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10.20.2009 Webinar: PV Financial Analysis Matt Heling Program Manager Solar & Customer Generation Pacific Gas & Electric Co. Garen Grigoryan Business Analyst.

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Presentation on theme: "10.20.2009 Webinar: PV Financial Analysis Matt Heling Program Manager Solar & Customer Generation Pacific Gas & Electric Co. Garen Grigoryan Business Analyst."— Presentation transcript:

1 Webinar: PV Financial Analysis Matt Heling Program Manager Solar & Customer Generation Pacific Gas & Electric Co. Garen Grigoryan Business Analyst Solar & Customer Generation Pacific Gas & Electric Co.

2 PG&E Webinar: PV Financial Analysis2 Webinar Goal Review concepts and resources needed to understand and/or perform an analysis of PV system cost-effectiveness.

3 PG&E Webinar: PV Financial Analysis3 Agenda PV system costs PV systems benefits (financial) Methods of financial analysis

4 PG&E Webinar: PV Financial Analysis4 Energy Efficiency

5 PG&E Webinar: PV Financial Analysis5 Energy Efficiency Energy efficiency is typically the most cost- effective way to reduce your energy bill Energy efficiency also reduces the size of the solar system you need –Can save $1,000’s of dollars on the cost of the system An energy efficiency audit is required to be eligible for some customer-side incentive programs

6 PG&E Webinar: PV Financial Analysis6 Large Solar PG&E Home: PV System Cost and Payback Large Solar PG&E Home Total Upfront Savings: $8, Panel Reduction Size and Cost of Solar Before EE (6.1 kW) Cost of Implementing EE Size and Cost of Solar After EE (3.6 kW) Total Combined Cost $ 34,898*$ 6,962$ 19, 047$ 26,009* ~ 15 years~4 years~ 22 years~ 10 years *($9/watt)-CSI Incentive -30% Federal Tax

7 PG&E Webinar: PV Financial Analysis7 Site Screening Criteria

8 PG&E Webinar: PV Financial Analysis8 Site Screening What physical site characteristics makes a site a good candidate for PV? –Orientation – S or SW is best –Solar “window” – Access to mid-day sunlight –Roof tilt – ~30º is ideal, but even flat is okay –Weather – Typically good in CA

9 PG&E Webinar: PV Financial Analysis9 System Performance

10 PG&E Webinar: PV Financial Analysis10 PV System Performance Rules of thumb: Each 1 kW of PV system capacity typically*… –Requires ~100 ft 2 of roof space –Produces ~1,300 – 1,700 kWh/yr. Depends on many factors, including: –Location –Shading –System orientation –etc. * Values presented are approximations only and may vary depending on a variety of factors. PV production calculators can estimate production for specific PV system types, locations, technologies, configurations, etc.

11 PG&E Webinar: PV Financial Analysis11 System Costs

12 PG&E Webinar: PV Financial Analysis12 Capital Investment Modules (Panels) Inverters Balance of system cost Typical installed costs are $8 to $10 per Watt

13 PG&E Webinar: PV Financial Analysis13 Operations and Maintenance Costs Washing –Cost related to hiring a service to perform this maintenance twice a year Inverter replacement –Typically every ten years PMRS (Performance Monitoring and Reporting Service) –Additional monthly cost - offset by owner’s awareness of system performance

14 PG&E Webinar: PV Financial Analysis14 Incentives

15 PG&E Webinar: PV Financial Analysis15 Types of Incentives CSI – California Solar Initiative NSHP – New Solar Homes Partnership MASH – Multifamily Affordable Solar Homes SASH – Single Family Affordable Solar Homes Local Incentives and Financing Opportunities –San Francisco –Berkeley (Berkeley First) –Sonoma (SCEIP) Federal ITC / Depreciation

16 PG&E Webinar: PV Financial Analysis16 CSI – California Solar Initiative Applies to Retrofit Residential and Non- Residential, plus New Construction Non- Residential Incentives designed to decline over time –Currently both Residential & Non-Residential are in step 6 Two types of Incentive Payments –EPBB (Expected Performance Based Buy-Down) – one lump sum paid upfront –PBI (Performance Based Incentive) – once a month payments made over 5 years

17 PG&E Webinar: PV Financial Analysis17 CSI Current Incentive Availability

18 PG&E Webinar: PV Financial Analysis18 NHSP – New Solar Homes Partnership Only For New Residential Home Construction –Builders –Developers –Custom home owners Aims to install 400MW Incentive budget is $400MM One time, upfront, expected performance based incentive (EPBI) PV system size 1kW AC or larger (>5kW requires justification)

