NEW JERSEY PV MARKET July 2010

Prepared by:Marc Arza

NEW JERSEY PV MARKET US market info (1)

PV installed.capacity evolution PV market by state

NEW JERSEY PV MARKET US market info (2)

PV capacity additions per type

Source: US Solar Industry year in review 2009 (SEIA)

PV installed costs evolution

NEW JERSEY PV MARKET US market info (3)

Source: Global PV market outlook until 2014 (EPIA)

NEW JERSEY PV MARKET New Jersey market info (1)

Source: Boston Consulting Group

NEW JERSEY PV MARKET New Jersey market info (2)

Source: Google maps

Yearly PV installed capacityYearly irradiation (as Spain's ave.)

NEW JERSEY PV MARKET Utilities map

Source: http://njcleanenergy.com

New Jersey main utilities:

- Rockland Electric Company- Jersey Central Power & Light- Public Service Enterprise Group (PSEG)- Atlantic City Electric

NEW JERSEY PV MARKET Average electrical tariffs

Source: http://www.eia.doe.gov/electricity/epm/table5_6_b.html

- Business Energy Investment Tax Credit (ITC):

- Corporate Tax Credit for 30% of the investment. Credits are available for eligible systems placed in service on or before December 31, 2016:

- The credit is equal to 30% of expenditures, with no cap. Eligible solar energy property includes equipment that uses solar energy to generate electricity.

- The energy property must be operational in the year in which the credit is first taken.

- The American Recovery and Reinvestment Act of 2009 allows taxpayers eligible for the federal renewable electricity production tax credit (PTC) to take the federal business energy investment tax credit (ITC) or to receive a grant from the U.S. Treasury Department instead of taking the PTC for new installations. The new law also allows taxpayers eligible for the business ITC to receive a grant from the U.S. Treasury Department instead of taking the business ITC for new installations.

NEW JERSEY PV MARKET Federal support programs (1)

Source: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US02F&re=1&ee=0

- Modified Accelerated Cost-Recovery System (MACRS):

- Five year time accelerated amortization period for photovoltaic installacions.

- The 5 year amortization will be as follows:

Year 1: 30%Year 2: 32%Year 3: 19,2%Year 4: 11,52Year 5: 11,42%Year 6: 5,76

- Amortization starts when turning on the PV system.

NEW JERSEY PV MARKET Federal support programs (2)

Source: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US06F&re=1&ee=0

- New Jersey enacted legislation exempting renewable energy systems used to meet on-site electricity, heating, cooling, or general energy needs from local property taxes. Eligible renewable energy systems* include solar PV. The exemption may be claimed for all qualified systems installed on residential, commercial, industrial, or mixed use buildings as accessory uses.

- In order to claim the exemption, property owners must apply for a certificate from their local assessor which will reduce the assessed value of their property to what it would be without the renewable energy system. Exemptions will take effect for the year after a certification is granted.

NEW JERSEY PV MARKET Property tax exemption for renewables

- New Jersey offers a full exemption from the state's sales tax (currently 7%) for all solar energy equipment. This exemption is available to all taxpayers. All major types solar energy equipment, including equipment for passive solar design, are considered eligible for the exemption as described by the New Jersey Division of Taxation Publication

- S&U-6 (Sales Tax Exemption Administration). According to S&U-6, the exemption includes all solar energy "devices or systems specifically approved by the Board of Public Utilities, Division of Energy and designed to provide heating or cooling or electrical or mechanical power by converting solar energy to some other usable energy source, including devices for storing solar-generated energy." The exemption does not apply to devices that would be required regardless of the energy source being utilized.

- In order to claim the exemption, the purchaser must fill out and submit Form ST-4 (Exempt Use Certificate) to the seller instead of paying sales tax.

NEW JERSEY PV MARKET Solar energy sales tax exemption

- New Jersey's Clean Energy Program is a legislative program of the NJ Board of Public Utilities providing more than 180 million dollars each year towards renewable technologies installations.

- NJ's REIP program has two main incentives:

> Upfront rebates> Renewable Energy Credits (tradable REC's)

NEW JERSEY PV MARKET NJ's Renewable Energy Incentive Program (REIP)

- Solar electric (PV) non-residential projects up to 50 Kw are eligible for upfront incentives.

- Incentives for non-residential will be 1$ per watt. (50kw = 50.000 w = 50.000$).

- Process towards REIP upfront incentives:

> Thre funding cycles opened each year. > Initial application: Managed by NJ Clean Energy*: Once apprved projects have 12 months to complete installations. A funding approval letter is issued granting funds for the project. > Final application: After reiew and approval expected turnaround time for upfront incentive payments is 60 days.> After final application system will be inspected and can apply to the utility for interconnection.

*http://www.njcleanenergy.com/renewable-energy/programs/renewable-energy-incentive-program/for-customers/application-forms

NEW JERSEY PV MARKET NJ's REIP upfront incentives (rebates)

- All PV installations generate tradable Renewable Energy Certificates (REC) as a second source of potential income. The program is managed by PJM-EIS Generation Attribution Tracking System (GATS)*.

- Generation of REC's start on the date of utility approval to operate/energize the system and will last for 15 years.

