Rooftop Solar Power Generation

Part One of this article discussed the financial and policy incentives for using solar energy. The conclusion herein addresses some of the practical considerations.

Practicial Considerations for Solar Power Installations

There is significant concern among PV system operators over the cost and availability of insuring the PV market. According to a recent study by NREL, insurance products for PV systems are limited and premiums make up approximately 25% of a PV system's annual operating expense, and can account for 5% to 10% of the total cost of energy produced. Such pricing and availability (adjusted annually) affects the PV developer's ability to enter into profitable long-term contract pricing contracts, and requires that the risk associated with uncertainty be passed on to the customer. These issues reflect the lack of maturity of the PV market, risk perception, lack of familiarity with the marketplace, and little claims history.

Additionally, the generation of solar power requires a large area for the system to be efficient. To generate 2 kilowatts of power, you need about 240 square feet of solar panels. This is a problem in inner cities where demand is high but space is limited.

While the costs of PV are steadily decreasing, Solar Power technology remains expensive. Currently, PV systems cost between $6,000-$10,000/kW installed. This includes the cost of the PV module itself, as well as installation, wiring, support structures, battery storage (if present), etc. Solar energy does not work at night without battery storage. Furthermore, cloudy weather can hinder the technology even during the day. Efficiency is an issue; most modern PV modules are about 10% efficient in converting sunlight.

Despite these challenges, major shopping center owners such as Macy's, Inc. and Wal-Mart are increasing their commitment to renewable energy and being recognized for their efforts. In 2007, Macy's Inc. earned a Green Power Award from the EPA. In 2008, Safeway, Inc. entered into green power purchase agreements as part of a comprehensive environmental strategy to benefit existing design. According to the EPA, Safeway is also the first retailer and grocer in North America to join the Chicago Climate Exchange and commit to legally binding reductions of its greenhouse gas emissions. Notably, Kohl's Department Stores receives 100% of its power from renewable sources, and received a Green Power Leadership Award in 2008, and the EPA's Partner of the Year in 2009. According to the EPA's Green Power Partnership, the purchase of electricity generated through renewable sources has experienced significant growth in recent years and the total market for green power exceeded 24 million MWh in 2008.

A Solar Future

Currently, any consumer can purchase “green power” through renewable energy certificates (RECs). The vast majority of RECs are sold to commercial and institutional customers by utility companies using a variety of renewable energy sources (e.g., solar, biomass, wind, etc.). According to a recent report by the National Renewable Energy Laboratory (NREL) in May 2010, on-site solar is projected to increase its market share forecasts for the total voluntary demand for renewable energy, while utility green power programs and competitive markets are projected to decline. According to NREL, in 2015 voluntary demand for renewable energy will range from 63 million MWh annually to 157 million MWh. When extended to 2020, projections show 94 million MWh to 327 million MWh. These estimates vary based on the adoption of national, regional and local policies that affect purchaser motivation (i.e., cost) based on the adoption of carbon policies that would significantly reduce the volume of existing purchasers. The higher estimates assume optimistic growth in on-site renewable energy installations driven by aggressive cost reductions in solar PV systems. In the end, much of the value of green energy will be driven by increased demand for energy, and policy decisions that address how green house gas inventories are allocated by utility customers.

Conclusion

For the many reasons described in this two-part article, PV technologies combined with energy policy and tax incentives create significant opportunities for sourcing renewable energy to the commercial real estate market. According to William E. Winner, Ph.D., Professor of Forestry and Environmental Resources and Program Coordinator for the University Energy Counsel at North Carolina State University, “The current technologies for providing energy to shopping centers are simply not sustainable. The need is to look forward to a new energy future that ensures safe, sustainable, secure energy that mitigates climate change. The vision for the new energy future is not a decrease in the standard of living, but advancement in living standard that provides the heating, cooling, lighting, and space needed for the human endeavor.” According to Professor Winner, “Forward looking, the new energy technologies will include not only PV, but other energy sources and management strategies that include passive solar heat exchange, more effective use of natural lighting, better insulation, new paints to optimize thermal balance, and creation of new energy sources such as solar fuels. The role of shopping center owners is to help lead the nation towards the new energy future, and now is the time to evaluate the potential for PV to supplement existing energy sources.”

