Going solar step by step
Solar Powered: Part 4 of 4
This is the fourth and the last article from the series on how to choose the best solar pv system and financing.
What do I have to know before entering into a solar PPA
A power purchase agreement (PPA) is a contract. A solar company buys, installs and operates a solar pv system on your roof and delivers you the solar energy. In principle, you only pay for the delivered energy. A PPA is usually a long term contract, designed to spread installation costs over many years of generation, thus making the unit price of energy attractive. This contract has many benefits such as limiting your risk exposure, saving you time and effort related to development and installation of a pv system, and minimizing your upfront investment. Because of its long term nature, it is recommended that you pay close attention a number of critical issues that should or might be covered in the PPA.
• System specification
The PPA should specify what kind of system the solar company is about to install. It should list all of the components, its technical characteristics and things important to you, like how/where the system will be installed on your property. The more specification the better, because both parties have a reference document to avoid misunderstandings.
• System ownership and responsibility
Definition of who owns what part of the system. For example: is the mounting structure owned by the solar company or you? What rights do the solar company have to access your property?
• Project schedule
When is system installed and commissioned? When will it start to generate energy?
• Forecast of the energy production
As you already know solar energy generation is predictable. For your pv system, there should be a forecast of how much energy a solar company will deliver to you each year.
• Performance guarantee
One you have the forecast of the energy production in the contract, the next question is how is the production is guaranteed? This is important for you in planning your PPA payments and also so you know how much energy can you expect from your system vs how much you will have to buy from the utility company. Utilities may have different tariffs depending on the amount of energy you buy.
• Price escalation
Is the price of solar energy fixed or escalated over the years? It there a fixed factor in the contract (2% each year) or it is related to some external factor like CPI (consumer price index)? Is the escalation annual, monthly, bi annually?
• Take-or-pay clause
What if a utility company doesn’t want to buy excess energy from you? Do you now pay for the solar energy you actually consume or all of the energy generated? A take-or-pay clause implies that you have to pay for all the energy generated by the pv system regardless of whether or not you consume it or sell to the utility company.
• Operating and Maintenance issues
Will the system be monitored and maintained? Do you have access to the monitoring data? Even more important, is there a guaranteed recovery time of the system in case of a malfunction?
• Interface with utility company
Who is responsible for dealing and communication with the utility company (in cases of an on-grid system)? Who is handling the paperwork and the metering issues?
• Who is benefiting from the support programs?
If there is a FIT mechanism or net metering, or any other solar incentive in place, who will be benefiting from those? Who will deal with the paperwork involved during the installation phase and throughout the project? This is important, because when dealing with public money, there are usually specific responsibilities involved.
• What are the payments?
Is there any upfront payment? Is the payment related only to energy actually delivered? Are payments monthly or bi-monthly? Is the payment integrated with your electric utility bill? If it is, you can expect to have a somewhat fixed payment comprising of your solar payment and your utility payment. In the summer, you would pay more to the solar company and in the winter, more to the utility company. In cases of fixed monthly solar payments (similar to a lease agreement), the total payment will be smaller in the summer and larger during winter.
• How long is the contract?
What is the duration of the contract? Are there options to exit sooner? Is there an option to terminate the contract or buy out your contract with the system?
• What happens if you sell the property?
Is there an option to transfer the contract to a buyer of your property? Is there an option to terminate the PPA?
• What happens at the end of the contract?
Does the solar company decommission and take away the system? Can you buy it and keep it? For how much? Who would provide the maintenance after the end of contract? Will the solar company provide you a PPA renewal option?
What do I have to know before buying and owning a pv system
Installing a solar pv system is a multistage process that involves a number of intertwined activities. The system you install has to be properly engineered, grid connected (if it’s an on-grid system), and installed in a way that guarantees its performance for the longest period of time possible.
