Submitted by Fred Zalcman, SunEdison
Now it is easier than ever for Connecticut businesses to go solar! Thanks to new financing models, and a suite of federal and state incentives, an ever-increasing number of businesses across the Nutmeg State are taking advantage of this clean and predictably-priced source of electricity generation. Businesses typically see significant bill savings from Day Oneand these savings only grow over time.
The financial innovation that makes these electricity savings possible is called the Solar Power Service Agreement (SPSA). Under the SPSA, the host customer enters into a long-term (i.e., 15-20 year) contract with a solar developer such as SunEdison to purchase the electricity produced by the solar systemtypically at a rate that is discounted from what the customer pays for retail electricity from the grid.
This arrangement has several advantages:
No upfront costs. In essence, the host customer is buying solar electricitynot solar equipment. The business can preserve its scarce capital for other more central and pressing business needs.
Electricity price certainty. As noted, the typical SPSA provides a fixed (or slightly escalating) price for the solar generation. This serves as an important price hedge against rising and volatile grid electricity prices. (see graphic above)
No performance risk. In contrast to the direct sale of solar equipment, under the SPSA the host customer assumes no performance or technology risk. The customer only pays for the kilowatt-hours produced by the solar equipment. This "pay for performance" arrangement also creates a powerful incentive for the solar developer to monitor and maintain the equipment to ensure that it is operating as designed over the life of the SPSA.
Efficient leveraging of state and federal incentives. The solar developer can "bake" the 30% investment tax credit (available from the federal government through 2016) and Zero Emission Renewable Energy Credit sales (Connecticut incentives to promote non-polluting customer-sited generation) into the SPSA, offering the host customer the lowest price possible.
Enticing? The next step is to explore whether a SPSA is right for you and your business. In doing so, it is extremely important that you understand that not all solar companies are created equal. You will want to ensure that the solar company that earns your business can deliver on its promises. The following questions can help tease out whether the developer has the requisite experience and competency:
Track record. What is the firm's track record of developing solar? How many have been under the SPSA model?
Financial strength. How strong is the financial backing of the solar developer, and how long has it been in business?
Installation expertise. What is the firm's (and its subcontractor's) construction knowledge and experience in solar systems?
Transparency and service. Does the developer have the capability to remotely monitor the system and send out repair crews to maximize production and uptime? Will the solar production data be transparent and made available to the customer?
Fred Zalcman is the Director of Government Affairs for SunEdison, a CBIA member company and one of the world's leading solar power service providers and the pioneer of the SPSA model that revolutionized the commercial solar market. SunEdison currently has over 1,000 MW of solar generation under management at nearly 700 customer locations, including several commercial sites across Connecticut.