which solar is as the property is greater than 50%).defined in

Sec. 48(a)(3)(A)(i) “equipment which uses solar In 2008 and 2009 only, as part

of the Economic Stimulus Actenergy to generate electricity”) from this

exclusion. The author of 2008 and the ARRA of 2009, businesses can also

receivehas not received a definitive answer from a qualified tax ‘50% Bonus

Depreciation’ meaning that they can furtherprofessional or the IRS as to

whether hotels and rentals are accelerate half the future depreciation amounts



into the firsteligible. Thanks to Chad Blanchard and Michael Masek for year

(2008 or 2009) the project was placed in service (it doeshelping research this.

not mean they are getting 50% extra depreciation, just getting Please seek

qualified tax advice before accepting anyone’s half of it even sooner). The 5-

Year MACRS schedules (half-claims of applicability of these or other tax

benefits to a year convention) are:particular situation. State Income Tax Credits

are available in several states, Year 1st 2nd 3rd 4th 5th 6thsuch as Oregon,

Hawaii, New Mexico, and New York, and can Not 2008 20% 32% 19.2%

11.52% 11.52% 5.76%be quite generous. However, potential recipients should

be or 2009aware that if they itemize their federal tax deductions, a state tax

2008 and 60% 16% 9.6% 5.76% 5.76% 2.88%credit isn’t worth its full face

value. When itemizing, state taxes 2009 onlyare usually deductible off federal

taxable income. Reducing Fig. 8: MACRS Federal Depreciation Schedules for

2008 andstate taxes by the state tax credit means that federal taxable net 2009

and years other than 2008 or 2009.income will go up. In effect, federal income

tax will be paid onthe value of the state tax credit. For most people, a state tax

State depreciation sometimes depends on the type of business.credit is worth

about 65-85% of its face value. In California, it is split between “Corporate”

and “Non- Corporate” businesses. Non-Corporate businesses use the

Depreciation and Accelerated Depreciation may be a regular federal MACRS 5-

year accelerated depreciationpossibility for business owned systems.

Depreciation is a (without the 50% bonus). California corporate businesses

usemethod of ‘writing-off’ expenses for long lasting (durable) 12-year straight-

line depreciation for state depreciation. Pleasegoods such as cars, computers,

etc. The ‘write-off’ is generally check the DSIRE database for the applicable

depreciation forrequired to be spread over several years, depending on the type

other states.of property. Since depreciation is a write-off, it reduces

taxableincome, and thus reduces tax liability. The net federal benefit of The

Sec. 179 Deduction has a negative interaction with thedepreciation is the federal

tax rate times the federal depreciation federal ITC and U.S. Treasury Grant. If

the taxpayer uses eitherbasis. The federal depreciation basis amount is the

federal ITC the ITC or the Grant for part or all of the property, they may

notbasis, minus one-half the federal ITC amount (85% of the ITC also claim the

Sec. 179 deduction for that part. The ITC orbasis in the case of the current 30%

ITC). For example, a Grant benefit, combined with MACRS depreciation are

muchsystem costing $100K (ignoring any rebate for this example) more

valuable than the Sec. 179 Deduction. In previouswould have a tax credit basis

was $100K, and thus receive a situations (typically Commercial Economics

classes), the author$30K federal ITC (30%). Its federal depreciation basis

would beEconomics of Solar Electric Systems ! 2009, Andy Black. All rights


42. incorrectly suggested that Sec. 179 may also be available and at either the

federal or state level, or both. Contrary to what wasmight be able to be used

with caution in certain situations. written in previous versions of this article,

there appear to be significant grounds for individual (residential) taxpayers in

Rebates, Buy-downs, and Grants provide direct cash some states to claim the

rebate payment is non-taxable. Sec.incentives to purchasers or their installers.

These types of 136(a) of the IRC specifies that ‘direct or indirect

utilityincentives are usually proportional to system size based on the payments

(i.e. from ratepayer funds) for energy conservationrated wattage of the system,

and are often limited to a measures may be excluded from taxable income,

where energypercentage of total system cost and/or a fixed total dollar

conservation measures reduce the consumption of energy in aamount. The

rating systems vary by program, using the CEC, dwelling.’ PV systems are

energy conservation measuresPTC, or STC rating systems. In cases where a

rebate is received, (source: Wiser & Bolinger, Lawrence Berkeley Lab -

LBL).the customer can usually also enjoy savings via Net Metering on



Therefore it seems clear that utility direct paid rebates for PV toher electric bill.

homeowners are non-taxable, such as in most of California, Rebate programs

are usually run and/or overseen by either a Colorado, New Jersey, and some

other states.state agency or a utility, often in compliance with a state law or

Other states, such as Florida, or cities such as San Francisco,voter initiative. pay

rebates from general funds collected from taxpayers (not Rebate payments are

paid and received up front, and are not ratepayers). In these cases, Sec. 136

would probably not apply,based on actual system performance. At best, they

can be and the rebate payments would probably be taxable.adjusted to account

for expected performance. Expected Less clear are rebates that are funded from

ratepayer sources,performance rebates may be adjusted by the expected relative

but paid by non-utility administrators, such as the Californiasystem

performance compared to an optimal or ideal system, Energy Commission or

the Energy Trust of Oregon. In a privatetaking into account reductions in

performance due to shading, letter ruling an IRS administrative law judge found

that thetilt, orientation, and/or geographic location (to account for Energy Trust

of Oregon rebate was indeed tax exempt, but thevariations in sunlight levels due

to location). reader is cautioned to note that private letter rulings are not

Performance Based Incentives (or PBIs) provide incentive precedents and do

not bind a different IRS administrative lawpayments based on actual delivered

system performance, and so judge to the same finding, nor do they apply to any

otherautomatically account for shading, tilt, orientation, and taxpayer than the

one named in the ruling. It is not expected thatgeographic location, as well as

the other factors mentioned in the IRS will make a public ruling, so it’s likely to

remain a greyFig. 2. The PBI amount is usually a set value in cents per kWh

area for now.(commonly 10-40¢/kWh) paid for each kWh produced, Some state

agencies, such as the California Energymeasured, and reported by the system

for a set number of years Commission have issued 1099 tax forms to rebate

recipients.(commonly 1, 3, 5, 10, 15, or 20 years) from the date the system

Simply receiving a 1099 tax form may not require payment ofis first placed in

service. Usually PBIs are received in addition tax on the amount. Such a 1099

may be advisory and a way forto the customer savings via Net Metering of her

electric bill. the issuer to cover itself and ensure compliance with IRS rules,

Since PBI payments are paid over time the customer must even if Sec. 136

applies. On the other hand, not receiving await for payment, and bear the risk

that something will interfere 1099 doesn’t excuse the taxpayer from tax liability

if due (i.e. ifwith system performance. Because of the time value of money, Sec.

136 doesn’t apply). Please check with a qualified taxand this additional risk, the

total of the PBI payments must be professional when making these important

decisions.more than a rebate would have been in order to provide an equal It

was mistakenly suggested in previous writings of this articletime- and risk-

adjusted incentive. This increases the cash cost of that if the installer accepted

the rebate on the customer’s behalf,the incentive program to the incentive

provider, but increases it might eliminate the customer’s rebate tax liability. The

authorcustomer attention to her system (in order to receive payment), has been

informed that this is not true, and that tax is due whenso per kWh delivered,

PBIs may be more cost effective to the value is received (including non-

monetary value in the form ofincentive providing agency and funding parties

than rebate-type part of a PV system), unless specifically exempted (as may

beincentives. the case if Sec. 136 applies) (source: Wiser, LBL). There is a

major marketing benefit to PBI programs as well. Despite this, there are other

reasons why it is still better forUnlike rebates, which are received one-time up-

front when the the customer to have the installer accept the rebate as part

ofcustomer is already excited about her system, PBIs are received payment for

the project: 1. Less cash is required (by theat regular intervals (usually every 1,

