Solar 2014: Buy, Lease or PPA? Buy

 
As utilities are using more solar and wind--both free energy sources--to power the grid than ever before we might think electricity rates could level off, if not actually go down. But this hasn't been the case. Moderate to heavy electricity consumers here in California saw their rates rise between 20 to 40%. 

So if you haven't gone solar yet, make it a 2014 resolution. With today's cheap panel pricing, installing solar could be less stressful than your other resolution... dropping weight! 

So how cheap is cheap?

Well, in 1977 panel cost per watt was around $77; ten years ago, about $5; and today it's around .74--yes, 74 cents a watt. The typical 24-watt panel in '77 would have cost $1848. Today, the average wholesale price of a standard 250W module is about $185. Bearing this in mind, the cost for a typical 5kW (5000Wdc) solar installation in CA is as low as $18,750 or $3.75/watt turnkey. Rebates and tax credits will defray much of that cost, too.

So now the question is whether to purchase or go with a lease or power purchase agreement (PPA). If you can afford it or have access to a low-interest loan, buy it.

The lease/PPA will commit you to a 15, 20 or 25-year lease. Down payments can be 0 or an amount the lessee (homeowner) can cough up to reduce the monthly payment. The monthly lease payment (unless prepaid) can be fixed or set with a 1-3% annual escalator. All incentives are taken by the lessor who owns the system. Lease/PPAs are also transferable.

Some like the idea that any maintenance or repairs are the duty of the lessor. But be careful here. The lessee (you) in most cases is responsible for keeping panels clean for optimal production and damage other than panel and inverter problems or poor wiring, must be covered by homeowner's insurance. Finally, at lease/PPA end of term, the homeowner has the choice to renew, purchase at market value or have the system removed at the lessor's expense. Here's the hitch to consider:  If you total the payments over the lease/PPA term, the amount can be more than the original purchase price AND the lessor will have taken the incentives.

Purchasing will require up-front payment but with the low cost for installing and solar incentives this choice makes good financial sense (see http://www.dsireusa.org/ for incentives in your state). The federal solar tax credit is 30% of cost after any rebate and can be taken in whole or anytime before the end of 2016. Payback (when savings equal net cost) can be in as little as 3.5 years here in CA--an ROI of 12-18%. How many other investments will give that sort of return today? And when selling, people in CA are 20% more likely to buy a house with solar (or solar-ready) than those without.

What's more is most states require a 5- to 10-year system-wide limited warranty from the installer. Better yet, manufacturer's warranties on solar panels and inverters are the best anywhere. Virtually all panels have a 25-year production warranty (at 80%) and 5-10 year warranty on materials and workmanship (quality). Standard string inverters have a 10-year limited warranty and some micro-inverter makers are giving as much as a 25-year warranty. Systems will last 30 years or more; annual degradation of panels is below 1%!

So with payback in 3-5 years, that's 25-plus years of free power from the sun. Buy, if you can, and you'll never look back. 

(If you live in the San Diego area and are interested in solar power for your home or business, contact me at dbrands72@gmail.com. Reply in 72 hours or less.)                            

                                                                           

American Indians Making $$ on Solar in West

Airborne coal ash pollutes the air at Moapa Indian village.

The Energy Policy Act of 1992 opened development of renewable energy projects on American Indian reservations. Since then wind and solar projects have provided power to pump water and electrify homes of Native Americans both on and off the grid. While not perfect, solar provides jobs and lease revenue for tribes as it cleans up their air.

The 2010 Census lists 334 American Indian and Alaska Native reservations with 565 federally-registered tribes living on or off reservations. The 56.2 million acres of reservations which lie mostly west of the Mississippi however many states have them. This is about 4% of the U.S. landmass which is significant because it was determined some years ago that if just 1% of U.S. land was covered with solar panels, it would meet America's electricity demand.

The Obama Administration's all-of-the-above approach to energy development has allowed tribes to make their reservations available to large-scale solar projects. The first such project started in June when Sec of Interior Ken Salazar approved the 350-megawatt (MW) solar project on land of the Moapa Band of Paiute Indians northeast of Las Vegas, NV. Building in three stages of 100-150MW each 2000 acres, the project will generate lease payments, jobs and clean energy to improve the tribe's overall economy. Power will be used in the immediate area but most is being bought by Los Angeles Dept of Water & Power in a 25-year deal.

California, Washington, Nevada, Arizona, Utah, New Mexico and Oklahoma--seeing rapid population growth as the country moves West--have the most reservations in number and land mass. Reservation solar development could provide an answer to distributed energy throughout those states.

The fast-track of solar on reservations is not without its pitfalls, however. In 2011, tribes have filed suit against the federal government for installing solar near abondoned villages, Native drawings and other cultural landmarks (see http://www.reznetnews.org/node/103). The afore-mentioned Moapa solar project has required the relocation of 157 desert tortoises, a threatened species of the area, after ten died of predation and heat exhaustion as they fled the site of the solar array.

