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Solar is coming in hot! After a brief pandemic-induced dip, solar installations are beginning to rebound. According to U.S. Energy Information Administration data, solar accounted for more than half of new energy generation installations in 2022.
Solar can be a key component of organizational energy efficiency and greenhouse gas reduction strategies. Clean, renewable energy helps reduce reliance on dirty fossil fuels. Rooftop or onsite solar installation is still a great option for facilities that have that capacity. As solar components have come down in price, and installation expertise in the industry has improved, the return on investment for onsite solar has come way down.
But if onsite solar isn’t an option, facility managers still have several others. From power purchasing agreements (PPA) to Property Assessed Clean Energy (PACE) financing to community solar, there are more options than ever before to take advantage of solar. The recently passed Inflation Reduction Act offers even more opportunities for facility managers to take financial advantage of renewable energy, as well. We recently talked with Ben Frank, an executive at the solar firm SolarEdge about solar options and financing strategies.
FacilitiesNet: First, what is the return-on-investment story these days for funding onsite solar as a capital improvement? What sort of simple payback can facility executives expect for onsite solar?
Ben Frank: The return on investment (ROI) for onsite solar as a capital improvement can vary depending on several factors, such as the size of the solar system, the type of inverter used, the location of the installation, the cost of electricity, and the financing options. As such, the typical payback period for onsite solar can range from anywhere between three and 10 years. Today, the industry is better able to evaluate CAPEX and OPEX costs and their impact on the lifetime value and revenue of solar systems, and technology selection plays a huge role in CAPEX and OPEX of commercial systems. While solar inverters, for example, may only account for around 10 percent of the system cost, they are responsible for 100 percent of the system’s energy production and control operation and maintenance expenses by enabling streamlined and highly efficient solar asset management.
Aside from financial advantages, installing onsite solar also helps to increase energy resilience. Another benefit to consider is that reducing greenhouse gas emissions can help in promoting a culture of sustainability among employees and attract environmentally conscious talent. These additional advantages contribute towards improving the corporate social responsibility reputation of a company.
FacilitiesNet: What are some best practices for commercial facilities to take advantage of PACE?
Ben Frank: Property Assessed Clean Energy (PACE) is a financing mechanism that enables property owners to obtain upfront funding for energy efficiency, renewable energy, and water conservation improvements, and pay it back over time through a special assessment added to their property tax bill.
To assess the potential for energy savings and identify the most suitable financing options, it is recommended to first conduct a preliminary feasibility study. It is also important to engage with local PACE programs or providers throughout to gain a better understanding of the eligibility criteria and requirements.
During the design and installation of the solar system, experienced EPCs should be hired to ensure optimal performance and long-term reliability. Additionally, it is advisable to implement energy-efficient measures such as LED lighting, insulation, and HVAC upgrades along with a solar system on the roof to further maximize the energy savings potential.
Once the project is completed, building occupants should receive training and education on how to use their energy efficiently to maximize the benefits of the solar system in place, reducing their energy waste.
For example, by using smart energy management techniques, solar system owners can use more of the energy produced onsite. E.g., moving energy-intensive processes, such as electric vehicle charging, to coincide with periods of high solar production.
FacilitiesNet: What is community solar, and which types of commercial facilities might it be a good option for? What are the costs, and what are the advantages?
Ben Frank: Community solar is a shared, typically ground-mounted solar system that allows multiple subscribers to benefit from the energy produced by a single solar array. It can be a good option for commercial facilities or businesses that cannot install solar onsite, for example, due to space limitations.
The costs and benefits of community solar can vary depending on local regulations, the subscription terms, and the pricing structure. In general, subscribers can anticipate a reduction in their electricity expenses while also contributing to the growth of local renewable energy sources. Community solar also offers benefits such as zero upfront costs, lower administrative overheads, and access to renewable energy for renters or companies that are unable to install on-site solar.
FacilitiesNet: How can facility executives take advantage of some of the provisions for alternative energy in the Inflation Reduction Act?
Ben Frank: Although certain aspects of the Inflation Reduction Act are still being finalized, it includes several provisions to support alternative energy, such as tax credits, grants, and loans. Facility executives can take advantage of these provisions by working with experienced energy consultants, engaging with local policymakers and advocacy groups, and exploring financing options, such as green bonds or energy service agreements.
Some of the best provisions to utilize are:
By taking advantage of these provisions, facility executives can expect to see improved efficiency by reducing their energy costs, increasing their sustainability, and improving their bottom line.
FacilitiesNet: What are power purchasing agreements, and what are their benefits? Why would a commercial facility consider a PPA instead of just laying out capital for onsite solar?
Ben Frank: A power purchase agreement (PPA) is a contract between a solar developer and a commercial facility to purchase electricity generated by a solar system at a fixed rate per watt, installed on the facility's property. The main benefits of a PPA are that there are no upfront costs, the cost of energy is consistent and predictable, and there is reduced administrative burdens.
A commercial facility might consider a PPA instead of laying out capital for onsite solar because it allows them to access renewable energy without making a large upfront investment and without taking on the maintenance responsibilities of the solar system. Additionally, a PPA can provide a long-term fixed price for electricity and can help avoid utility rate price hikes, which can in turn help with budgeting and planning.
Greg Zimmerman is senior contributor editor for the facility group, which including FacilitiesNet.com and Building Operating Management magazine. He has more than 19 years’ experience writing about facility issues.