This CESA report provides an overview and specific examples of three creative finance tools that any state can use to support PV in the context of an existing RPS: solar set-asides, feed-in tariffs, and reverse auction mechanisms. These tools are primarily targeted at commercial- and utility-scale projects, and use of any of them can reduce the need for states to provide direct rebates and incentives to PV projects. These tools, if smartly designed, can allow states to build sustainable solar markets with programs that are economically efficient, reward PV system performance, allow for program continuity, advance market transformation and avoid rebate dependency.

The authors contend that providing special treatment to PV projects in the context of an RPS is important if states are to build and maintain public support for their RPS programs, particularly in cases where solar is the most widely accessible in-state renewable energy resource.

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File Format: PDF
Source: Clean Energy States Alliance

The New Solar Homes Partnership (NSHP) is part of a comprehensive statewide solar program known as the California Solar Initiative (CSI).The NSHP implements the Energy Commission’s portion of the CSI and provides financial incentives to encourage the installation of eligible, solar energy systems on new residential construction. The Energy Commission will work with builders and developers to incorporate high levels of energy efficiency and high-performing solar systems to help create a self-sustaining solar market.

 The NSHP seeks to achieve 400 megawatts of installed solar electric capacity in California by the end of 2016.

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File Type: PDF
Source: California Energy Commission

For more information, please see their website by clicking here.

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File Format: PDF
Source: California Public Utilities Commission

Over the past decade, states have played an increasingly important role in providing financial support to renewable energy projects, with funding often derived from state-established public benefit funds. The financial support tools for renewable energy projects have ranged from rebates to competitive grants to loans. Complementing these tools has been a set of public policies— tax incentives, net metering and interconnection rules, renewable portfolio standards—passed by state legislatures and regulators. Recently, the American Recovery and Reinvestment Act (ARRA) also provided significant funding to states to support clean energy investments.

The purpose of this report is to describe the many financing options available to state energy offices, municipal governments, and other energy agencies for utilizing public funds for clean energy project support. The report analyzes their strengths and weaknesses and identifies best practices. One key finding is that, while each tool has its own strengths and weaknesses, the use of these tools as a portfolio of approaches creates the most robust, effective programs.

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File Souce: Clean Energy States Alliance

Connecticut Solar Lease Program

The groundbreaking introduction of a state-sponsored solar leasing program has drawn national attention and an onslaught of additional leasing programs and financing options have developed as a result. The Connecticut Solar Lease Program is a Connecticut Clean Energy Fund (CCEF) initiative that was begun in 2008 and designed to eliminate the high upfront capital cost associated with solar photovoltaic (PV) system installations.  One of the  first of its kind in the nation, CT Solar Lease Program uses a combination of rebates and tax credits to help moderate and low income residents in the state gain access to clean, renewable solar energy.

The Connecticut Solar Lease Program addresses affordability issues for homeowners interested in installing residential solar energy systems. Eligible Connecticut homeowners—those residents whose household income is 200% or less of their area’s median income and meet the credit qualifications of the program—have the opportunity to install a cutting-edge solar system on their home with no down payment required and a low fixed monthly payment.  

While electricity prices are projected to continue to rise, the monthly CT Solar Lease payment will remain constant. In addition, homeowners enrolled in the program will benefit from the Connecticut Clean Energy Fund (CCEF) Solar Rebate Program. Because CT Solar Leasing owns the solar PV system, it can take advantage of business tax incentives, further reducing the cost of the system on the homeowner. To procure a system, homeowners work with an eligible solar installer of their choice; over twenty installers have been pre-approved by the CCEF and CT Solar Leasing. Lessees also receive Solar Dividends, allowing them to share in the sale of the panel’s generation of Renewable Energy Credits (RECs) where 1 REC is earned for every megawatt (MW) of electricity generated by the system. The money from the earned RECs goes into an account that lessees can use towards paying for a new inverter or towards the cost of system removal. Homeowners receive full use of the system for fifteen years at a fixed cost, with the option to buy. At the end of the fifteen year lessees have the option to buy the system from CT Solar Leasing at its current value, extend the lease for an additional five years at a reduced monthly rate, or have the system removed at their own expense with no future obligation. For more information on The Connecticut Solar Lease Program click here. 

