Businesses bank on solar power

Much of the action in solar power is at large organizations looking to hedge against rising energy prices, show environmental stewardship, and lower electricity bills.

Martin LaMonica Former Staff writer, CNET News
Martin LaMonica is a senior writer covering green tech and cutting-edge technologies. He joined CNET in 2002 to cover enterprise IT and Web development and was previously executive editor of IT publication InfoWorld.
Martin LaMonica
4 min read

SAN DIEGO--With so many large organizations putting solar panels on their roofs, you would think that it's because solar power is cheaper than the grid. But a closer look shows that it's not that simple.

The California Center for Sustainable Energy organized a corporate solar tour on Monday, as part of the Solar Power International conference taking place here this week.

solar power
A part of the one megawatt at the Alvarado Water Treatment Plant in San Diego. Martin LaMonica/CNET Networks

The tour made clear that there are a lot of good reasons to go solar, namely hedging against fossil fuels prices or good community relations. But it's not just about lowering the electricity bill. In fact, in some cases, customers pay nearly as much as they did before they went through all the trouble of installing the panels.

Consider the city of San Diego which is in the process of procuring as much as five megawatts of solar electricity in municipal sites over the next five years.

The first to go online is the Alvarado Water Treatment Plant, a one-megawatt installation that produces about 20 percent of the power the plant uses. The second planned array, also for a water treatment facility, could be finalized in weeks.

The Alvarado solar array is spread across three different locations at the plant where rows and rows of solar panels are placed on top of concrete water storage tanks.

An installation of this size costs about $6.5 million--beyond what most municipalities can afford. So they arrange what is called a power purchase agreement (PPA), where another company called a systems integrator finances, installs, and then owns the facility.

The water treatment plant just buys the electricity, at only half a cent less than the retail rate of 12.5 cents per kilowatt-hour. A half-cent discount doesn't sound like much but the plant estimates that it will save $177,300 a year by installing the panels.

Perhaps more importantly, the city's contract with its systems integrator, SunEdison, stipulates the the price it will pay for the solar panels' electricity will go up slower than the retail price of electricity. So while other customers are exposed to the vagaries of price increases, the plant will know how much its electricity will cost for the 20 years of the contract.

"We anticipate that with the systems in the future that we'll get better pricing because the price of solar panels is going down all the time," said John Helminski, a systems engineer for San Diego's energy program in its environmental services department.

Meeting the city's renewable energy goals and hedging against rising electricity prices was so important that the city considered big solar installations even when it was unclear that a sizable renewable energy tax credit would be renewed. (It was).

Solar trees sprout in San Diego
The University of California at San Diego had similar motivations when it embarked on a series of solar installations on campus.

A "solar tree," or solar powered canopy at the University of California at San Diego. Martin LaMonica/CNET Networks

Rather than a strictly financial decision, renewable energy purchases are part of bigger sustainability initiative, said David Weil, who works with the university's facilities management division.

Within about two weeks, it will connect a 164-kilowatt installation of "solar trees," or solar-powered canopies in one of its parking lots.

The solar parking lot will allow them to purchase electricity at just under the market rate as well. But its primary reasons were to demonstrate its commitment to sustainability and make progress on its goals to be "climate neutral," Weil said.

The city and university's attitudes are similar to many corporate solar installation decisions, said Dave Thompson, a senior energy consultant at Borrego Solar's Commercial Projects Group.

Solar panels are a visible way of saying that a company is doing something about environmental protection and lowering a business' carbon footprint--all of which can lead to good public relations.

"I cannot say I ever sold a solar system on finance alone," said Thompson. "You get a lot of nonmonetary benefits. So if a project will break even, they'll do it."

Cash is better
For organizations that actually have the cash on hand to purchase a solar installation, the financial benefits are a lot more direct.

Corporations can get a federal tax credit of 30 percent of purchase price as well as state-level rebates. They can also amortize the equipment as a capital expenditure.

And they know that the source of fuel for their power generator--the sun--will always be free. (Panels are typically guaranteed to work for 20 years and then they start to degrade in performance.)

The solar array at the New Children's Museum in San Diego which produces about half of the building's electricity. Martin LaMonica/CNET Networks

The New Children's Museum in downtown San Diego, which is a certified green building, was able to purchase its 90-kilowatt solar panel outright, rather than go with a power purchase agreement.

Although the purchase price before rebates and tax credits was steep--on the order of $700,000--the system will pay for itself in 12 to 15 years and make their energy costs more predictable, said Troy Strand, executive vice president of Independent Energy Solutions, a solar integrator.

Strand predicted that corporate purchases of solar power will continue to go up for a number of reasons.

"What's driving the corporate model? For nonprofits, it's budgetary relief and trying to fix their costs," he said. "A corporation is going to do it for myriad of reasons--being good to the environment, freezing costs--again for budget effects--and they may have a tax liability."

The price of solar electric gear and installations continues to go down and many experts expect that solar power within a few years will be at "grid parity," or the same cost per watt as fossil fuel-generated electricity.

But organizations that invest in solar are putting a value on things other than purchase price--some of which benefit their bottom line, others that benefit society as a whole.