By Jason Slattery, director of solar for GEM Energy
Once upon a time, solar energy wasn’t viable as a commercial power option. Expensive components and a slow return on investment eliminated it as an economically sound opportunity for most businesses and institutions.
Those days are gone. New technology, streamlined industry best practices and market forces driving costs down today have made this alternative power a smart investment.
The solar industry has arrived
Cost improvements rapidly promote U.S. solar installations development. The cost curve continues to fall as technology becomes more efficient and more installations are built across the country.
An Oxford University study reveals solar panel pricing has dropped 10% annually since the 1980s. A business owner implementing solar in 1977 paid $76.67 per watt. Today, solar energy costs have dipped below $1.50 per watt in many cases.
Solar power is unique in the energy landscape. Commodities compete with one another and are bought and sold at constantly fluctuating rates. Solar, however, competes only with peak power, not coal or nuclear-base load generation.
A solar array reduces peak-demand electrical usage at a level of cost control that can’t be replicated. On-site solar power offers customers the capability to produce power immediately, with instant savings. It also locks in long-term rates with precise predictability.
Solar easily supports traditional energy by stabilizing power grids. This lessens dependence on individual suppliers, such as large power plants. And, it provides a clean source of power generation, often at the point of use.
Businesses can also enjoy various utilities incentives promoting alternative energy use. The Federal Investment Tax Credit runs about 30% of eligible system costs. Another, accelerated depreciation, based on Modified Accelerated Cost Recovery System, is set at five years. Many states also offer smaller incentives or tax reductions on solar generation.
But incentives are just the icing on the proverbial cake. The entire philosophy of using solar power embraces sound economic principles and savings. Solar is cost-effective today, often without needing incentives.
Where solar projects begin
Solar development projects typically begin when a municipal economic development officer or mayor hears about another city succeeding with solar, or a business owner learns of another company using solar to save on energy costs. They then want to learn how to achieve the same cost-saving benefits.
A comprehensive analysis of a customer’s energy usage patterns and electricity demand helps solar installers learn what a customer needs before the design phase ever starts. At GEM Energy, a Rudolph Libbe Group company, we look at the customer’s unique load profile—how much power is used and when—and how much it will cost to build and connect the array. Then we ask critical questions, including:
- What are you paying for power?
- Is there a time of day or year during which energy usage spikes?
- Which operations incur the greatest energy expense?
This audit information guides our design phase so we can optimally configure the solar array for maximum savings and determine the next steps in financing and construction.
Eliminating financing hassles
Raising funds to cover a solar investment no longer needs to be a painful process. Solar developers manage this step for customers to help them demonstrate to a financier that the undertaking is an opportunity that likely will deliver a significant ROI through the solar array’s lifespan.
Solar customers can turn to a third-party financing option—such as a power purchase agreement (PPA). Sourcing a solar investment through a PPA delivers instant cost savings. A third-party investor backs array construction. The customer, or off-taker, purchases power produced by the array directly through the utility, paying only for what it uses. The off-taker immediately gains the benefit of utility electric cost savings without incurring the cost of designing, constructing and maintaining the array.
Ohio Northern University (ONU), an independent university in Ada, Ohio, is one customer taking advantage of a PPA. The school enlisted GEM Energy to construct a 2-MW, ground-mount solar array to supply electricity to the campus. Completed in early 2017, the array, which spans 11 acres adjacent to the college campus, generates about 10% of ONU’s annual electricity needs. It reduces the university’s carbon footprint by more than 2,000 tons, equal to 210 average households.
To make the project happen, GEM Energy secured project financing under a negotiated PPA structure. Under the 25-year PPA, the university benefits from a no-out-of-pocket solution that required zero capital for the array’s construction and ongoing maintenance. GEM Energy is starting construction on the university’s second-phase solar initiative—a 1-MW array that will generate another 5% of ONU’s electricity needs. Like ONU’s first solar array, the second also is financed through a 25-year PPA.
Siting, design and construction
Site selection plays a definitive role in a solar array’s ongoing success. An appealing, sunlight-right site today might not be ideal five, 10 or 15 years from now. For example, a new commercial development near an array could adversely affect performance. Or, dust build-up from a nearby dirt or stone road could lower power output over time.
That’s why GEM Energy, as both a solar array developer and design-build contractor, work with our customers during this phase to forecast geographic variables over a 25-year-period. We want to ensure that a solar investment reaps the largest benefits possible for our customers. It starts with proper, forward-looking site selection and moves into design and construction, followed by ongoing maintenance, which we provide for the life of the system.
At the Toledo Zoo in Northwest Ohio, a 2.1-MW solar array operates on 22 acres of contiguous property—a vacant brownfield site, once contaminated and stranded in receivership. The zoo engaged GEM Energy to work with city and county officials to repurpose the property and eliminate the outstanding tax burden.
Underused land tracts, such as this brownfield, offer solar customers a great way to reduce their operating cost through solar power. And, with conservation as a key pillar in the Toledo Zoo’s mission, repurposing the land and installing a solar array on the property was a natural fit.
The zoo’s array generates approximately 30% of its annual energy needs. The zoo also benefits from peak demand savings because the array is on its side of the meter. With the load profile structured in its favor, the zoo can reduce its grid power consumption during the most expensive times of day. The Toledo Zoo noted $200,000 on top of consumption savings in the array’s first operating year because the solar array reduced the peak load contribution.
Aging infrastructure challenges municipalities nationwide. Especially east of the Mississippi, power generation/delivery systems installed years ago are approaching end of life. Many of these systems, power lines on telephone poles, are more than 70 years old, carrying electrons from a distant distribution point.
Because of this, municipalities are at the forefront of a huge growth opportunity. Modernizing with best-in-class technology through solar arrays and emerging energy storage will add reliability to the grid and give facilities more ability to control the energy they produce on site.
The convergence of lower costs and innovative services have ushered in solar’s golden age. In this new era, organizations of all sizes and scope can access high-quality, cost-effective solutions that start delivering savings from day one.