The activities involved can be grouped into the following stages: permitting/licensing, engineering, financing, procurement, installation/commissioning and finally, operating. You don’t have to deal with all of the aspects of the project development by yourself. There are solar companies that offer turn-key services and are willing to help you through any and all stages of the process. Here are the key issues to focus:
Depending on local regulations, the required permits may include: building permits, grid connection permits, a grid connection agreement, a PPA with the utility company to deliver excess solar energy to the grid, and a license for energy generation. It is important to know who is responsible for getting the permits and licenses — you or the solar company you hire? You should also be aware of any formalities that need to be fulfilled and any time frames for those activities.
At the end of the day, what ultimately matters to you is how much energy the system will generate. This should be determined during the engineering phase and then verified. The amount of energy generated by each system is different. For example, the tilt of the panels affects whether more or less energy is generated and how much space is needed for the installation. The system can be optimized to generate more energy in total, throughout the year or to produce more in the summer or in the winter. It can be optimized to generate more during the morning or the evening, and if required, a specific power consumption requirement.
The more efficient the panels, the more they allow for generation of energy within the same surface. There are 200Wp panels and 325W panels available on the market. The same space can yield 60%+ more energy then. More efficient panels are usually more expensive, so this trade-off between energy production and installation costs has to be taken into account.
Make sure the engineering documents you receive are stamped by appropriate, qualified people, such as professional engineer, and can be included into the permit application. Please remember the same thing with electric installation. Make sure the design meets all standards required by the energy company and the relevant building code.
Financing — 3 aspects of financing to focus on:
(1) What is the payment schedule you have with the solar company that engineers and installs your system? In general, payments should reflect the progress made with the project. Payments should be made upon completion of clearly defined results, milestones, such as the completion of engineering, obtaining all necessary permits, delivery of equipment to site, installation, commissioning, etc.
Paperwork is very important. Without the right document, no one will pay you for the energy. Make sure final payment is directly related with commissioning and with the utility company, or other relevant authority, accepting the installation and written confirmation that it will pay you money for the energy generated.
(2) If you are financing your system with a loan check, what requirements that have to be fulfilled in order for the bank to release the milestone payments? Make sure the solar company you work with knows these conditions and accepts them. Also, check for your payment start date and payment schedule. Check to see if payments will be covered by savings you make on your energy bill. Finally, what are the options and costs of early payoff of your loan, or if you sell the property.
(3) Make sure you know about any and all solar incentives available to you. Ask your local solar companies. They will know which programs are currently available. Make sure you understand and know how to provide all required paperwork to be eligible for grants, tax credits, an FIT or a net-metering scheme.
Sometimes, when there is a public support program for solar systems, there is a list of equipment that is eligible. Not all systems can receive it.
Sourcing the right equipment is crucial for a system’s efficiency and reliability. How can you tell the difference between good or bad pv system components? They might look the same, but it’s all in the data sheet! Here is list of things you should check — within the data sheets of specific pieces of equipment — before buying a solar pv system:
• What is the panel’s efficiency? What is the peak capacity of the panel, meaning, what is the power the panel can generate, in watts [W]? Generally, the higher the peak capacity, the higher the quality.
• What is the performance guarantee of the panel? In a performance guarantee, the manufacturer states how many years a panel will efficiently generate energy. It also states what the performance of a panel will be as a percentage of initial output. For example, the performance guarantee might be 25 years at 80%. That means a 240W panel will still generate 192W after 25 years.
• What is the product warranty (against workmanship and material defects)?
• Is there an insurance policy for the product performance and warranty? The insurance policy should cover the entire period of the warranty and performance guarantee. It is extra security for you because you are then covered even if the manufacturer is no longer able to fulfill its obligations.
• Are the panels tested against weather conditions? The data sheet should include information regarding the profile of the panel — anodized aluminum for example, makes panels resistant to salty mist. It will also contain information regarding whether it was tested against hail and if it has passed a mechanical load test.
• Are all modules individually tested for actual efficiency and energy generation?
• Do panels meet the requirements as stated in the EN IEC standards for solar panels and safety standards?
