Solar Glossary

Increase Your Solar IQ

A Glossary of Terms

Increase your solar IQ with this informative solar glossary, including industry terminology and various financial options and definitions.


Active Versus Passive Solar

A passive solar system is typically referring to a design that is created to capture the heat of the sun. A passive solar house, for example, faces south so the sun can enter the home and heat is collected by special floor tiles or “thermal” walls that store the heat during the day and release the heat at night. Placing a glass pitcher of water with a tea bag immersed makes ‘sun tea’ using passive solar energy from the heat of the sun.

Photovoltaic – the type of most solar systems in use today – and virtually all commercial solar systems – are active as they generate electricity from the irradiance of light waves from the sun, not the heat.


Battery Back-Up for Solar

As the name implies – and as in other power systems, back-up power allows you to continue using electricity when the utility cannot provide power due to an outage. A back-up power system with a bank of batteries can be kept charged with solar panels (or by the traditional grid, if it is operating), supplying power for a limited amount of time, depending on how many batteries there are and the essential loads they supply.

District Sun does not generally recommend batteries because of their inefficiency, their limited lifecycle of just seven years, yet their relatively high cost, reflected by their 12-year payback.

Not surprisingly, the industry is working hard on developing better technology and the moment reliable and affordable batteries are available, you can be certain District Sun will be offering them on new installations as well as retrofitting existing solar systems.


Community Solar

Community solar – sometimes referred to as a solar farm or solar garden or shared solar — is a solar power installation that accepts capital from and provides output credit and tax benefits to individual and other investors. In some systems you buy individual solar panels, which are installed in the farm after your purchase. In others, you purchase kilowatt capacity or kilowatt-hours of production. The farm’s power output is credited to investors in proportion to their investment, with adjustments to reflect ongoing changes in capacity, technology, costs and electricity rates. Companies, cooperatives, governments or non-profits operate the farms. Centralizing the location of solar systems has advantages over residential installations. Factors that do not affect community solar include:

  • Reduction of power output because of trees, roof size and/or configuration, adjacent buildings, the immediate microclimate and/or other issues.
  • Building codes, zoning restrictions, homeowner association rules and aesthetic concerns.
  • Lack of skills and commitment to install and maintain solar systems.
  • Extending solar to renters and others who are not residential property owners.

New community solar rules that took effect in New York in October 2015 should help jump start community solar development in that state. The rules make it possible to build projects at utility-scale costs and sell electricity directly to customers at lower rates than utilities pay for utility-scale power. The new rules provide incentives for projects with capacities of up to two megawatts and require participation by at least 10 customers in each project. Projects larger than two megawatts (2,000 kilowatts) can be still be built, but only the first two megawatts are eligible for credits and incentives. Projects must serve customers located within the same utility service area and Projects must serve customers located within the same utility service area and Load Zone per the NY Load Zone Map.

With the first full-scale “green bank” in the country, Connecticut offers solar incentives or subsidies to home- and business owners through utilities; some are offered by the state itself. Such incentives include tax incentives, rebates and other inducements that help reduce the up-front cost of solar for potential buyers.

The electricity generated by a community solar array is fed into the grid. The project sponsor holds a “host meter account” at the facility under a demand rate or non-demand rate classification. The sponsor determines each customer’s generation every month and reports net-metering credit.

NOTES: In November 2015, New York officials announced that they are encouraging cities and towns that are planning community microgrids to couple them with community solar or ‘shared renewables.’ Chadbourne & Park, 2015. For all requirements, visit http://www.chadbourne.com/Community-Solar-Gains-Ground-New-York_projectfinance or New York Public Service Commission.


Demand Management

Demand management – the ability to change usage of electricity for financial gain and through behavioral change – is made possible by an analysis of what devices are using what levels of power throughout the day. Once a business owner knows which machines are using the greatest amount of energy, perhaps during the highest rate period a utility charges, it may be possible to modify these usage patterns for cost savings.

District Sun offers Demand Management Analysis to business clients as a standalone service, providing detailed recommendations to clients on their precise energy use and strategies for optimizing energy use for cost savings. The fee for a Demand Management Analysis is steeply discounted for the clients who install solar energy systems following the analysis.


Investment Tax Credits

The Business Energy Investment Tax Credit (ITC) refers to an 11-year, $18.6 billion energy bill passed by the U.S. Senate in 2005. Congress made the original legislation even more expansive with the Energy Improvement and Extension Act of 2008 and further still with the American Recovery and Reinvestment Act of 2009 that expanded the energy tax credit scheme and policy, which is currently in effect through December 21, 2016.

The ITC provides significant tax breaks to businesses, residences and other organizations that implement energy conservation measures or install solar energy and other renewable energy systems to help meet a portion or all of their energy needs.

One of the major reasons organizations choose solar energy systems is that solar credits do not have a maximum amount. Certified solar installations can help organizations receive a maximum tax credit of 30 per cent. It also yields benefits beyond the investment tax credit.

Business owners can apply their business energy investment tax credit towards a variety of renewable energy resources. Solar tax credits can be used for multiple and varied solar technologies that provide electricity, hot water, and which heat and cool spaces.

District Sun work with these eligible solar technologies:

  • Solar hot water
  • Solar space heat
  • Photovoltaic

Photovoltaic (PV) systems consist of an array of solar panels that absorb direct sunlight and convert the energy into electricity. Hybrid solar involves the use of fiber optics to distribute light and illuminate the interior of a building. Solar credits do not cover the installation of passive solar components or solar pool heating systems.

