With energy bills soaring and the poor economy, the costs of solar energy systems may be beyond the reach of many businesses and municipalities. As George Harrison sang in his song, “Got My Mind Set on You,” it’s going to take a whole lot of money. He obviously was singing about his wish for solar. No fear, George. Companies such as Sunlight General Capital, have stepped in to create a bridge to provide the benefits of solar without business owners incurring the cost of the system. The financing model that the Company uses is called a solar purchase power agreement.
The Company recently completed two municipal solar projects in Bergen County, New Jersey at a cost of $3.5 million dollars. The two projects will generate 850,000 kilowatts a year and save the county anywhere from $250,00o to $1 million dollars depending the escalation of future electrical costs. (See their solar purchase power agreement projects, here.)
But the best part? Taxpayers reap the benefit without paying a dime for the systems.
Solar Without the Cost
Stacey Hughes, partner of Sunlight, walked me through how business owners and municipalities could benefit by partnering with her company. I urge you to listen to the below podcast or video as she explains the financing aspect of a solar purchase power agreement.
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As Hughes explained, her company is a developer and financier of solar system primarily in the northeast. Most companies don’t have the cash up front and a company like Sunlight finance the solar system based upon the electricity the system generates and the state and federal incentive derived for installing the system. Sunlight retains ownership of the system during that 15 year term.
In turn, the Company sells back the electricity to the owner. According to Hughes, the price is lower than what a business is paying now.
However, this model is not for everyone. If an owner’s roof is too old or in bad condition, this may preclude this type of model. Generally, a roof needs to be about five years old or in good condition. Hughes stated that they can roll in the roof repairs into the electricial price paid but this is a case by case situation. It all comes downs to the numbers.
Fixed Fee or Escalated Price?
Generally, the lock-in electrical price has a 2% increase each year for 15 years. According to Hughes, the benefit of this model is the power prices are locked-in to make budgeting easier. Companies can have a zero escalation price but this will affect the price paid per year.
What makes Sunlight different?
Sunlight personally invests in the project. Currently, they only enter into agreements in the Northeast so they are within driving distance to their projects. Their minimum system that they will invest in at the moment is about 50KW system. The Bergen County Prosecutor Office system pictured above is 116KW.
Seek an Installer or Financier first?
When Hughes was talking about financing, I wondered why not just find an installer and then seek financing. Hughes explains that if you know up front that you can’t afford to purchase a system outright, they should seek a purchase power financier like Sunlight. They in turn bring their construction partners to the table based upon the needs of the client. In addition, Sunlight offers a hybrid situation where a client can paid for part of the system and finance the balance.
Why not simply finance the system through a bank? Hughes explains banks lend based upon the revenues of your business. In a purchase power agreement is solely based on the solar project.
Is My Roof Big Enough?
The roof is not the only part of a building that is considered. In the case of a South Jersey manufacturer, Sunlight will be installing car ports in their parking lots, on the manufacturer’s various buildings’ rooftops, and in its fields. So Hughes indicated they look at the entire property, not just the roofs.
How Much Does Solar Decrease the Electric Bill?
Hughes found that they are saving their clients about 30% on their electrical bill. In the case of the Bergen County Prosecutor’s Office, their agreement was Bergen County would pay initially 9.7 cents per kilowatt to the Company.
But I wondered did Bergen County negotiate the best price per kilowatt? Could they have obtained a better result with an electrical aggregator such as Constellation Energy? (Think Costco for electricity. Buying in bulk and passing the savings to the consumer.) Hughes explains that the 9.7 cent quote does not include additional taxes or surcharges or demand charges of electrical energy supplier. The aggregator is only buying the power in bulk not supplying the power. In addition, the aggregator can not give you a long term hedge.
I’m Sold. But Sunlight is only in the North.
Although, Sunlight General Capital is currently only in the Northeast, Stacey offered her assistance in locating a reputable solar purchase power provider for your commercial buildings. She indicated that it is really important to find a solar financier that has done projects in your state. You don’t want to be a guinea pig since ever state has its own financial incentives. She further recommends a financier who is within driving distance so that you have a personal relationship with them. Remember, it is a 15 year partnership.
Join the Conversation:
- Would you consider a PPA for your commercial buildings?
- Are you really getting the best bang for the buck with a PPA?
- Is Solar PPA the way to go or are there other renewable PPA which generate better results?
- Have you entered into a PPA and has it met your expectations?
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