Professional Documents
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Workshop Objective
Commercial solar sales are rooted in economics that lead to profits and the ability to finance the project. This course is an in-depth look into the calculations that lead to a reliable and accurate commercial quote.
What information is needed from Customer and Site? e.g., Customer goal and site readiness What Calculations are required? e.g., System sizing, utility-savings, return on investment How is this information presented? e.g., Text, tables, charts, links, cut sheets What proposal options, flexibility, and speed is needed? e.g., Quote v. Bid, PDF or printed, own v. lease
Workshop Outline
9am Start: Workshop Overview
ROI
Contract Miscellaneous
Acronym Check
# 1 2 Term REC PTC Ltr Meaning or Association A B Common rating of energy from entire system (Arrays & Inverters) County or City tax applied to utility services
3 4
5 6 7 8 9
CEC-AC LCOE
PACE IRR kW STC TOU
C D
E F G H I J K
Interest/discount rate that indicates the yield of an investment Also called a Green Tag
Real World output rating of DC Array The temp and insolation condition for Nameplate PV panel rating Type of financing tied to property assessments Power rating equivalent to 1000 Volt-Amps Unit cost of lifetime energy production Energy/power rates based on when electricity is used Solar cell temperature in Standard Operating Conditions
10 NOCT 11 UUT
1D, 2E, 3A, 4I, 5G, 6C, 7H, 8F, 9J, 10K, 11B
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Qualification: Site
Solar access/shading Foundation readiness:
Roof: Original 1970s Tar & Gravel Roof: Real Slate Marshy, muddy, quagmire bog? terra really darn firma?
Electrical compliance
Adequate power panel
Bus & Main Breaker Amperage rating Available breaker slot(s)
[see www.sdge.com/regulatory/currentEffectiveTariffs.shtml]
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A flat rate composed of Commodity Charges (Generation): SDG&E $0.10072 DWR $.00515 Transmission $0.01937 Distribution $0.0599 Other Charges Public Purpose Program $0.00866 Nuclear Decommissioning $0.00046 Competition Transition Charges $0.00281 Reliability Services $0.00083
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1.11% 0.26%
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Electric Service Panel and Transformer limits 95% of Electricity Consumption limit if net metering Budget limitations: Whats the upfront expense limit? Module dimensions/orientation
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Array #1 Parameters
DC side only
Condition Good
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Condition Good soil; slight grading; short trenching Foundation Shape & Size Rectangular: 50 x 25 (1,250sf)
Orientation South (180 deg); no slope Useable Area Shape & Size Rectangular: 50 x 25 (1,250sf) Net Tilt 27 degrees (6:12 pitch) % Occlusion: Soiling and Shading 3%; Minimal Shading Module 56 Generic 225 Watt (4 rows of 14) Inverter 2 Generic 6000 Watt Array Size 12.60kW STC
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North
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WHOA !! PVWatts actually returns Energy production for each month. An accurate quote would consider each month and if TOU calculations are included, each hour (8760 report: 24 * 365). Oops! That means well really need to use PVWatts 1. This is getting too hard and time consuming .
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Psst! You might be able to do your taxes manually, but if you had to do them professionally for others, you would use software, right?
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Lunch Time!
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The Post-solar billing is based on switching to a TOU version of Schedule A. Without doing so, the ROI would be less simply because the bill offset would be less. Q: What does the $10 monthly charge for May Aug represent?
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Before and After Solar billing based on switching to a TOU version of Schedule A.