Eligibility

Your business or organization may be eligible for a business energy investment tax credit – not to be mistaken for a tax deduction.

A tax deduction allows you to deduct a certain amount from gross income, which determines your taxable base income. In contrast, a tax credit gives an owner a dollar-for-dollar pay-off of owed federal taxes. To be eligible:

  • You must construct, and have the system operational per utility standards.
  • If you buy a property, you must be the one who places the system into original use.
  • The property has to meet specified performance and quality standards.

District Sun is knowledgeable on the application of the 30 percent business energy investment tax credit, which can be subject to certain caps and restrictions. To find out more about business energy investment tax credit, other incentives and utility rebates, contact District Sun!


Net Metering

When an entity has a solar system, the electricity generated by the system is used to offset the electric bill. This is called net metering and although it measures current flowing in both directions, your meter flows forward when generating solar and it flows backwards when you use more energy than you generate. It requires no special metering and can be implemented simply as an accounting arrangement.

During the day, the solar energy system produces electricity for immediate use. Any extra energy not consumed (unless there is a back-up battery) is sent to the utility grid. The utility supplies power when the solar system is unable to generate enough energy. The credits earned during a billing cycle offset electricity usage at other times.

Net metering policies vary by state. Examples of these policies are:

  • The cost of the meter, if any
  • How long a consumer can keep banked credits
  • How much credits are worth, either using a retail or wholesale rate
  • The cost of the monthly connection fee
  • The disposition of residual credit whether on an annual or other basis.


Remote or Virtual Net Metering

Virtual net metering – sometimes referred to as remote net metering – enables a multi-meter property owner to allocate a solar system’s energy credits to others, most usually tenants. The arrangement, first piloted as a means of providing equal and direct benefits of the solar system to low-income tenants in an affordable housing complex, is a system that can be used by any property owner with a solar energy system to allocate electricity and is sometimes called “shared renewables.”

Virtual net metering can also be used by multiple homeowners to participate in the same metering system and share the output from a single facility that is not physically connected to their properties (or their meters).

Remote or virtual net metering allows renewable energy system owners with excess net metering credits to offset other electric accounts that are also in their name. The site or electric meter to which the solar system is connected is called the host account; sites that receive excess credits are the satellite accounts. Host account electric charges are offset first before credits are applied to satellite accounts.

Virtual net metering is supported in both Connecticut and New York State. In New York, non-residential solar sites are eligible to be host or satellite accounts as well as residential farm accounts. Residential sites may be satellite accounts only. Accounts must be established in the same customer account name, utility, and NYISO (New York Independent System Operator) zone. Satellite accounts must be located on a property owned or leased by the host account. Each satellite account can only have one host account and cannot have a net-metered system. For example, a commercial business has two offices in the same name, utility and NYISO zone. The main office installs a solar array and sets up a host account. In a single month, the company’s system produces 2,000 kWh but only uses 1,500 kWh. The extra 500 kWh will be converted to a dollar amount to offset the main building’s demand and other charges, and then will offset the regional office – the satellite account – electric bill.

Connecticut requires electric companies and competitive electric suppliers to give a credit for any power generated by a customer from a Class I renewable energy source such as solar power. The electric company providing distribution services to these customers must make the interconnections needed for this purpose. If a customer’s renewable energy system produces more power in any billing period than the customer uses, the electric company credits the customer at its retail rate for the excess power. (In effect, the company or supplier must run the meter backwards.) The credit is applied to the customer’s bill for the next month. The electric company or supplier must carry over the credits earned from month-to-month, and the credits accumulate until the end of the billing year. At the end of each billing year, the electric company or supplier must compensate the customer for any excess power generated, at its cost of wholesale power.

A customer who generates power from a generating unit with a capacity of more than 10 kilowatts (kW) must pay certain charges, which pay for conservation and renewable energy programs, among other things, based on the total amount of power the customer consumes from the electric company’s facilities without netting the power the customer produces. A kilowatt is the amount of energy used by ten 100-watt light bulbs; residential renewable energy systems typically have a capacity of less than 10 kW.

See Your Commercial Electric Bill: Do You Know How You’re Charged?


Operating Lease

An operating lease also known as the true lease can be obtained from the equipment leasing division of a bank or a specialty leasing company. In these leases, the bank owns the equipment and your organization pays monthly payments under a multi-year contract. At the end of the lease, you can return the equipment back to the bank or purchase the equipment at the depreciated market value.

Solar leases are similar to other asset leases. You lease your solar system, just as you would lease a vehicle. You do not need upfront capital, the lease payments are lower than financing to buy, and you have an opportunity to buy the depreciated system once the lease term is over. This is a very predictable and attractive option for businesses, government entities and non-profits. A ten-year lease on a solar system that lasts 25 years, for instance, may make better financial sense for your business, if you can find a willing commercial lender. The Lessor gets all the tax benefits and you keep all the income from the renewable energy credits and the reduced electric bill.

Additionally, since lease payments are treated as operating expenses, your overall tax bill is reduced while also preserving other credit lines used to run your business.

Farm Credit, the recognized leader is loans to agriculture and rural communities, recently announced it will offer operating leases for solar conversions to its agricultural clients.