Table 1 – CT Solar Leasing – Estimated Costs Table (click here for source)

The uniqueness of the CT Solar Lease Program encompasses several factors. To start, it is the first time that a ratepayer funded organization such as CCEF has partnered with financial institutions to leverage federal business tax credits in order to make renewable energy more affordable.  Secondly, the CT Solar Lease Program’s financial model is especially innovative because it was designed to allow valuable benefits to the customer such as low fixed payments and zero down payments.  Thirdly, the financial model also allows funding to come back to the program leveraging CCEF’s investments and benefitting Connecticut ratepayers.

(The PV Peer Network featured the CT Solar Lease Program as the focus of one of its webinars on Sept. 19, 2008. The webinar materials and audio file from the event are located on the PV Peer Network page of this website at http://www.statesadvancingsolar.org/state-activities/pv-peer-network.)

Electric utility companies have recognized the increasing importance homeowners and businesses are placing on clean, accessible, and affordable renewable energy.  Since the introduction of Connecticut’s program, many private companies have unveiled leasing programs for both residential and commercial markets.

SolarCity Lease provides affordable solar leasing options for businesses and homeowners in California, Arizona, and Oregon. Similar to CT Solar Lease, SolarCity offers leasing options for no money down and low monthly payments. The flagship company partnered with U.S. Bancorp Community Development Corporation to ensure the financing of Power Purchase Agreements (PPAs) for a wide range of potential lessees. The company supplies financing, design, installation, monitoring, and maintenance for all of its solar leasing clients. Utilizing cutting edge proprietary software, SolarCity is capable of analyzing potential solar production, financials and environmental impacts for each client, managing thousands of concurrent projects, and automating key processes to further cut costs. The company is able to finance small commercial spaces as small as 20 kilowatts, to systems that generate upwards of 1,000 kilowatts or more. As of July, 2009 SolarCity had struck leasing agreements with over 3,500 homeowners, businesses, and schools.

SunRun PPA has a similar model to that of SolarCity and operates within California, Massachusetts, and Arizona. SunRun is the first company to strike an agreement with a local utility company, the Los Angeles Department of Water and Power (LADWP), which has resulted in even lower cost leasing options for SunRun customers within the Los Angeles area.

FreEner-g, a newcomer to the scene, is a Minnesota leasing company starting a program out of the Twin Cities area. FreEner-g has marketed itself as an eco-venture with a triple-p approach: people, planet, and profit. The pilot project is being partially funded through customers of Xcel Energy through a $1.5M grant from the Xcel Energy Renewable Development Fund. The Solar Assessment phase of the project began in August of 2008; currently, frEner-g is in the midst of the Solar Installation phase. By installing approximately fifty solar systems on homes and small businesses, freEner-g plans to deliver 280 kilowatts of installed solar capacity throughout the Twin Cities.  

Urban Electric Company recently announced their plans to create a Solar Equipment Lease program in the Philadelphia area. Like all companies whose state law requires net metering, Urban Electric Company solar system meters track the net difference between energy flowing in and out of the home and utility companies compensate for excess power fed back into the system.

While the above sampling of companies providing solar leasing programs vary in specific financing options and lease lengths, all the providers have been attracting customers with projected savings on monthly energy bills, solar system maintenance agreements, and guaranteeing high system performance. As more and more individuals and companies realize the financial and environmental advantages of solar leasing programs, expect to see more options available to consumers countrywide.

 http://www.ctsolarlease.com/documents/NRELSolarLeasePaperMarch2009.pdf 

 http://www.nrel.gov/docs/fy09osti/44853.pdf

This program summary and other State Solar Spotlight Program case studies can be found on this website under State Activities.

