By Mark Hagerty
Jan. 28, 2010
In a tough economy and with lots of pressure to go green, 2010 is fast becoming the year for businesses to consider going solar. There are lots of reasons for this: One is for the greening of the environment. The other is for the green of money.
With recently enacted incentives and rising energy costs, renewable energy has never been cheaper. And believe it or not, even a Midwest climate is ideal for solar energy.
The Climate
Not known for its sunshine or warm weather, the Midwest may not seem like the most efficient place for a business to go solar. In reality, Michigan has an average of 4.2 hours of peak sunlight per day each year. Florida, the “Sunshine State” only has about five, but the heat is another factor. Solar panels are less efficient the hotter they get and actually produce more power when it gets cooler. While parts of the South may get more hours of sun, the panels produce less voltage per peak hour because of the heat.
The Incentives
As a result of the economic downturn, the federal government is now allowing businesses to use a 30 percent grant from the U.S. Treasury Department to invest in renewable energy. Some states, like Michigan, also have a true Net Metering Law, which means that utility companies have to accept, at full retail value, any electricity that an owner puts onto the grid.
This is on top of other incentives and the ability to sell the solar array’s Solar Renewable Energy Certificates (SRECs) on the open market. When a solar power system generates 1,000 kilowatt hours of power, the owner earns one SREC. This can then be claimed against the requirements to go green.
The SRECs can be sold while the company that owns the solar array keeps the electricity. Utility companies in approximately 30 states are required to sell a portion of their electricity from renewable sources. The purchase of SRECs allows them to comply with their mandate. Other purchasers are suppliers that work with companies that require them to show green initiatives.
Even utility companies are offering incentives. DTE Energy is one example. It has a mandate to supply 10 percent of its energy from renewable sources by 2015. As a result, DTE is currently piloting a “Solar Currents” program designed to make solar energy more affordable. It has been authorized by the Michigan Public Service Commission to partially reimburse customers for installing solar systems on their homes or businesses.
“Solar Currents” will pay $2.40 a watt within 60 days of commissioning the system. After it has been installed, customers who participate in the program will receive a credit on their energy bills for the next 20 years (11 cents per kilowatt hour) for all the electricity they produced, even if they consume 100 percent of it. This is in addition to federal tax credits and other local incentives.
Consumer’s Energy has also introduced a feed-in tariff to spur more interest in solar. This program reimburses customers 65.0 cents per kilowatt hour for approved systems installed by May 2010 (52.5 cents per kilowatt hour for approved systems installed after May 2010) for any electricity produced from solar-powered systems. Similar programs in Germany have resulted in the creation of 170,000 jobs and the most solar-powered systems installed per capita in the world.
The Environment and Our Nation
Businesses with an environmental conscience already understand that renewable energy like solar makes a big impact on the environment as it cuts down the use of non-renewable resources such as oil, coal and gas.
Businesses that might not care about the environment are taking an interest due to increasing requirements to go green, additional government taxes and incentives, and the security of our nation.
As a country, our electrical power grid is our Achilles Heel. Recent reports have shown that something as simple as a cyber attack could knock out the grid for several weeks.
The U.S. gives $700 billion every year to foreign countries for oil. Becoming energy independent will help balance the foreign trade, strengthen the dollar and keep the money out of foreign countries that want to use it to hurt the U.S.
The Bottom Line
Though varying electricity rates make it difficult to precisely predict a return on investment, most businesses going solar can expect an ROI within five to nine years at the current rates. Factoring in an estimated inflation rate of electricity costs, it’s reasonable to expect to see an ROI within seven years.
Combined with the Federal Treasury Grant, the value of the produced electricity and the incentives from utility companies like DTE, most businesses can expect a profit before their 20-year contract expires. In fact, at this rate, approximately 65 percent of the cost of the solar powered system is returned within the first year.
Mark Hagerty is president and founder of Michigan Solar Solutions, a local leader in alternative energy. He is passionate about solar power and excited about what the future holds for the industry. Hagerty can be reached at [email protected].
