clean technology

The Importance of Reducing Solar Soft Costs

What are solar soft costs? Soft costs are any costs, fees, or taxes that are included with a product after material and labor. While solar energy is worthwhile, thanks to the long term savings and the benefits for the environment, many potential users are hesitant at first due to the initial cost. A significant portion of the heavy sticker price is the “extra” added when taking soft costs into account.

Solar is becoming more prevalent in America, and many users are beginning to see their investment come to fruition. Unfortunately, many potential users are halted before they get started; so let’s look at some of the soft costs and how they could be reduced.

Courtesy of U.S. Department of Energy

As the graph shows, a massive 64% of the cost of solar is due to soft costs. Costs like permitting fees, interconnection labor, installation labor, and installer profit are significant portions of the soft costs, but are also necessary. The solar system needs to be approved by the city (permitting fee), connected to the grid (interconnection labor), installed (installation labor), and the company selling it needs to make some profit to stay open and continue selling their product (installer profit). However, most of the other costs could be trimmed down so there isn’t as much of a cost for each one.

The other portions of soft cost: sales tax, transaction costs, supply chain costs, indirect corporate costs, and customer acquisition, CAN be reduced, sometimes to virtually nothing. Some states actually pay the solar user, through stipends or other incentives, to install rather than charge sales tax; therefore, sales tax could be done away with or reworked so the user gets that cost back. In fact, some states like Florida, do not charge sales tax on renewable energy, effectively eliminating this soft cost.

Transaction costs are costs that come from a third-party lender when the buyer needs a loan and could be reduced to a lower rate. We find that buyers need to be aware of the hidden fees and transactions costs that can quickly add significant cost to their installation. Some transaction costs are unavoidable and more than fair. After all, no one is going to loan you money at 0% interest. That being said, be aware of who is charging what fees and where they’re being charged in the process. Supply chain costs are from the transporting and housing of solar units from the company to the buyer. Better supply chain management and cooperative buying can help reduce this cost.

Lastly, and probably most interestingly, customer acquisition is the cost for the solar installer to reach out and connect its potential customers. This cost is effectively sales and marketing; and while it’s a necessary function, you can immediately see the issue. If hundreds of people contact their local solar installer only to be turned away because of bad site conditions, not being able to finance the system, or any number of reasons, the solar contractor has spent money on a customer that ultimately cannot buy its product. That means this cost must be charged to the next customer who CAN purchase the system. The U.S. Department of Energy and many startups around the country are developing tools explicitly designed to attack this problem. The more information at the fingertips of consumers and contractors helps reduce the amount of time spent on projects that just simply could never be built.

A good way to think of solar installation with lower soft costs is to merely look overseas. Germany is one example of solar installation working without high soft costs and their wide user base is proof it’s effective. By making solar more available (cheaper), Germany has a much bigger user base than the United States and they see more users every year. Although the process of buying solar is different in Germany, they immediately provide savings by getting rid of most soft costs from the start.

Let’s not handicap solar right out of the gate. By working to significantly reduce soft costs, we can make solar more affordable for everyday Alabamians. Quite literally, giving them the power back.

Understanding Public Utility Regulatory Policies Act of 1978 (PURPA)

Defining PURPA

Passed in 1978 as one part of the National Energy Act, the Public Utility Regulatory Policies act (PURPA), provided a major benefit to the production and integration of renewable energy.

The National Energy Act was conceived in reaction to the energy crisis of 1973. It contained a plethora of legislation that would aim to drastically cut the demand for imported oil. One such act, now today as PURPA, would give manufacturers of renewable energy a toe-hold in the door to large scale energy manufacturing and deployment, which is always appreciated. PURPA was meant to promote better energy conservation, domestic power production, and renewable energy construction and integration.

Prior to PURPA, electric utilities were structured in what is known as vertical monopolies, which basically means that they control all aspects of energy supply: the generation, distribution and control were all controlled by one company, which was originally thought to be more effective method of energy maintenance. Well, that is until PURPA was introduced and broke that model and would make it much easier for other energy companies to integrate into the grid.

