Solar Southwest Florida

The Florida Solar Energy Industries Association (FlaSEIA) is voicing the solar industry’s dissatisfaction with the FPL Solar Rebate program. While touted as successful by Florida’s largest utility and a spectacular windfall for a few lucky rebate recipients, the solar rebate program has been disastrous for Florida utility ratepayers, solar energy contractors, and solar suppliers.

FPL and FlaSEIA are at odds over the FPL Solar Rebate Program

Solar Southwest Florida is in receipt of a series of letters between FlaSEIA’s former President, Bill Gallagher, and Florida Power & Light’s Manager of New Product Development, Oscar Gans. The letters detail results from the latest distribution of 2012 rebate funds, FlaSEIA’s position on the rebate program, and FPL’s response. There is some very important and disturbing information contained in the letters, and based on FPL’s response I am not confident that they share the same sense of urgency about the problems with the program.

There are really three overriding factors in this debate over the program in my opinion:

• The flawed reservation system and procedures that creates an unfair playing field for solar contractors and rebate applicants.
• The rebate amount is seriously out of balance with demand for those funds.
• The program does not accomplish the stated goal, which is to increase the number of photovoltaic energy systems installed in the state.

The Reservation System

Case in point for the flawed reservation system is that one contractor was able to secure 27 of the 119 approved rebate applications (23%). The top three contractors accounted for 50% of the approved applications, and the top five hoarded nearly two-thirds. The top four solar contractors for commercial systems garnered 71% of the business, with only seven other contractors securing one or two approvals. Only 26 contractors (out of hundreds of solar and electrical contractors licensed to do installations) were able to secure any rebate approvals.

The reservation system is an online application process that requires the FPL customer to log into their account and enter system details to an online form. In reality, contractors are asking account holders for their account information so they can have employees fill in the technical data required. The application forms go live at 8:30 am on the application date, and then it’s a race to see who can type fastest.

In the last round of funding, the funds were exhausted in under two minutes and further applications were rejected!

How did some contractors fare so much better than others? It is quite apparent that some have figured out how to use form-filling software to quickly enter rebate applications. While that is not cheating, illegal, or immoral in any way, it puts others at a severe disadvantage and give individuals virtually no chance of success in securing their own rebate approval.

Full disclosure to dispel any thoughts that this is just sour grapes: My employer had 11 people frantically entering rebate applications, and we had two people type fast enough to secure approvals, one of which went through with purchasing a system.

There are other problems with the reservation system, like not continuing to take applications after funds are exhausted so that unused funds can go to the next applicant in the queue. Another problem is not requiring that the applicant have serious intentions of actually going forward with an installation. The main problem at this point is the skewed distribution of the funds – the fairness factor. A lottery process has been suggested by others, but that isn’t a process through which industry members can build reliable and predictable sales (read: jobs).

Supply and Demand

Why did the rebate funds run out in under two minutes? Because the rebate amount at $2 per watt is insanely generous in today’s photovoltaic market. It’s no secret that the price of photovoltaic modules themselves is now under $1 per watt. The total installed price being offered by retailers in Florida is well under $6 per watt, and can be under $4 per watt in many circumstances. The combination of a 30% tax credit and the utility rebate exceeding 70% of the remaining cost in many cases makes the return on investment look like stealing power from your neighbor. There is no reasonable financial argument against installing a solar electric system if you are able to secure a rebate for your home or business.

Unfortunately, the rebate funds are limited, so the number of applications approved (119 in the last round) falls grossly short of the demand.

To put things into further perspective, the State of Florida ran a wildly successful $2 per watt rebate program a few years ago when systems were selling at $8-$10 per watt retail price. Because of the plummeting cost of photovoltaic panels and components over the last few years, it is now cheaper to buy a system without rebates than it was a few years ago with rebates. Even at “those prices” a $2 per watt rebate amount was so successful that the State ran out of funds and ultimately paid many people just 52 cents on the dollar. On a good note, the FPL program guarantees that approved applications will be paid as long as the program standards are met.

The bottom line is that the rebate amount is far too generous. People are reluctant to install a system without rebates when their neighbor received a $20,000 handout from the utility. They are far more likely to roll the dice in the next round of funding and hope for a windfall.

Other states and utilities offer far less generous rebate programs and are seeing huge levels of solar energy adoption. For example, Arizona utilities offer rebates in the range of 20 to 50 cents per watt. The programs are wildly successful and at least one utility has exhausted funding for this year.

You will see in the letters that FPL spent $3 million advertising the solar rebate program. It clearly did not need to be advertised. This amount put toward actually installing solar energy systems would have resulted in 1.5 megawatts of additional capacity for ratepayers, and far more if the rebate amount was in line with demand.