• Are the panels design to deal with partial shadowing?
• What is the current condition and experience of the manufacturing company?
• What is the conversion efficiency of an inverter? Higher efficiency means more electricity can be effectively utilized. High quality inverters have efficiency of 98%.
• What is the warranty? Is there a warranty extension option?
• Is there a single inverter for a number of panels or a number of micro-inverters for each pane? Micro inverters are, in general, considered a better option for small sized installations such as houses.
(3) Mounting system
• What is the mounting structure made of (preferably aluminum)?
• What is the weight of the structure (this may be very important, as with steel roof deck)?
• Does the mounting structure require roof perforation?
(4) Monitoring system
• Is monitoring offered with a system?
• Is it on-line?
• Does it provide remote (internet) access?
• Can it provide automated notification of events?
(5) DC cabling
• Is the cable dedicated to solar systems?
• Is it designed for outdoor use? How many years?
• What is the breakdown voltage?
• What are the energy losses of the cable?
Installation and commissioning
Installation of a well prepared solar project should be fast and easy. Still, pay attention to who has responsibility for the installation site and the ownership transfer. For example, who takes responsibility for the project during the installation? Who is responsible for the materials and equipment when they are on site but not yet installed? When are ownership and any related risks of the system transferred to you? Before or after commissioning? Does the installation company have a construction risk insurance policy?
After successful commissioning, there are still several thing that require your interaction with your chosen solar company related to operating your new system. Key aspects include: warranty — what does the warranty cover, for how long? What is the warranty for the electric works, cabling? What is the guaranteed reaction time for your warranty claim? Is there a local warehouse with replacement equipment available?
Does the company offer monitoring and maintenance services? Are those obligatory in order to keep the warranty?
How to pick a company to work with
References, references, references. A good, reliable solar company, or any company, in fact, will be more than happy to share information about their successes with you. There are many new companies on the market, including many solar startups. They might not have that many completed projects as a company, but the people involved with the company, on all levels, should have relevant experience to share. Always ask for reference.
Secondly, after reading this publication, you have a good understanding about the difference between a cheap system and the lowest cost of solar energy. It is advisable to work with people who also understand this and focus on providing you with high quality, affordable solar solutions.
Finally, ask for independent professional advice, if you feel the need. When buying a used car, you would take it to a garage for a mechanic to check it. Do the same thing with a solar offer. Ask someone who knows about finance, solar, or hire a professional to check your solar and financing offer. Especially if you are about to install a larger pv system. The financial implications of such decisions are significant and last for a long period of time.
Going solar step by step
Instead of a summary here is a step by step guide for going solar:
1. Determine how much energy you consume a year. Check your electricity bills.
2. See how much solar energy can be generated in your location. Check available solar maps on the internet.
3. Calculate how big of a pv system you need to meet your energy demands.
4. Ask for estimates and preliminary offers from your local solar companies to get an idea of how much the system can cost.
5. Investigate any financing options available to you, including solar incentives (if available).
6. Check to see if it makes sense/is possible to install a system larger than you need, to allow you to generate extra energy and sell it, if you can afford the installation.
7. Compare the offers, see what is the best option for you.
8. Narrow the offers down and speak again with these shortlisted companies. Explain your needs in more detail this time. Maybe someone will be able to give you an even better offer.
9. Pick the best option. Ask for advice if needed.
10. Go for it!
11. Make sure ALL paperwork is done properly during the installation and commissioning.
12. Monitor the energy production on a regular basis to see if it meets the forecasts. React accordingly in case of a variation from the forecast.
13. Count the money you made. Be proud of yourself and tell your family and friends about it.
14. Repeat if required.
Congratulations. You can now call your parents and tell them that not only do you have every light in the house turned on, but that it is, in fact, free. ;)
Creator of Online Project Tracker. Web app solving problems with communication and data inconsistency issues when managing construction and O&M projects. http://www.hienergypeople.com/online-project-tracker/