3, or 6 months) providing customer) during the project, and 2. The customer has

greaterthe customer a reminder of her solar system and a reason to leverage

over the installer should the installer do a substandardsmile (or call for warranty



service). A smart installer or job (if either the customer or inspector doesn’t sign

off on thesalesperson will time her follow-up communications to the job, the

rebate may be withheld). This is less attractive for thecustomer to ensure the

customer got her PBI check, and also to installer because it hurts her cash flow,

but might provide her amake sure she is remembered for referrals. This residual

benefit sales advantage over a competitor. It doesn’t impact thecan last for

years, generating many new sales. installer’s tax return because the rebate is

part of the job’s Taxability of Rebates and PBIs: Depending on the structure

revenue whether received directly or thru the customer, and allof the program,

and the type of taxpayer (residential or job revenue minus expenses is already

subject to taxation.commercial), rebates, PBIs, and grants may be taxable

incomeEconomics of Solar Electric Systems ! 2009, Andy Black. All rights


43. A sales and cash flow optimization strategy is to have the were lower than

30%, then she would prefer the rebate becustomer pay full price and receive the

incentive directly unless taxable (if she had a choice or if she and her tax

advisor feelshe requests otherwise, optimizing installer cash flow on as there is

enough uncertainty in the applicability of Sec. 136)many jobs as possible, while

providing the sales flexibility to because she would then pay less in rebate tax

than she wouldmatch the competition upon customer request. gain in getting the

full ITC. On the other hand, a taxpayer in a tax bracket over 30% would prefer

the rebate to be non-taxable. Non-profits, governments and schools don’t pay

income taxes, Each 1% of difference between the customer’s tax bracket andso

incentives received are generally not taxable. 30% makes 1% difference in the

net value of the rebate to them. Business/commercial solar system rebates are

likely subject to For most taxpayers, this isn’t going to be very much in

absolutetaxation, as Sec. 136 applies only to systems installed on the dollars

either way compared to the total cost of a PV system, asdwellings of individual

taxpayers. There is no known exemption is evidenced by the examples.for

business taxpayers, but it turns out that, in general, a For business taxpayers,

Sec. 136 does not apply, and there isbusiness wouldn’t want to use it – more on

this later. no other known section of the IRC that might exempt the rebate No

Double Benefit: Sec. 136(b) states that if the rebate is tax from federal taxation.

This turns out to be convenient, becauseexempt, then the taxpayer will need to

reduce the tax credit while paying tax on the rebate is a cost, not only does it

allow abasis for any related ITC, and will then get less tax credit. On larger ITC

to be enjoyed, but since the depreciation basis isthe other hand, if she does pay

tax on the rebate, then she does proportional to the ITC basis, it allows more

depreciation to benot deduct the rebate amount when she calculates the tax

credit enjoyed as well. The larger amounts of both ITC andbasis (and therefore

get relatively more tax credit benefit). depreciation far more than compensate

for the tax on the rebate. See Fig. 10 for a comparison of the two results. For

residential taxpayers, the above interaction and theimportance that Sec. 136

apply to any rebate she has received Even when the rebate is taxed, it is usually

only taxed by thewas much more significant before 2009, because the Federal

federal government. State governments that have enactedITC was capped at

$2,000. Now that the Federal ITC is an rebates in support of solar generally

don’t tax their ownuncapped full 30%, the impact is usually far less, and

depends incentives, however, tax laws vary by state, so check with youron the

marginal tax rate of the customer. If the taxpayer’s state taxing

authority.bracket is 30%, then it makes no difference to the customer PBI

Taxation: Since PBIs are paid over time and the totalwhether the rebate is

federally taxable or not, since she will gain value that will be received is

unknowable at the time the federalthe same amount either in no tax on the

rebate or in higher ITC ITC needs to be calculated, the interaction between

them andvalue. See the 4 cases illustrated in Fig. 9. If her tax bracket the ITC is

less straightforward. For businesses, PBIs are almost certainly taxable. Case 1:



Non-Taxable Rebate For residential customers however, one might be able to

argue $100K System Cost that Sec. 136 should also make PBIs paid from

ratepayer funds -$30K Rebate for PV systems non-taxable, but this would

create the difficulty -$21K Tax Credit Value (30% of $70K after rebate cost) of

calculating how much to reduce the ITC basis by, since it =$49K Net Cost

would require the impossible task of calculating the present value of the

unknowable stream of PBI payments that will be Case 2: Taxable Rebate at

30% Federal Tax Bracket received as and if the PV system produces electricity.

Even if $100K System Cost -$30K Rebate +9K Rebate Tax ($30K * 30% Fed

Tax) Case 1: Non-Taxed Rebate -$30K Tax Credit Value (30% of $100K)

$150K System Cost =$49K Net Cost -$50K Rebate -$30K Tax Credit Value

(30% of $100K) Case 3: Taxable Rebate at 20% Federal Tax Bracket -$35K

Depreciation Value (85K * 41%) $100K System Cost =$35K Net Cost -$30K

Rebate +$6K Rebate Tax ($30K * 20% Fed Tax) Case 2: Taxed Rebate -$30K

Tax Credit Value (30% of $100K) $150K System Cost =$46K Net Cost -$50K

Rebate +17.5K Rebate Tax ($50K * 35% Fed Tax) Case 4: Taxable Rebate at

40% Federal Tax Bracket -$45K Tax Credit Value (30% of $150K) $100K

System Cost -$52K Depreciation Value (127.5K * 41%) -$30K Rebate

=$20.5K Net Cost +$12K Rebate Tax ($30K * 40% Fed Tax) -$30K Tax Credit

Value (30% of $100K) 41% = combined net federal & state tax rate (35%

Federal =$52K Net Cost & 8.84% CA State) Fig. 9. Residential examples of

rebate/ITC interactions. Fig. 10. Commercial examples of rebate/ITC

interactions.Economics of Solar Electric Systems ! 2009, Andy Black. All

rights reserved. July 2009 - 10 of 19

44. you could agree with the IRS on a discount rate for PBI industry (which was

over 40% of the world solar market inpayments to be received in the future, no

one can know how 2008) is effectively completely shut down as of 2009.many

kWh will actually be produced until it has happened, ! Solar benefits some

customers much more than otherswhich is usually well after the ITC needs to be

calculated and (customers high in the rate tiers, those with avoidablesubmitted

with a tax return. Guidance from Mark Bolinger at demand charges, and/or

those who can benefit from Time-of-LBL (not a qualified tax professional, but

someone who has Use rates), each of which is a hidden artifact of Net

Metering.studied this in greater depth than the author, see “Further Losing the

Net Metering benefit levels the playing field, whichReading” at end for more

info) is to assume PBIs are taxable for is democratic, but removes a lot of

existing salesresidential customers as well as businesses, to be on the safe

opportunities for those who know where to look, and mayside. completely

eliminate the market if the FIT is set too low. Of course, the ideal and much

more valuable result would be ! FITs have no ‘End Game’ unless the customer

can switchfor the IRS to accept an argument that the PBIs are non-taxable back

to Net Metering (without other incentive) at her choice.to homeowners due to

Sec. 136, but also not challenge the This means that if only FITs are available

(without Nethigher claimed amount of the ITC since there was no rebate

Metering), the FIT payment can never be reduced to 0¢/kWhreceived up front

to reduce it. The author is not advocating this because the customer will always

need some payment to makepotentially risky strategy, and a competent

qualified tax it worth going solar (since she won’t be saving on her

electricprofessional should be consulted before considering this bill). This

makes the solar industry perpetually dependent onmaneuver. However, it is

fairly certain that even if the IRS the existence of FITs and their future renewal.

If the customerwould to approve such an approach, they aren’t likely to chase

can always choose between a FIT or Net Metering, then thisthe taxpayer around

attempting to provide a refund unless she problem goes away, because once the

Net Metering benefitfiles her taxes in this way. becomes greater than the FIT

payment, customers will chose Feed-In Tariffs (FITs) are very similar to PBIs

in that they Net Metering.provide a payment to the customer for each kWh



delivered to Tax Abatements are offered by some taxing jurisdictions inthe grid.

The difference being that usually a Feed-In Tariff is the the form of Sales Tax

or Property Tax exemptions. Many statesonly benefit received from owning the

solar system – there is no exempt solar systems from being included in the

assessed valueNet Metering benefit, so the customer continues to pay her of a

home, so installing a solar system doesn’t cause theregular electric bill. In order

to make Feed-In Tariffs attractive, homeowner’s property taxes to increase. For

example, solarthe payment per kWh needs to be higher than a comparable PBI

systems installed in California between January 1, 1999 andbecause of the lost

Net Metering. Common feed-in tariff terms January 1, 2017, are exempt from

triggering Property Taxare 10, 15, and 20 years. reassessments (California

Taxation Code, Sec. 73). Sales Tax Gainesville, Florida and Ontario, Canada

have implemented exemptions help reduce the up-front cost of the solar

system.feed-in tariffs. Gainesville’s tariff of 32¢/kWh for 20 years was Solar

Renewable Energy Credits/Certificates (often knownvery popular and used up

the first allocation of money quickly. as SRECs, S-RECs, sRECs, RECs, or

Green Tags) are a newOntario’s first attempt at CAD 42¢/kWh for 20 years was

not and growing way to value the greenness of the energy from ahigh enough to

be strongly popular, so in May 2009 revised solar energy system. SRECs

represent the bundle of legal rightsincentives of CAD 44-80¢/kWh depending

on system size and to the green part of each kWh produced by a solar system.

