BUSINESS - QUESTIONS AND ANSWERS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HOW DOES A SOLAR SYSTEM BENEFIT ME ECONOMICALLY?


Eliminate or reduce your electric bill insulating your business from rate increases.

 

Receive a 30% federal cash rebate on building improvements done in conjunction with the project such as roof work or energy saving improvements like efficient lighting or appliances.

 

You can depreciate 85% of the cost in the first year or longer.  

 

Increase the value of your building.

 

Secure extremely favorable government financing for solar systems with only a 1.5% down payment to EWS (see below.)

 

Generate cash:

There are three options:

1.      Sell your Solar Renewable Energy Certificates - SRECS (see below) on the spot market and generate cash equal to about 3.7 times your current electric bill (based on the average NJ commercial electric billing rate).

2.      Sell your Solar Renewable Energy Certificates in advance for a 10 or 15 year contract with your utility at a guaranteed lower price and generate cash equal to about 2.6 times your current electric bill.

3.      A blend of both.

All three options provide an immediate positive cash flow after paying a 10 year loan at 6% (see spreadsheets.)

 

Low risk: sunlight is the fuel, the system has no moving parts, the government programs are unlikely to be changed retroactively because the political will is not there and such an action would not stand up in the courts. There is essentially no maintenance, like the meter and wires you currently use for electricity.

 

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WHAT ARE THE GOVERNMENT INCENTIVES?

 

Government website for state and federal programs:

http://www.dsireusa.org/

 

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FINANCING:  

The federal government program for renewable projects offers 6% interest for 10 and 20 year terms. Unlike a traditional bank this financing program, part of the federal incentives to promote jobs and renewable energy, counts the state and federal incentives toward your portfolio. It is essentially certain you’ll qualify because the New Jersey Solar Renewable Energy Certificates can be sold in advance to cover 100% of the loan payments, the payments would go directly to the bank from the utility and the Federal 1603 30% cash rebate (see below) can be used as the down payment (except for 1.5% for EWS); since the system is affixed to your roof it represents a low risk. The loan is assignable to anyone who purchases your building. Our company requires a 1.5% down payment to secure your contract which is fully refundable in the unlikely event you don’t qualify for financing even after preselling the SRECS under contract.

 

Two main requirements: in business for two years and of good character. For example it is not important to have good credit, only to give a reasonable explanation if you don’t. We refer to this as a “character loan.”

 

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30% CASH REBATE OF THE TOTAL AMOUNT OF THE PROJECT FROM THE FEDERAL GOVERNMENT, THE PROGRAM IS CALLED 1603:

The 1603 program was a part of the Economic Recovery Act to create jobs and promote alternate energy; all work associated with the installation, including roof improvements for example are applicable. The money is wire transferred into a designated bank account within 60 days of your project’s completion. http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx

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NEW JERSEY’S SOLAR RENEWABLE ENERGY CERTIFICATE PROGRAM (SREC), A 15 YEAR ‘CAP AND TRADE’ RENEWABLE ENERGY INCENTIVE PROGRAM THAT GENERATES A CASH INCOME:

Established in 2003 under New Jersey’s Clean Energy Program this market based incentive, administered by the New Jersey Board of Public Utilities (BPU) mandates that New Jersey’s utilities produce a portion of their energy from renewables. 1 certificate equals 1,000 kilowatt hours of electricity produced; to calculate the numbers on your spreadsheet we took the number of KWH it is projected to produce per year and multiplied it by the current price. The price of the certificates is market based but is closely linked to a value set by the NJ Board of Public Utilities called a Solar Alternative Compliance Payment (SACP). The SACP is the price utilities pay if they do not meet their renewable portfolio requirements either by producing their own SRECS or purchasing them so it acts as a benchmark for the SREC market value. SCRECS can be sold directly to the utilities or they can be sold through a broker for a 2% fee. The price we used in your spreadsheet is the current trading price reduced by 3% per year, an amount set by the BPU for the SACP. SCRECS can be presold for contract lengths of 10 or 15 years after your system has been registered with the state. SCRECS can be presold for contract lengths of 10 or 15 years after your system has been registered with the state. To find the 10 to 15 year contract price go to this link: http://njedcsolar.com/assets/files/SREC-Based_Financing_Program_Update_1-14-2011.pdf  and scroll down to page 23 where you will see the average and low prices accepted. PSE&G has their own program that will finance 40% to 60% of the system cost with SRECS. Here is their link: http://www.pseg.com/home/save/solar/index.jsp