19 PG&E Webinar: PV Financial Analysis19 MASH and SASH Designed to encourage solar adoption for low income housing residents MASH –Administered by PG&E –$108MM available for incentives –Track 1a: $3.30/Watt for systems that offset common load –Track 1b: $4.00/Watt for systems that offset tenant load SASH –Administered by Grid Alternatives –$108MM available for incentives –Very low income customers may receive a 1kW fully subsidized (up to $10,000) system

20 PG&E Webinar: PV Financial Analysis20 City Government Incentive San Francisco –10 year program –In addition to other incentives –$1,000 to $3,500 for Residential –Up to $10,000 for Commercial –Low income residents may qualify for additional grants

21 PG&E Webinar: PV Financial Analysis21 Federal ITC Solar Investment Tax Credit* –Went into effect January 1 st 2009 –Available for next 8 years (through 2016) –30% of net solar system cost –No monetary cap –Applies to residential & commercial *All tax related statement are designed to inform and not to be construed as tax advise. Please consult a tax attorney before making any purchasing decisions.

22 PG&E Webinar: PV Financial Analysis22 Bonus Depreciation Applies to commercial system owners Only –Benefits extended for systems installed in % of cost of capital investment Up to $250,000 with phase-out threshold of $800,000 –Benefits will continue for systems installed 2010 with reduced depreciation allowances Allowed write-off up to $125,000 of capital expenditure Subject to phase-out once capital expenditure exceeds $500,000 *All tax related statement are designed to inform and not to be construed as tax advise. Please consult a tax attorney before making any purchasing decisions.

23 PG&E Webinar: PV Financial Analysis23 Sample Costs Example* for average SF household of four - Monthly electrical bill $75 to $150 - Installing 3.0kW AC System Cost of system $27,000 CSI Incentive (est $1000/kW) -$3,000 Federal ITC-$7,200 San Francisco Rebate-$3,500 Tax on SF Rebate+$700 NET COST$14,000 kWh Production~5000 kWh / year *These Incentive and ITC values are for demonstration purposes. Please consult a qualified tax attorney for applicability of various Incentives and grants.

24 PG&E Webinar: PV Financial Analysis24 Electricity Costs and Net Energy Metering

25 PG&E Webinar: PV Financial Analysis25 Electric Rates Two basic types of rate schedules: *Both incorporate the concept of tiers: The more electricity is consumed, the more it costs. Example: kWh $0.10/kWh kWh$0.12/kWh etc. Tiers apply to both “flat” rates and TOU rates Rate Schedule TypeElectricity cost structure “Flat”Constant $/kWh* Time-of-Use (TOU)$/kWh varies by time of day*

26 PG&E Webinar: PV Financial Analysis26 Rate Tiers – Impact of PV Output from PV systems tends to offset the most costly electricity first.

27 PG&E Webinar: PV Financial Analysis27 TOU and PV

28 PG&E Webinar: PV Financial Analysis28 Net Energy Metering (NEM) NEM allows customers to receive credit for electricity produced in excess of what is consumed on-site. Utility grid acts as “battery” Credit is at the relevant retail rate Annual true-up –AB 920: Credits for excess generation (kWh) (details TBD) Can zero out energy portion of bill, but other (minor) service charges still apply –Typical customer sizes PV system to ~80% of annual energy (kWh) consumption NEM is especially valuable for customers on TOU rates because PV system output tends to occur during the most expensive (peak) periods.

29 PG&E Webinar: PV Financial Analysis29 Financing Options

30 PG&E Webinar: PV Financial Analysis30 Purchasing Options Cash / Financing Power Purchase Agreement Lease To Own

31 PG&E Webinar: PV Financial Analysis31 City and County Financing Berkeley –Creative financing – Berkeley First Sonoma County –SCEIP – Sonoma County Energy Independence Program –Financing is for existing buildings only –Repayments made through property tax bills over time

32 PG&E Webinar: PV Financial Analysis32 PPA Structure Third Party owns system and is responsible for financing, designing, installing, monitoring and maintaining for the customer No upfront fee required Customer purchases electricity (kWh) the system generates at contracted rates Customer may purchase system after contract expires Contracts are typically 20 to 25 years RECs (Renewable Energy Credits) are claimed by third party

33 PG&E Webinar: PV Financial Analysis33 Lease To Own Third Party owns system and is responsible for financing, designing, installing, monitoring and maintaining for the customer Customer typically pays a small upfront fee Customer enters into a lease agreement Significant reduction in electricity bill Contracts are typically ~10 years Leases may have annual built-in increases – typically not exceeding increases of electricity rates

