A “Solar Groupon” for Small and Mid-sized Businesses

With more widespread acceptance, increased production will produce economies of scale that result in lower prices.  Until that happens, however, government subsidies and tax incentives are needed to get many individuals and businesses to make the investment in green power.

From Forbes:


When it comes to solar power, small- and mid-sized business have faced a Goldilocks dilemma. Existing solar financing solutions for homeowners and corporations have been too small and too big, respectively. But now there’s something that fits them just right.
Solar@Work, a new program announced today San Francisco’s Department of the Environment at the Intersolar North America conference held in the city, will offer solar systems to Bay Area business via a group purchase or aggregation model. “We think of it like a Groupon for solar,” said Melanie Nutter, department director.
This overcomes historic barriers for small and mid-sized businesses that aren’t issues for big businesses, said Jenna Goodward, an associate with the World Resources Institute, an adviser to the program. “They’re smaller, so it’s that’s much more important to aggregate demand and negotiate as a buying group,” she said. “And a lot of them don’t have the cash flow to do an up-front purchase.” Nor do they have access to prime credit, she said.
Jason Coughlin, project leader at the National Renewable Energy Laboratory (NREL), another adviser, explained further. “You’ll talk to bankers, and they’ll say, ‘The work we have to do for a 200 kilowatt installation is similar to the work we have to do on a 2 megawatt system.’ So if we can do twenty 100 kilowatt systems using standardized documents, and use one solar installer and one financial partner, in effect we create a 2 megawatt installation project, which is interesting to the financial partner, to the installer, and to the independent small businesses who are getting the benefits as if they were doing one large system.
Solar@Work aims to install 2 megawatts by the end of the year, which is a modest target of about 20 buildings. However, this is just a pilot project that organizers hope will be expanded in the Bay Area and replicated elsewhere in the United States and throughout the world.
Nutter said she expects the program to be popular in San Francisco because they designed it in response to feedback from small business. “We anticipate there will be huge interest,” she said.
Optony, a global research and consulting services firm focused on solar development, is also an adviser. SolarCity, a distributed generation firm that recently gained star power with a $280 million investment from Google, was selected as the vendor. The company, based in the Bay Area, has more than 15,000 projects completed or underway and expects to hire more than 400 new workers in the second half of 2011, including 100 in the Bay Area.
Solar@Work offers several financing options for businesses and commercial property owners to install solar power: cash purchase, solar lease, capital loan, power purchase agreements, property-assessed financing, and others, said Nutter. The program will help match the buyers with appropriate financing.
“We anticipate that buildings that participate in the program will have energy bills at the current rate or lower,” said Nutter. “The program has performance guarantee to deliver savings.”
The more businesses that sign up, the lower the prices will be for the entire buying group. The largest reductions will be available if the group purchases more than 3 megawatts by the end of 2011.
Aside from the discounted group price and performance guarantee, program participants will get a special pre-negotiated lease for 10 years with a buyout and free technical assistance from the city to evaluate their solar options.
“Sometimes it can be intimidating for folks who haven’t purchased solar to review bids, to know what’s a good price, what’s a proper inverter warranty, and how to choose among these ancillary services that come with a solar installation,” said NREL’s Coughlin. “Providing unbiased technological assistance is really valuable.”
San Francisco’s Department of Environment also offers free energy audits to small businesses, so all participants will get that service as well to help them reduce energy costs and gain access to energy efficiency rebates, said Nutter.
Part of what makes the performance guarantee equation work at this point is American Recovery and Reinvestment Act funding from the U.S. Department of Energy’s Solar America Cities program and support from U.S. DOE’s SunShot Initiative,
“The Treasury grant, which offers cash payments for 30 percent of the cost of a solar installation (in lieu of a tax credit) is currently expected to expire at the end 2011,” said Nutter. But “we are confident that by leveraging the Federal Renewable Energy Investment Tax Credit that offers 30 percent in tax credits through 2016, we will be able to provide the needed financial incentive for small and medium-sized commercial buildings to participate in the program in 2012 and beyond.”
Nutter said the federal subsidies and Solar@Work are stepping stones to driving down costs for solar. “We envision a future in which subsidies will no longer be needed as an incentive,” she said. “Until then, we will be utilizing the rebates and credits that are available in our current and future group purchasing programs.”
While San Francisco is leading the way, this type of program is easily scalable and replicable elsewhere, said the partners. “One of the reasons why we’re so excited about participating in this program is that there is replicability,” said Alex Perera, codirector of business engagement for World Resources Institute. We see this is something that could be rolled out to other cities and even other countries. WRI is working in China and other big markets.”