Are Your Customers Getting The Most Out of Their Solar System?

Are Your Customers Getting The Most Out of Their Solar System?

By Ed Toppi 

Over the last several years, deployment of customer sited solar PV systems has grown tremendously.

Source: SEIA / GreenTech Media

The solar PV market in the U.S. has experienced 47% compound annual growth rate between 2010 and 2015. Federal and state policy and gains in industry cost efficiencies have made solar PV a compelling investment.

Source: EIA, Electric Power Monthly Report, December 2017

In 2016, GreenTech Media reported that 20 states had achieved solar-grid parity. It was also estimated that customer sited solar PV will be at parity with grid purchases in over 40 states by 2020.

Source: GreenTech Media, February 2016

At the federal level, customers opting for solar PV can take advantage of the Investment Tax Credit (ITC). The ITC allows for a tax credit on federal income taxes of 30% of the cost of the system. Solar installers offering a power purchase agreement (PPA) option, the ITC extends to them allowing for reflection of the credit in the PPA pricing to still benefit the customer.

At the state level, customers benefit from net energy metering (NEM), the mechanism by which consumers receive a credit for the production of their solar systems. Nearly every state with NEM (only 3 have no sort of NEM) allows for crediting of the excess solar production at the full retail rate. NEM has achieved its objective of promoting the development of customer sited (often renewable) energy sources. The policy has been so successful that many states need to modify their NEM policy. In recent years nearly half of all states with NEM policies have changed or considered changes.

In April 2016, Massachusetts reduced the NEM credit for new systems to 60% of the retail rate for most non-residential systems. This reduction in the credit creates an incentive to shift the excess solar production to another time of day rather than export it.

In 2017, California began implementation of its NEM 2.0 successor to its original program. NEM 2.0 mostly retains the full retail rate credit except it now omits some non-bypassable surcharges from the credit. NEM 2.0 also raises the size limit on an individual customer sited system to allow systems greater than 1 MW. More significantly is the requirement for customers with an NEM 2.0 eligible system to take electricity service under a Time of Use (TOU) rate from their utility and the NEM credit will reflect the time of use in which the excess electricity is generated. The associated TOU rates for the utilities reflect a significant shift in the definitions of the times of use. These new definitions are consistent with the shift in the cost of energy in the wholesale market and they no longer align with the typical production profile of solar.

How then can one maximize the value new customer sited solar in the changing NEM landscape? Energy storage could be the answer. Battery energy storage can be used to shift the excess solar production to times when it is of more value to the customer as demonstrated in the graphic below.

Storage paired with solar can also be eligible for the federal investment tax credit on the cost of the storage system if at least 75% of the charging energy is provided directly from solar.  This is ideally suited for systems where a primary objective is optimizing the value of the solar production.

Storage provides an increasingly economical solution to extend the value of solar as costs come down. Additionally, because storage can provide a multitude of services the return on an investment in storage can be measured across multiple value streams beyond optimizing solar.

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Ed Toppi is Vice President – Integrated Solutions at Customized Energy Solutions, Ltd.