- Solar Basics
- Get Started
Commercial Solar Overview
At OnPeak, we understand that our commercial customers and their requirements are distinctly different than those of our residential customers. Every business has its own initial motivations for investigating a solar electric system. Some are driven by the positive economics associated with systems sited in New Jersey while others see the marketing benefits of being a green business partner. We've organized the tabs in this section to correspond to our own decision making process and hopefully it fits yours but feel free to jump around:
- In Solar Basics you'll learn how photovoltaics generate electricity from sunlight and the relationship among all the other components of a solar electric system and how they affect how quickly you'll earn a profit from your system.
- Once you understand the basics, the Benefits of your solar system will make more sense and perhaps you'll come up with some benefits that we haven't listed but are important to you, your business, and your customers. Share them with us.
- Solar economics are important and are driven primarily by federal and state Incentives that are continually changing.
- We'll need to figure out how you pay for your system so our Financing tab outlines some of the options available today which range from a traditional outright purchase to a power purchase agreement that requires no capital from you. However, each method has its pros and cons.
- In Implementation you'll see how easy and timely the process really is for you regardless of the financing method you choose.
- By the last tab, you've made your decision and can Get Started
Once you've reviewed our commercial tabs, take a look at our FAQ page and our Glossary page for more information. If you have any questions go ahead and contact us. We're just a call away. It's Just That Easy!
Solar Basics for Businesses
An important element in the process of "Going Solar" is understanding how solar modules (panels) convert sunlight into electricity and how these modules integrate with other components in the system to bring power into your facility. By reading the material on this page, you'll be well informed and be able to pass on information about your system. If there is a term that you're unfamiliar with and that we don't define here, most likely it's included on our Glossary Page.
Let's start with the solar cell:
A standard solar cell is comprised of silicon, a semiconductor material also found in computer chips, but for solar cells the semiconductor material can also be produced from other materials that provide advantages and disadvantages from traditional silicon. For our purposes we will look at three types of solar cells:
- Monocrystalline Solar Cells
- Polycrystalline Solar Cells (also known as Multicrystalline)
- Thin Film Solar Cells (also known as Amorphous, CdTe, CIGS, and other variants)
Monocrystalline Solar Cells
A monocrystalline solar cell is formed from a single, large silicon crystal that is sliced in thin layers. Because the silicon is a single crystal, the transfer of electrons within the semiconductor is very efficient which results in this type of solar cell being the most efficient when compared to polycrystalline and thin film cells. The top face of the cell has a homogenous look and is coated to prevent reflection of sunlight. Because they are more difficult to make, these cells are also more expensive. Their efficiencies range from 14% up to 20% but are a good choice for businesses with limited roof area and high power demands.
These cells can be identified by their octagonal shape and distinct boundaries between cells that form a diamond shape where four cells meet when mounted on a module. Depending on the time of day and viewing angle, the cells often appear black or dark blue in color. Because the top surface of a solar module is glass and will reflect objects above and beside the module, a solar array will often take on the the color of the sky, nearby trees, or even a facility's walls. The reflection will change with your viewing angle.
Polycrystalline (Multicrystalline) Solar Cells
These cells are similar to monocrystalline except they are manufactured from a single mass that is comprised of randomly oriented silicon crystals. Because of the various boundaries between the individual crystals, these types of cells are not as efficient and range from 13% to 15%. They are less costly than monocrystalline and are a good choice for standard installations and in fact make up a high percentage of the modules installed in commercial and utility scale environments.
Although polycrystalline cell efficiencies are lower, on a module level their efficiencies are often similar to monocrystalline because the cell density of polycrystalline is greater in a given area. The polycrystalline cells with their rectangular shape join evenly at seams verses the octagonal shaped crystalline cells with their lost corner areas.
These cells can be identified by their rectangular shape and bright blue color although certain manufacturers are using coatings to create a darker module face which provides a more aesthetic look in certain installations.
Thin Film Solar Cells
This type of solar cell has no crystalline structure and is produced by depositing silicon or other semiconductor material with photovoltaic properties on a substrate material. Such cells in the past were generally lower in cost, however, currently they are not cost competitive with crystalline modules. They are less efficient than modules created from crystalline silicon although when thin film material is used in a flexible format it has advantages in allowing Building Integrated Photovoltaic applications (BIPV). Other types of semiconductor material include copper indium gallium selenide, abbreviated CIGS. Because the efficiency of thin film is generally less than 10%, a much greater number of cells must be used to generate the same amount of electricity as can be generated from crystalline cells. This can result in additional racking and installation costs and may not be optimal where roof area is limited. However, thin film does have the advantage of tolerating heat better than crystalline. Unless there is a very specific need for a BIPV installation, our current recommendation is to utilize a crystalline solar module because of their lower cost and higher reliability.
Solar Panel (Module)
The term solar cell and solar panel or module are often used synonymously, however, a photovoltaic panel or module is an assembly of solar cells that are interconnected and packaged in a unit that generally has a tempered glass covering, a frame, and a backing material of plastic, metal, or fiberglass. Panels come in a variety of sizes, shapes, efficiencies, and wattages. In the panels below the monocrystalline cells are clearly visible.
