Thoughts on Solar by Run on Sun's Founder & CEO, Jim Jenal

Before you can ever get a bid for your commercial solar project, you have to contact a solar installation contractor to come out to your location and perform a site evaluation.  Actually, you should contact at least three contractors so that you have a set of bids to compare (more on that process below) - but how do you find them in the first place?  Well, you could choose based on who has the most ads on TV or the Internet, or you could rely on Cousin Billy’s recommendation - but somehow that just doesn’t seem sufficiently scientific for a project like this.  There has to be a better way - and there is.

If you remember that you need to find someone who will work NICELY with you, success is all but assured.  And no, we don’t mean nicely, we mean NICELY - as in:

N - NABCEP Certification
I - Incentive provider (CSI or local utility) connected
C - City building department experienced
E - Electrician on staff
L - Local or national?
Y - Years in business.

Focus on those attributes and you will have found a contractor who will inspire confidence and guarantee a successful project.  Let’s expand on why these particular attributes are so important.

NABCEP Certification

The North American Board of Certified Energy Practitioners - NABCEP for short - provides the most rigorous certification process of solar installation professionals in the industry.  Not to be confused with their Entry Level Letter that merely demonstrates that the person has taken an introductory course in solar,  the NABCEP Certified Solar PV Installer™ credential is the Gold Standard for installers and consumers alike.  Earning NABCEP Certification requires the successful candidate to have an educational background in electrical engineering or related technical areas (such as an IBEW union apprenticeship program), at least two solar installations as the lead installer, and the successful passing of a 4-hour written examination on all aspects of solar power system design and installation.

As NABCEP notes:

When you hire a contractor with NABCEP Certified Installers leading the crew, you can be confident that you are getting the job done by solar professionals who have the “know-how” that you need. They are part of a select group of people who have distinguished themselves by being awarded NABCEP Certified Installer credentials.

NABCEP’s website offers a database of all Certified Solar PV Installers - just enter your zip code to find the installers located near you.  It is with great pride that we point out that at Run on Sun, all three of our owners have earned the designation, NABCEP Certified Solar PV Installer™ - and we know of no other solar power company in Southern California that can make that claim.

Incentive Provider - CSI or Local Utility

A second source of solar installers is the Incentive provider such as the California Solar Initiatives’ Go Solar California website.  Every installer who has done a solar power installation for a CSI utility (i.e., SCE, PG&E or SDG&E) will be included on this list.  Unfortunately, there are no other criteria associated with getting listed - and there is limited verification done to guarantee that the listed installer is reliable.  If your job is in California, your contractor must be on this list - but this is a double-check only - not an ideal starting point for your search.

Another source for information about solar installers is your local utility’s point person for solar rebates.  This person deals with installers on a daily basis, and while s/he won’t give you a specific recommendation, they may be able to warn you off of an installer whom they have learned is less than reliable.

City Building Department

Similarly, the folks in your local building department deal with installers regularly as part of the permitting/inspection process.  Once again, they won’t be in a position to provide referrals, but they may be able to give you a warning if there are red flags associated with a contractor that you are considering.

Local or National?

Solar installation companies come in all sizes - from national organizations that have crews installing systems all across the country, to local operations that only work in a limited geographic region.  To be sure, there are pluses and minuses on both ends — maybe lower prices for the national chain due to economy of scale in their purchasing versus greater attention to detail from a local company that lives or dies based on how well it satisfies its local customer base.  And, of course, money spent on a local company tends to stay in the local economy - another consideration in tough economic times.

Years in Business

The last of the NICELY elements is to look at the number of years the company has been in business.  Again, this is not a perfect indicator – some recent ventures really have their act together and some long-standing enterprises have long since ceased to really care about what they are doing – but at a minimum you want some assurance that the folks you are doing business with know how to run a business. Otherwise you run the risk of having a largely useless warranty and no one to call if things go wrong.

We would recommend a minimum of three-to-five years in the business of doing solar, with preferably a longer track record of running a business.  Expertise in areas beyond just installing solar is also useful such as engineering, management and law.

The preceding is an excerpt from Jim Jenal’s upcoming book, “Commercial Solar Step-by-Step,” due out in July.

Our first post on the new SCE rate structures revealed that there were big changes coming to Residential customers.  In this post we will look a little closer at how those changes will affect your bill.

As we explained before, SCE’s new Domestic rate structure changes baseline allocations and completely eliminates the dreaded Tier 5.  Instead, the price of energy at Tiers 3 and 4 went up sharply (6.3% and 7.2% respectively) while summertime allocations generally declined.  (We didn’t discuss it in our previous post because it doesn’t affect that many SCE customers, but allocations for “all-electric” homes dropped dramatically, as much as 35% or more!  If you are in an all-electric home, you better be generating your own electricity!)