Leasing Versus Power Purchase Agreement

PPA vs. Lease


Property Assessed Clean Energy (PACE) Commercial Financing

Property Assessed Clean Energy commercial financing – PACE – is a program developed to help small and mid-sized businesses and nonprofits with financing solutions to enable them to adopt solar with no upfront costs.

It is a financing structure using a state or municipality’s ability to fund improvements in the public interest by attaching special tax assessments to properties. (Many cities around the nation use this same method to fund infrastructure-based projects.) The goal of PACE is to provide building owners access to affordable financing for energy and water upgrades.

You must be a property owner. Organizations that qualify can receive financing that is repaid through an assessment on their property taxes. Because of this option, the repayment term can be much longer than conventional financing: up to 20 years for PACE financing as compared to five years for other commercial loans.

PACE provides financing for projects that cost between $100,000 and $10,000,000. If your project is larger or smaller than that, it may still be considered on a case-by-case basis.

Requirements for a PACE Commercial Project

  • The project must be located within the county where PACE funding is available [see below]
  • The property cannot be in default or have a history of default on either the mortgage or property tax payments
  • The property debt obligation cannot exceed 90 per cent of the current value.
  • Primary mortgage holders must consent that they are willing to take a secondary position to the PACE assessment, in a case of default
  • PACE requires that properties receive an energy audit (approved by PACE) to identify and prioritize building-specific energy improvement opportunities and energy savings
  • Participants will use the EPA “Portfolio Manager” to track results on their project properties during the financing term.

PACE Funding:

New York and Connecticut

Connecticut has enacted PACE enabling legislation and there is an active statewide commercial PACE program.

New York State’s Energize NY Finance Program, which is the state’s PACE program is offered to customers in parts of Beacon, Dutchess, Orange Tompkins and Ulster counties.

Benefits of a PACE-financed solar project

There are many benefits to PACE financing versus conventional bank financing for a commercial solar project.

PACE finances 100 per cent of the project costs, including any soft costs such as energy audits or engineering costs. The utility savings that exceed monthly debt-service payments can help improve cash flow and net operating incomes starting on Day One. Recipients receive up to 20 years of amortization at fixed rates. This enables deeper retrofits and reduces monthly costs for building owners.

PACE financing is paid for through a tax assessment that transfers with the property title and is not tied to the borrower. The PACE loan is not added to company debt and this is a huge advantage over conventional financing to some borrowers.

District Sun can help your organization pursue a PACE-financed solar energy project to reduce your utility bills. It is part of what sets District Sun apart – by providing you with everything under the sun you need to go solar!

PACE Savings


Peak Shaving

In terms of energy use, peak demand describes a period of simultaneous, strong consumer demand or a period of highest demand in a billing period.

In essence, peak shaving is a method for reducing the amount of energy purchased from the utility company during peak hours when the rates are highest. Many businesses pay for electricity consumption on a time-of-use basis, typically when the utility charges its highest “peak demand” rates; daily peak demand usually occurs around 5:30 p.m. at the time when there is a combination of office, domestic demand and at some times of the year, the fall of darkness. Utilities peak demand rates will apply to a block of time that encompasses 5:30 p.m.

Fortuitously, s solar system produces most of its energy during these peak hours. A business using solar energy can offset its highest-cost electricity, paying only for lower-cost energy used during off peak times.

District Sun does not add this benefit in calculations, as it is very difficult to measure when you can achieve peak shaving and when you cannot. (If you use your highest amount of power on a cloudy day, for example.) Until we apply solar storage, we just count this as a bonus benefit!


Photovoltaic

Photovoltaic is the method of converting solar energy into direct current electricity using semiconducting materials that exhibit the photovoltaic effect, a phenomenon of physics, photochemistry and electrochemistry.

A photovoltaic system uses solar panels composed of a number of solar cells to supply solar power. The process is both physical and chemical in nature, as the first step involves the photoelectric effect from which a second electrochemical process take place that generates an electric current.

The sunlight shines on the solar cells and the electrons get excited, jump out of their shells, and positive and negative ions form a current that is collected at the junction box in the back of the panel. Each panel is connected to form a “string;” the string forms an array that with a “homerun” wire connects to the inverter to convert the direct current (DC) electricity to alternating current (AC) electricity when connecting to the existing electric panel.

Photovoltaic systems have now been used for fifty years in specialized applications, and grid-connected PV systems have been in use for over twenty years.


Power Purchase Agreement (PPA)

A solar power purchase agreement (PPA) is an arrangement in which a system owner funds, maintains, and operates a solar system installed at a business owner’s location. In turn, the business owner purchases electric output from the system owner for 15 to 20 years. Both the business owner and the system owner benefit from this arrangement, while increasing the use of sustainable energy sources.

The Players in a PPA

The Property Owner enters into an agreement to lease an area where the solar system will be built. The solar entity pays the property owner “rent” for the space used by the solar system.

The Developer is the PPA provider and coordinator of the project, providing the impetus to execute the project from origination to completion. District Sun is a Developer.

The Solar Contractor is the builder of the solar system that the developer designs.

Solar Investors and Financiers are a group of investors or companies that form an LLC to own the solar system to take advantage of the federal tax credit.

The End-User, sometimes referred to as the off-taker, agrees to buy the solar generated electricity.

A Power Purchase Agreement is a contract for the sale of solar electricity not the sale of a solar system. For the end-user of the electricity, there are no up-front costs, down payments or deposits required. The end-user simply pays an electric bill that is discounted from Day One.