Similar to computer processors, each solar cell has a slightly different efficiency. Manufacturers sort cells and package them into modules to arrive at a target wattage for each module.
This target is often a range for a module and is known as the module's Power Tolerance (described as "+ or - 5 watts" in the case of one manufacturers module). Many manufacturers are now producing modules with only a positive power tolerance which guarantees that the module will produce its rated wattage (under certain solar test conditions - power output of modules varies with the amount of solar radiation). Because of these different cell efficiencies, identical sized modules of a single manufacturer may carry different wattages. For example, Canadian Solar's CS6P Crystalline Modules come in wattages DC of 235, 240, 245, 250, and 255 in an identical sized panel. Because modules are sold on a price per watt DC, the higher wattage module will be more expensive but a lower number of modules will be required to achieve a certain system size. Using modules at the top end of a manufacture's range allows for higher power density where roof size is a limitation. As such, these modules are often in short supply.
Manufacturers also use different colored Backsheets on monocrystalline modules (the material behind the cells). By using a black or dark backsheet, the monocrystalline cells boundaries and their "diamond" corner intersections are not as apparent. This along with using a black frame, sometimes termed bronze, allows the module to take on the appearance of a black skylight and/or have a homogenous look which many system owners prefer especially for parts of a building that has street exposure. Although such panels were more expensive than their silver backsheet, silver aluminum frame counterparts in the past, their availability and cost has improved.
Polycrystalline modules such as the modules to the left are often packaged with a silver backsheet and silver aluminum frames and are frequently used in commercial rooftop and ground mount applications. Polycrystalline modules are also available with black backsheets and black frames, however, the cells themselves will still have a blue color even when the module is coated to make the cells appear darker.
Backsheet and frame color are purely aesthetic characteristics and do not significantly impact the efficiency of the module.
The rear of a module has a junction box which connects the various cell strings to two leads, one positive and one negative. A module also has an identifying label with the module's specifications and listings. Serial numbers are normally found on the face of the panel underneath the glass covering and sometimes on the rear of the module.
Individual solar cells have very low voltages but when mounted in series on a module, the overall module attains a voltage level of 25 to 35 volts although many modules are below or above this range. Because inverters (see below) work most efficiently at higher voltage levels, modules are strung together serially to achieve voltage levels as high or higher than 400 volts DC.
Module warranties vary by manufacturer but have standardized to around 10 years for defects in material and workmanship and 25 years for power warranties.
All modules will experience some level of power decline over their service life. Most manufacturers will warrant their panels will produce at least 80% of their original output for 25 years. Some manufacturers have begin providing what is termed "linear power output warranties" where the module's power warranty is based on an output that declines year by year in a linear fashion rather than a stepped warranty (i.e. 90% for years 1-10 and 80% for years 11-25). In contrast, a linear warranty might provide for a 97% guarantee of power output in year one. Although modules are robust and rarely fail, having a more attractive warranty provides additional system value.
To further provide confidence, some module manufacturers have begun contracting for third party insurance to cover their products providing additional confidence.
The inverter is the component of a solar electrical system that converts the panel generated DC current into AC current that is suitable for your business equipment regardless of its AC power requirements. For grid-tied systems, the AC current generated must be of sufficient quality to allow connection to the utility's grid. Most modern inverters are certified for such installations.
Most inverters are warranted for 10 to 15 years but can operate substantially longer. Because the solar modules can have a service life in excess of 25 years, most likely your system will require an inverter replacement.
To maintain its highest efficiency, an inverter must be connected to an optimal number of panels. Normally, in selecting a system it is not a good idea to have the system installed with an oversized inverter with the plan that you will install additional panels later. Either install the larger system or install a smaller system and then in the future install your add on system complete with its own panels and inverter. Your OnPeak representative can discuss your options if you are planning on upgrading your system size in the future.
If in a blackout, the utility power in a grid-tied system shuts down, the solar electric system will also shut down to avoid what is called Islanding which is a safety concern for utility workers. If your system were to remain operational and be feeding electricity into the grid, utility workers could be endangered. If you install a backup battery system, you can continue to maintain power.
Available for a number of years but relatively new to the solar industry are MicroInverters that are connected to one or two modules and are generally mounted either to the solar module itself or to the mounting structure (rails) that support the modules. MicroInverters have the advantage of eliminating some of the issues associated with the high voltage series stringing of modules to a large central inverter. They are the optimal choice in cases of shade, small roof areas, and multiple small arrays with different tilts and orientations. Expansion is also easier and they eliminate the potential for a single point of failure as is the case with a single large central inverter. MicroInverters are monitored remotely and manufacturers provide the system owner a method to view the activity of the system on their personal computer or through a web portal.