But the changes in the rate structure are complex - after all, non-summer allocations often increased and without Tier 5 it figured that some customers - those who use a great deal of energy - would actually benefit from the change.  We decided to find out.

Methodology

To assess the impact of the new rate structure, we modified our old SCE Domestic rate model (which we have used to estimate future savings from installing solar) to reflect the rate structure changes: new baseline allocations and the elimination of Tier 5 in return for modifications to the lower Tier rates.  Now we had two models - one based on the “2012 Historical Rates” and the other based on the new rates effective April 1, 2013.

Since the allocations vary by region, we chose Region 9 (which covers the cities surrounding Run on Sun such as South Pasadena and San Marino) as the home for our representative SCE customer.  We then ran our models based on a daily usage ranging from 10 kWh (way less usage than any single-family home in either of those cities) all the way up to 70 kWh (greater usage than all but the largest properties).  To account for summertime loads, we increased the daily usage by 50% for the months of June through September (a generally conservative estimate, especially as daily usage increases).

Winners and Losers

Here are our results (click for larger):

Despite the presence of four (or five for 2012) different rates, the actual graph is almost entirely flat, except for usage at the very bottom end of the scale.  Fairly early on, we see the 2013 rates bend up above the values from 2012 with the greatest increases between 18 and 36 kWh daily usage (more on that in a moment).

As predicted, however, the rate increase is actually a rate reduction - if you happen to own a mansion or are running a whole bunch of Grow Lights.  Indeed, for folks way out there on the right edge of this curve, they will see their annual energy costs decline by more than 1%!  How nice for them.

But how did the rest of us do?  Let’s zero in a bit on where the middle class lives and see what their rates look like - check this out:

For this graph we have restricted our usage values to the range of 18-36 kWh and narrowed the scale of our cost axis to start at $1,000 instead of $0.  The resulting “magnification” shows who is shouldering the bulk of this rate increase.  Customers in this band will see rate increases this year of anywhere from 2.88% to 4.85% (at 28 kWh), and keep in mind this is just one year of a multi-year rate increase plan.

Who are these lucky folks?  Well, in terms of potential solar clients, their system needs would range from 3.6 kW (just above our minimum system size) to 7.2 kW - in other words, the “sweet spot” of our potential residential clients.

So what is our takeaway from this analysis?  Well, as is seemingly commonplace these days, if you are  in the middle you are getting squeezed.  Folks on the low end mostly get a pass while folks on the high end are actually getting a break!  But if you are in the middle, it is your pocket that is getting picked.

Installing solar is your best hedge against the clever targeting by the team, no, make that the legion of lawyers and economists employed by the utilities to design these rate structures.  We cannot stop their scheming, but we can certainly assist you in fighting back!  Give us a call today, or better yet, fill out our online form and let’s put this new rate model to use in saving you some money!

Coming up later this week: how the new rate structures affect commercial customers.

In November we wrote that SCE’s rates were set to climb on average by more than 17% over the next three years.  Now we are starting to see how those rates are about to change and the differences are indeed dramatic.

In a 500+ page filing with the California Public Utilities Commission (CPUC), SCE documents major changes to both residential and commercial rate structures that will change how, and how much, SCE’s customers will pay in the coming years.

We will be breaking this filing down over time, but for a start, let’s look at changes for residential customers.

Changing the Baseline

Most residential customers of SCE pay according to Rate Schedule D (for ‘Domestic’) that charges based on a tiered structure.  At the bottom of the tier is the so-called baseline allocation - an amount of energy use per day allowed based on where the customer resides.

As SCE explains it on their FAQ page:

Baseline was never intended to cover 100% of average residential use, but rather to provide a significant portion of the reasonable energy needs to be charged at the lowest rate, and to encourage conservation of energy.

The CPUC established that the baseline quantities be allocated at 50% to 60% of average residential consumption for basic services such as lighting, cooking, heating and refrigeration, except for residential gas and all-electric residential customers, the baseline quantity is established at 60% to 70% of the average residential consumption during the winter heating season.

Under SCE’s new Domestic rate structure, baseline allocations will drop from their present 55% down to 53% of the average residential consumption.  Since all other aspects of the rate structure are dependent on the baseline allocations, these seemingly small drops can have a significant impact on how much a residential customer ultimately pays.  However, the baseline allocation reductions are an average over the entire customer base - some customers will see their allocation increase while others will see theirs go down.

Here’s a table showing old allocations versus new ones for customers in the Run on Sun service area:

Most everyone sees their allocation increase in the winter period - precisely when most of us need it the least.  But if you live in the San Gabriel Valley - where the vast majority of our clients do - you will see a real drop in your daily baseline allocation and folks in the Pasadena area are especially hard hit.  (NB: Customers of Pasadena Water and Power are not affected by this change - only those who get their electrical service from SCE.)