The Goal

The stated goal of the FPL Solar Rebate Program is to increase the adoption of distributed solar energy installation in the state of Florida. This rebate program is effectively capping the installed capacity in FPL’s service area, having the exact opposite effect! If $4.5 million is actually reaching ratepayers as noted in FlaSEIA’s letter, then simple math indicates that 2.25 megawatts of capacity will be installed. As stated above, and proven by ample anecdotal evidence, other ratepayers are not going to proceed without a rebate if they know a rebate program is in place.

To put this in perspective, the state of New Jersey saw 173.8 megawatts of capacity installed in the first quarter of 2012 alone.

Statistically, Florida fell to 17th among states in 2011 for total installed solar electric capacity, down from 8th place, right at the time that FPL’s rebate program came into existence. In the first quarter of 2012, the total capacity installed in Florida was a paltry 2.8 megawatts. This was 14th among states, and only 1.8% of the amount of solar capacity installed in the top ranked state, New Jersey.

FlaSEIA recommends that the rebate amount be reduced to 50 cents per watt, which would result in a four-fold increase in the capacity installed. I believe a more aggressive reduction is in order – 25 cents per watt. I truly believe that and eight-fold increase in installed capacity is possible with today’s current retail price of solar photovoltaic systems and a 25 cent per watt rebate. Furthermore, a small rebate amount will not dissuade ratepayers who are not lucky enough to obtain an approved rebate application.

Conclusion

The FPL Solar Rebate Program is clearly flawed. FlaSEIA, with its limited funding and power, is admirably taking the industry’s complaints to FPL and the Public Service Commission. Moreover, this is a battle for the Florida electricity ratepayer who is willing and able to install a solar photovoltaic system, but is stymied by the process and conflicted over whether to proceed without a rebate handout. The fact of the matter is that Floridians were installing solar energy systems in larger quantities while systems were sold at higher net costs before the rebate program came into existence.

Am I asking for the rebate program to go away? Certainly not. I do believe utility rebates encourage the adoption of solar energy. Unfortunately, because of the way this program is being administered, and the supply and demand being so far out of whack, FPL’s implementation is having disastrous results on the industry (jobs), and is having the direct opposite effect as the stated goal.

The series of letters can be viewed here:

FPL Letter May 29, 2012

FlaSEIA Letter July 30, 2012

FPL Letter August 14, 2012

With the fantastic monitoring tools available today, we can see exactly how much energy production drops on cloudy days and when storms pass by. Tropical Storm Isaac just passed by Southwest Florida, and I’ve been reviewing energy output from many of  the systems we have out there. Saturday and Sunday were completely cloud covered days. Sunday August 26, 2012 was not only cloudy, but it was dark and rainy virtually all day long.

Despite the cloud cover, photovoltaic systems continued to put out significant amounts of energy. In general, most systems across Southwest Florida had production cut in half on Saturday and lost almost 3/4ths production on Sunday. Here are a couple of examples:

PV Energy Output During Tropical Storm Isaac

PV Energy Output During Tropical Storm Isaac (Residential)

The last two days were extraordinary, of course. It is interesting to see the performance of the systems during a storm, because there would definitely be an impact on battery backup systems if a power outage were to occur during a storm. Fortunately, there is usually plenty of sunshine to recharge batteries the day after a storm. We still have off and on rain today, but I have seen glimpses of blue sky already. Go Sun!

The most complex financial analyses that solar dealers need to perform are for grid-interactive solar electric systems. The number of variables makes an accurate and reliable analysis difficult to provide to potential customers (investors). However, there are plenty of models out there to give us an idea of the realistic investment returns a system owner can expect. Some are simplistic, while others are tremendously sophisticated. The key is to ensure that the inputs are realistic and accurate.

The first kind of analysis, the one that most people ask for, is the payback. Many people, myself included, are critical of this metric, primarily because it is not intended to measure the type of investment profile provided by a solar energy system, and the result is not particularly useful unless put into context. Unless you are comparing this metric to another investment option with similar costs, term, and risk, the results can be misleading. In addition, the concept only works for investments where there is a single cash outlay at the beginning of the investment with a simple stream of cash returns. You cannot calculate the payback for a system that is financed with no money down, because there is no single initial cash outlay.

What is the payback on a 10-year CD? The answer is 10 years – the stream of cash flows from annual coupons will never come close to paying back the initial investment. The investment is only paid back when the principle value is returned at the end of the term.