The MicroInverter's disadvantage is that it is located in an often inaccessible location which makes maintenance and replacement difficult. For flat roof ballast systems that maintain spacing between module rows, these inverters are accessible and can provide a good solution in areas that are shaded during part of the day by exhausts, hvac equipment, or even the parapet. They are currently more expensive than central inverters on a per watt basis but can be the only solution for certain installations.
Usually not installed on most grid-connected solar installations, a battery stores any extra electricity that the system generates. In an off-grid system, the stored power can be used when the solar electric system is not generating power such as at night or not generating enough power such as during cloudy periods or when the power demand of equipment exceeds the generating capacity of the system.
For on-grid systems, the grid can be considered the battery and provides power at night or in cloudy conditions or when power demand excess the generating capacity of the system. However, when utility power shuts down, a grid-tied system without a battery will also shut down for safety reasons. The advantage of having a battery is that your system will continue to operate in a blackout and can be used to power equipment. The disadvantage is that battery systems, depending on their size, can add significant additional cost as well as complexity to the installation and require routine maintenance and replacement every few years. Since most industrial businesses utilize significant power, it is often more cost effective to implement a backup generator to continue operations during a blackout rather than large battery systems.
System Production Meter (SREC Meter)
A system production meter is an electric meter which records the amount of electricity generated by the photovoltaic solar system. Although most inverters display the amount of electricity generated, States such as New Jersey are now requiring the installation of a system production meter for all solar installations and requiring that these meters have specified accuracy levels (that most inverters are not certified to achieve). In New Jersey, the system production meter readings are reported to PJM-GATS, a system that tracks electricity generators and their generation. The readings are used to determine the number of SRECs the system will be issued. An SREC or Solar Renewable Energy Certificate is a certificate that can be sold and represents all the clean energy benefits of electricity generated from a solar electric system. Each time a solar electric system generates 1,000 kWh of electricity, an SREC is issued which can then be sold. SRECs are one of the sources of income (cash) by which a system owner generates a return on their investment in Solar.
A net meter is an electric meter capable of recording both the amount of electricity supplied by the utility to your facility and the amount of electricity fed into the utility's grid from your solar electric system. A net meter is used to supply the data necessary for "Net Metering" which is an electricity policy that allows you to receive credit (or a deduction from your electric bill) for the value of the electricity your solar electric system has fed into the utility's grid. New Jersey currently maintains a net metering policy allowing credits at the retail rate with any annual excess being purchased at the utility's avoided cost rate.
Such a meter spins both forwards and backwards, the latter indicating that your system is feeding the grid. Most meters today are digital such as the Atlantic City Electric meter shown. Since this meter is digital it doesn't physically spin, but it still records the net of the power inflow and outflow. In the case of the three phase meter shown, demand is also being recorded so when the solar is operating, demand is being reduced and if your business peak is during the day from hvac and/or operations, the system can help reduce your demand charges as well as kWh usage.
After the system is installed and your facility's interconnection to the grid is approved by the utility, the utility comes out and replaces the existing meter with a net meter. In addition, various labels and tags are added to indicate that the facility is solar powered.
Balance of System
The balance of system term is often defined differently but is used to describe whatever else is required for a system to function beyond the photovoltaic panels. Accordingly it might include the following:
- Net Meter
- Safety Disconnects
Racking generally consists of metal structures that are used to connect the building's structure to the solar modules. In the case of flat roofs, the preferred method to avoid penetrating the roof surface is to use a ballast system where the racking and modules are held in place by weight, usually concrete blocks. Because each building has its own characteristics, the system is specifically tailored to accommodate the roof load capability and wind loads. Ballast systems have various styles including systems with wind deflectors which reduce the amount of ballast required. Where ballast systems can not be used, systems can be bolted to a flat roof, but special care should be taken to ensure appropriate waterproofing. This is generally performed by the buildings roofing contractor to maintain warranties.
One of the best system attachment methods available for commercial roofs is for standing seam. For these roofs, attachment can be made directly to the standing seam and no penetration of the roof surface is necessary. Engineering must be done to ensure that the roof can support both the weight of the system as well as the wind uplift, but most often standing seam roofs can accommodate systems.
In addition to keeping the panels securely fixed to the roof, racking provides a space between the roof and panel to allow for air circulation. Without this circulation, the panels would become very hot during operation and produce less electricity. HVAC and other roof equipment can significantly affect the placement and quantity of panels. If you are planning a new facility, and locate roof equipment optimally, your system can be more cost effective.
For commercial buildings with traditional asphalt shingle roofs, identical methods can be use to attach and mount the system as used in residential applications. OnPeak exclusively uses flashing material designed for solar applications to seal the penetrations into the shingles and structural members of the roof. This is an important part of the overall system that many installers avoid to reduce the installation material and labor cost.
There are electrical connections between individual solar modules to join them together into what is termed a string. The string has a much higher voltage than the individual modules as the modules are interconnected serially. This higher voltage allows the inverter to function optimally. A number of individual strings comprise an array. One or more strings are individually connected to an inverter. Depending on the number of strings in your array, you may need more than one inverter.