State Solar Spotlight:  August 2010

Focus on Energy: Solar Hot Water Incentive Program

Bonus incentives are available for projects that incorporate efficiency, and adders may also be available from local utilities. Due to the maturation of and increased interest in efficiency and solar technologies in Wisconsin, the incentive levels and procedures for project approval are subject to change in 2011.
  

The levels of incentives provided are one factor in stimulating commercial solar hot water installations in Wisconsin, but other, non-monetary program elements are just as important. These elements include:

• Technology specificity: Focus on Energy has developed a program just for commercial solar hot water, meaning it is not in competition with other technologies that may meet different objectives (such as PV for electricity generation).
• Non-competitive, ongoing: As long as funds remain in the program and all elibility criteria are met, commercial solar hot water projects are assured funding in a first-come, first-served manner on a rolling basis.
• Simple paperwork: Focus on Energy provides a form with detailed instructions for the customer and his or her installer to fill out, requiring all the information that the program administrators will need to determine a project’s eligibility. The installer base has been well-trained to facilitate the submission of this paperwork for approval.
• Broad applications allowed: Focus allows for systems in situations ranging from hot water to process heating to pools heating, meeting the needs of most potential high-use customers.
• Assistance offered: Focus helps customers at both the front and the back ends of the process, from offering discounted site assessments, design review, a list of installation requirements, and a preapproved list of contractors to verifying systems post-completion and requiring monitoring systems on larger installations, so the program and the customer can track a system’s effectiveness.

The following chart illustrates the success of the program since its inception:

These incentives have served a wide variety of applications, including:

• Dentists’ offices
• Laundromats
• Landscaping firms
• Churches
• Health care clinics
• Hospitals
• Hotels
• Restaurants
• Schools
• Public pools
• Apartments
• Industrial applications

Special thanks to Kari  Heinrich, Solar Hot Water Lead,  Focus on Energy for her assistance in preparing this Solar Spotlight.

A PDF file of this program summary and other State Solar Spotlight Program case studies can be found on this website under State Activities.

“Through the Single-Family Low-Income Incentive Program…our goal is to provide low-income homeowners access to solar photovoltaic systems, to decrease electricity usage and reduce bills without increasing monthly expenses…By enabling low-income households to purchase photovoltaic systems, this program will help ensure that all Californians have an opportunity to avail themselves of the benefits provided by the clean energy technologies this Commission so ardently supports, including solar.”

CA PUC President Michael R. Peevey
November 16, 2007

With Decision 07-11-045 on November 16, 2007, California Public Utilities Commission adopted an innovative $108.34 million dollar program to provide incentives to low-income, single-family, owner-occupied homes in investor-owned utility territories. The goal of the Single-Family Low-Income Incentive Program is to provide low-income homeowners in California access to solar photovoltaic systems and to decrease electricity usage and reduce bills without increasing monthly expenses. The name of this program has been recently changed to the Single-Family Affordable Housing (SASH) Program. This program does not provide incentives for solar water heating systems.

The CSI SASH Program provides fully-subsidized 1 kW PV systems to very low-income households, and highly-subsidized systems to other low-income households.  The Commission expects approximately 1,800 households to qualify for fully-subsidized 1 kW systems. These systems are targeted towards households that cannot afford to take out loans to cover even part of the cost of a solar PV system. An additional 5,000 households are expected to be eligible for highly subsidized systems, whose owners also can take advantage of incentives, tax credits and other financing mechanisms.

All SASH applicants must meet the legal definition of “low-income residential housing” in Public Utilities Code 2852 to qualify for the program. Eligibility is limited to households who financed their homes with low-income housing tax credits, tax-exempt mortgage revenue bonds, general obligation bonds, or local, state or federal loans or grants. In this program, the system owner must be the homeowner.

To qualify for a fully-subsidized 1 kW PV system, homeowners must first meet the eligibility requirements per Public Utilities Code 2852 and have household incomes at or below 50 percent of the area median income. The subsidy is capped at a maximum of $10,000 per qualifying household, and a maximum of 20% of program funds will be used for full subsidies.