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Demand
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3.0 2.5
2.5 2
1.5 1
2.0
1.5 1.0 0.5
0.5 0 1 3 5 7 9 11 13 15 17 19 21 23
0.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
The area under the graph for each TOU period represents the amount of usage
Whats your cost per Watt or per unit? Whats your expected profit margin? Price = Cost /(1-margin)
Installation Crews: Racking, Electrical Subs: Roofers, Trenching/Backfill, Foundation/structure Clerical/Administrative: Rebate/Utility forms, Drawings, Permits, Project Mgt Price = Cost *(1+markup)
Gross System Price Array #1 CEC = 28.0kW PTC * .955 = 26.74kW AC Array #2 CEC = 11.2kW PTC * .950 = 10.64kW AC System AC-CEC = 37.38kW Sales Tax on Equipment 8.37% (pass-through)
Tax Credits/Deductions
No CA tax credit Federal Investment Tax Credit Depreciation Deductions
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Federal tax credits per US Code 26 (IRS): Credits Against Tax (26,A,1,A,IV) Individual Tax Credit: really Personal Tax Credit (PTC) (form 5695) Authorization: IRS Code 25D
Title: Residential Energy Efficient Property Amount: 30% of qualified PV property expenditures during tax year Restriction: for residential property or dwelling
Investment Tax Credit; the real ITC (forms 3468 & 3800) Authorization: IRS Code 48
Title: Energy Credit Amount: 30% of the cost basis of solar energy property placed in service
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System Description
Depreciation (1/3)
Federal Depreciation via MACRS
(CA uses the same depreciation method; so combine income tax rates) Accelerated Depreciation of a PV installations Cost Basis
As Energy Property [48a3Ai], it has a 5 year period [168e3BviI & 168c] default method is 20% declining balance (v. straightline)
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Depreciation (2/3)
Tax Recovery Adjusted Year Period Basis for Remain- Depreciation ing 1 5.0 $100,000 2 4.5 $ 80,000 3 3.5 $ 48,000 4 2.5 $ 28,800 5 1.5 $ 17,280 6 0.5 $ 5,760 Total HY: 200% to Straight Line Method 40% annually Annually Revised (200% / 5yrs) Straight-line (Basis / yrs left) $20,000 $20,000 $32,000 $17,778 $19,200 $13,714 $11,520 $11,520 $11,520 $ 6,912 $ 5,760 $ 2,073.6 $100,000
% of Year 1 Cost Basis Half-Year Mid-Quarter 20.00% 5.00% 32.00% 38.00% 19.20% 22.80% 11.52% 13.68% 11.52% 10.94% 5.76% 9.58%
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5-yr Straight-line Method for comparison $ 10,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 10,000 $100,000
Tax Year 1 2 3 4 5 6
Depreciation (3/3)
ITC Amount 50% ITC Tax Rate MACRS Basis Apply 50% ? Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total $ 86,877 $ 43,438 42% $246,151 No 20% 32% 19.2% 11.52% 11.52% 5.76%
$ $ $ $ $ $ $ $
The above table summarizes the deductions to Gross System Cost to get to Net Cost in both the year of installation (Year 0) and the all years (years till inverter replacement): Federal Tax Credit/Tax Impact = Federal ITC Grant CSI PBI: Step 7 = aggregate payments over 5 years less income tax (42%)
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Financial Analysis
Utility Savings Over System Life: The sum of annual utility savings in cash flow The cumulative utility savings = $366,508 (/300 = $1,221.69) Total Life-Cycle Payback: the cumulative change in cash flow / the initial cost (Cumulative cash flow Initial cash flow) / -(Initial Cash flow) = 232% Levelized Cost of Solar Energy: The initial Net Cost / lifetime energy production The Fix is in! 202,713 / (25 years production) = $0.131 /kWh Payback Period: the year in which cumulative cash flow first goes positive Rate of Return on Cash Invested: the Internal Rate of Return on upfront cash (IRR) 500 iterations of a calculation are performed to find the best fit for an interest rate estimate; Excel IRR comes up with 9.82%
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Loan (1/2)
232%
9.9%
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Loan (2/2)
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Lease (1/2)
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Lease (2/2)
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Other Considerations
Renewable Energy Credits (RECs): RSP driven; Solar REC carveout (SRECs) not in CA; CA traditionally has kept the clean aspect of renewable energy bundled with the energy aspect for the RPS compliance market? This year the CPUC started allowing some Tradable RECs (TRECs) to be sold to IOUs, but DG systems are not considered RPS compliant by the CEC. So PV generated RECs can only be sold in the voluntary market. Stay tuned in 2011 when IOUs, CEC, CPUC, and the Courts hopefully settle issues.
Thank You
Actually, there are more slides on Loans, Leases, & PPAs following this slide
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Non-Tax Lease:
Customer owns the system, uses the tax credit and accelerated depreciation IRS treats the lease as if it were a purchase or loan for tax purposes. Take advantage of Section 179 more write-offs
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Unsecured Loan:
NOT backed by collateral Solely based on customers credit Line of Credit , Cheaper and less risk for borrower Highest consideration is an individuals FICO score
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Longer Terms
Better Rates
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Leases
- Typically utilized by commercial installers who dont want to take out mortgage or 2nd lien on their property - Financed only collateral. - Fixed payments over a fixed term
Apples to Oranges Compare monthly payments instead of loan interest rates and lease rates.
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Challenges:
Complex negotiations and possibly higher transaction costs than buying system outright Ongoing administrative costs of paying separate electricity invoice and allowing access to equipment by maintenance personnel Customer may be contractually prohibited from making changes to property that could affect the solar production
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http://solarfinancing.1bog.org/municipal-solar-financing/