In MicroInverter systems, one or two modules are connected to one MicroInverter. The MicroInverters are then interconnected in parallel; a number of interconnected MicroInverters is termed a "branch" verses "string" which refers to a number of serially connected solar modules. Accordingly, the individual MicroInverter voltage (normally 240 AC or 208 AC) is the same voltage as the "branch" interconnection wiring verses a "string" in which the wiring may carry DC voltages considerably in excess of the module voltage (10x or more).
There is also wiring between the inverter, solar load center, power disconnects, and your facility's electrical panel where your circuit breakers are located (load center). There may also be low voltage communication wiring between your inverter and a performance monitor. The wiring between the modules and the inverter handles DC electrical power, while wiring from the inverter to your electrical panel and meter handles AC electrical power. The low voltage wiring is generally DC.
Safety DisconnectsThere are safety disconnect switches at various points in the system. One between your modules and the inverter and another between your inverter and your electrical panel. These two disconnects provide the ability to turn power off to your inverter (so that it can be serviced) and to disconnect the system from your facility's electrical system and the utility-grid. Depending on the system, these disconnects may be incorporated in the inverter. Systems with batteries and multiple inverters may have additional disconnect switches. In Microinverter systems, the disconnection is executed by disconnecting the entire system or an individual branch of MicroInverters from the utility grid power. Once the Microinverter no longer senses utility grid power, it shuts down. This is a safety function, specified by UL 1741, and is also implemented in central inverters.
Inverters normally include a basic readout of how much energy has been produced but to track the statistics of your system, most businesses opt for at least a basic solar monitoring system whose display device is located in the office or even retail area. Basic units can provide the amount of energy produced while more sophisticated units can analyze your production and determine whether the system is indeed operating properly. There are also third party monitoring services that link to your system remotely. Many of the advanced monitoring units provide the ability to access the data through personal computer software to generate detailed reports and even serve them online so you and your customers can see how your system is performing in real time.
Benefits of a Commercial Installation
Solar electricity has many advantages for a business. Among the most important are:
- Lower power bills
- A great return on your investment
- Increasing your business's value
- Doing what is right for the environment
- Supporting the Country
A solar electric system will immediately reduce your electric bill and, depending on the size of your system, may eliminate it entirely due to the "Net Metering" policies adopted by the State of New Jersey. Any excess power your system generates is fed back to the utility grid and you receive credit for this excess that can be used to offset the electricity you pull off the utility grid when your business uses more power than your system can generate such as at night or during very cloudy weather. If you have any excess at the end of an annual period, the utility will reimburse you at their avoided cost rate. This rate is much less than current commercial rates but is a better value than if the value of any excess were to revert to the utility. Most businesses use more power than can be supported by a solar electric system especially in multi-story buildings. For businesses with large unused ground areas or brownfields, it is often cost-effective to ground-mount systems.
Locked-In Rates and Predictability
You won't need a crystal ball to predict what your future electric rates will be since your business will be generating its own power for the next 25 years. It will be locking-in the price of power and we all know power prices are expected to increase so it's a no-brainer that the business will be saving in the future.
With available Federal and State incentives such as the 30% Federal income tax credit for businesses and solar renewable energy credits that can be sold on the open market, a solar electric system has the potential to be a profitable investment.
As more New Jersey businesses caught on to the value of solar, upfront incentives (often known as rebates) available in 2009 and 2010 for businesses were eliminated. Because module prices and installation costs have declined substantially in recent years as a result of the tremendous volume in the State, an investment in solar can be economically viable even without a State rebate.
The OnPeak Solar Equation
The return on your solar investment is dependent on a number of factors or variables that go into what we like to call the "OnPeak Solar Equation" the sum of which provides the highest return on investment (or alternatively the lowest cost per generated kWh of electricity). The variables are:
- How much sun your location receives
- Your utility power prices
- The size and efficiency of your solar electric system
- The available incentives from government or other sources
With the equation, a solar electric system in New Jersey can easily outperform the return on investment capable with a system sited in a state with excellent solar resources such as Arizona. This is because the power prices in New Jersey are much higher than those in Arizona. Another example is tracking systems which can improve dramatically the power generated and significantly decrease the cost per kWh of the generated electricity.
Payback and ROI
Many solar professionals and their counterparts in the utility and financial circles like to equate the term Payback with the Return on Investment you'll see on your system, but the terms are completely different. The term Payback reflects the period of time required in years to recover the cost of a solar electric system and is simply the number of years it takes for the sum of the financial benefits associated with a solar electric system to equal the expenditures made to that date. Payback periods can vary significantly from system to system and are highly dependent on the variables in the solar equation noted above. Depending on the future value attributed to SRECs in NJ, system paybacks can be expected to average 7 to 10 years.
Unfortunately, the Payback metric does not take into account the time value of money (present value factors), inflation in electric power prices and system maintenance costs, and the effect of taxes. More importantly, Payback completely ignores the value of the electricity the system generates and the value of the SRECs created after the Payback point. These can be substantial for a system with a 25 or longer year life.