If you are considering PV as a supplemental source of energy, commercial real estate owners should begin with an assessment of the solar energy source in your areas. Next, evaluate the Renewable Energy Policy Incentives available to you and develop an understanding of the specific laws in your state. Finally, develop a business model using dollars in a cost/benefit analysis. Determine what costs may be borne by the tenants either as an upfront obligation or a contribution payable over time. Such an approach will establish a framework for deciding whether rooftop solar power generation is right for you.

For more information on purchasing renewable energy visit the EPA's Web site at http://www.epa.gov/grnpower/documents/purchasing_guide_for_web.pdf

SOURCES

Southern Alliance for Clean Energy, www.cleanenergy.com.

Southern California Edison, www.sce.com.2008 Solar Technologies Market Report, DOE Energy Efficiency & Renewable Energy, January 2010.

Voluntary Green Power Market Forecast Through 2015, National Renewable Energy Laboratory, May 2010.

Insuring Solar Photovoltaics: Challenges and Possible Solutions, National Renewable Energy Laboratory, February 2010.

Constructing Commercial Buildings to be Solar-Electric Ready, Focus on Energy, 2008.

Solar Energy International, www.solarenergy.org.

National Geographic, “Solar Energy,” http://environment.nationalgeographic.com/environment/global-warming/solar-power-profile/.

National Geographic, “Future Power: Where Will the World Get Its Next Energy Fix?” http://environment.nationalgeographic.com/environment/global-warming/powering-the-future/#page=3.

Sustainable Business, http://www.sustainablebusiness.com/index.cfm/go/news.display/id/20468.

U.S. Energy Information Administration, “Solar Explained,” http://www.eia.doe.gov/energyexplained/index.cfm?page=solar_photovoltaics.

First Solar FSLR, www.firstsolar.com.

Michael P. Carvalho is an Environmental and Energy attorney based in Marietta, GA. He can be reached at 678-354-0066 or via e-mail at [email protected]. Mr. Carvalho acknowledges the assistance of Christine E. Westberg in researching and writing this article.

Part One of this article discussed the financial and policy incentives for using solar energy. The conclusion herein addresses some of the practical considerations.

Practicial Considerations for Solar Power Installations

There is significant concern among PV system operators over the cost and availability of insuring the PV market. According to a recent study by NREL, insurance products for PV systems are limited and premiums make up approximately 25% of a PV system's annual operating expense, and can account for 5% to 10% of the total cost of energy produced. Such pricing and availability (adjusted annually) affects the PV developer's ability to enter into profitable long-term contract pricing contracts, and requires that the risk associated with uncertainty be passed on to the customer. These issues reflect the lack of maturity of the PV market, risk perception, lack of familiarity with the marketplace, and little claims history.

Additionally, the generation of solar power requires a large area for the system to be efficient. To generate 2 kilowatts of power, you need about 240 square feet of solar panels. This is a problem in inner cities where demand is high but space is limited.

While the costs of PV are steadily decreasing, Solar Power technology remains expensive. Currently, PV systems cost between $6,000-$10,000/kW installed. This includes the cost of the PV module itself, as well as installation, wiring, support structures, battery storage (if present), etc. Solar energy does not work at night without battery storage. Furthermore, cloudy weather can hinder the technology even during the day. Efficiency is an issue; most modern PV modules are about 10% efficient in converting sunlight.

Despite these challenges, major shopping center owners such as Macy's, Inc. and Wal-Mart are increasing their commitment to renewable energy and being recognized for their efforts. In 2007, Macy's Inc. earned a Green Power Award from the EPA. In 2008, Safeway, Inc. entered into green power purchase agreements as part of a comprehensive environmental strategy to benefit existing design. According to the EPA, Safeway is also the first retailer and grocer in North America to join the Chicago Climate Exchange and commit to legally binding reductions of its greenhouse gas emissions. Notably, Kohl's Department Stores receives 100% of its power from renewable sources, and received a Green Power Leadership Award in 2008, and the EPA's Partner of the Year in 2009. According to the EPA's Green Power Partnership, the purchase of electricity generated through renewable sources has experienced significant growth in recent years and the total market for green power exceeded 24 million MWh in 2008.