These financial arrangements allow business owners to avoid many common barriers to investing in solar power: high up-front costs, performance risk, design challenges, and permitting. Many business owners have discovered that a power purchase agreement allows them to enjoy the economical and environmental benefits of solar power, without assuming any of the risks or financial burdens.

The business owner benefits from a system that requires no upfront capital investment and helps provide predictable energy pricing. Because the system owner operates and maintains the system the business owner isn’t susceptible to performance risk or responsibility for repairs. Participating in a power purchase agreement demonstrates a visible commitment to the environment and offers business owners the possibility of reducing their carbon footprint. The installation of a solar system provides a potential increase to property value and supports job creation and the local economy.

At about year six, the property owner can opt to buy the system at a discounted amount based on fair market value.

District Sun can help you sort out the complexities of a PPA and can negotiate one on your behalf that takes into consideration such things as:

  • Contract Length. PPAs generally have terms of 15 to 25 years. The term begins on the commercial operation date, which is the date when the seller meets the requirements necessary to deliver solar energy.
  • Operation Milestones. Ensuring the timely achievement of the commercial operation date, a PPA may include deadlines for items such as:
    • Permit acquisition for construction
    • Construction contract execution
    • Construction commencement
    • Evidence of the purchase of solar panels
    • The PPA may call for delay damages when a seller does not meet a milestone.
  • Contract Termination. A PPA should give you the opportunity to terminate the contract if certain events do or do not occur before the commercial operation date. These events may include:
    • Lengthy repair after severe weather
    • Not receiving the necessary construction or operation permit approvals
    • The inability to secure financing
    • Not securing transmission access.
  • Rate Terms. The cost of solar energy depends on factors such as geographic location, the quality of the solar resource, the cost of photovoltaic (PV) cells and labor. A PPA should outline the annual price of electricity and the percent of the escalator.
  • Output Guarantee. When negotiating a PPA, a termination clause can be included in the event the solar system does not meet performance requirements. With an output guarantee, a seller may stipulate that it has 12 to 24 months to fix output problems before terminating a contract. A PPA may also include seller acknowledgement of an output degradation rate based, on the manufacturer’s warranty.
  • Transmission Upgrades. In general, the property owner is responsible for the transmission upgrades necessary to deliver solar energy. Some PPAs, however, allow the property owner to pass on some of the costs to the solar owner.
  • End-of-Term Expectations. At the end of a PPA term, the solar owner may remove the PV system or sell it to the customer. If one opts to buy the system, the contract should include a provision to have the system appraised at fair market value. If the PPA includes a provision for contract renewal, after the completion of the initial term, it should indicate if the seller is responsible for the cost of replacing any older inverters.

Negotiating a fair PPA is essential to getting the most from your solar energy system. Because these agreements often include critical terms and conditions, it is wise to use the help of an expert like District Sun that specialize in solar energy contracts. This ensures that the PPA meets your needs and represents your best interests.

PPA Bill Payments


Active Versus Passive Solar

A passive solar system is typically referring to a design that is created to capture the heat of the sun. A passive solar house, for example, faces south so the sun can enter the home and heat is collected by special floor tiles or “thermal” walls that store the heat during the day and release the heat at night. Placing a glass pitcher of water with a tea bag immersed makes ‘sun tea’ using passive solar energy from the heat of the sun.

Photovoltaic – the type of most solar systems in use today – and virtually all commercial solar systems – are active as they generate electricity from the irradiance of light waves from the sun, not the heat.


Battery Back-Up for Solar

As the name implies – and as in other power systems, back-up power allows you to continue using electricity when the utility cannot provide power due to an outage. A back-up power system with a bank of batteries can be kept charged with solar panels (or by the traditional grid, if it is operating), supplying power for a limited amount of time, depending on how many batteries there are and the essential loads they supply.

District Sun does not generally recommend batteries because of their inefficiency, their limited lifecycle of just seven years, yet their relatively high cost, reflected by their 12-year payback.

Not surprisingly, the industry is working hard on developing better technology and the moment reliable and affordable batteries are available, you can be certain District Sun will be offering them on new installations as well as retrofitting existing solar systems.


Community Solar

Community solar – sometimes referred to as a solar farm or solar garden or shared solar — is a solar power installation that accepts capital from and provides output credit and tax benefits to individual and other investors. In some systems you buy individual solar panels, which are installed in the farm after your purchase. In others, you purchase kilowatt capacity or kilowatt-hours of production. The farm’s power output is credited to investors in proportion to their investment, with adjustments to reflect ongoing changes in capacity, technology, costs and electricity rates. Companies, cooperatives, governments or non-profits operate the farms. Centralizing the location of solar systems has advantages over residential installations. Factors that do not affect community solar include:

  • Reduction of power output because of trees, roof size and/or configuration, adjacent buildings, the immediate microclimate and/or other issues.
  • Building codes, zoning restrictions, homeowner association rules and aesthetic concerns.
  • Lack of skills and commitment to install and maintain solar systems.
  • Extending solar to renters and others who are not residential property owners.

New community solar rules that took effect in New York in October 2015 should help jump start community solar development in that state. The rules make it possible to build projects at utility-scale costs and sell electricity directly to customers at lower rates than utilities pay for utility-scale power. The new rules provide incentives for projects with capacities of up to two megawatts and require participation by at least 10 customers in each project. Projects larger than two megawatts (2,000 kilowatts) can be still be built, but only the first two megawatts are eligible for credits and incentives. Projects must serve customers located within the same utility service area and Projects must serve customers located within the same utility service area and Load Zone per the NY Load Zone Map.