This program will also service those homeowners who qualify under Public Utilities Code 2852, but whose household income is over 50 percent of the area median income. These families will receive partial subsidies for the installation of their PV system; the size of the subsidy will depend upon their federal tax liability. The CSI program has agreed to subsidize between 50% and 75% of the PV systems installed on these houses and to facilitate low-interest loans for the remainder of the cost.

The electricity generated by homeowners will be re-directed into the electrical grid they are on, and at the end of the year, any electricity generated will be subtracted from the cost of their total consumption. However, homeowners will not be paid for any excess energy generated during the year—Go Solar California urges people to contact their state legislator if they would like to change California’s Net Metering Law that does not obligate Utilities to pay their clients for excess energy generated and re-entered into the grid from personal solar PV systems.

Residential systems generating PV electricity will be credited between $4.75 and $7.00 per watt for the electricity they produce based on a sliding scale that reflects the homeowner’s federal income tax liability. In order to support the lowest economic echelon, this program has been designed in such a fashion that “the incentive rates are intended to provide a homeowner who has no federal tax liability with a positive cash flow in the first year of the installation.” The CPUC has decided that it prefers “to keep incentives at a constant level to avoid customer confusion” as this particular population sector will be hard to reach and market solar energy to in the first place, but it may consider adjusting the incentives later in the program based on market changes in solar energy costs. Lump-sum incentives will be provided at the following per-watt rates:

Incentive Rates for Highly Subsidized Systems (shown in $ per watt):

Federal Income Tax Liability	Qualifying Low-Income CARE-Eligible Homeowners	Qualifying Low-Income Homeowners not eligible for CARE
$0	$7.00	$5.75
$1 to $1000	$6.50	$5.25
$1001 to $2000	$6.00	$4.75

Funding for this program is being collected from distribution rates of the three primary utilities in California, PG&E, SCE and SDG&E, who are all paying a percentage of the budget based on the same percentages as the total CSI budget.

Utility	PG&E	SCE	SDG&E	Total
Percentage	43.7%	46%	10.3%	100%
Total Budget	$47.34	$49.8	$11.2	$108.34

Concerns have been raised regarding the geography necessary for optimal energy production. In order to qualify for the incentives presented by CSI, “an installation must meet a minimum performance requirement, which is .95 of the Design Factor used to calculate up-front incentive payments.”  While there was debate over the effect that this restriction would have on low-income homeowners in the less sunny areas of the state, the restriction has been put in place in order to help ensure that high-performing PV systems are installed on low-income homes, which is a goal of this program.

To govern this program throughout the state of California, the PUC has decided to select a single “Program Manager” to oversee the low-income homeowner incentive program. After much discussion between the parties involved, CSI has decided that the Program Manager should be a non-profit organization dedicated to helping and serving the low-income community. By having only a single Program Manager team, it will be possible to save money on administration and put more of it into PV systems and outreach programs.

Prior to being regarded as eligible for a PV solar system, applicants must enroll in the LIEE (low-income energy efficiency program) (if eligible) and complete an energy efficiency audit to determine what size system would be appropriate to create maximum efficiency in their particular house. Applicants may obtain a free energy efficiency audit through utility efficiency programs. Once the audit has been completed, it will be reviewed by the Program Manager who may require some “reasonable and cost-effective energy efficiency improvements” in order for the PV system to function at maximum output.

The Program Manager will work with the homeowner to determine whether applicants are eligible for the program, or whether they qualify for the full subsidies or incentives that partially subsidize the PV systems. Further, the Program Manager will help incentive recipients to find loans, other grants, and tax credits to cover any remaining costs of the system. Though each utility will credit incentives directly to qualifying applicants in its service territory, incentives will only be paid after the Program Manager verifies that installation is complete and the solar PV system is operable. It is expected that once systems have been installed, the payback period will be up to two years and the systems will remain under warranty for 10 years.