Thismounting type were proposed (not yet finalized). green part can be sold for

a value, which generates additional Feed-In Tariff Policy Discussion: Feed-In

Tariffs (FITs) are revenue for the seller.very simple incentives for solar, and are

very popular in SREC value is created in two common ways. The first is

theGermany and Spain because they have very quickly created “voluntary”

market, where individuals buy SRECs as a way oflarge markets in each of those

countries. There are a number of “greening” their world by paying extra to

someone else torisks associated with FITs however: install some new solar

capacity, often because they can’t or! The incentive is 100% visible, and makes

solar look chose not to make the large, long-term investment themselves.

expensive, making it an easy target for solar detractors, This is common for

apartment dwellers and business renting the whereas Net Metering ascribes

value to the publicly received space they occupy. Business such as Kinko’s,

Wal-Mart, Whole benefit of the electricity generated and delivered when the

Foods, and White Wave (the makers of Silk soy milk) have utility needs it. The

cost to the ratepayer is equal, so it’s a bought SRECs to offset some of the

emissions from their matter of perceptions and visibility, however Net Metering

operations. better reflects the public benefits. Voluntary SREC purchases do

actually “green” the grid if! The entire incentive for solar becomes vulnerable to

political they result in net new solar (or wind or other renewable changes – FITs

can come and go with a change of elected or generation depending on the type

of REC or Green Tag appointed officials, creating potentially large changes in

purchased) that wouldn’t have been installed if the SRECs fortunes of the solar

industry. Germany and Spain both found weren’t purchased for the agreed

price. For example, a solar their incentives aggressively cut back in the summer

of 2008 ‘farmer’ wants to build a solar farm on some open land or on when they

started to be viewed as too expensive. Spain’s solar the roof she has access too.

If the value of the electricity she will be getting from the utility (via sales or Net

Metering),Economics of Solar Electric Systems ! 2009, Andy Black. All rights


45. combined with the incentives discussed (excluding SRECs) assurance of

long-term agreements, the customers (homes andabove isn’t enough to provide

the rate of return the ‘solar businesses) installing solar don’t need to be paid as

much forfarmer’ is looking for, the investment won’t happen. If the their

SRECs because they know the value is locked, which also‘farmer’ can sell the

SRECs to a buyer for enough extra value saves the utilities in the short term,



and probably also in the(1-5¢/kWh is common in ‘voluntary’ locations), the

total long term, because the risk-premium is eliminated.investment may become

attractive, and the ‘farmer’ will invest Maryland has a 2009 ACP of 40¢/kWh

which will declinethe money and effort to make it happen, and Voila! – net new

over time (see the DSIRE Database for current details).generation happened in

part because of the SREC value. Pennsylvania and other states will likely also

have similar The second common (and very important) way SREC value is

arrangements. There is no guarantee that actual value will becreated is thru the

regulatory “compliance” market where state anywhere near the ACP unless the

ultimate buyer (the utility)law or voter initiative has required that a certain

percentage of agrees to it.electricity in a given geographic or territorial area

must come Colorado has an RPS as well, but rather than paying for eachfrom

solar sources. Often, the percentage is set to rise over time. SREC as it is

produced, the two main utilities, Xcel and BlackFourteen states have

Renewable Portfolio Standards (RPS) with Hills Energy (formerly Aquila) buy

20 years worth of the SRECsuch a requirement. In these states, the utilities must

either build output from smaller systems for $1.50/W STC of installedand own

solar installations (if allowed), or buy SRECs from capacity (looking more like

a rebate) in addition to the regularproducer/owners. Usually, there is an

Alternate Compliance $2/W rebate. This equates to an approximate SREC value

of 5-Payment (ACP) that sets a maximum on the value of the SREC 7¢/kWh

depending on sunlight levels and system performance.value, whereby, if the

utility isn’t able to buy SRECs for lessthan the ACP, they can pay the ACP as a

penalty for failure to California and several other states have Renewable

Portfoliodo so. Standards too, but these RPSs don’t have requirements that any

of the energy be sourced from solar, so it is likely that most will New Jersey is

the best known of the states where its solar come from wind and other sources,

which are currently lessprogram is supported mostly by SREC value. Currently,

the expensive. That means that the SREC market in these states isACP in New

Jersey is the equivalent of 71.1¢/kWh. The market voluntary (including some

speculators buying or trading SRECsin which the NJ utilities can buy SRECs is

set up as a bid- on the bet that they will become more valuable if/as theauction

market, so supply and demand rule the price of SRECs government and

industry take on global warming). Currentat any given moment, with the

artificial cap of the ACP. As of voluntary SREC values are estimated to be in

the range of 1-June 2009, the auction market in NJ had set the price of SRECs

5¢/kWh, which is not insignificant compared to Net Meteredat 60-65¢/kWh.

This value may continue for the short-, mid- or electricity value that is

sometimes as low as 6-20¢/kWh.long-term, but there is no assurance of it. The

price could alsocollapse if an oversupply of SRECs becomes available, The

only way an SREC has any real value though, is to ensuredepending on the rate

of installation of solar systems compared that the bundle of legal rights to the

greenness it represents hasto the increasing requirements of the NJ RPS. only

been sold once to its ultimate consumer for “retirement”, the same way as a

publicly traded company can only sell a fixed SREC Policy Discussion: The

New Jersey style incentive number of shares of its stock. Within a state RPS

complianceusing SRECs is one of the author’s favorites, because it allows

market, this is usually done by an administrator who tracks allmarket

mechanisms to automatically readjust the incentive the production, sales, and

retirements. In voluntary markets,(SREC) level to changes in market conditions.

For example, the SRECs should be certified by a certifier such as Green-e

(auncapping of the federal ITC provided a lot more federal service of the Center

for Resource Solutions) http://www.green-incentive for solar, and so would

require less state support and e.org/, which is the nations leading independent

consumerwould allow the SREC level to decline, all things being equal.

protection program for the sale of renewable energy andSimilarly, the recent

rapid decline in solar module prices has greenhouse gas reductions in the retail

market. Only then canlowered end-customer costs, again requiring less support



to be the consumer be sure she is buying something of value.required in the

form of SRECs. The U.S. economy of 2009 is insuch bad shape that the above

two have not actually manifested One should take care to consider whether she

really wants toin substantially increased solar purchasing and supply of sell the

SRECs her system generates. By selling them, she losesSRECs yet, but the Rate

of Return on a solar investment in NJ the right to claim she is using any of the

clean green energyhas been increasing due to the two events. Eventually, the

generated by the system. That right would belong to the newreturn will get good

enough, and the economy will get stable SREC owner. The system owner could

claim she is a host forenough, that individuals will start to buy systems and put

new the generation, but not a user. The distinction is important inSRECs on the

market, creating more supply to satisfy an order to prevent double counting of

the SRECs, which isinelastic demand, causing SREC values to come down at

least important to maintaining their value.somewhat. The missing element in the

New Jersey program has beenlong-term contracts whereby solar customers can

get anassurance of future SREC value. Without such an agreement, apotentially

oversupplied SREC auction market could cause thetraded price to plummet, so

customers installing systems needto insist on a risk-premium. This is starting to

shift. With theEconomics of Solar Electric Systems ! 2009, Andy Black. All

rights reserved. July 2009 - 12 of 19

46. HOW IS THE SOLAR PAYOFF PROVEN? after-tax savings of $100. The

example would then be Independent tests of the financial viability of solar

energy calculated as follows:include:! Rate of Return for comparison to other

interest rate based AfterTax $100 $100 $100 investments PreTax = = = = =

$100 * 2 = $200 1" TaxRate 1" 50% 1" .50 .50! Payback in a reasonable time!

Total Lifecycle Payback! Net increase in property value compared to solar

system cost Meaning that $100 after-tax is equivalent to $200 pre-tax at a!