With the first full-scale “green bank” in the country, Connecticut offers solar incentives or subsidies to home- and business owners through utilities; some are offered by the state itself. Such incentives include tax incentives, rebates and other inducements that help reduce the up-front cost of solar for potential buyers.

The electricity generated by a community solar array is fed into the grid. The project sponsor holds a “host meter account” at the facility under a demand rate or non-demand rate classification. The sponsor determines each customer’s generation every month and reports net-metering credit.

NOTES: In November 2015, New York officials announced that they are encouraging cities and towns that are planning community microgrids to couple them with community solar or ‘shared renewables.’ Chadbourne & Park, 2015. For all requirements, visit http://www.chadbourne.com/Community-Solar-Gains-Ground-New-York_projectfinance or New York Public Service Commission.


Demand Management

Demand management – the ability to change usage of electricity for financial gain and through behavioral change – is made possible by an analysis of what devices are using what levels of power throughout the day. Once a business owner knows which machines are using the greatest amount of energy, perhaps during the highest rate period a utility charges, it may be possible to modify these usage patterns for cost savings.

District Sun offers Demand Management Analysis to business clients as a standalone service, providing detailed recommendations to clients on their precise energy use and strategies for optimizing energy use for cost savings. The fee for a Demand Management Analysis is steeply discounted for the clients who install solar energy systems following the analysis.


Investment Tax Credits

The Business Energy Investment Tax Credit (ITC) refers to an 11-year, $18.6 billion energy bill passed by the U.S. Senate in 2005. Congress made the original legislation even more expansive with the Energy Improvement and Extension Act of 2008 and further still with the American Recovery and Reinvestment Act of 2009 that expanded the energy tax credit scheme and policy, which is currently in effect through December 21, 2016.

The ITC provides significant tax breaks to businesses, residences and other organizations that implement energy conservation measures or install solar energy and other renewable energy systems to help meet a portion or all of their energy needs.

One of the major reasons organizations choose solar energy systems is that solar credits do not have a maximum amount. Certified solar installations can help organizations receive a maximum tax credit of 30 per cent. It also yields benefits beyond the investment tax credit.

Business owners can apply their business energy investment tax credit towards a variety of renewable energy resources. Solar tax credits can be used for multiple and varied solar technologies that provide electricity, hot water, and which heat and cool spaces.

District Sun work with these eligible solar technologies:

  • Solar hot water
  • Solar space heat
  • Photovoltaic

Photovoltaic (PV) systems consist of an array of solar panels that absorb direct sunlight and convert the energy into electricity. Hybrid solar involves the use of fiber optics to distribute light and illuminate the interior of a building. Solar credits do not cover the installation of passive solar components or solar pool heating systems.

Eligibility

Your business or organization may be eligible for a business energy investment tax credit – not to be mistaken for a tax deduction.

A tax deduction allows you to deduct a certain amount from gross income, which determines your taxable base income. In contrast, a tax credit gives an owner a dollar-for-dollar pay-off of owed federal taxes. To be eligible:

  • You must construct, and have the system operational per utility standards.
  • If you buy a property, you must be the one who places the system into original use.
  • The property has to meet specified performance and quality standards.

District Sun is knowledgeable on the application of the 30 percent business energy investment tax credit, which can be subject to certain caps and restrictions. To find out more about business energy investment tax credit, other incentives and utility rebates, contact District Sun!


Net Metering

When an entity has a solar system, the electricity generated by the system is used to offset the electric bill. This is called net metering and although it measures current flowing in both directions, your meter flows forward when generating solar and it flows backwards when you use more energy than you generate. It requires no special metering and can be implemented simply as an accounting arrangement.

During the day, the solar energy system produces electricity for immediate use. Any extra energy not consumed (unless there is a back-up battery) is sent to the utility grid. The utility supplies power when the solar system is unable to generate enough energy. The credits earned during a billing cycle offset electricity usage at other times.

Net metering policies vary by state. Examples of these policies are:

  • The cost of the meter, if any
  • How long a consumer can keep banked credits
  • How much credits are worth, either using a retail or wholesale rate
  • The cost of the monthly connection fee
  • The disposition of residual credit whether on an annual or other basis.


Remote or Virtual Net Metering

Virtual net metering – sometimes referred to as remote net metering – enables a multi-meter property owner to allocate a solar system’s energy credits to others, most usually tenants. The arrangement, first piloted as a means of providing equal and direct benefits of the solar system to low-income tenants in an affordable housing complex, is a system that can be used by any property owner with a solar energy system to allocate electricity and is sometimes called “shared renewables.”

Virtual net metering can also be used by multiple homeowners to participate in the same metering system and share the output from a single facility that is not physically connected to their properties (or their meters).

Remote or virtual net metering allows renewable energy system owners with excess net metering credits to offset other electric accounts that are also in their name. The site or electric meter to which the solar system is connected is called the host account; sites that receive excess credits are the satellite accounts. Host account electric charges are offset first before credits are applied to satellite accounts.

