The other day I saw a press release announcing the start of a commercial solar project in Northern CA. Over the last ten years I have read many of these press releases. I enjoy reading through them when I have time and learning what I can from the data points provided. Sometimes you can reverse engineer the project story from the data points. Other times you can tell the author has enough experience not to include certain details so that someone like me can’t piece together the story. It reminds me of field geology where you piece together an geological story based on partial data points and experience.
This press release stood out because it illustrated what happens when the buyer fails to retain an experienced solar consultant. Here are the data points I gained from the article: 1.) Project cost, 2.) Number of modules, 3.) Brand of modules, 4.) Annual kWh production, 5.) Type of mounting system, 6.) Awarded grant amount, 7.) Loan amount, 8.) Construction start date, 9.) Non-‐profit entity.
From this information I was able to piece together this story: The buyer put up $1.56 per watt ($441,992) in cash for the project, borrowed $2.27 per watt ($640,000) and received a grant for $3.13 per watt (885,209). Assuming a 10 year loan at 5% the debt service is $82,800 per year while the energy savings are likely to be about $50,000 per year. Assuming they reserved a rebate at $.19/kwr they would also receive about $80,000/yr for five years.
So at the end of the day the buyer is paying back their cash investment at about $48k per year (Energy Savings + rebate -‐ debt service). All said and done the system will have paid for the debt and cash investment in about year 10. There will be differing opinions on whether or not this is a good investment. But that is not my interest in highlighting this press release.
My interest is in highlighting the importance of having an experienced PV consultant manage the purchasing process of a commercial PV system. I see two key aspects of this project. First is the good work that went into securing a federal grant for the project. This is a key piece since the non-‐profit does not qualify for the 30% federal tax grant. Second is the outrageous price for the project, $6.97 per watt DC. This price is very high and even if it was the going price at the time of the grant application (doubtful), an experienced consultant would have known that solar modules price were on their way down soon and would have negotiated a clause to protect the buyer. As I sit here and write this I would say the project cost is at least 40% higher than what it should cost for a prevailing wage project starting construction in October 2011.
What does this mean? It means two things; first the hard fought grant the buyer obtained is mostly going straight to the bottom line of the contractor instead of benefiting the non-‐profit and second it means the buyer needed an experienced PV consultant to manage the purchasing process so that safeguards could have been in place to protect the buyer against overpriced projects and sudden price drops in the market.
John Whisman, VeriSol, Inc.