Payback is an acceptable method for comparing one solar electric system to another but when deciding whether an investment in a system has a greater return potential than a traditional investment in securities, other property, or other alternative business uses, we must take into account the time value of money (inflation). Investment returns from other sources such as money markets are currently very low, therefore, even a modest ROI on a solar system can be attractive. The ROI on a system is even more variable than the Payback as the number will also depend on your tax rate. Your OnPeak representative can give you some information but you should probably pull in your legal and financial advisors to make a fully informed decision based on your business' circumstances.
A solar electric system can improve the value of your business through reduced expenses and the stabilizing of future costs. The positive marketing aspects are limitless. Environmental awareness has become almost expected thereby placing a business at a disadvantage if it has not taken steps to become green.
In addition, New Jersey provides a property tax exemption.
By avoiding electricity produced from fossil fuels, your business's system when combined with all the systems throughout the world will have a dramatic positive impact on the environment. Utility plants that burn coal and other fossil fuels create significant air pollution and contaminate soils. Even nuclear power has its disadvantages with regard to the long-term storage of spent radioactive material and the dangers of accidental radioactive releases such as those recently seen in Japan.
Using solar avoids the creation of smog, acid rain, and greenhouse gases helping to slow global warming and the negative health affects associated with the burning of fossil fuels. Putting your solar electric system in place is like planting a forest of trees.
A solar electric system provides your business with increased energy independence from foreign oil sources. Distributed power also reduces the amount of utility infrastructure needed throughout the country eliminating the energy required to produce the equipment as well as the energy lost by transmission of electricity over long distances.
Incentives for Commercial Solar Installations
Thanks to some the Federal and State incentives for businesses, the investment needed to acquire a system and be energy independent and green is affordable!
Federal incentives continue to be available but NJ State upfront incentives (often called a rebates) have been eliminated, however, the SREC, the other NJ incentive, will continue to be available to businesses and is discussed in detail below.
For businesses there are four incentives that currently apply and we'll go into detail here on each of them but to understand the full impact on your business you'll have to schedule a site visit at which one of our representatives can help you better understand the specifics:
- Federal Solar Investment Tax Credit and Accelerated Tax Depreciation
- Solar Renewable Energy Certificates (generation based incentive)
- Net Metering
For businesses, Federal ITC legislation provides a strong incentive to acquire a solar electric system. The Federal legislation provides for:
- A 30% investment tax credit on solar property available through 12/31/2016
- There is no maximum limitation on the credit.
- Allows the use of the credit to offset AMT liability.
- Allows any unused credits to be carried forward up to 20 years.
The credit is calculated based on the business's expenditure for the solar equipment and installation. The accelerated 5 year depreciation schedule is available, however, the basis of the solar property will be reduced by 50% of the ITC or grant. Accordingly, depreciable basis is reduced to 85% of the system's cost.
An important incentive for New Jersey Businesses is the ability to generate and sell Solar Renewable Energy Certificates (sometimes called Credits or Green Credits). These certificates are created through the generation of solar electricity and are considered a production based incentive.
New Jersey and other states have created Renewable Portfolio Standards or RPS's. The New Jersey RPS most recently amended in July of 2012 requires utilities in the State to obtain a certain amount of their power from renewables of which a portion needs to be from solar electric systems. In order to meet their RPS requirements, the utilities purchase SRECs from businesses and homeowners which have solar electric systems and are generating SRECs. If they don't purchase the SRECs, there is a minimum value per Megawatt Hour (mWh or 1,000 Kilowatt Hours) they need to pay to the State called a Solar Alternative Compliance Payment (SACP) whose value is $641 for energy year 2013 (ending May 2013).
When the new SREC program was developed back in 2007, it was expected that SRECs would trade in the open market at approximately $100 below the SACP, however, the values could fluctuate depending on the number of SRECs available. In 2009 and 2010, because there were not enough SRECs generated in New Jersey, the SREC prices traded very close to the SACP value ($711 and $693, respectively). With this attractive incentive, a federal grant program for businesses, and a drop in equipment cost that lead to lower priced installations, solar installations grew dramatically in 2010 and 2011 and the expected SREC generation of these systems (many commercial and utility(solar farm) scale) was forecast to exceed the RPS requirements in energy years 2012 and beyond. Because the price of an SREC is determined by supply and demand, the price of SRECs dropped dramatically in 2011 and 2012 to levels below $100 per SREC.
To stabilize the market for SRECs in NJ, the State enacted legislation in July 2012 to increase the RPS requirements in the next few years. An RPS schedule as well as SACP value was set until the year 2028. Limits on large projects were also put into affect along with other changes such as increasing the life of an SREC to 5 years (discussed below). Another change is the shift in the use of open space (farmland) for solar. Large ground installations in the future will primarily be based on brownfields and similar areas.