Positive cash flow when financing the project ! 50% tax rate. To put it in

context of a solar system: if a customer were choosing between investing $15K

in a solar All of the analyses and analysis methods presented here apply system

that would save them $100/month on her electric billonly to residential

scenarios. Different mechanisms, (tax-free), vs. $15K in a taxable investment,

the taxableassumptions, and accepted financial and accounting practices

investment would need to earn them $200/month so that afterapply to

commercial cases, which are not discussed here. For she paid taxes on the $200,

she would have $100 left over toexample, commercial analyses must be done

on an after-tax pay the electric bill, for the two choices to be consideredbasis,

which has important consequences relating to the loss of equivalent. In reality,

combined federal and state tax rates arethe electric bill tax deduction a business

otherwise would have currently lower than 50%, with an effective rate of 20-

40% forenjoyed, and commercial property resale valuation is done using most

taxpayers. At these rates, $100 after-tax savings would beCapitalization Rate,

rather than the method discussed here. equal to $125-$165 pre-tax

equivalent.Future versions of this article may include this material, socheck

back later please. Once the value of the savings, maintenance costs and other

amounts are properly adjusted to their pre-tax values, they canRATE OF

RETURN: be inserted into a 25-year financial timeline (the warranted life

Compound Annual Rate of Return on an investment is of most solar electric/PV

modules) representing the cash flowsanother term for effective interest rate or

yield, which is a way for each year, to calculate the Compound Annual Rate

ofof comparing one investment to another. For example, a savings Return. This

allows the accurate inclusion of all relevant costaccount might pay 0.5%-1%

interest, and the long-term (80 and benefit components.year) Dow Jones

Industrial Average of the stock market,assuming dividend reinvestment had

earned 8.5% per year The initial capital cost is the only amount that doesn’t get

(CAGR) to its height of 13,500 in 2008. At its level of 8,000 in adjusted. That

amount is the net system up-front cost (total outJune 2009, the long-term



CAGR of the Dow has been 7.5%. of pocket), and is unaffected by the taxation

or lack thereof of future savings in the utility bill. Consider it the same as The

author chose 10% as the test point for solar, because that principal that is

invested anywhere. The principal is not taxedcompares favorably to other long

term investment average upon its departure or return.returns from common,

readily accessible, higher yieldinginvestments such as stocks and bonds and

provides a slight Tax savings and consequences, inverter replacement,premium

to compensate for solar’s lack of familiarity to much maintenance, and other

significant financial events can beof the public. included at their appropriate

places on the timeline. Inflation, escalation, and module degradation are also

easily included. For To properly value the savings from a solar system, it should

each year, the values can be summed, creating a 25-yearbe noted that solar

saves after-tax expense, while most other timeline of net expense or net savings

by year. The Internal Rateinvestments earn pre-tax income. In order to compare

solar to of Return (IRR) function in most spreadsheets can thenother

investments, all investments should be placed on the same calculate the IRR,

which is the same as the Compound Annualside of the tax equation. Since most

investments are taxable (i.e. (interest) Rate of Return (CARR) for the

investment.stocks, savings interest, etc.), and because most people thinkabout

their investments on the pre-tax side, it is most One should note that there is a

significant and very importantmeaningful to convert solar savings to its taxable

equivalent difference between Compound Annual Rate of Return andvalue (i.e.

PreTax value). average return or total return divided by the number of years an

investment is held. Average return does not factor in AfterTax dollars are worth

more to a taxpayer than the same compounding of interest, and may make an

investment looknumber of PreTax dollars, because PreTax dollars are subject to

more attractive than it really is. This article uses CARR for alltaxation.

Therefore, an AfterTax dollar saved (with solar) is items under consideration

(solar, stocks, savings, etc).worth more than $1 on a PreTax basis, by an

amountproportional to the taxation rate. To make this conversion from The

difference becomes more visible the longer the timeAfterTax value to PreTax

value, the following equation can be horizon. A brief example: Suppose an

investment doubles everyused (where TaxRate is the net total effective income

tax rate): year. Its CARR would be 100% because you get 100% increase each

year on your investment. No matter how long you hold it, AfterTax its CARR is

100% because you need to compound for the PreTax = number of years it’s

held. Alternatively, if you were to look at (1" TaxRate) the “average rate of

return”, over 1 year, it would still be 100%. However, if you held it 3 years,

your investment would be To illustrate this with an example, let’s assume a Tax

Rate of 800% of the original, or a total return of 800%50% (unrealistically high,

but easy to illustrate with) and an !Economics of Solar Electric Systems ! 2009,

Andy Black. All rights reserved. July 2009 - 13 of 19

47. (100%>200%>400%>800%). The average annual return wouldbe

800%/3years-100% or 167%, which looks great, but isn’trepresentative,

because it isn’t factoring in the compounding.This faulty method of analysis is

highlighted here becauseunfortunately there are several inaccurate (misleading)

solaranalyses and sales presentations being given to the public thatuse

averaging, rather than compounding. Total Lifecycle Savings is Please see Fig.

14 for example analyses from several states several timesand their Compound

Annual Rates of Return. These cases are Initial Cost paid Initial Cost back in 8

yearsfor full service residential system installations, using typicalinstalled

system costs on a simple composition shingle roof.Utility & state specific

assumptions for the examples are listedin Fig 13. General variables and

assumptions are: ! 28% federal tax bracket, corresponding state tax bracket Fig.

12. Simple Payback vs. Total Lifecycle Payback. Total ! Facing south, 22°

pitch, simple composition shingle roof by Lifecycle Savings over 25 years is

several times the initial cost full service provider, no complications represented



by the area up until year 8. Year 15 shows ! Slightly conservative real system

performance, no shade diminished savings due to inverter replacement. ! Final

Net Cost = total installed system costs - Rebate (if any) - 2009 Fed 30% ITC +

$500 Permit + $0 Utility Fee residential long-term investment; it does not

properly include ! System maintenance cost is 0.25% of gross system cost per

the tax savings and consequences, it does not account for year, adjusted for

inflation maintenance or inverter replacement expenses, and it makes it ! 5.0%

electric escalation (2.2% in CO) difficult to compare to other investments such

as stocks, savings, etc. because of inflation and other factors. ! Module

degradation 0.5% per year ! Module PTC/STC Ratio: 89.6%, Inverter

Efficiency: 95.0% TOTAL LIFECYCLE PAYBACK: ! Inverter replacement

costing $700/kW occurs in year 15 Comparing the savings of a solar electric

system over 25 years These analyses were performed using the OnGrid Tool, of

operation to its initial cost is a better way of looking at payback, because it

more fairly values the savings due to theavailable at

http://www.ongrid.net/payback. Other tools are compounding effect of electric

rate escalation. Because of thislisted in the Design and Analysis Tools section at

the end. effect, the savings in the later years is much greater than

thePAYBACK: savings in the first few years. Typical systems give back 1.5 to

3 What about calculating the payback? Payback is a simple but times their

initial cost. See Fig. 14 for several examples and Fig.crude tool for comparing

investments. Solar is an inflation- 12 for an illustration. One drawback to this

analysis is it fails toprotected investment but many others are not. This

improves the account for the time value of money. A dollar saved in thepayback

for solar (electric rates double every 15 years at 5% future isn’t worth as much

as a dollar saved today, so that a totalescalation). To properly calculate the solar

payback, it is lifecycle payback isn’t worth quite as much as it might

initiallynecessary to add in the rate escalation adjusted savings of each appear.

The better methods of comparing solar as an investmentsuccessive year, less the

reduction due to module degradation are the Compound Annual Rate of Return,

Increase in Propertyand maintenance costs, until payback has been achieved.

Value, and Cash Flow.Savings in the latter years are larger than savings in the

first INCREASE IN PROPERTY VALUE:years, so the payback is faster than

simply dividing the cost by Solar electric systems increase property value by

decreasingthe savings. See Fig. 12 for an illustration. utility operating costs.

According to the Appraisal Journal Payback analysis on an after-tax basis does

not reflect the true (Nevin, Rick et al, “Evidence of Rational Market Valuations

forvalue of the saved utility expense, because after-tax savings are Home

Energy Efficiency,” Oct 1998 (available at variousworth more on a pre-tax

basis. However, trying to do payback locations on-line, including atusing the

pre-tax value gives an unrealistically optimistic view

http://www.icfi.com/Markets/Community_Development/doc_filof when

“payback” has occurred. The examples in Fig. 11 show es/apj1098.pdf), a

home’s value is increased by $20,000 forhow long paybacks on other

investments really are in every $1,000 reduction in annual operating costs from

energycomparison to solar, when taken on an after-tax basis. efficiency. There

are numerous other flaws in using payback for a Net Interest Earned or After-

Tax After-Tax Payback / Time-to- Investment Type Investment Net Electric

Bill Value the Value the Doubling including Amount Savings First Year Eighth

Year taxes & inflation Savings $30,000 $300 (at 1% rate) $196 $196 153 years

Stocks $30,000 $2,400 (at 8% rate) $1,567 $1,567 19.1 years Solar – CA

PG&E 5.5 kW $30,000 $2,321 (1st year) $2,321 $3,176 10.4 years Fig. 11.