PURPA also eliminated “rate structure” promotions offered by utilities. Rate structure decreased the cost of electricity by kWh with increasing usage, with smaller increments included, as well.

PURPA’s Role in Renewable Energy

PURPA enabled non-utility generators (NUG’s) to generate and attach energy to the energy grid by breaking the monopolies that held control of it. Not only that, but PURPA also forced utility companies to purchase energy from other energy producers, like producers of renewable energy, if that cost was less than their avoided cost, or the cost of producing the extra energy on their own and delivering it to the consumer. As a result, more and more cogeneration plants were built and implemented into the system. These plants were required by law to harness thermal energy in the form of steam, which would otherwise be wasted if energy alone was produced.

Controversy with PURPA

PURPA was not as big of an issue back in the 1970’s. However, more and more utility providers are having issues with PURPA. Specifically, having to accept renewable energy providers, specifically providers of solar energy, due to the fact that solar energy has become gradually more affordable and viable in energy production over the last few years.

One such controversy has erupted in Montana where the state’s largest investor-owned utility company, known as NorthWestern Energy, filed a claim with the state’s public service commission stating that the current rates of qualified providers (QF’s), which were stalled at $66 per mega-watt hour, was out of date as of 2013. The commission granted the proposal and altered the terms of which QF’s that provided between 100 kilowatts and 3 megawatts received the current avoided cost rate. None of the projects met the criteria.

The Federal Energy Regulatory Commission (FERC) declared that the Montana State Commission had ruled in a way that was inconsistent with PURPA. However, as of this writing, they have not made any movements to rectify the commissions movement, which begs the question as to how seriously PURPA is being enforced.

In another instance, a North Carolina based utility company, Duke Energy, is currently backing a bill that would bring all renewable energy construction to a slow crawl. Introduced by Rep. Dean Arp (R-Union), House bill 909 is encouraging the once halted negotiations between Duke Energy, renewable energy advocates, and other PURPA stakeholders.

The bill would remove all North Carolina renewable energy projects from the umbrella of PURPA, and would throw those projects into a bidding process lead by Duke Energy. The bidding would have a ceiling of a predicted 400 megawatts.

“This bill would crush renewables in every sense, except perhaps in agriculture,” said Chris Carmody, the executive director of the North Carolina Clean Energy Business Alliance. You can read more on the North Carolina controversy here!

But Montana and North Carolina are not the only states seeing conflict with PURPA. Utah and Oregon utilities are starting to call for new contract lengths, rates, and other changes. Solar companies have since stated that the proposed changes would make it impossible to finance solar projects. It is not farsighted to say that further controversy could emerge in the near future.

New Legislation Affecting PURPA

PURPA is seeing a steady decline in significance as most of the contracts signed in the 1980’s are coming to an end. Furthermore, PURPA was amended in 2005 under the Energy Policy Act of 2005. The amendments to PURPA begin on Section E, subsection 1251 through 1254 of the Energy Policy act. Here is a short list of what amendments were made:

  • Each electric utility service shall make available upon request net metering services to any electric consumer the utility serves
  • Each electric utility shall develop a plan to minimize dependence on 1 fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies.
  • Each electric utility shall develop and implement a 10-year plan to increase the efficiency of its fossil fuel generation.

Is Alabama Really Open for Business?

Alabama says it is open for business, but does it really mean it? A recent piece in AL.com explored many of the ways Alabama is, in fact, closed for business when it comes to renewable energy.

The AL.com profile looked at a report titled the Corporate Clean Energy Procurement Index authored by the Retail Industry Leaders Association, a trade group representing large retailers like Target, Walmart, Best Buy, Home Depot, and Lowe’s. Alabama’s score on the index was 1.82 out of 100. The next-lowest score was a 13.60; putting Alabama about as far behind as is technically possible.