- REC's generation and trading process:

> Registration and REC's account opening**.> Generation of 1 REC per each 1000 Kw/h of energy metered.> REC's are sold to utilities at trading prices. > Average prices for REC's is around 550$-600$ (slight upwards trend).

*http://www.pjm-eis.com/gats/gats.html**http://www.njcleanenergy.com/renewable-energy/programs/srec-registration-program/registration-forms

NEW JERSEY PV MARKET NJ's REIP Renewable Energy Certificates (REC)

NEW JERSEY PV MARKET REC's trading prices & evolution

Edison innovation Clean Energy Fund:

- The Clean Energy Fund provides grants of $100,000 to $500,000 to New Jersey companies to commercialize identified renewable energy technologies and innovative technologies that significantly increase energy efficiency. All grants are subject to a 50% matching funds requirement.

CESCI loans:

- Clean Energy Solutions Capital Investment Loans. Projects that meet the above qualifying criteria are eligible for zero-interest loans with terms of up to 10 years. Loans are limited to 50% of project costs up to a maximum of $5 million.

NEW JERSEY PV MARKET Currently suspended programs

- Public Service Electric and Gas (PSE&G) of New Jersey offers loans for "behind the meter" photovoltaic (PV) systems to all customer classes in its electric service territory.

- The program will provide loans covering 40-60% of the cost of PV systems with the remainder to be financed separately by the customer. A loan term of 15 years is available to non-residential customers at an interest rate of 11.3092%.

- Loans are only available to systems of 500 kilowatts (kW) DC or less that are eligible for net-metering and to generate Solar Renewable Energy Certificates (SREC's) under state rules.

- Customers may repay the loan through cash payments or by signing over their SRECs to PSE&G.

NEW JERSEY PV MARKET PSE&G (utility) Solar Loan Program

NEW JERSEY PV MARKET Competitors & business models

- A quick look at competitors shows different business models present in the commercial rooftop photovoltaics market.

- Analized competitors:

> Arosa Solar: http://arosaenergy.com > Trinity Solar Systems: http://trinitysolarsystems.com > The Solar Center: http://thesolarcenter.com

- Two basic business models*:

a) Full site-host ownership (through lease or other financial tools)c) Power Purchasing Agreement (PPA)

- QUESTION: Do REC's justify a rooftop lease business model?

*Tax benefits being the main issue.

NEW JERSEY PV MARKET Full site-host ownership model

NEW JERSEY PV MARKET Business model: Power Purchase Agreement (1)

NEW JERSEY PV MARKET Business model: Power Purchase Agreement (2)

NEW JERSEY PV MARKET Business model: Power Purchase Agreement (3)

- The site host neither owns nor leases the PV system, but instead agrees to buy all of the electricity generated by the system for a specified term, through what is known as a power purchase agreement (PPA).

- The project developer either owns (in partnership with it stax investors) or leases (from its tax investors) the system, and is responsible for operating and maintaining it throughout the entire PPA term.

- The project developer (and its tax investors) take on the risk that the project does not perform as expected – i.e., the site host only pays for power that is actually generated. As the owners of the project, the project developer and/or its tax investors take all of the project’s tax benefits (and, in effect, pass a monetized portion of them through to the site host in the form of a lower PPA price).

- From the site host’s perspective, a PPA feels very much like an operating lease: The primary difference – which reportedly is a major selling point for the PPA10 – is that, under a PPA, the site host is not required to operate and maintain the system, and likewise faces no performance risk. In short, the PPA model effectively provides the site host what it presumably really wants – solar power at an affordable price, rather than solar equipment that it must operate and maintain.

NEW JERSEY PV MARKET Business model: Power Purchase Agreement (4)

Source: The Solar Group

- Solar contractors need a valid Electrical Contractor license to work with PV installations in the state of New Jersey.

- The Electrical Contractor license is controled by the Board of Examiners of Electrical Contractors and requires five years experience and passing an exam which is scheduled five times a year.

More information:

http://www.njconsumeraffairs.gov/electric/http://ibew269.com/library/document-library/20100408082458.ccc_spring2010_solar%20article.pdf

NEW JERSEY MARKET Electrical contractor license

NEW JERSEY PV MARKET Timeline for coming months

SEP - Prepare an agenda of New Jersey contacts to meet during Solar Power

OCT

NOV

DEC - Visit New Jersey and meet potential partners

JAN-FEB - Close agreement with partner and start landing

MAR-APR - Start operations. Be successful!

- Meet with New Jersey PV market contacts during Solar Power to learn about the market - Define a strategy for market penetration- Look for potential partners- Contact potential partners (PV installer/PV professional to start joint venture with)- Prepare a trip to meet potential partners

ONTARIO MARKET PV industry associations & resources

- Solar Energy Industries Association (SEIA): http://seia.org- Solar Electric Power Ass. (SEPA): http://solarelectricpower.org - New Jersey Clean Energy Program: http://njcleanenergy.com - New Jersey Board of Public Utilities: http://state.nj.us/bpu - North East Roofing Contractors Ass.: http://nerca.org - Database of Solar Incentives for Renewables: http://dsireusa.org