Investment Payback Comparisons: Solar savings grow due to escalation (4.5%

net w/ degradation). Assumed 28% federal & 9.3% state tax rates play a big role

in the different outcomes. Stocks & savings are more liquid, but it’s clear why

Wall Street and banks don’t talk “Payback”.Economics of Solar Electric




48. AC kWh Production Installed Cost per Staring/Ending Rate Utility

Insolation per rated kW per rated Watt Incentives Schedule, Peak % year

(~October 2008) $2.40/W Rebate (net) AZ - APS Phoenix 1660 / STC kW

$8.25 STC E-12 / ET-2, 50% 25% State Tax Credit CA - PG&E San Francisco

1630 / CEC kW E1XB / E6XB, 35% $1.55/W Rebate 3kW: $9.50 CEC D-10-

Basic / CA - SCE Los Angeles 1675 / CEC kW 6kW: $9.25 CEC $1.90/W

Rebate TOU-D-1, 36% 9kW: $9.00 CEC DR-Coastal-Basic / CA - SDG&E San

Diego 1700 / CEC kW $1.55/W Rebate DR-SES, 28% CO - Xcel Boulder

1398 / STC kW $8.25 STC R $3.50/W Rebate & SREC CT - UI Hartford

1262 / PTC kW $8.75 PTC R / RT, 45% $1.75/W Rebate FL – FPL Miami

1345 / ST kW $8.25 STC RS-1 $4/W Rebate HI - HECO Honolulu 1460 / STC

kW $8.25 STC Res 35% State Tax Credit $1.20/W Rebate (net), MD – BGE

Baltimore 1236 / STC kW $8.25 STC R / RL-2, 65% SRECs: 10¢/5yrs,

5¢/10yrs NC - Progress Raleigh 1260 / STC kW $8.25 STC RES / R-TOUD,

60% 35% State Tax Credit SRECs: 48¢/1yr, 30¢/12yrs, NJ - JCP&L Newark

1140 / STC kW $8.25 STC RS / RT, 58% 10¢/12yrs; $1.55/W Rebate Rate I /

Rate II TOU, $2.81/W Rebate (net) NY - ConEd New York City 1178 / STC

kW $8.25 STC 75% 25% State Tax Credit $2.25/W Rebate, PA – PPL

Philadelphia 1217 / STC kW $8.25 STC RS / RTD R, 70% SRECs: 10¢/5yrs,

5¢/10yrsFig. 13. Utility specific residential assumptions. Module prices have

dropped since October 2008, and selling prices are declining,but still in a state

of flux. For now, the analyses assume 10/2008 pricing. Before Solar Size & Net

Cost Results, Savings, and Benefits Cumulative Net Monthly Cash Flow Final

Net Appraisal kWh Savings Pre- PV System Cost w/ Lifecycle Years Pre-Tax

Compared to 8% 30-yr Equity / Usage Over First Loan Annual Utility Solar

Size & Tax Payback To Annual Resale per 25 Years Savings Bill Rating

Benefits Ratio Payback Return In First In Fifth Increase in Month (including &

Rebate Year Year First Year inflation)AZ - APS $77 800 5 kW STC $18K

$22K 1.2x 22.2 6.6% $-31/mo $-38/mo $539 $11KCA - PG&E $74 550 3 kW

CEC $17K $28K 1.7x 18.6 10.0% $-11/mo $-15/mo $671 $13KCA - PG&E

$258 1100 6 kW CEC $33K $120K 3.6x 9.7 19.5% $100/mo $123/mo $2,761

$55KCA - PG&E $499 1650 9 kW CEC $48K $234K 4.9x 7.8 24.6% $259/mo

$320/mo $5,355 $107KCA - SCE $85 550 3 kW CEC $16K $36K 2.2x 15.5

12.9% $6/mo $6/mo $835 $17KCA - SCE $414 1650 9 kW CEC $45K $193K

4.3x 8.5 22.1% $193/mo $238/mo $4,446 $89KCA - SDG&E $97 550 3 kW

CEC $17K $38K 2.2x 15.4 12.9% $6/mo $7/mo $877 $18KCA - SDG&E $455

1650 9 kW CEC $47K $206K 4.4x 8.4 22.4% $207/mo $255/mo $4,722

$94KCO - Xcel $72 800 5 kW STC $17K $13K 0.7x 31.9 3.1% $-47/mo $-

46/mo $521 $10KCT - UI $183 800 5 kW PTC $25K $57K 2.3x 15.2 11.9% $-

20/mo $1/mo $1,333 $27KFL – FPL $89 800 5 kW STC $15K $24K 1.6x 19.3

7.5% $-35/mo $-25/mo $591 $12KGA - GaPwr $88 800 5 kW STC $21K $20K

0.9x 27.0 6.9% $-80/mo $-67/mo $493 $10KHI - HECO $164 800 5 kW STC

$25K $62K 2.5x 13.2 15.1% $-10/mo $16/mo $1,442 $29KMD – BGE $131

800 5 kW STC $25K $39K 1.6x 18.4 9.3% $-25/mo $-30/mo $1,262 $17KNC-

Progress $80 800 5 kW STC $21K $25K 1.2x 23.2 9.6% $-66/mo $-51/mo

$601 $12KNJ - JCP&L $143 800 5 kW STC $24K $66K 2.8x 9.3 19.4%

$71/mo $85/mo $2,947 $22KNY – ConEd $134 800 5 kW STC $16K $40K

2.6x 12.4 16.5% $-2/mo $16/mo $956 $19KPA – PPL $95 800 5 kW STC

$21K $32K 1.5x 18.9 8.5% $-22/mo $-30/mo $1,100 $14KFig. 14. Example

residential cases with their net costs and financial benefits.Economics of Solar

Electric Systems ! 2009, Andy Black. All rights reserved. July 2009 - 15 of 19

49. add more than 215% of their value upon resale (Alfano, Sal, “2003 Cost vs.

Value Report”, Remodeling Online – www.remodeling.hw.net downloaded

March 5, 2004). Other types of remodels like kitchens and bathrooms had

similar results related to geography. So it makes sense that in certain

geographies where the sun shines brightly and the electric rates are high, solar

would return more than its installed cost, while in other states with less sun and



lower rates, the return might be much lower, with a national average

comparable to other types of remodel. Fig. 16 lists projected resale value of

various solar systems, compared with nationwide averages for some other home

improvements. The increase in property value is currently theoretical. A very

high fraction of the grid-tied solar electric systems in California were installed

since the state’s Power Crisis and the Fig. 15. Resale value increases over time

because savings get Deregulation fiasco in 2001. Most of these homes have not

been larger each year. Total remaining lifetime savings in the sold and there are

no broad studies of comparable resale values system declines annually, putting

a limit on the increase in available. However, some evidence is beginning to

emerge that resale value after year 11. there are significant jumps in resale value

being realized by The rationale is that the money from the reduction in some

solar home sellers.operating costs can be spent on a larger mortgage with no net

It is also interesting to note that PV systems will appreciatechange in monthly

cost of ownership. Nevin states that average over time, rather than depreciate as

they age. The appreciationhistoric mortgage costs have an after-tax effective

interest rate comes from the increasing annual savings the system will yieldof

about 5%. If $1,000 of reduced operating costs is put towards as electric rates

and bill savings rise. All the calculations in thisdebt service at 5%, it can

support an additional $20,000 of debt. article assume electric rate escalation

will be 5%. If so, the PVTo the borrower, total monthly cost of home ownership

is system will save 5% more value each successive year, and thusidentical.