A Solar Future

Currently, any consumer can purchase “green power” through renewable energy certificates (RECs). The vast majority of RECs are sold to commercial and institutional customers by utility companies using a variety of renewable energy sources (e.g., solar, biomass, wind, etc.). According to a recent report by the National Renewable Energy Laboratory (NREL) in May 2010, on-site solar is projected to increase its market share forecasts for the total voluntary demand for renewable energy, while utility green power programs and competitive markets are projected to decline. According to NREL, in 2015 voluntary demand for renewable energy will range from 63 million MWh annually to 157 million MWh. When extended to 2020, projections show 94 million MWh to 327 million MWh. These estimates vary based on the adoption of national, regional and local policies that affect purchaser motivation (i.e., cost) based on the adoption of carbon policies that would significantly reduce the volume of existing purchasers. The higher estimates assume optimistic growth in on-site renewable energy installations driven by aggressive cost reductions in solar PV systems. In the end, much of the value of green energy will be driven by increased demand for energy, and policy decisions that address how green house gas inventories are allocated by utility customers.

Conclusion

For the many reasons described in this two-part article, PV technologies combined with energy policy and tax incentives create significant opportunities for sourcing renewable energy to the commercial real estate market. According to William E. Winner, Ph.D., Professor of Forestry and Environmental Resources and Program Coordinator for the University Energy Counsel at North Carolina State University, “The current technologies for providing energy to shopping centers are simply not sustainable. The need is to look forward to a new energy future that ensures safe, sustainable, secure energy that mitigates climate change. The vision for the new energy future is not a decrease in the standard of living, but advancement in living standard that provides the heating, cooling, lighting, and space needed for the human endeavor.” According to Professor Winner, “Forward looking, the new energy technologies will include not only PV, but other energy sources and management strategies that include passive solar heat exchange, more effective use of natural lighting, better insulation, new paints to optimize thermal balance, and creation of new energy sources such as solar fuels. The role of shopping center owners is to help lead the nation towards the new energy future, and now is the time to evaluate the potential for PV to supplement existing energy sources.”

If you are considering PV as a supplemental source of energy, commercial real estate owners should begin with an assessment of the solar energy source in your areas. Next, evaluate the Renewable Energy Policy Incentives available to you and develop an understanding of the specific laws in your state. Finally, develop a business model using dollars in a cost/benefit analysis. Determine what costs may be borne by the tenants either as an upfront obligation or a contribution payable over time. Such an approach will establish a framework for deciding whether rooftop solar power generation is right for you.

For more information on purchasing renewable energy visit the EPA's Web site at http://www.epa.gov/grnpower/documents/purchasing_guide_for_web.pdf

SOURCES

Southern Alliance for Clean Energy, www.cleanenergy.com.

Southern California Edison, www.sce.com.2008 Solar Technologies Market Report, DOE Energy Efficiency & Renewable Energy, January 2010.

Voluntary Green Power Market Forecast Through 2015, National Renewable Energy Laboratory, May 2010.

Insuring Solar Photovoltaics: Challenges and Possible Solutions, National Renewable Energy Laboratory, February 2010.

Constructing Commercial Buildings to be Solar-Electric Ready, Focus on Energy, 2008.

Solar Energy International, www.solarenergy.org.

National Geographic, “Solar Energy,” http://environment.nationalgeographic.com/environment/global-warming/solar-power-profile/.

National Geographic, “Future Power: Where Will the World Get Its Next Energy Fix?” http://environment.nationalgeographic.com/environment/global-warming/powering-the-future/#page=3.

Sustainable Business, http://www.sustainablebusiness.com/index.cfm/go/news.display/id/20468.

U.S. Energy Information Administration, “Solar Explained,” http://www.eia.doe.gov/energyexplained/index.cfm?page=solar_photovoltaics.

First Solar FSLR, www.firstsolar.com.

Michael P. Carvalho is an Environmental and Energy attorney based in Marietta, GA. He can be reached at 678-354-0066 or via e-mail at [email protected]. Mr. Carvalho acknowledges the assistance of Christine E. Westberg in researching and writing this article.