34 PG&E Webinar: PV Financial Analysis34 Renewable Energy Credits

35 PG&E Webinar: PV Financial Analysis35 Renewable Energy Credits (RECs) RECs are associated with the “green” component of electricity from renewable sources RECs are presently traded in voluntary markets –~$0.01–0.05/kWh Generally, for PV systems on the customer side of the meter, RECs are owned by system owner –For PPAs, the owning 3 rd party retains RECs May become more valuable in the future – particularly if utilities are allowed to use RECs to meet Renewable Portfolio Standard (RPS) goals PG&E ProgramREC Owner CSICustomer MASH/SASHCustomer NSHPCustomer

36 PG&E Webinar: PV Financial Analysis36 Methods of Financial Analysis

37 PG&E Webinar: PV Financial Analysis37 The Key Questions 1.How much does/will my PV system cost? vs. 2.What is the value of the avoided electricity costs and other financial benefits?

38 PG&E Webinar: PV Financial Analysis38 Key Inputs and Variables Capital (installed) costs –PV modules, inverter, installation, monitoring equipment, etc. –Inverter replacement O&M costs –Panel-washing, monitoring service, etc. PV system performance –Annual energy production –Performance degradation –System life Value of electricity displaced –Projected electricity production –Electric rate type (TOU vs. not) –Projected future electricity rate increases Incentives –May be received up-front or over time Tax credits –ITC –Other local tax benefits Financing method –Cash vs. loan vs. PPA vs. … Other assumptions/concepts –Discount rate (opportunity cost) –Compound interest

39 PG&E Webinar: PV Financial Analysis39 Methods of Analysis Simple payback –Years until costs are recovered Total life cycle payback –Considers benefits received after simple payback is attained Cash flow model –Shows expenses and revenues each year –See Appendix for example/illustration Internal rate of return –Average annual profit (loss) over life of system

40 PG&E Webinar: PV Financial Analysis40 Information Resources

41 PG&E Webinar: PV Financial Analysis41 Information Resources Program/TopicsResourceLinkNotes CSIPG&E CSI websitewww.pge.com/csiPG&E CSI resource GoSolarCalifornia websitewww.gosolarcalifornia.orgState-wide CSI resource CSI Handbookwww.gosolarcalifornia.ca.gov/documents/CSI_H ANDBOOK.PDF Official CSI program rules Trigger Trackerwww.csi-trigger.comDisplays current incentive rates NEMPG&E NEM websitewww.pge.com/gen NSHPPG&E websitewww.pge.com/nshp/Details for applying for NSHP incentives SASHSASH websitewww.gridalternatives.org/sashManaged by GRID Alternatives MASHMASH websitewww.pge.com/lowincomesolaManaged by PG&E SCEIPSonoma Countywww.sonomacountyenergy.org/For Sonoma County specific financing options EE surveysCalifornia State Governmentwww.energy.ca.gov/HERS/index.htmlFor hiring HERS rater Federal ITCIRSwww.irs.gov/formspubs/ITC forms IncentivesDSIRE databasewww.dsireusa.org/solar/Details for applicable depreciations Local Municipality Rebates San Franciscowww.sfwater.org/solarincentiveSF City Rebates BerkeleyFirstwww.berkeleyfirst.renewfund.com/ Sonoma County Energy Independence Program SEIASolar Energy Industries Assoc.www.seia.org/Guide to Federal Tax Incentives for Solar Energy PG&E Classes classes available on a multitude of solar and solar-related topics

42 PG&E Webinar: PV Financial Analysis42 Thank you! Your thoughts? Suggestions for future content? Opinions on content and delivery? Topics to emphasize or de-emphasize? How can we provide a better service? Feedback is welcomed! Feedback is welcomed!

43 PG&E Webinar: PV Financial Analysis43 Appendix

44 PG&E Webinar: PV Financial Analysis44 Net Energy Metering (NEM) Sell Power to the Utility by Day Buy Power at Night and Winter Exchange at retail Annual billing cycle

45 PG&E Webinar: PV Financial Analysis45 NEM OctoberMayApril “SUMMER”“WINTER” kWh/mo Roll over Average monthly usage PV system production

46 PG&E Webinar: PV Financial Analysis46 Value of displaced electricity grows as assumed electricity cost increases outpace assumed performance degradation Inverter replacements (Simple) Payback at ~Year 15 Profit increase with time Note: This chart and the values shown are for illustrative purposes only. Capital costs – (incentives + tax credit) Example Up-front, cash purchase of PV system


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