For every Megawatt Hour (mWh or 1,000 Kilowatt Hours) generated by your system, one SREC certificate will be provided by New Jersey to you which you can then trade(sell) to the utility that needs it to meet their RPS requirement. SRECs are created for 15 years, however, after that period you can still create Renewable Energy Credits and be able to trade them on their respective market.
SRECs created from generation after July 23, 2012, have a life of 4 to 5 years depending on when the certificate was created within the energy year. For a certificate created in energy year 2014, the certificate can be sold to satisfy an RPS for 2014 and also for 2015, 2016, 2017, and 2018. Because there are only a certain number of SRECs required per the RPS for each energy year, it is possible for the requirement to be fulfilled before a business is able to sell their certificate (perhaps because their asking price was higher than other individuals selling certificates). The business can then attempt to sell their certificate in the next year, however, after the fourth energy year post their certificate creation year, the certificate will expire and can no longer be sold.
Companies and even individuals can purchase SRECs which allows anyone who purchases an SREC to say they use solar power and are "green". If you sell all your SRECs, technically you cannot state that you use green power (even if you use all the power that you generate in your business) but you can say you host a system which is just as good for the business' reputation and financials as it is for the environment. You can also just retire your SRECs (not sell them) and in that case you can say you use solar power and are "green".
For a business to take advantage of SRECs in New Jersey, they must register their solar project in the SRP program (SREC Registration Program). There are various system requirements and paperwork that must be completed along with a utility interconnection, local inspections and other analysis. OnPeak can handle all the requirements for you but will still require you to review and sign various documents.
To trade SRECs to third parties you'll need the following:
- A REC (renewable energy credit) account on the PJM-EIS Generation Attribute Tracking System (GATS for short). We'll help set up your account which is very easy to do.
- The SREC certificate which is generated in electronic form.
PJM is the regional transmission organization that is responsible for the movement of wholesale electricity in the Northeast US including New Jersey. PJM EIS or PJM Environmental Information Services maintains a Generation Attribute Tracking System or GATS. This GATS provides reporting and tracking services for emissions data and renewable energy credits including SRECs. For owners of commercial and residential solar systems in NJ, the PJM EIS - GATS platform is used to track monthly solar generation, create SRECs, and also provide for certificate trading and retirement.
To create an SREC you'll need to generate solar electricity and the amount you generate will be recorded on your production meter. Each month you'll provide your production to PJM-GATS who then provides an SREC for each Megawatt Hour of generation. Certificates are only created for whole Megawatts and any fraction produced is carried over to the next month (and for any month the fraction left in the prior month is carried forward).
It all sound complicated but it becomes easy after a few months. You can also assign your SRECs to a broker or aggregator who will sell them for you or you can enter into a long-term contract for the sale of your SRECs. You can find out more about these options on our SREC Financing Page.
Note: there are varying interpretations on whether SREC sales represent taxable income. OnPeak advises you to consult with your tax and legal advisors to confirm the financial and tax implications SREC sale proceeds. Since the business will be depreciating the system, it should be expected that the income derived from the system but this may not necessarily be the case. Some installers will definitively state that SREC sales are not taxable, however, the NJ Clean Energy SREC Frequently Asked Questions web site does not provide an answer and specifically advises that you should ask your accountant the following questions:
Is the money from the sale of SREC's treated as taxable income?
Should I provide my tax identification number to a company that sends me a 1099? and
What kinds of deductions do I qualify for?
As we stated previously, you will be filing your tax return and that the installer can not and will not be guaranteeing the non-taxability of SREC sales they have presented to you in a proposal. Your total solar investment before any State incentive and Federal ITC should be your point of comparison on the same basic system when evaluating one system or installer against another. Aggressive tax positions, high power generation, and high inflation assumptions are typical methods used to inflate system returns and you should be wary of such practices.
"Net Metering" is an electricity policy that allows you to receive credit (or a deduction from your electric bill) for the value of the electricity your solar electric system has fed into the utility's grid. New Jersey currently maintains a net metering policy allowing credits at the retail rate with any annual excess being purchased at the utility's avoided cost rate.
To effect the net metering policy, your utility will replace your existing utility meter with a net meter that is an electric meter capable of recording both the amount of electricity supplied by the utility to your business and the amount of electricity fed into the utility's grid from your solar electric system. Such a meter spins both forwards and backwards, the latter indicating that your system is feeding the grid. Most meters today are digital such as the Atlantic City Electric meter shown. Since this meter is digital it doesn't physically spin, but it still records the net of the power inflow and outflow. In the case of the three phase meter shown, demand is also being recorded so when the solar is operating, demand is being reduced and if your business peak is during the day from hvac and/or operations, the system can help reduce your demand charges as well as kWh usage.
Excess kWh generation in any month is added to a "solar bank" on the business' bill. During periods of excess consumption, this solar bank is depleted. At the end of an annual period the solar bank is reset to zero and the business paid for any solar kWh left in the bank at that time (see below).