For the current spot market price go here: http://markets.flettexchange.com/new-jersey/

Websites for more information about SCRECS:

http://www.cleanenergystates.org/Publications/CESA_SLICE_Award_NJ_CEP.pdf

http://www.njcleanenergy.com/renewable-energy/programs/solar-renewable-energy-certificates-srec/new-jersey-solar-renewable-energy

http://www.njcleanenergy.com/renewable-energy/tools-and-resources/faqs/srec

SCREC brokers:

http://njedcsolar.com/

http://markets.flettexchange.com/new-jersey/

http://www.srectrade.com/background.php

Or EWS – we would be glad to handle the sales on your behalf!

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DEPRECIATION: 85% OF THE PROJECT IS DEPRECIABLE IN THE FIRST YEAR OR LONGER DEPENDING ON YOUR TAXABLE PROFITS.

http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US06F&re=1&ee=1

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SALES TAX: YOUR NEW JERSEY PROJECT IS EXEMPT.

http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=NJ01F&re=1&ee=1

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PROPERTY TAX: YOUR NEW JERSEY PROJECT IS EXEMPT.

http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=NJ25F&re=1&ee=1

 

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TAX DEPRECIATION:

 

Only you and your accountant know how the tax advantages apply to you. 85% of the system cost is subject to depreciation in the first year or longer as is the interest on a loan if you get one.

 

http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US06F&re=1&ee=1

 

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HOW IS THE OUTPUT OF THE SOLAR SYSTEM CALCULATED?

 

To create your spreadsheet numbers we employed a commonly used formula and compared it to results obtained from PV Watts; an algorithm developed by the National Renewable Energy Laboratory (NREL), a national laboratory of the U.S. Department of Energy Office of Renewable Energy  and Efficiency. This is the formula used by New Jersey. The results are within 1% and we have enclosed a PV Watts data sheet.

 

http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/US/New_Jersey/

 

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HOW IS THE VALUE OF THE ELECTRICAL SAVINGS CALCULATED?

 

With a copy of your electrical bill we can show the numbers exactly. The prices for electricity vary little but the New Jersey state averages about $0.18KWH. This rate includes numerous other charges and taxes however they are calculated by percentage on the amount of electricity purchased so if we reduce or eliminate your electrical costs the other charges and fees will rise and fall in tandem. We used an annual inflation rate of 4%, the average yearly increase over the last 10 years in NJ however we believe this to be inaccurate; electricity is projected to rise about 10% per year.   

 

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WHAT TYPE OF SYSTEM DO YOU USE?

 

For information about solar panels: http://en.wikipedia.org/wiki/Solar_panel

 

There are 3 main variations:

 

1.    Thin film, a flexible peel and stick made by Unisolar: http://www.uni-solar.com/

2.     Traditional flat panel monocrystalline or multicrystalline: http://www.trinasolar.com/index.php

3.     Solyndra, a tubular design: http://www.solyndra.com/

 

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WHAT ARE THE WARRANTIES?

5 years complete on labor and material, 25 years on the panels, 10 to 15 years on the inverters. Extended maintenance plans are available. We monitor every panel and our system design allows them to keep producing even if one fails due to damage or shading.

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WHAT IS THE PROCESS AND CHRONOLOGY?

  1. Sign a contract with a 1.5% deposit (minimum $500.) Deposit is fully refundable if financing is not approved from our government source as described above even with the SCRECS being sold under contract to cover the entire loan payment.
  2. Apply for financing and engineer system.
  3. Apply for SREC approval (system must be engineered first), 1603 cash rebate and other rebates or incentives if applicable.
  4. If desired or needed for financing approval presell SCRECS for a 10 or 15 year contract. This takes place quarterly.
  5. When funds are available secure equipment and install the system.
  6. Secure required inspections for electrical contracting and New Jersey Clean Energy Program.
  7. Monitor system performance.

 

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