Instead of paying the utility, the homeowner (or future gain from the 20:1

multiplier effect. The resale value will thenhomeowner) pays the bank, but her

total cost doesn’t change. increase 5% per year compounded, less 0.5%

moduleSince the Nevin article is from 1998, is it dated? No more than

degradation.2+2=4 is dated - the rationale is mathematical, not based onmarket

whims, so it is timeless. This cannot continue forever, as the increase in resale

value runs into the second limit, which relates to the remaining life Please see

the column labeled “Appraisal Equity Increase” in left in the system. For these

analyses, the system is assumed toFig. 14 for examples of the increase in home

value. In some be worthless at the end of 25 years. This is probably verycases, a

solar system can increase home value by more than its conservative, since the

panels are warranted to be working atcost to install. This effectively reduces the

payback period to 0 least 80% of their new performance. So if the system

isyears if the owner chose or needed to sell the property worthless at the end of

25 years, the only value the system hasimmediately. It could even lead to a

profit on resale. as it nears that time, are the remaining savings it can generate

th There are two limits to the increase in resale value over before the end of the

25 year. Fig. 15 shows both thesystem net installed cost. First, why should a

homeowner pay in increasing value due to increasing annual savings and

thetotal more for a home with a solar system, when she could buy a remaining

value limitation that takes over at approximately yearnon-solar home, and

solarize it for less money? Yet this 11. If the system does have additional resale

value, so much thehappens with other remodels. Decks, on average across the

better.nation, return 104% of their cost upon resale. However, in Still, the

skeptical homebuyer might question the abovecertain markets like St. Louis,

San Francisco, and Boston, decks assertions in light of the lack of hard

evidence. Perhaps the best evidence to present would be a stack of old bills

showing usage Investment and cost before solar, and a stack of new bills

showing a Resale Home Improvement Amount / % substantial savings. The

question might be posed, “What are a Value Type Net System Return

continuous, if not growing, stream of these savings worth to the Increase Cost

prospective buyer?” That sort of evidence can’t easily be CA PG&E Solar 3 kW

$17K $13K 76% ignored. Of course, other factors will weigh heavily in the CA

PG&E Solar 6 kW $33K $55K 167% value. How attractive is the home? A tidy,

attractive installation CA PG&E Solar 9 kW $48K $107K 223% should add all

of the value shown above, but like a spa, some Deck Addition $6.3K $6.7K



104% prospective buyers may not care or value it, while others may Bathroom

Remodel $10.1K $9.1K 89% love it. Window Replacement $9.6K $8.2K 85%

Kitchen Remodel $44K $33K 75% Fig. 16. Resale value comparison of various

home improvements.Economics of Solar Electric Systems ! 2009, Andy Black.

All rights reserved. July 2009 - 16 of 19

50. Utility Bill w/o Solar at 5% escalation Accumulated 8% Loan (net cost),

New Savings Smaller Bill, & Maintenance Fig. 18. Accumulated net savings of

solar system financed over 20 years, including all costs, thus showing pure cash

profit accumulated over time with no additional expense. has 2 parts: principal

and interest. As the balance is paid down, the interest portion of each successive

payment is reduced, so the tax deduction benefit is also reduced. In after-tax

terms, the loan is least expensive in the first year when the borrower is Net

Annual enjoying the maximum tax deduction for interest paid. Savings The

difference between the two lines in the top of Fig. 17 is the amount the scenario

is cash-positive (or cash-negative) for the customer, and is reflected in the lower

graphic, which showsFig. 17. Effect of a solar system financed at a fixed 8%

interest “Net Annual Savings” by having purchased a solar system withrate over

20 years showing a cash-positive result from the a loan (put no money down).

In this case, the savings arefirst day of ownership, including maintenance costs

and the substantial even before the loan is paid off in the 20th year, andinverter

replacement at year 15. gets even better after that. The Net Annual Savings can

be accumulated as shown in Fig. 18 to show how much extra cashCASH FLOW

WHEN FINANCING: a purchaser will have in her pocket before the inverter

needs to Financing a solar system makes the purchase achievable to be replaced

in year 15, or before the loan is paid off in year 20,more consumers. If the

situation is right, the savings on the or before the equipment is out of warranty

in year 25.electric bill can more than compensate for the cost of the loanand

maintenance, making it a cash-positive maneuver. That is, The uncapping of the

residential federal ITC has made it morecompared to the occupant’s current cost

of energy (her current difficult to figure out how much a customer should

borrow. Theelectric bill), going solar but paying for it entirely with a loan

problem is that the ITC is a significant incentive, but it isn’t(no money down)

can actually be less expensive on a monthly received until the customer files her

taxes, which can be a yearbasis. or more after the system needs to be paid for.

Electric rates and electric bills are subject to electric rate In what one might call

the “Optimistic Loan” scenario, theescalation, as can be seen in the top graphic

in Fig. 17, where customer would borrow the net cost after all incentivesthe cost

of energy increases steadily over the years, doubling (including the ITC) have

been received. This would produce theapproximately every 15 years. While

interest rates might vary lowest loan payments, and have the best chance of

being cash-depending on the loan type, loans are not subject to inflation or

positive from the start, making the salesperson happy. However,rate escalation,

so the loan payments do not increase the customer would need to have the cash

to cover the ITCcontinuously. This means that the difference between what the

amount or get a bridge loan until the ITC is received because ofelectric bill will

become and what the loan & maintenance costs the optimistically low loan &

payments.will become continues to move in the customer’s favor. Even if In an

“Inefficient Loan” scenario, the customer would borrowa customer didn’t start

out cash-positive in the first year, she the net cost after all other incentives,

except the ITC. This willmay become cash positive after a few years. allow

them to acquire the system with no money down. In the top graphic of Fig. 17,

the lower line labeled “8% Loan However it will also result in a lot of cash on

hand once the ITC(net cost), New Smaller Bill, & Maintenance” represents all

the is received, which she is paying interest on, which is expensivenew costs

compared to the old Utility Bill cost. While the loan and not very efficient. It is

also less likely to be cash-positive,rate is fixed at 8% and the monthly loan

payments are steady, which will be a disadvantage for the salesperson.there are



3 components to this new set of costs that do increase The solution is what

OnGrid Solar calls “Smart Financing”over time: 1. The new maintenance cost

will rise with inflation. where the customer uses a “line of credit” financing

source that2. The new small electric bill will rise with electric rate she can

borrow from and repay without pre-payment penalty.escalation. 3. In fixed

amortization loans, each loan payment Assuming the ITC will be received in a

year, and that she canEconomics of Solar Electric Systems ! 2009, Andy Black.

All rights reserved. July 2009 - 17 of 19

51. apply it to the principal of the loan at that time, one can partnership with

cities, whereby a citizen property owner cancalculate the necessary loan

payment that allows them to pay off receive a loan for a solar system and have

it collateralized andthe loan in the desired number of years including interest.

The paid back on her property tax bill. The program was pioneeredcalculation is

complex, and is not a standard function in most in Berkeley, California, and is

now available in several citiesspreadsheets, but can be done. The resulting loan

payment will thanks to AB811, the “Community Financing” bill.be somewhere

between the Inefficient Loan and the Optimistic The loans are obligations to the

city, the interest is taxLoan, typically tending to be pretty close to, but slightly

more deductible, and the property tax bill shows the itemization of theexpensive

than the Optimistic Loan. loan amount, the principal and interest. The interest

rate is set Results of Smart Financing can be seen in Fig. 17. A subtle by the

city and their partner bank and is generally at marketfeature of it is the slight

dip in savings in the 2nd year. In the 1st rates. However, even if the financing

was at what might beyear the loan principal is very high because it includes the

ITC considered a subsidized level, because of the ARRA of 2009,amount

causing the interest cost to be quite high. This allows there is no longer any

negative interaction with the ITC (therefor a large 1st year tax deduction

benefit, even though the loan used to be a tax rule that allowed one but not both

of an ITC orpayments are fixed and steady. Once the ITC is received and

subsidized energy financing to be enjoyed). The loans areapplied to reduce the

principal, the interest is reduced, so the tax generally transferable to a future

buyer of the property if she isdeduction shrinks, effectively raising the cost of

the loan willing to agree to assume the loan payments.compared to the fixed

loan payments. These loans pose little risk to the city and their funding Refer to

Fig. 14 for several examples showing the initial and partner, because property

taxes are considered to be in “1st5th year monthly cash flow assuming 100%

Smart Financing of position” to get paid in cased of a foreclosure. This has

caused aa solar system using a 30-year loan. Because of the 2nd year dip,

controversy in the banking community because this now placesthe 5th year

monthly cash flow isn’t always better than the 1st more risk on the holder of the

