In continuing our “model solar” series after taking a look at “residential solar” 2 weeks ago let’s take a look at what a model commercial solar projects look like in Alaska.
The starting point for this discussion is the baseline incentive provided by the solar investment tax credit (ITC), which is the same value currently as the residential solar energy tax credit at 30% through 2019 (when it begins to step down per the rules of its renewal in late 2015). In addition, businesses can claim two types of equipment depreciation with solar equipment – MACRS and Bonus deprecation, which account for an additional 25%-27% of incentives (in the form of tax deductions). These incentives are powerful drivers, but they are designed to not be around forever and (comparably to many other incentivizes industries) they are considered modest.
Commercial owners use more power than homeowners. This requires solar projects of a larger size. The variable size of businesses produces a big range of projects sizes (from 20-200 solar pv modules being the most common). With commercial projects more stringent permitting and engineering requirements increase costs. Authorities Having Jurisdiction (AHJs) permitting in Alaska is based on a percentage of project value and can range from $400-$2,500 or more. We produce both structural and electrical drawings for our projects as well. These add costs, but ensure long-lasting and successful projects.
This results in projects that have similar paybacks to what you see on the residential side of solar (typically 8-10 years). Outside of Anchorage this can change with the applicability of an additional incentive; the USDA REAP grant. The grant can add up to 25% of project capital coverage through a reimbursement grant (post project completion and subject to competitive award). This powerful incentive, coupled with the ITC and MACRS+Bonus depreciation produce projects in Alaska of nationally attractive paybacks. The projects we have done involving these three coupled incentives produce paybacks from 5-7 years, which is very attractive for any area of the United States. From an investment standpoint this translate to projects with internal rates of return (IRR) in the 15%-20% range.
Looking strictly at kWh savings per year we see businesses saving (again, dependent on size) between $1,000-$20,000+ per year.
Commercial solar has a lot of untapped but rapidly growing potential in Alaska. Individual projects of 25kW in size and smaller also qualify for net-metering, thus allowing the sell-back of overproduction in the form of credits with utilities (acting as the battery for these projects as well).
As a tool that can both lock-in energy rates long term and reduce annual operating costs (in reduced utility bills) commercial solar makes great sense in the Alaska market.
As a side note we have also just introduced a new, penetration-less roof mounting system to Alaska (for flat commercial rooftops) that is very exciting and keeps existing roof membranes completely intact and warrantied.
As always, we are here as your solar resource and are here to answer your questions and provide education where we can.
Happy Solar-ing Alaska!