After a system has been installed, it will remain under the surveillance of the Program Manager and be subject to a formal biennial independent evaluation. In addition, the Program Manager will be similarly evaluated every two years by an independent evaluator to ensure that the program and PV systems are functioning efficiently and correctly.

By implementing the Single-Family Affordable Housing Program, California Solar Initiative hopes to install 1,000 PV energy systems within the territory of PG&E, SCE and SDG&E by the end of 2010, and to have established contact with every eligible homeowner in these territories. Other states have already begun to follow suit, as is demonstrated by the recently implemented State Rebate Program for Low-Income residences in Connecticut, funded by Connecticut Clean Energy Fund.

For the most update information on this CSI program, please see:

http://www.cpuc.ca.gov/PUC/energy/Solar/070424_csilowincome.htm

http://www.gosolarcalifornia.ca.gov/csi/low_income.html

The CPUC Decisions on the Single-Family Affordable Housing Program can be downloaded at:

http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/75400.pdf

http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/93687.pdf

http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/99026.pdf

A special thanks to Melicia Charles, Public Utilities Regulatory Analyst, California Public Utilities Commission, for her assistance with this summary.

New Jersey’s Solar Transition to a Market-based Solar Financing Program

New Jersey’s clean energy goal is simply stated to be 20% by 2020. More specifically, the state hopes to achieve 20 percent reduction in GHG by 2020; 20 percent reduction in energy use by 2020, 20 percent use of renewable energy by 2020, and 2.12 percent of its energy to come from solar PV by 2021, as mandated by the state’s Renewable Portfolio Standard.

Today, with over 3100 solar pv systems installed across the state, New Jersey is second only to the state of California in the number solar panels installed. New Jersey’s favorable net metering and interconnection rules have allowed for this impressive solar push by allowing PV systems to connect to the electricity distribution system (the grid) and be compensated for the generation of clean, emission-free electricity that is fed back into the grid.

New Jersey’s success has been accomplished through the New Jersey Clean Energy Program, administered by the NJ Board of Public Utilities, that has provided over $227 million dollars in funds from May 2001 – June 2008 to promote solar energy through rebates on the cost of installations of PV systems in New Jersey. Historically, NJ’s upfront rebates to solar PV owners have provided up to 50 percent or more of the installation costs.

New Jersey will seek to grow its cumulative solar capacity to as much as 2300 MW by 2021, up from the 57 M-dc installed, grid connected cumulative capacity as of June 2008. However, if the current rebate program were to continue, it was estimated that the cost to achieve the 2.12 % solar RPS requirement by 2021 would be almost $10 billion dollars. Because of this and other factors, the NJ Board of Public Utilities decided in September of 2007 to move NJ away from a rebate program to advance solar and to begin a market-based Solar Financing Program to ensure continued growth of NJ’s solar market. NJ will phase out rebates by 2012 and rely on Solar Renewable Energy Credits (SRECs) and a Solar REC-based financing to spur private investment and market development for solar technologies.

SRECs represent the renewable attributes (clean energy benefits) of solar power generated from a solar electric system, and they can be bought or sold separately from the electricity, thus providing the PV system owner with a source of revenue to help offset the cost of the system installation. An SREC is issued to a solar facility for each 1000kWh (1 MWh) of solar energy it generates.

If a generator has accumulated a fraction of an MWh by the end of a reporting year (May 31), the fraction may be carried over and combined with energy generated in one or more subsequent reporting years in order to make a full MWh that is eligible for sale. Under existing rules, one or more full MWh (SRECs) may not be carried over to subsequent years.  However, “bankablity” or the extension of the utility of a SREC for an additional year is one of several rule changes proposed as part of the Solar Transition that is currently before the Board.