Many people gladly invest in CDs with 10 year payback periods, but balk at the thought of a solar energy investment with a 7 year payback. The context is not the same, and it illustrates why payback is not a reasonable metric to use, at least on its own, in deciding whether to invest in a solar electric system. Many solar models available will provide a payback period in number of years and months, and I don’t understand why.

The more important factor in deciding whether to invest is the return-on-investment (ROI) as commonly measured by the internal rate-of-return (IRR). Alternatively, if the cost of capital for the investor is well known, the net present value (NPV) can be used to compare investments or determine whether to accept the investment. The NPV is the dollar value at which IRR equals zero. The higher the NPV, the better in comparing investment alternatives. Void of alternative investments, a positive NPV project should be pursued, depending on risk and investment horizon.  Similarly, the higher the IRR, the better, and as long as the IRR is higher than the cost of capital, the project is “profitable.”

That’s all a bunch of finance-speak I picked up in school. We need to break it down to what the average homeowner is likely to experience in terms of the investment value. We need to make many assumptions and determine reasonable ranges so that we can see how each variable impacts the investment decision (sensitivity analysis). The assumptions we make include:

• The cost of utility electricity in the future.
• Rebate and incentive amounts and time of receipt.
• Degradation of solar module performance.
• Future maintenance costs.
• Future tax rates.
• Cost of capital on variable rate financing.
• Inflation rates.
• Salvage value.
• Future utility regulation/deregulation.
• Cost or benefit of waiting to make investment.

What we know for certain is:

• The price being offered for the installation of the system.
• The cost of utility electricity today.
• Individual tax rates today.
• Cost of capital on fixed rate financing.

What we have a fairly good idea about:

• The average cost of utility electricity the system can be expected to offset initially.
• The warranty on the system components.
• The longevity of the system.

Obviously there are a lot of factors at play. We can use historical data to narrow the risk in making assumptions. However, we also need to look at the future possibilities that cannot be determined by the past alone. For example, what do you expect your tax rate to be in 15 years? If you expect to be making more money and enter a higher marginal tax bracket, the cost of paying for electricity with after-tax income becomes greater, and reducing your utility electric bill would be very smart. If you are entering a period of fixed or reduced income, you may lose out on some of the tax benefits, but you may also be subject to higher risk of inflation and escalating utility electric rates, making the stability of low or no electricity bills very attractive.

A solar financial analysis will give you a good idea of what to expect from an investment in a solar electric system. Just like any investment analysis, assumptions are made and there is a degree of risk involved. Fortunately, many of the factors make the investment less risky than alternatives, and a good case can be made for solar electricity more often than not. When looking at this type of investment consider your current situation, your future scenarios, and the comparative risk of a solar investment. Don’t use payback as a deciding factor without putting it into context. Use return-on-investment as a comparative metric versus other investment alternatives with similar risk profiles and time horizons.

Regardless of what you decide, know that a solar electric system will provide a reliable source of energy production to offset you utility usage, which is the same thing as saying you will have a reliable after-tax stream of income for the next 25+ years!

In my previous post about plug-and-play solar panels, I discussed the realities of this technology in terms of current product offerings. The US Department of Energy just released a request for information from parties interested in developing plug-an-play technology.

The US government is about to spend up to $30M of taxpayer money to partially fund development to make this technology viable under the “SunShot Initiative.” The idea is to make solar electricity economically viable without incentives and make installation as easy as plugging in a TV. In other words, they want to put solar electric contractors out of business.

That last comment was a bit facetious, but it would have that effect. Fortunately, or unfortunately depending on what side of the fence you are standing, I don’t see it happening. Solar electricity is no less dangerous than electricity from the utility company. In fact, it’s more dangerous to handle in some ways. The concept of an appliance that simply plugs in is very nice in theory, but in practice is much more complicated.

When household generator backup became more popular in Florida over the last few decades, there were many fires and deaths attributed to people trying to connect the generator output to their home using an electrical outlet. Similarly, connecting a generator to your circuit breaker panel is extremely dangerous without a proper transfer switch to protect both the household wiring and utility line workers that are repairing systems during an outage. The difficulties with the plug-and-play solar panel concept are similar in many ways, with the added complexity of physical mounting of panels on a roof or ground rack.

In any case, a licensed electrical contractor is going to be required to make a home ready for any future plug-and-play technology that is developed. The physics involved with a standard electrical outlet will not allow safe operation of parallel sources of power on existing wiring systems. It’s like trying to fit four lanes of traffic on a two lane highway. It’s not going to work – at least not safely!

The SunShot Initiative seeks to remove some of these barriers through new product design, standardized connectors, utility and building department cooperation, and building/electric code changes. Regardless of what innovations come out of this project, don’t expect solar panels to be available at your local retailer that you can take home and plug in without some sort of major upgrade to your existing electrical distribution system.

