Solar Cells Info

Kerry A. Dolan, FORBES, Aug 16, 2007
Source: Forbes.com
http://www.forbes.com/technology/2007/08/16/
financing-solar-energy-tech-07egang-cz_kd_0816solarfinance.html

For lots of good reasons, more corporations are turning to solar power installations: lower electricity bills, generous state rebates, the 30% federal investment tax credit and the overall “green” sheen that comes with putting solar panels on an otherwise unadorned corporate roof.  But one common roadblock to going solar is the sizable upfront installation cost. Depending on the size of the installation, it can run $600,000 or more per commercial rooftop.

Thanks to some clever innovation by a variety of financial players, a growing number of companies are getting solar electricity without paying the big upfront installation cost. Using a mechanism known as a power purchase agreement (PPA), such companies as Wal-Mart Stores (nyse: WMT – news – people ) and Whole Foods Market (nasdaq: WFMI – news – people ) have contracted with third parties that install, own and maintain solar power systems that typically sit on the roof of a corporate outlet. The corporation then signs a long-term contract to buy the solar electric power from the third party at rates that are almost always less than what it would pay its traditional utility.

SunEdison of Baltimore and MMA Renewable Ventures of San Francisco are two companies that have pushed the PPA further into the mainstream. Bigger players, including Goldman Sachs (nyse: GS – news – people ), Morgan Stanley (nyse: MS – news – people ) and General Electric’s (nyse: GE – news – people ) Energy Financial Services arm, also provide some financing for solar projects.

In late April, SunEdison inked a deal to put solar panels up at 24 Kohl’s (nyse: KSS – news – people ) department stores in California through a PPA model. Kohl’s eventually plans to convert 75% of its 80 California locations to solar. With the move, Kohl’s could save tens of thousands of dollars a year in electricity costs, figures Jigar Shah, SunEdison founder and chief strategy officer.

In May, Wal-Mart Stores (nyse: WMT – news – people ) chose to enter into a solar pilot project through a PPA model with SunEdison at four of its stores in California and four in Hawaii. Morgan Stanley will own and finance solar electric power systems from SunPower (nasdaq: SPWR – news – people ) on seven other Wal-Mart facilities in California.

Whole Foods, another SunEdison customer, installed solar at some of its New Jersey stores in 2004 through a PPA. Because New Jersey electricity rates have risen significantly, SunEdison’s Shah says Whole Foods is now paying about 25% less for its electricity.

MMA Renewable Ventures, a subsidiary of Municipal Mortgage & Equity (nyse: MMA – news – people ), has arranged the financing and PPAs for a 600-kilowatt solar installation at AC Transit, a San Francisco Bay-Area public transit agency, and a 600-kilowatt system for Estée Lauder (nyse: EL – news – people ) in New Jersey. It’s currently working on the largest single solar installation in the U.S., a 15-megawatt project at Nellis Air Force Base in Las Vegas.

To pay for the installations, SunEdison and MMA Renewable Ventures raise funds from investment banks and mid-market banks. The banks profit from investing in solar in two ways: They get tax advantages (the investment tax credit) as well as a single-digit rate of return.

But there’s a catch: PPA’s make economic sense only in states with significant solar rebate programs. California has been one of the biggest markets for solar, but rebates from California’s two largest utilities have fallen from 39 cents a kilowatt hour to a recent 26 cents, which some solar installers say undermines the economics.

“I think the PPA has peaked [in California],” says Stephen Torres, chief operating officer of DRI Energy, a solar installer and provider of roof-integrated solar products. “The numbers simply don’t work at 26 cents a kilowatt hour.”  As a result, says Torres, SunEdison and others offering PPAs are shifting their efforts to other states, such as New Jersey, which has more generous rebates.