Under existing rules, an annual estimate can be used, at the option of the owner, to calculate the monthly SREC generation for systems with a capacity less than 10 kilowatts (kW). The program’s web site allows owners of systems 10 kW and larger to upload monthly meter readings and/or production information. When a generator has at least one SREC in an account, the generator can use the electronic bulletin board on the SREC web site to announce a sale offering. Interested buyers can also use the web site to request an SREC purchase. Buyers and sellers contact each other offline and execute a sale. After the sale is executed, the seller uses the web site to transfer SRECs to the buyer. Electricity suppliers can also use the web site to retire SRECs that have been used to meet their RPS requirements. Generators also have the option of recording and retiring SRECs for purposes other than for RPS compliance.

PV system owners can choose to sell their SRECs to a broker, aggregator or Load Serving Entity (an electric supplier or provider in New Jersey’s restructured electric industry not a utility) that must buy SRECs to meet its RPS obligation. Some solar installers or project developers will offer to buy the SRECs as part of the project financing, thereby reducing the amount of capital needed up front to finance a project. All residential and commercial customers considering financing options for a solar installation should ask about the value of SRECs and who will have the rights to claim them. By increasing the value of SRECs paid out over the life the system, the amount of the rebate needed up front can thus be reduced or eliminated.

The SREC value is determined by the market with supply of SRECs a function of installed capacity and demand determined by the RPS percentages and the level of retail electricity sales by regulated entities.  The price is effectively capped by the level established for Solar Alternative Compliance Payments (SACP) in a particular Energy Year. The SACP is a tool within NJ ‘s RPS that enables compliance during times of insufficient supply of Solar Renewable Energy Certificates.  The regulated entities in NJ’s RPS rules, electric suppliers and providers (not utilities or EDCs), must supply either SRECs or SACPs in proportion to their retail sales to comply. 

The SACP level had been $300 per MWH since it was established in 2004.  In September 2007, the Board of Public Utilities approved an increase in the SACP for Energy Year 2009 to $711 per MWH as part of our state ‘s effort to transition the solar subsidy delivery system away from a heavy reliance upon rebates toward greater emphasis on the RPS.  The Board also established a schedule for the SACP level for eight years and a process for setting the level for the “new” eighth SACP amount annually.  The current schedule for eight years of SACP decreases by 3% from $711 per MWH and currently culminates at $549 per MWh in 2016. This Fall the Board will convene an Advisory Panel to recommend an SACP level for the new eighth year, i.e., 2017.

For smaller PV systems, solar rebates will still be available for the years 2009-2012. A funding level of $53 million has been recommended for these rebates over that time period, and they will be administered from the NJ Clean Energy Program.  The funding levels proposed by staff for solar PV as well as other clean energy measures are currently being considered by the Board with a decision expected before the Fall of 2008.

Finally, under the recently proposed rule amendments, PV systems can be qualified for SREC revenues for a period of 15 years, after which the system will be considered eligible for Class I RECs in NJ’s RPS.  And each SREC will have a two-year vintage, meaning that an unused SREC may be carried forward for one year in the market.  As a financial safety valve for ratepayer funding, a cap on overall state solar incentives has been recommended to approximately 2 percent of total electricity sales (ratepayer bills) on an annual basis. The NJ BPU will monitor the costs of solar installations relative to the total retail market electricity costs to provide for a “safety valve” in the RPS rule making as needed.

By transitioning to the Solar REC-based financing program, NJ will use market forces to achieve its clean energy goals by shifting away form up-front rebates and toward a performance-based SREC revenue stream.  A chronology of documents used to support the stakeholder proceeding which culminated in the Solar Transition adopted by the Board is available at http://www.njcleanenergy.com/renewable-energy/program-updates/program-updates.

A set of answers to Frequently Asked Questions on the New Jersey Solar Market Transition can be found at:

http://www.njcleanenergy.com/files/file/SOLARTransitionFAQs121707%20fnl2(2).pdf

The NJ Clean Energy Office Solar REC Program is one of five awarded the Clean Energy States Alliance "State Leadership in Clean Energy" awards in 2009.