To continue reading the full article, please visit: http://www.al.com/opinion/index.ssf/2017/03/is_alabama_really_open_for_bus.html#incart_river_home

Huntsville Area Association of REALTORS® Joins North Alabama Buildings Performance Challenge

Huntsville, AL – One of Huntsville’s most prominent professional organizations, the Huntsville Area Association of REALTORS® (HAAR), has joined the North Alabama Buildings Performance Challenge, committing to achieve ENERGY STAR certification within 10 years. HAAR is reducing operating costs to deliver more resources toward their members and and ultimately the community at-large.

“We strongly believe this is not just financially beneficial but also the right thing the do,” says Josh McFall, CEO of the Huntsville Area Association of REALTORS®. “Energy efficiency is increasingly important to home-buyers and we want to lead the way.”

The North Alabama Buildings Performance Challenge aims to support the Department of Energy’s goal of helping businesses save energy costs, enabling them to grow, invest in new technology, and create American jobs. The North Alabama Buildings Performance Challenge has identified over $50 million dollars of low hanging savings potential in Huntsville alone.

“HAAR is clearly stepping up to the plate,” says Daniel Tait, CEO of Energy Alabama. “Homeownership is fundamental to the fabric of our community and it’s great to know our local professionals want homeownership to be as affordable as possible.”

The North Alabama Buildings Performance Challenge is a collaborative effort of Avion Solutions Inc., the Energy Huntsville Initiative, and Energy Alabama. The Challenge now boasts over 8 million square feet of participating building space.

About Huntsville Area Association of REALTORS®
Founded in 1948, the Huntsville Area Association of REALTORS® (HAAR) is a 2,000 member organization of real estate professionals engaged in every aspect of the industry, including residential/commercial sales and leasing, appraisal, etc. They also maintain ValleyMLS.com, the leading real estate source in North Alabama.

About Energy Alabama
Energy Alabama is a non-profit organization accelerating the transition to clean, sustainable energy throughout Alabama. We accomplish our mission by educating at all levels, informing smart energy policy, building the next generation workforce, and providing technical assistance to deploy more sustainable energy. We believe in 100% sustainable energy for all.

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If you would like more information about this topic, please contact Daniel Tait by phone at 256-303-7773 or by email at dtait@alcse.org.

Energy Alabama to Help Local Churches Slash Energy Costs with Energy Benchmarking

HUNTSVILLE, AL—Energy Alabama is helping local churches and houses of worship get the most out of their utility bills and reduce church energy costs with energy benchmarking. More budget for work in the community is just a perk.

On Tuesday, February 7, Energy Alabama will host an Energy Benchmarking at Avion Solutions, Inc. on Research Drive in Huntsville. At this free event, local church representatives will have energy experts on-hand to help guide them through the process of using energy benchmarking to save money on utility bills.

Energy benchmarking is the process of measuring how much energy a building consumes, and comparing it to the same data from similar structures. This benchmarking “jam session” will bring energy experts together with church leaders to maximize energy and water efficiency throughout the community. In addition, businesses will be able to identify potential projects eligible for ENERGY STAR certification.

Tickets are free, although space is limited. The jam begins at 5:30 p.m. and finishes at 8:30. Refreshments will be provided. Each building representative should bring the following:

  • Laptop or tablet
  • The building street address, year built, and contact information.
  • Twelve consecutive months of utility bills for all fuel types used in the building.  Historical energy use data can be downloaded on the Huntsville Utilities website with an online account.

Space can be reserved at: http://alcse.org/events/church-energy-benchmarking/

About Energy Alabama

Energy Alabama is accelerating the transition to clean, sustainable energy throughout Alabama. We accomplish our mission by educating young and old alike, informing smart energy policy, and providing technical assistance to help deploy more sustainable energy. We believe in 100% sustainable energy for all.

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For more information about this topic, please contact Daniel Tait by phone at 256-303-7773, or by email at dtait@alcse.org.