1st mortgage (who is in 2ndyear’s, but is a basis for continuous improvements

in cash flow position), and the lawsuits have started. The mortgagees

insistgoing forward. Note, we use the 5th year because most these loans be in at

least 3rd position to protect their mortgages.depreciation (in commercial

systems) and PBI benefits (both of Depending on how they are structured, that

may work for thewhich are applied to loan principal in the same way as the

ITC) cities. Stay tuned, it’s developing as this is written.have been received and

included by then. There are also two commercial financing products being

Sources of financing funds can include: applied to residential situations: Power

Purchase Agreements ! Unsecured (PPAs) and leases. PPAs are the agreement

for one party to sell ! Home equity power to another at agreed upon terms. The

sale is for kWh of ! Community Financing energy only. The leases for solar are

rentals, where a customer ! Power Purchase Agreements (PPAs) rents (leases) a

solar system from another party. In both ! Leases products, the parties owning

the systems have large investors who have money to finance systems and who

can use both the Unsecured financing can include credit cards or other types of

ITC and depreciation.unsecured loans. These are generally a terrible idea for



any kindof long term financing because they usually have high interest In the

typical PPA scenario, the site occupant agrees to a PPArates and the interest is

not tax deductible. It may be reasonable for electricity kWh at a certain price

and in exchange allows ato consider them to temporarily finance the rebate or

tax credit solar system to be placed on her roof. In residential applicationsuntil

it is received, however, it requires discipline to ensure the of a PPA, the

homeowner usually pays a deposit of anywhereloan is paid off as soon as the

incentive is received. from $2,000 to 25% to 50% of the cost of the system in

addition st to the price she will pay for the electricity. Naturally, the more Home

equity sources of funding can include 1 mortgage nd she puts down as a

deposit, the lower the price of the electricity.refinances, 2 mortgages, Home

Equity Loans, and Home The contract lengths are typically 15-20 years, and

there may beEquity Lines of Credit (HELOCs). In general, home equity a

buyout cost at the end if the homeowner wishes to purchase itborrowing is tax

deductible, has the best unsubsidized interest at that time, or she may have to

pay a removal fee if she doesn’t.rates, and has the longest repayment terms, all

of which allow The price of electricity may be fixed by the agreement, or itfor

lowest monthly costs. However, the decline in real estate may have an escalator,

causing it to get more expensive overvalues have hurt Loan-to-Value (LTV)

ratios for most time. There is usually a guaranteed minimum performance,

buthomeowners, and the tight credit market in 2009 have put strict the customer

must purchase any extra electricity, whether shelimits on LTV ratios, credit

scores, and income requirements, wants it or not.making use of home equity

difficult. Only the Line of Credit islikely to work with Smart Financing. Other

loans tend to be less A typical residential solar lease is similar, in that there is

oftenflexible on borrowing and repayment term. Attractive FHA a deposit paid

and a long-term agreement to rent a system forEnergy Efficient Mortgages

(EEMs) may be available from the placement on the customer’s roof. The

monthly rent mayU.S. Dept of Housing and Urban Development (HUD) at:

include an escalator, increasing costs over time, and

mayhttp://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm. include a buyout

clause and termination costs. The buyout clause must not allow the system to be

purchased for less than A new idea and source of funds are local loan programs

called Fair Market Value (FMV) at the end of the term, and that

the“Community Financing” developed by funding sources in FMV must be

determined at the end of the term, otherwise theEconomics of Solar Electric


52. lease will fail to satisfy IRS tax rules. The system usually comes o Property

Tax Assessments as a Finance Vehicle forwith a performance guarantee, and

the homeowner enjoys any Residential PV Installations: …extra production at

no extra charge. o Exploring the Economic Value of EPAct 2005s PV Tax

Credits Things a customer should watch out for regarding leases & ! SEIA

“Guide to Federal Tax Incentives for Solar Energy”PPAs: 1. High escalators in

the contracts and their compounding http://www.seia.org, Solar Energy

Industries Associationnature. These vehicles can be good hedges against future

rate ! Utility Tariff and Rate Tables (see desired utility’s website) –inflation, but

a customer should be cautious about overpaying great for insomniafor that

hedge. Rates may not rise fast in the future for anynumber of reasons, and are

certainly not likely to rise much DESIGN & ANALYSIS TOOLS:faster than

6% per year over the long term. Currently, state or ! OnGrid Tool, which

incorporates all of the elements of thisfederal government does not regulate

these products, so there is paper, plus up-to-date rates and incentives, to allow

the usera lot of risk of customers agreeing to very expensive terms over to

design and analyze PV systems at a high level. It alsothe long term. 2. Large

deposits without performance guarantees produces proposals and sales

documentation:and without clarity in the contract on what happens to the

http://www.ongrid.net/paybacksystem in the event of the provider’s bankruptcy.



3. Large ! Clean Power Estimator:buyout charges or removal costs at the end of

the term. http://www.consumerenergycenter.org/renewables/estimator. !

PVWatts: http://www.nrel.gov/rredc/pvwatts Leases and PPAs with $0 deposits

are easy to understand and ! PVSyst: http://www.pvsyst.comsell if the monthly

costs or $/kWh are less than the customer’s ! RETscreen:

http://www.retscreen.netcurrent costs. Otherwise the customer must figure out

how soon ! PV Design Pro: http://www.mauisolarsoftware.comthe deposit

amount will be recovered. ! QuickQuotes: clean-

power.com/quickquotes/products.aspx Leases and PPAs can be attractive to

customers who have no ! CPF Tools: http://www.cpftools.comother way of

financing a system, or who can’t use the ITC. But

ACKNOWLEDGEMENTS:if she has her own cash, or can get her own

financing, she can Thank you to the following that have provided

invaluableusually do better and keep more of the benefits for herself, insights

knowledge, corrections, and review:rather than sharing them with the financing

party and the Michael Bishop, OnGrid Solarprovider. Customer shouldn’t be

taken in by claims that these Chad Blanchardproducts are a lot less expensive

because of the depreciation – Mark Bolinger, Lawrence Berkeley Laboratory

(LBL)effectively the depreciation offsets the taxability of the revenue Keith

Martin & John Marciano, Chadbourne & Parke LLPreceived the provider.

These deals are currently a goldmine to Ryan Wiser, Lawrence Berkeley

Laboratory (LBL)developers and providers, but are just “ok” for the

consumer,and will be until more competition comes along. !Copyright 2009,

Andy Black. All rights reserved. This information changes periodically. The

author maintains anCONCLUSION: updated version of this article at: It is

important to compare the solar investment to other

http://www.ongrid.net/papers/PaybackOnSolarSERG.pdf. Forinvestments on an

even basis. Rigorous treatment and critical more info on solar payback, analysis

tools, upcoming classes,analyses from several angles including Compound

Annual Rate and other papers and articles, see http://www.ongrid.net.of Return,

Cash Flow, and Resale Value need to be consideredto do a fair assessment.

Andy Black is a Solar Financial Analyst and CEO of OnGrid Solar, creator of

the OnGrid Tool, and educator on the Solar will make economic sense for

many, but only a hard financial aspects of solar electric systems. He is a

formerlook at the numbers will tell. The reader is encouraged to check

NABCEP Certified PV Installer, is on the Advisory Board of theit out. Run the

numbers, get evaluations and proposals from at NorCal Solar Association, and

is a recent past board member ofleast 3 solar providers, and take them to a CPA

to check them the American Solar Energy Society. He can be contacted atout.

That way the smile on your wallet can be as big as the (408) 428-0808x1 or

[email protected] for questions about thesmile on your face! payback on

solar.SUGGESTED ADDITIONAL READING:! OnGrid Solar’s papers,

publications, and presentation slides: http://www.ongrid.net/papers! “A Guide

To Photovoltaic (PV) System Design And Installation”

http://www.energy.ca.gov/reports/2001-09- 04_500-01-020.PDF, California

Energy Commission! Bolinger, Wiser, et al, LBL papers and presentations at:

http://eetd.lbl.gov/ea/emp/re-pubs.html, particularly: o Shaking Up the

Residential PV Market: … o The Impact of Retail Rate Structures on the

Economics of Commercial Photovoltaic Systems in California And at:

http://eetd.lbl.gov/ea/emp/cases/EMP_case.htmlEconomics of Solar Electric


53. The OnGrid Solar Financial Analysis & Sales Tool Simplify Solar Sales:

(866) 966-5577 Qualify and Close in www.ongrid.net Less Than a Day! Show

Your Customers Simplify Your Sales! Their internal rate of return ! Identify

and screen hot leads (solar vs. stock market or interest-based investment)

(guides salespeople through the entire sales process)! Their cash flow for

financed systems ! Size PV systems accurately (positive and increasing over



time) (time of use, shading, tilt, orientation, incentives and more)! System’s

total lifecycle payback and savings ! Price systems considering all factors (show

how much they save over time) (e.g., tile roof, custom mounting, etc.)! Their

increased resale value ! Create proposals, price quotes quickly, onsite (often is

more than system cost & increases over time) (one button form generation,

documentation, includes CSI) Use customer data to paint them a picture.

Example Output*: Cash Flow: Cash Flow: Annual Costs: Solar with Loan vs.

