Solar power becoming hotter for municipalities

Solar power is an important and fast-growing part of the energy portfolio for Massachusetts and the nation. Solar is a great option for communities concerned about the social and environmental costs of fossil fuel technologies.

The Solar Renewable Energy Certificate program in Massachusetts, which began in January 2010, has made solar installations an attractive option for many municipalities. Along with the SREC program, there are tax credits and federal incentives that allow solar providers to pass along a cost-effective solar rate to communities.

Massachusetts electricity rates have fluctuated dramatically over the past several years, averaging a 9 percent annual increase from 2002 to 2008. Solar power allows municipalities to avoid such budget instability.

A power purchase agreement is a financing option that enables the consumer to pay nothing upfront, in exchange for agreeing to purchase the electricity generated by the solar system at a set price for a set amount of time. A third party builds, owns, operates, and maintains the solar project at the consumer’s site. Shifting development, operation and maintenance costs and responsibilities to a third party makes this option particularly cost-effective. PPAs have quickly become the preferred contracting mechanism for solar projects.

Consumers who use a PPA to install a solar system receive electricity bills from the provider similar to those they’re accustomed to receiving from their local utility company. The beneficial difference is that the price per kilowatt hour is preset, not subject to fluctuations in the energy market. Knowing energy prices in advance gives consumers more control over their electricity budgets.

Through a PPA, consumers also receive an energy rate that incorporates applicable subsidies, rebates and incentives. The third party may leverage all applicable programs and ensure that any cost savings and values associated with renewable energy certificates or carbon sales are passed on to the consumer in the energy rates.

At the end of the contract term, customers can obtain ownership of the solar system – a valuable and sustainable energy-generating asset that provides energy at relatively little cost going forward.

During low electrical usage periods, the excess electricity generated by on-site solar systems is exported to the electric grid, and the consumer has a specific time (typically one year) to use/reclaim this power at no additional cost.

The current administrations in Massachusetts and at the federal level are very supportive of developing renewable energy. There are numerous tax incentives available supporting the construction of renewable energy projects, which has assisted in the rapid growth of the solar industry. There may also be federal stimulus funds available that can be used by municipalities to offset costly endeavors such as land clearing and interconnection fees. Combining these incentives with the SREC program has helped to heat up the solar market in Massachusetts.

What projected savings can solar provide? That depends on the current electricity rate the customer is paying. It is not uncommon to see rates in the range of 10 to 15 cents per kilowatt hour in Massachusetts. For a 1 megawatt solar system, it is customary to see a 15 percent to 25 percent rate reduction in the first year. Considering these numbers, a cost-savings analysis projected over 20 years demonstrates a significant savings to the customer.

Constellation Energy is the endorsed supplier to the MMA’s MunEnergy program. For more information, contact MunEnergy Program Manager Emily Neill at (617) 772-7513 or emily.neill@constellation.com.

Paul Sleeper is the director of solar initiatives for Constellation Energy’s retail business.