Since NJ specifies that the size of a business' solar system generation capability can not exceed the immediate annual usage prior to the utility interconnection application, on an annual basis most businesses should expect that they will utilize some small amount of electricity supplied by the utility. In the case of a sunnier year than normal or where efficiency improvements have taken place in the the facility, the business may find that they have generated more electricity than they have used and the excess on an annual basis was fed back to the utility. This excess is purchased by the utility but at a rate much lower than the business pays. Note that such a case only occurs if the system was sized to provide close to 100% of the business' usage. If the system was sized lower, say 50% of the business' usage because of limited roof space or to reduce the investment required to install the system, most likely the business would not see any excess generation unless major improvements were put in place (conversion from all electric heating to gas or oil).
The annual period starts from the day the utility installs the Net Meter. The period can be changed once to accommodate the business. Such a change can be advantageous in the situation where a business wishes to utilize banked kWhs during heavy summer usage rather than have them cashed out because their annual period ends just prior to the summer. For businesses with large winter loads, just the opposite may be true.
Note: for businesses using third-party energy providers, it is important to communicate your solar addition to insure that the third-party will properly net meter your system. Additionally, there is currently no provision for carryover of banked kWh balances from one provider to another. Changing energy providers with a banked kWh balance will cause a loss of that balance.
Financing for Commercial Solar Installations
Focus on solar and renewable energy has prompted support by many financial institutions and utilities. Some of the most popular financing alternatives available are outlined below. We can assist you in determining which program is most advantageous and also help you through the financing process:
- Leases and Power Purchase Agreements
- Up-Front Lump Sum SREC Payment and Fixed Price SREC Contracts
- Utility Financing Programs
Other than an outright purchase of a system, obtaining a loan from a financial institution or other source generally provides the most benefit to the system owner from a return perspective. Generally, the lender will require that the benefit of any income tax credit be utilized to reduce the loan balance. For businesses with an existing borrowing relationship and viable operations, this method can be very easy to pursue.
Operating and capital lease programs are available for solar equipment. A popular alternative for large systems is the Power Purchase Agreement or PPA. Also known as a SSA or Solar Services Agreement, it is a contract between the owner of solar electric system and a user of electricity produced by that system. The user hosts the system on their property, whether roof or ground mounted. Because of the limited or no capital required from a user, such agreements have become attractive to users seeking alternatives to purchasing or leasing a system. It is a relatively new concept primarily geared toward businesses with large installations as the costs associated with the legal and financial structures required to implement the agreements are significant. With the decline of SREC prices in NJ and the elimination of the "Federal Grant" program in lieu of the Investment Tax Credit, PPA structured installations for NJ have become challenging. Businesses with multi-state locations may have an advantage in this regard. OnPeak has partnered with a number of nationwide (worldwide) firms which can provide support for multi-state installations.
Sol Systems provides its Sol Upfront as an option to help reduce the business' out of pocket costs by providing a lump-sum payment that is based on the size of the system. The SRECs produced by the system in the first ten years are committed to Sol Systems. Once you sign up, Sol Systems will lock in the amount of your upfront payment. After your system is registered, you receive a check providing you with immediate financing for your solar energy system and eliminating all risk associated with the fluctuation SREC market prices. For further information on SRECs and your financing options using Sol Systems visit our page on SREC Financing Options.
Fixed Price SREC Contracts
Sol Systems provides its Sol Annuity as a long-term solution that provides guaranteed prices for your SRECs even when spot market prices fall. You receive a fixed, quarterly payment for each SREC produced over a 3 or 5 year term. Committing to a loan can be easier knowing the business has a fixed price to look forward to on each SREC generated. This financing vehicle is the perfect companion for a 5 year loan. For further information on SRECs and your financing options using Sol Systems visit our page on SREC Financing Options.
In prior years, the various electric distribution companies (EDC) in NJ (Atlantic City Electric, PSE&G, Jersey Central, and Rockland) participated in a long-term SREC contract program or loan financing program. These programs expired in 2011, however, the utilities are currently working on an Extended EDC SREC Program.
Although the detail of these programs have not been finalized, it is expected that the program details would be similar to those previously implemented. The programs previously took two forms:
The first type of financing program was a loan program provided by the utility to its customers for commercial installations on a first-come, first-serve basis. The loan program was a good alternative for those businesses who did not have the ability to use a traditional financing vehicle. The utility structured the loan over a 15 year term such that the value derived from SRECs by the business would cover the loan payments. The system was used to collateralize the loan and the business needed to reside in the utilities service territory. The loan provided 40 to 50% of the system cost. In the case of this loan program, the business needed to identify an additional funding source, whether cash or equity, to cover the unfinanced portion of the system both pre and post the Federal Income Tax Credit. The positive aspect of the program was that the business was guaranteed a floor for their SRECs.