No Solar Net Annual Savings When Financed Annual Savings Utility Bill w/o

Solar at 5% rate escalation Loan cost, Maintenance, Inverter Net Annual

Replacement, & new small electric bill Savings Lifecycle Payback: Resale:

Annual Savings Before & After Payback Resale Value Over Time Resale Value

Lifetime savings are typically 2-3.5 times system cost Payback Resale Value

increases due to increasing annual savings *See website for detailed description

and comprehensive list of customizable outputs and displays. 9:00 a.m. 9:30

a.m. 11:00 a.m. 12:00 p.m. 12:30 p.m. 1:00 p.m. 1:30 p.m. Receive Qualify,

Site Update Present Bid, Close Turn in Incoming Gather Data, Visit Estimate

Contract & the Closed Sales Call Email Print All Docs Docs Sale Sale Estimate

(on site) Example Sales Call FREE Demo / Examples:

www.ongrid.net/payback ! 2008 OnGrid Solar

54. The OnGrid Solar Financial Analysis & Sales Tool for Commercial &

Residential PV Sales A Time-Saving, (866) 966-5577 Comprehensive Tool for

Solar Sales www.ongrid.net Helps Create & Close More Sales Calculates TOU

Value with Shading Proves Payback for the Customer Prepares Rebate &

Utility Docs Easily The OnGrid Solar Sales Tool Helps Commercial &

Residential Salespeople: (See www.ongrid.net for comprehensive lists of all

details and options) Perform Multiple Solar FinancialIdentify and Screen Hot

Leads, Analyses, option to generate a Develop Accurate Price Quotes, guide

them successfully thru Variety Of Proposals including all material, the entire

sales process regulatory and job-site factors Fill out Closing Sales Paperwork

and Documents (including CSI) with the touch of a button Size PV systems

based on customer needs, incentive programs and site data Solar Pathfinder ®

Upload shading device data for SunEye ® accurate Time-of-Use value analysis

Demonstrate the financial benefits of a solar electric system to your customer

with customized calculations. Tailor and brand your printouts. Use them for

direct presentations as your sales materials. ! PV System Size & Production !

Financing & Cash Flow ! Current & Future Electric Bills ! Resale Calculations

& Graphics ! Cost, Rebate & Tax breakdowns ! Rate of Return CalculationsThe

OnGrid Tool is offered on a subscription basis and is updated frequently with

current Rate Schedules,Incentive, Tax and Product information, and

periodically with new tool features and benefits. Download thefree demo. Then,

contact Andy Black at [email protected] or (866) 966-5577 to start closing more

sales. (866) 966-5577 FREE Demo / Examples: www.ongrid.net/payback !

2008 OnGrid Solar Net Annual Savings

55. Andy Black OnGrid Solar Feedback for Solar Financial Analyst Sales,

Marketing & Economics Classes (408) 428 0808 [email protected] Rate

the Following: Excellent Very Good Good Fair PoorInstructor’s knowledge of

the subject matter? ! ! ! ! ! Comments:

___________________________________________________________________Instructor’s

ability to communicate effectively with the class? ! ! ! ! ! Comments:

___________________________________________________________________Effectiveness

of the handout materials & overhead slides? ! ! ! ! ! Comments:

___________________________________________________________________Relevance

of the subject matter? ! ! ! ! ! Comments:

___________________________________________________________________Overall

rating of this instructor’s part of the class? ! ! ! ! ! Comments:

___________________________________________________________________

Too Short Just Right Too LongGive the topic, this workshop was: ! ! !



Comments:

___________________________________________________________________

Introductory Intermediate AdvancedIn your opinion, this workshop was? ! ! !

Comments:

___________________________________________________________________

Yes NoWould you recommend this workshop to others? ! ! Comments:

___________________________________________________________________How

would you improve this workshop?

___________________________________________________________________________

___________________________________________________________________________What

did you like LEAST about this class?

___________________________________________________________________________What

did you like MOST about this class?

___________________________________________________________________________Please

share any additional comments:

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________Your

Name (optional):__________________________ May we quote you? YES NO

56. Andy Black Acronyms Used In Sales, Marketing & OnGrid Solar Solar

Financial Analyst Economics Classes (408) 428 0808 [email protected]:

Alternating Current (standard AC wall power) kWh: kilowatt-hourACP:

Alternative Compliance Payment LADWP: Los Angeles Department of Water

& PowerACEEE: American Council for an Energy Efficient LBL: Lawrence

Berkeley Laboratory Economy: www.aceee.org LTV: Loan-To-ValueAMT:

Alternative Minimum Tax MACRS: Modified Accelerated Cost Recovery

SystemARRA: American Recovery and Reinvestment Act NABCEP: North

American Board of Certified EnergyASES: American Solar Energy Society

PractitionersCA: California NCSC: North Carolina Solar CenterCAD:

Computer Aided Design NESEA: North-East Sustainable Energy

AssociationCalSEIA: California Solar Energy Industries Assn NJCEP: New

Jersey Clean Energy PartnershipCAGR: Compound Annual Growth Rate NLP:

Neuro-Linguistic ProgrammingCARR: Compound Annual Rate of Return

NOL: Net Operating LossCCSE: California Center for Sustainable Energy

NOx: Nitrous OxidesCEC AC: The California Energy Commission AC NREL:

National Renewable Energy Laboratory (Alternating Current) Power Rating

NSHP: New Solar Homes PartnershipCEC: California Energy Commission

PACE: Property Assessed Clean EnergyCEO: Chief Executive Officer PBI:

Performance Based IncentiveCFO: Chief Financial Officer PEC: PG&E’s

Pacific Energy CenterCHEERS: California Home Energy Efficiency Rating

PG&E: Pacific Gas & Electric System PPA: Power Purchase AgreementCL&P:

Connecticut Light & Power PSE&G: Public Service Electric & Gas (NJ)COO:

Chief Operating Officer PTC: PVUSA Test ConditionsCO2: Carbon Dioxide

PUC: See CPUCCoSEIA: Colorado Solar Energy Industries Assn PURPA:

Public Utility Regulatory Policies Act of 1978CPI-U: Consumer Price Index-

Urban PV: Photovoltaics (Solar Electricity)CPUC: California Public Utilities

Commission PVUSA: PV for Utility Scale ApplicationsCRES: Colorado

Renewable Energy Society QF: Qualifying FacilityCRM: Customer

Relationship Management REC: Renewable Energy Certificate/CreditCSI:

California Solar Initiative ROI: Return On InvestmentDC: Direct Current (what

comes out of PV modules) ROR: Rate of ReturnDER: Distributed Energy

Resource/Renewable RPS: Renewable Portfolio StandardDGR: Distributed

Generation Resource SB1: CA Senate Bill 1, the law that created the CSIDOE:

Department of Energy (U.S.) SCE: Southern California EdisonDSIRE:

Database for State Incentives for Renewable SDG&E: San Diego Gas &

Electric Energy: www.dsireusa.org SDREO: San Diego Regional Energy Office

(now calledDWR: Department of Water Resources CCSE)EPBB: Expected



Performance Based Buydown SEI: Solar Energy InternationalEEM: Energy

Efficient Mortgage SEIA: Solar Energy Industries AssociationEIA: Energy

Information Administration (of DOE) SLI: Solar Living InstituteEPBI:

Expected Performance Based Incentive SMUD: Sacramento Municipal Utility

DistrictFASB: Financial Accounting Standards Board SOx: Sulfur

OxidesFICA: Social Security Payroll Tax S-REC, sREC: Solar Renewable

Energy CertificateFMV: Fair Market Value STC DC: Standard Test Conditions

DC (Direct Current)FIT: Feed-In Tariff ratingHELOC: Home Equity Line of

Credit STC: Standard Test ConditionsHERS: Home Energy Rating System

SVP: Silicon Valley PowerIDR: Interval Data Recording (meter) SWOT:

Strengths, Weaknesses, Opportunities, ThreatsIID: Imperial Irrigation District

TOD: Time Of DayIRC: Internal Revenue Code TOU: Time Of UseIRR:

Internal Rate of Return TRC: Tradable Renewable Certificate (= sREC = REC

=IRS: Internal Revenue Service Green Tag)ISO: Independent System Operator

UI: United Illuminating Co. (CT)ITC: Investment Tax Credit URG: Utility

Retained GenerationJCP&L: Jersey Central Power & Light WIIFM: What’s In

It For Me

Search

• Connect on LinkedIn• Follow us on Twitter• Find us on Facebook• Find us on Google+

• Learn About Us• About• Careers• Our Blog• Press• Contact us• Help & Support

• Using SlideShare• SlideShare 101• Terms of Use• Privacy Policy• Copyright & DMCA• Community Guidelines• SlideShare on mobile

• Pro & more

• Go PRO New

• Business Solutions

• Developers & API• Developers Section• Developers Group• Engineering Blog• Blog Widgets

© 2013 SlideShare Inc. All rights reserved.

RSS Feed

• ENGLISH◦ English◦ Français◦ Deutsch



22

‹›/58