Overall, for SCE’s nine different regions, six will see a reduction in their baseline allocation during the summer season while three will see increases.  For the remainder of the year, one region will see their allocation go down, six will see it go up and three will remain unchanged.

Is Anyone Shedding Tears Over Fewer Tiers?

SCE’s old residential rate structure had five tiers: baseline (or Tier 1), Tier 2 (usage of the next 30% beyond baseline), Tier 3 (usage between 131 and 200% of baseline), Tier 4 (usage between 201 and 300% of baseline) and Tier 5 (all usage beyond 300% of baseline).  At each Tier, the cost increased substantially.  Whereas a kilowatt-hour of energy within your baseline allocation was charged at the (relatively) modest rate of just 12.9¢, that same kilowatt-hour in Tier 5 would cost 32.6¢ - more than two-and-a-half times as much!

Going forward, Tier 5 is eliminated altogether - which sounds like good news until one realizes that the cost of Tiers 3 and 4 are going up, and for customers with reduced baseline allocations in the summer, they will get into those tiers much sooner.

Here’s how the new rates compare:

While the two lowest tiers are essentially flat, Tier 3 goes up by 6.3% whereas Tier 4 jumps 7.2%.

But surely with Tier 5 eliminated altogether, some customers must do better under the new rate structure, right?  Ah, that is a question for another day, but wouldn’t a graph showing annual electric bills under the old and new domestic rate structure be something interesting to see?

We thought so to - that’s coming next time.

A company controlled by Warren Buffett’s Berkshire Hathaway - MidAmerican Energy Holdings - has announced that it will pay SunPower between $2.0 and $2.5 billion for the 579 MW Antelope Valley solar projects.

Shares of publicly-traded SunPower (SPWR) jumped on the news and closed the week at $8.73, up 2.6 times over its 52-week low.

MidAmerican had previously purchased a 49% stake in a 290 MW solar project in Arizona and the FirstSolar Topaz Solar Farm (590 MW) in California.  The Antelope Valley project will sell power to SCE under two long-term contracts.

The announcement was certainly good news for SunPower which, like other manufacturers of solar power modules, has struggled in the last year as modules prices have continued to fall.

Of course, falling module prices - while extremely painful for module makers - is good news for installers and their clients.  That said, we do not anticipate significant drops in system prices during 2013 and with rebates continuing to decline, waiting to buy is not likely to be a rewarding strategy.

Or at least so Mr. Buffett seems to think.

We wrote before about an upcoming study from the California Public Utilities Commission (CPUC) to determine the overall cost-benefit of installing solar.  Well in advance of that study, the investor-owned utilities (IOUs) in California are coming out swinging, with populist rhetoric about solar’s unfair impact.  But just because a utility says something, doesn’t make it true!  Here’s a quick take.

In the closing weeks of 2012 several news stories appeared, making the case for the IOU’s POV regarding solar.  (This one from the San Francisco Chronicle is typical: Solar Power Adds to Nonusers’ Costs.)

Their theory is that because solar system owners pay according to Net Metering - whereby excess energy produced during the day is used to offset (or net out) energy usage at night or during stormy days - they are not paying their fare share of other fixed costs of the utility such as for distribution and transmission facilities.

It is certainly true that solar customers pay less for distribution and transmission systems because those costs are tied to a customer’s total usage and is not simply part of the fixed “customer charge” that all residential utility customers pay - including solar customers.  But customers did not decide the nature of the utility’s rate structure, and presumably the IOUs were happy to charge more to cover “fixed costs” based on usage.  If that is the case, then it is equally fair to receive less from a customer with a lower monthly usage.

Moreover, the “analysis” being advanced by the IOUs ignores the benefit of that net energy being provided by solar customers - since that energy largely peaks alongside the utility’s peak demand, it offsets peak production energy costs for the utility.  Such “peaker” plants provide the most expensive energy a utility produces, so reducing that demand is actually a significant benefit to the utility.

At least one countervailing analysis asserts that solar customers are providing a net benefit: Solar Power Generation in the US: Too expensive, or a bargain? That study looked at all components of solar system benefits - including impacts on transmission and distribution - and concluded that solar power customers are actually subsidizing other users, even with solar deployment as high as 30% (the current net metering cap is just 5% and California is still a long way from reaching that goal).

Make no mistake, the IOUs are coming after net metering because it is beginning to affect their bottom line - and they can predict that as costs for solar continue to fall, that enormous potential for solar energy will hurt their business model.  The solar industry is in for a fight - and it will be a fight of existential proportions.