Virtual net metering is supported in both Connecticut and New York State. In New York, non-residential solar sites are eligible to be host or satellite accounts as well as residential farm accounts. Residential sites may be satellite accounts only. Accounts must be established in the same customer account name, utility, and NYISO (New York Independent System Operator) zone. Satellite accounts must be located on a property owned or leased by the host account. Each satellite account can only have one host account and cannot have a net-metered system. For example, a commercial business has two offices in the same name, utility and NYISO zone. The main office installs a solar array and sets up a host account. In a single month, the company’s system produces 2,000 kWh but only uses 1,500 kWh. The extra 500 kWh will be converted to a dollar amount to offset the main building’s demand and other charges, and then will offset the regional office – the satellite account – electric bill.

Connecticut requires electric companies and competitive electric suppliers to give a credit for any power generated by a customer from a Class I renewable energy source such as solar power. The electric company providing distribution services to these customers must make the interconnections needed for this purpose. If a customer’s renewable energy system produces more power in any billing period than the customer uses, the electric company credits the customer at its retail rate for the excess power. (In effect, the company or supplier must run the meter backwards.) The credit is applied to the customer’s bill for the next month. The electric company or supplier must carry over the credits earned from month-to-month, and the credits accumulate until the end of the billing year. At the end of each billing year, the electric company or supplier must compensate the customer for any excess power generated, at its cost of wholesale power.

A customer who generates power from a generating unit with a capacity of more than 10 kilowatts (kW) must pay certain charges, which pay for conservation and renewable energy programs, among other things, based on the total amount of power the customer consumes from the electric company’s facilities without netting the power the customer produces. A kilowatt is the amount of energy used by ten 100-watt light bulbs; residential renewable energy systems typically have a capacity of less than 10 kW.

See Your Commercial Electric Bill: Do You Know How You’re Charged?


Operating Lease

An operating lease also known as the true lease can be obtained from the equipment leasing division of a bank or a specialty leasing company. In these leases, the bank owns the equipment and your organization pays monthly payments under a multi-year contract. At the end of the lease, you can return the equipment back to the bank or purchase the equipment at the depreciated market value.

Solar leases are similar to other asset leases. You lease your solar system, just as you would lease a vehicle. You do not need upfront capital, the lease payments are lower than financing to buy, and you have an opportunity to buy the depreciated system once the lease term is over. This is a very predictable and attractive option for businesses, government entities and non-profits. A ten-year lease on a solar system that lasts 25 years, for instance, may make better financial sense for your business, if you can find a willing commercial lender. The Lessor gets all the tax benefits and you keep all the income from the renewable energy credits and the reduced electric bill.

Additionally, since lease payments are treated as operating expenses, your overall tax bill is reduced while also preserving other credit lines used to run your business.

Farm Credit, the recognized leader is loans to agriculture and rural communities, recently announced it will offer operating leases for solar conversions to its agricultural clients.

Leasing Versus Power Purchase Agreement

PPA vs. Lease


Property Assessed Clean Energy (PACE) Commercial Financing

Property Assessed Clean Energy commercial financing – PACE – is a program developed to help small and mid-sized businesses and nonprofits with financing solutions to enable them to adopt solar with no upfront costs.

It is a financing structure using a state or municipality’s ability to fund improvements in the public interest by attaching special tax assessments to properties. (Many cities around the nation use this same method to fund infrastructure-based projects.) The goal of PACE is to provide building owners access to affordable financing for energy and water upgrades.

You must be a property owner. Organizations that qualify can receive financing that is repaid through an assessment on their property taxes. Because of this option, the repayment term can be much longer than conventional financing: up to 20 years for PACE financing as compared to five years for other commercial loans.

PACE provides financing for projects that cost between $100,000 and $10,000,000. If your project is larger or smaller than that, it may still be considered on a case-by-case basis.

Requirements for a PACE Commercial Project

  • The project must be located within the county where PACE funding is available [see below]
  • The property cannot be in default or have a history of default on either the mortgage or property tax payments
  • The property debt obligation cannot exceed 90 per cent of the current value.
  • Primary mortgage holders must consent that they are willing to take a secondary position to the PACE assessment, in a case of default
  • PACE requires that properties receive an energy audit (approved by PACE) to identify and prioritize building-specific energy improvement opportunities and energy savings
  • Participants will use the EPA “Portfolio Manager” to track results on their project properties during the financing term.

PACE Funding:

New York and Connecticut

Connecticut has enacted PACE enabling legislation and there is an active statewide commercial PACE program.

New York State’s Energize NY Finance Program, which is the state’s PACE program is offered to customers in parts of Beacon, Dutchess, Orange Tompkins and Ulster counties.

Benefits of a PACE-financed solar project

There are many benefits to PACE financing versus conventional bank financing for a commercial solar project.

PACE finances 100 per cent of the project costs, including any soft costs such as energy audits or engineering costs. The utility savings that exceed monthly debt-service payments can help improve cash flow and net operating incomes starting on Day One. Recipients receive up to 20 years of amortization at fixed rates. This enables deeper retrofits and reduces monthly costs for building owners.

PACE financing is paid for through a tax assessment that transfers with the property title and is not tied to the borrower. The PACE loan is not added to company debt and this is a huge advantage over conventional financing to some borrowers.

District Sun can help your organization pursue a PACE-financed solar energy project to reduce your utility bills. It is part of what sets District Sun apart – by providing you with everything under the sun you need to go solar!

PACE Savings


Peak Shaving

In terms of energy use, peak demand describes a period of simultaneous, strong consumer demand or a period of highest demand in a billing period.