The BIA and BLM have both insisted that the concerns of Indians have been carefully considered. The Moapa solar project must also be measured against the antiquated, coal-burning Reid-Gardner Generating Station it is replacing. Asthma, lung disease, heart disease and cancer have plagued the community for decades, ills the Moapas blame on pollution from the Reid Gardner plant (see http://goo.gl/q0wwAZ).As for disrupting the native habitats of endangered species, more due diligence in environmental impact studies are forthcoming.

One band of the Kumeyaay Nation east of San Diego has looked into solar as a revenue generator in lieu of a third Indian casino in five-mile radius. Instead they completed an agreement with San Diego Gas & Electric to lease land for more high-producing wind turbines.
                                                                               

SolarWorld Reports Heavy Hit in 2012

SolarWorld plant in Freiburg, Germany.

SolarServer (www.solarserver.com) reported yesterday that SolarWorld AG of Bonn, Germany release selected results for 2012 showing a 42% decline in revenues to EUR 606 million ($792 million), an 81% operating margin drop with a net loss of EUR 477 million ($623 million).

On the bright side, SolarWorld reached an agreement with creditor over basic financial restructuring in a plan intended to allow a 60% reduction in its non-current liabilities. The plan includes a combined capital reduction and capital increase with debt-to-equity swap. Still, the plan needs approval of all pertinent committees.

Bloomberg reports SolarWorld has EUR 150 million ($196 million) worth of bonds maturing in 2016 plus EUR 400 million ($523 million) worth of bonds maturing in 2017.

SolarWorld attributes 2012 losses to both a 40% decline in solar photovoltaic (PV) module prices and a decline in shipments. SolarWorld  (www.solarworld-gt.de/en) is Germany's largest PV panel maker.

LDK Solar Update

Some upbeat news for LDK Solar (www.ldksolar.com).

Fulai Investments Ltd. (British Virgin Islands) agreed to purchase $25.7 million of new shares in LDK Solar Company Ltd. (Xinyu City, China). Fulai will buy 25 million shares at $1.03 per share. This is Fulai's second purchase of LDK stock in three months, the first being an agreement to purchase $31.1 million in stock in January 2013.

LDK and Suntech are two major Chinese PV manufacturers facing  major financial problems this year with the latter entering bankruptcy.

Now LDK Solar Defaults

On the heels of Suntech's bankruptcy last month, LDK Solar Company Ltd. (Xinyu City, China) failed to make  full payments of $23.8 million-worth of 4.75% convertible notes due this year.

LDK was able to reach a private agreement on some cash payments and payment postponement with two other holders of $16.6M in notes. The company is seeking settlement with owners of the balance of convertible notes.

LDK just released fourth quarter 2012 results showing a 54% year-over-year collapse to $136M, an operating loss of $409M with a net loss of $515M. Obviously, it was a bad quarter but one of seven recent quarters with heavy losses. PV cells and panels along with silicon wafers saw drops in sales. Still, LDK's CEO Xinghue Tong is confident financial obligations can be met.

"Our business continued to be affected by the significant challenges that remained pervasive throughout the solar industry," Tong said in a statement this week. "Our fourth quarter results reflect the industry-wide overcapacity and resulting pressure to ASP's [average selling prices] and margins."

Symptoms of the Fall:  Commentary

Chinese PV manufacturers are heavily responsible for the bottom dropping out of panel pricing worldwide. The 2008 US financial collapse had the Chinese dumping panels here in the US forcing stateside and foreign makers to sink or swim to this day.

As I see it, under the Chinese financial model--a blend of communism and pragmatic capitalism--business leaders were used to heavy government with less concern for profit in a free market. Conversely, self-funded, profit-minded competitors around the world must pay more attention to supply and demand. Spoiled, if you will, by the old way things were done, Chinese companies like LDK now had international investors to pay back. It's a lesson the Chinese had to learn sooner or later.

Solar margins continue tumbling

With solar margins continuously shrinking, one might think diversified corporations with solar subsidiaries are better capable and more determined to make solar profitable. But German companies Schott, Schuco and Bosch with solid core businesses scaled back or even ceased their solar operations rather than continue paying for a dying horse, so to speak.

Still, solar is growing worldwide. Cheap panel prices are great for individual and commercial consumers, of course. Dedicated solar manufacturers have found other ways to keep afloat. Beside their widely-acclaimed panels, Sunpower's leasing program has been a huge boost to the company's presence in the US. Sunpower is also generating revenue for inverters, monitoring and racking. Just as Ford started making more than just the Model T, Sunpower's moxie could prove the way of things to come.