Hopefully there will be significant cost reducing technologies that come out of this initiative. We very well may be able to reach solar cost parity with the utility in the next decade, with or without this project, and without turning every homeowner into a solar installer.

The full text of the RFI can be found here:

DE-FOA-0000634: Plug and Play Technologies and Systems Request for Information (RFI)

You may have seen the promise of plug-and-play solar panels coming to a store near you. I’ll try to make sense of these “new” products and tell you what they will and won’t do for you. There are two kinds of “plug-and-play solar panel” promises floating around out there. There is the solar panel that you can plug into your house and use or sell back to the utility, and there is the solar panel system into which you plug devices directly.

The first “plug-and-play solar panel” product promises that you can plug your solar panels into an existing outlet and feed power back into your home. This is completely unsafe and will not meet any building code in existence. This would require that the system have a male plug that you insert into the outlet. Guess what – that plug with exposed metal conductors could have live power on it (unless the inverter is listed to UL 1741 – let’s not get too technical here!) Even if the proper inverter were used, there are numerous National Electric Code sections that would not allow its use in this manner. No utility company would allow this power to be sent back to the grid. This is not an approved interconnection method, and it is completely unsafe.

Consider that you have a 15 amp circuit breaker feeding a string of outlets in your home. The wire and outlets on that circuit are capable of safely supplying 15 amps of power. If you plug a solar panel’s output into an electrical outlet, you have increased the amount of power available to that wire and all receptacles on the circuit. Furthermore, there is no way to restrict the number of solar panels that a homeowner would plug into a circuit. The homeowner could theoretically install dozens of solar panels into power strips on a single circuit. Hopefully the closest fire station is close by…

The second kind of “plug-and-play solar panel” is really nothing more than a complete mobile off-grid solar electric system. The components include a solar panel, an inverter, and possibly a battery. With this system you can plug devices directly into the inverter output using a standard AC receptacle. There is nothing wrong with this concept, except that it has serious limitations in usefulness, efficiency, and value.

A new product of this kind from Onyx Service and Solutions Inc promises to revolutionize plug-and-play solar. There is really nothing new with this product except that it is larger and higher powered than most other portable solar power devices. I use the word “portable” loosely here because it’s hardly something you can pop in the trunk for an afternoon outing. The included 330 watt solar panel is at least five feet long by three feet wide. The premise of this product is to include a solar panel, a battery, and an inverter in a single box with a standard AC outlet. That’s great, but the amount of power generated and stored isn’t even enough to run a laptop computer for 24 hours.

This system cannot be attached to your home’s electrical system and it cannot sell electricity back to the grid. Don’t be misled!

This type of product is fantastic for small power needs, like charging phones, tablets, or other small devices, or using some higher powered devices for shorter periods of time. They key is to make it portable enough. There is a nice consumer product line from Goal Zero that is perfect for modest power needs, and it does exactly what the Onyx system does, albeit on a much less powerful scale, but it is truly portable.

The promise of “plug-and-play solar panels” is a long way away. There is hope. The best opportunity for a plug-and-play type system may be using a transfer switch similar to the generator input to a home. One thing is certain – you will need to upgrade your home wiring or provide a proper receptacle that in some way makes this type of installation safe, and it will need to be done under the current or future requirements of the National Electric Code.

The best bet in solar electric today is still the basic grid-interactive solar electric system. Don’t be misled by promises of new revolutionary products that can’t deliver. If you want a portable consumer grade solar energy system, educate yourself on the limitations, and if it meets your needs, by all means, proceed!

Early morning dew covers PV panels at Naples Botanical Gardens

Fafco Solar has completed the FGCU Naples Botanical Garden photovoltaic system installation. I am particularly proud of this system and the expert installers that did the heavy lifting. The system includes 164 SolarWorld 245 watt solar photovoltaic modules, 164 Enphase M215 microinverters, a Unirac SolarMount mounting system, and S-5! Clamp attachments.

Because of the existing electrical system at the facility, the photovoltaic system is divided into two sub-arrays backfeeding power into two 208V 3-Phase electrical distribution panels. Commercial 3-Phase installations are always interesting from a design standpoint because typically we are dealing with various existing transformers and often generator backup systems.

Workers Install PV Module

It was truly a pleasure working with the Naples Botanical Garden staff and Manhattan Kraft Construction on this project. The weather cooperated for the most part. The job went very smoothly, finishing about a week ahead of my expectations.

This job is a model for future PV construction projects. We look forward to the next big PV job as we move on to a large multi-tenant solar water heating job in Fort Myers.