In essence, peak shaving is a method for reducing the amount of energy purchased from the utility company during peak hours when the rates are highest. Many businesses pay for electricity consumption on a time-of-use basis, typically when the utility charges its highest “peak demand” rates; daily peak demand usually occurs around 5:30 p.m. at the time when there is a combination of office, domestic demand and at some times of the year, the fall of darkness. Utilities peak demand rates will apply to a block of time that encompasses 5:30 p.m.

Fortuitously, s solar system produces most of its energy during these peak hours. A business using solar energy can offset its highest-cost electricity, paying only for lower-cost energy used during off peak times.

District Sun does not add this benefit in calculations, as it is very difficult to measure when you can achieve peak shaving and when you cannot. (If you use your highest amount of power on a cloudy day, for example.) Until we apply solar storage, we just count this as a bonus benefit!


Photovoltaic

Photovoltaic is the method of converting solar energy into direct current electricity using semiconducting materials that exhibit the photovoltaic effect, a phenomenon of physics, photochemistry and electrochemistry.

A photovoltaic system uses solar panels composed of a number of solar cells to supply solar power. The process is both physical and chemical in nature, as the first step involves the photoelectric effect from which a second electrochemical process take place that generates an electric current.

The sunlight shines on the solar cells and the electrons get excited, jump out of their shells, and positive and negative ions form a current that is collected at the junction box in the back of the panel. Each panel is connected to form a “string;” the string forms an array that with a “homerun” wire connects to the inverter to convert the direct current (DC) electricity to alternating current (AC) electricity when connecting to the existing electric panel.

Photovoltaic systems have now been used for fifty years in specialized applications, and grid-connected PV systems have been in use for over twenty years.


Power Purchase Agreement (PPA)

A solar power purchase agreement (PPA) is an arrangement in which a system owner funds, maintains, and operates a solar system installed at a business owner’s location. In turn, the business owner purchases electric output from the system owner for 15 to 20 years. Both the business owner and the system owner benefit from this arrangement, while increasing the use of sustainable energy sources.

The Players in a PPA

The Property Owner enters into an agreement to lease an area where the solar system will be built. The solar entity pays the property owner “rent” for the space used by the solar system.

The Developer is the PPA provider and coordinator of the project, providing the impetus to execute the project from origination to completion. District Sun is a Developer.

The Solar Contractor is the builder of the solar system that the developer designs.

Solar Investors and Financiers are a group of investors or companies that form an LLC to own the solar system to take advantage of the federal tax credit.

The End-User, sometimes referred to as the off-taker, agrees to buy the solar generated electricity.

A Power Purchase Agreement is a contract for the sale of solar electricity not the sale of a solar system. For the end-user of the electricity, there are no up-front costs, down payments or deposits required. The end-user simply pays an electric bill that is discounted from Day One.

These financial arrangements allow business owners to avoid many common barriers to investing in solar power: high up-front costs, performance risk, design challenges, and permitting. Many business owners have discovered that a power purchase agreement allows them to enjoy the economical and environmental benefits of solar power, without assuming any of the risks or financial burdens.

The business owner benefits from a system that requires no upfront capital investment and helps provide predictable energy pricing. Because the system owner operates and maintains the system the business owner isn’t susceptible to performance risk or responsibility for repairs. Participating in a power purchase agreement demonstrates a visible commitment to the environment and offers business owners the possibility of reducing their carbon footprint. The installation of a solar system provides a potential increase to property value and supports job creation and the local economy.

At about year six, the property owner can opt to buy the system at a discounted amount based on fair market value.

District Sun can help you sort out the complexities of a PPA and can negotiate one on your behalf that takes into consideration such things as:

  • Contract Length. PPAs generally have terms of 15 to 25 years. The term begins on the commercial operation date, which is the date when the seller meets the requirements necessary to deliver solar energy.
  • Operation Milestones. Ensuring the timely achievement of the commercial operation date, a PPA may include deadlines for items such as:
    • Permit acquisition for construction
    • Construction contract execution
    • Construction commencement
    • Evidence of the purchase of solar panels
    • The PPA may call for delay damages when a seller does not meet a milestone.
  • Contract Termination. A PPA should give you the opportunity to terminate the contract if certain events do or do not occur before the commercial operation date. These events may include:
    • Lengthy repair after severe weather
    • Not receiving the necessary construction or operation permit approvals
    • The inability to secure financing
    • Not securing transmission access.
  • Rate Terms. The cost of solar energy depends on factors such as geographic location, the quality of the solar resource, the cost of photovoltaic (PV) cells and labor. A PPA should outline the annual price of electricity and the percent of the escalator.
  • Output Guarantee. When negotiating a PPA, a termination clause can be included in the event the solar system does not meet performance requirements. With an output guarantee, a seller may stipulate that it has 12 to 24 months to fix output problems before terminating a contract. A PPA may also include seller acknowledgement of an output degradation rate based, on the manufacturer’s warranty.
  • Transmission Upgrades. In general, the property owner is responsible for the transmission upgrades necessary to deliver solar energy. Some PPAs, however, allow the property owner to pass on some of the costs to the solar owner.
  • End-of-Term Expectations. At the end of a PPA term, the solar owner may remove the PV system or sell it to the customer. If one opts to buy the system, the contract should include a provision to have the system appraised at fair market value. If the PPA includes a provision for contract renewal, after the completion of the initial term, it should indicate if the seller is responsible for the cost of replacing any older inverters.

