The Time for Solar is Now

Nov 10 - Electric Light and Power

Solar energy has proven to be a viable alternative and sustainable way of meeting O.S. energy requirements. In the short term, however, key issues are impacting the solar energy industry. Most notably, the Federal Section 1603 Grant program, originally scheduled to expire at the end of 2010 and extended through 201 1, likely will not be renewed. The program, part of the American Recovery and Reinvestment Act of 2009, provides 30 percent cash rebates for qualified projects. The 30 percent grant is in lieu of certain tax credits, although projects are still eligible to depreciate 100 percent of the system, less half the cash grant or investment, for qualifying energy systems put into service between Sept. 8, 2010. and Dec. 31, 201 1. Many financial institutions are more willing to lend with the grant as a down payment. Commercial companies essentially can purchase a solar installation's equipment with no money down.

Time is dwindling to do a solar installation this year and qualify for the 1603 grant. But there are ways to safe harbor, or lock in the grant. If a company cannot finish a solar installation by the end of 201 1, it is still possible to get that check for 30 percent. One way to lock in the grant is to pay 5 percent of the installation's cost, which would constitute an irrevocable contract. If the equipment subsequently is delivered by March, a company still can get that 30 percent check.

Our company recently completed a solar installation for Kaiustyan Corpus 100,000-square-foot food-processing plant in Union, N.J. For this importer and processor of food products from the Middle East and Asia, the 700-KW rooftop installation was completed with the help of federal and state incentives. Estimated to be worth about $100,000 of Kalustyan's electricity, the installation covers most of the single-story industrial building's rooftop. Kalustyan's lender accepted the 30 percent federal grant as a down payment, so the company purchased the entire system without putting any money down.

The industry also faces the pricing volatility of solar renewable energy certificates (SRECs), which are tradable certificates based on energy generated by solar electric systems that can be sold or traded on the open market, separately from the power.

Many states have solar energy incentives. New Jersey is No. 2 behind California in solar installations. The state's advantageous rules on net metering of electricity coupled with state incentives, including SRECs, have been key factors. The problem is pricing volatility. Mirroring trends elsewhere, SREC values in New Jersey have fallen from about $600 in early 201 1 and $500 as late as mid- June to current pricing of about $150. That falloff is attributable to so much solar being built; it's a supply-and-demand issue. The more solar that is built - wim much of mat current uptick in demand related to companies seeking to complete their projects before the federal grant program expires - die more SREC prices have dropped. Utilities only must purchase a certain number of SRECS every year. There are solutions to SREC pricing. Specifically, there are ways of locking into forward contracts and loan programs that take the risk out of the SRE.

On the technological front, however, me prices of solar system equipment have fallen. It's tied to volume. There is a lot of competition. Compared with a year ago, prices have fallen between 10 and 25 percent, depending upon the market and installation size.

There are other ways to take advantage of current pricing and incentives. If a company must replace a roof, it is possible to bundle the cost of the new roof into me solar installation. In terms of die federal 1603 grant program, for example, the key benefit derives from the accelerated bonus depreciation, enabling a company to bundle that into a portion of the roof's cost. Photovoltaic panels generally rely on me reflectivity of a roof. If a company installs a white TPO roof- a reflective roof that also provides the benefit of cooling a building - bundling the cost is possible. If a company plans to spend the money on a new roof, this is another way to save money on the roof and a solar installation. Solar systems' and roofing components' working together are just part of sustainability. Solar is a valuable alternative in helping protect against rising energy costs and saving companies money while reducing the carbon footprint. Upgrading, for which financing is typically available, however, can take a substantial bite out of a company's electric bill. The potential of lowering overall operating costs by lowering electric as much as 80 or 90 percent can provide any business with a substantial competitive advantage.

Why invest in solar now? Property owners should evaluate their long-term energy opportunities and liabilities. Because energy prices are expected to rise tremendously during me next two decades, businesses should evaluate opportunities for renewable energy and energy efficiency programs.

The payback of a solar or energy efficiency project can be quick, as has been demonstrated across the country. More important are the benefits that will accrue to property owners for 25 years or longer.

With the expected long-term rise in energy prices, many businesses may be unable to survive. Doing something now, including carefully navigating the incentive- and pricing-related issues discussed, can help those businesses avert potential problems.