The second type of financing program was a SREC Based financing program with which businesses could enter into long-term contracts to sell their SRECs to the utility which served them. The purpose of the program was to provide a stable revenue stream through fixed price SREC values over a term of 10 to 15 years that would facilitate independent financing for businesses thorough loans or other means. The long-term contracts were acquired through an auction process where the lowest bidders received contracts (i.e. lowest cost to the utility purchasing the srecs). Because each auction had more bidders than available contracts, obtaining a contract through the process was not guaranteed. Since a business was required to "not" have installed a system in order to be eligible to bid, lack of a obtaining a contract did not expose the business to any risk associated with building a system and then not having a long-term srec contract available to absorb part of the cost of the investment. The program was very popular with businesses, especially those with larger prospective systems because the paperwork and complexity of this program made having larger system sizes advantageous.
Will endeavor to post updates to the future programs here as they occur.
The process of acquiring a solar electric system is rather straightforward. Although each installation will be different, the following can be expected the following to occur:
- Feasibility Evaluation
- Initial Site Visit
- System Design and Quote
- Contract, Rebate Application, and Permits
- Equipment Acquisition
If at any time during the process you have questions or concerns you can contact your installation manager to assist you!
Remember, It's Just That Easy!
When you first call On Peak, we'll collect some information to see if solar is right for you. They're easy questions including letting us know where your business is located, your utility provider name, and what your approximate bill is for electricity. We'll analyze this information and review a satellite image of your business to give you an initial assessment. Often the whole process can be done while you're on the phone and you'll know where you stand at the end of the call. Many businesses can accommodate solar and so it's likely we'll schedule a site visit.
Unless you have a significant amount of roof shading or have a business with very poor roof orientation, solar will work for you. Your electric bills should be significant (above a few $100 per month) but small installations can also make sense. There are a lot of details in designing and installing the right system for you, but don't worry, we'll do most of the work.
During the site visit, an OnPeak representative will review your property to determine the best location for your system and also perform an energy review to determine what system size is most appropriate. We'll need a current electric bill to do the analysis. We'll use some shading analysis instruments to optimize the location of your solar array.
We'll also bring along manufacturer literature for you to review and examples of panels and other equipment you're investing in. If possible, you'll want everyone involved in the decision making process at the site visit so that we can answer any questions firsthand.
During the site visit, the OnPeak representative will put together a rough system design that will show you the details of your photovoltaic system and its expected performance along with a preliminary proposal. We'll also go through the available Federal and New Jersey incentives to give you an understanding of what your out of pocket costs might be for the investment. We'll also give you a good primer on the production based incentives (SRECs) you'll receive on the electricity you generate. Much of this information is also available on the incentive page of our web site.
Based on the initial site visit, if it appears that you've decided that a solar system makes sense for your business, we'll prepare a formal proposal and a detailed system layout.
If your happy with our proposal, we'll prepare a contract that includes all the pertinent details and collect a deposit. We'll also prepare the paperwork needed for your SREC Registration and any incentive programs. We will also process the municipal permits and the utility interconnection paperwork that allows your system to be connected to the utility grid.
New Jersey is currently running a few weeks for SREC Registration and during that period we can file the utility interconnection paperwork and your municipal permits. Once we have all the approvals, we'll order any specific material for your system that we might not have on hand. It usually takes a week or two to receive everything but once it's all in, we'll schedule the installation with you. Just prior to the installation date, OnPeak will deliver all the materials to your business to insure that your installation will go smoothly.
On the day of installation our crew arrives and installs the modules on the roof and your inverter along with all other required electrical connections. Depending on the size of your system, this may take more than a single day.
As for any major work done on your facility, we should be able to contact you during construction in case there are any questions or access issues. Often project managers want to be around the entire time just to see how everything fits together. Naturally, if the electrical panel is inside the facility, we'll need to have access to it.
Depending on the needs of the business, we can schedule installation to accommodate the operations of the facility.
In order to start up your system and begin feeding electricity into your home and onto the grid, we'll schedule inspections with both your local code official (municipality) and the utility and be on site to demonstrate the system, answer any questions, and resolve any issues if they should arise. We may need access to the inside of the facility and you may wish to be present. Once the system has been approved by both parties, we can make your system live.
At this point, we'll show you the details of your system and explain how everything will operate. If you have opted for an external monitoring and reporting system, we'll show you how to use it.
You're now generating electricity for your business and if you have any excess generation, it will feed back onto the grid.
There may be additional inspections by the State to verify that the details of your system match those submitted in your registration. Additionally, there may be inspections by other parties depending on your financing method. Most of these inspections will be scheduled directly with the business but if you contact us, we can be on site to answer questions, etc.
After local and utility inspections, we submit as-built paperwork to the State to finalize your SREC registration. Once approved, you'll receive a system number that will allow the setup of your account on GATS so you can begin recording your solar generation. For each 1,000 kWhs of generation, GATS will issue you an SRECs which you can then sell yourself or use a broker or aggregator to sell.
Yep, it was just that easy ...
To schedule a site visit and receive a free quote please give us a call at 856-468-2355, e-mail us at email@example.com, or complete the contact form below. A representative will contact you to provide information and perform an evaluation over the phone to determine whether you're a candidate to Go Solar.