Negotiating a fair PPA is essential to getting the most from your solar energy system. Because these agreements often include critical terms and conditions, it is wise to use the help of an expert like District Sun that specialize in solar energy contracts. This ensures that the PPA meets your needs and represents your best interests.

PPA Bill Payments


Solar Canopies

While rooftops are the most common space for solar panels, resources that are often overlooked are parking lots. Solar panels can be installed on top of a stylish and functional canopy. These structures offer a simplified alternative to a roof that already may be filled with mechanical equipment to run the building. Additionally, canopy structures offer shade and protection from the elements for parked automobiles, require little or no maintenance and provide easy access to panels, if necessary.

Parking lots associated with shopping centers, businesses, and urban lots and garages are ideal locations to install photovoltaics (PVs) on canopies, tapping unrealized potential.


Solar Hot Water

Solar hot water (sometimes called solar thermal) uses solar energy to heat water and supply hot water needs.

Many businesses use an enormous amount of solar hot water. Also water is heated in the hot water tank and when it cools it is heated up again each day, week, month and year. Heating hot water at a facility uses significant amounts of energy.

District Sun designs and installs commercial hot water systems that supply savings and financial benefits. Solar hot water systems are eligible for tax credits and PACE financing, just like solar electricity.

District Sun has researched, vetted and chosen the highest quality commercial equipment, both German and American made, to last and function over time. Highly experienced and trained tradespeople in the plumbing and solar thermal trades install and maintain the solar hot water systems District Sun provides.


Solar Panels

Photovoltaic is the term used for the method of converting solar energy into direct current electricity using semiconducting materials that exhibit a photovoltaic effect – a process that is both physical and chemical. A photovoltaic system employs solar panels composed of a number of solar cells to supply usable solar power.

Not all photovoltaic (PV), or solar, panels are the same. The most common types available on the market are:

  • Polycrystalline silicon panels: Multi-crystal square wafers that contain random crystal formations that give panels a blue appearance.
  • Monocrystalline silicon panels: Single-crystal wafers cut from cylindrical crystal ingots. The crystals are uniform and the panels have a deep blue color. The panels are more efficient than polycrystalline panels, but cost more.
  • Thin-film modules: The least expensive and most inefficient type of panel. Because they are lightweight, thin and flexible, many scientists are focusing on improving this technology.

The panels that you install may be stationary arrays or have tracking systems that follow the sun. It’s common for panels to be part of a stationary array that’s tilted at latitude and faces the south. The more panels you install, the more a solar installation will cost. The number of panels that you can install depends on the amount of un-shaded space available. If you’re considering installing solar panels on the roof, for example, you may only be able to use the parts of the roof that face south, east or west. Similarly, if you wish to install the panels on the ground, you may only be able to use a south-facing area that receives full sun for most of the day.


Solar Canopies

While rooftops are the most common space for solar panels, resources that are often overlooked are parking lots. Solar panels can be installed on top of a stylish and functional canopy. These structures offer a simplified alternative to a roof that already may be filled with mechanical equipment to run the building. Additionally, canopy structures offer shade and protection from the elements for parked automobiles, require little or no maintenance and provide easy access to panels, if necessary.

Parking lots associated with shopping centers, businesses, and urban lots and garages are ideal locations to install photovoltaics (PVs) on canopies, tapping unrealized potential.


Solar Hot Water

Solar hot water (sometimes called solar thermal) uses solar energy to heat water and supply hot water needs.

Many businesses use an enormous amount of solar hot water. Also water is heated in the hot water tank and when it cools it is heated up again each day, week, month and year. Heating hot water at a facility uses significant amounts of energy.

District Sun designs and installs commercial hot water systems that supply savings and financial benefits. Solar hot water systems are eligible for tax credits and PACE financing, just like solar electricity.

District Sun has researched, vetted and chosen the highest quality commercial equipment, both German and American made, to last and function over time. Highly experienced and trained tradespeople in the plumbing and solar thermal trades install and maintain the solar hot water systems District Sun provides.


Solar Panels

Photovoltaic is the term used for the method of converting solar energy into direct current electricity using semiconducting materials that exhibit a photovoltaic effect – a process that is both physical and chemical. A photovoltaic system employs solar panels composed of a number of solar cells to supply usable solar power.

Not all photovoltaic (PV), or solar, panels are the same. The most common types available on the market are:

  • Polycrystalline silicon panels: Multi-crystal square wafers that contain random crystal formations that give panels a blue appearance.
  • Monocrystalline silicon panels: Single-crystal wafers cut from cylindrical crystal ingots. The crystals are uniform and the panels have a deep blue color. The panels are more efficient than polycrystalline panels, but cost more.
  • Thin-film modules: The least expensive and most inefficient type of panel. Because they are lightweight, thin and flexible, many scientists are focusing on improving this technology.

The panels that you install may be stationary arrays or have tracking systems that follow the sun. It’s common for panels to be part of a stationary array that’s tilted at latitude and faces the south. The more panels you install, the more a solar installation will cost. The number of panels that you can install depends on the amount of un-shaded space available. If you’re considering installing solar panels on the roof, for example, you may only be able to use the parts of the roof that face south, east or west. Similarly, if you wish to install the panels on the ground, you may only be able to use a south-facing area that receives full sun for most of the day.