Solar PV project development


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Presentation covers the different issues in setting up a rooftop solar photovoltaic project in Ontario. Things that are addressed is what should be included in feasibility study, different levels of involvement in your project, and risks and concerns during the project set-up and construction stage.

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Solar PV project development

  1. 1. Green Intelligence at your side Rooftop Solar PV projects for landlords and investors What you should know prior to meeting a solar salesman Last Updated August, 2012
  2. 2. Agenda• Ontario FIT2.0 program• Property requirements for a solar PV project• Different ownership models – roof lease, system ownership & ownership with development• An overview of project progression from idea to commissioning• Aspects of solar PV technology that affect property owner – financing and taxation Copyright GreenQ Partners Inc 2
  3. 3. FIT Program Overview• Program started with the Green Energy Act in May 2009. New Rules were introduced in August 2012.• Established rules under which businesses can sell to the grid electricity produced with renewable energy generation technologies, such as solar PV, wind, bio-energy• Electricity is bought by the OPA on the basis of a 20-year fixed price contract Copyright GreenQ Partners Inc 3
  4. 4. Ontario FIT Rates for PV Project Size Rooftop, C$/kWh Ground, C$/kWh ≤10 kW 0.549 0.445> 10 ≤ 100 kW 0.548 0.388> 100 ≤ 500 kW 0.539 0.388 > 500 kW 0.487 0.35 (up to 5MW) 0.347 (over 5MW Copyright GreenQ Partners Inc 4
  5. 5. FIT Program RequirementsTo qualify for FIT rates project must:• Be located in Ontario• Pass the transmission/distribution availability test• 60% of implied project cost* should be incurred in Ontario• Meet OPA’s size requirements per kW* While determining compliance with domestic content requirement OPA assigns FIT portions of costs to project activities and materials regardless of actual costs. Copyright GreenQ Partners Inc 5
  6. 6. Site suitability ElectricalRoof Room Location Copyright GreenQ Partners Inc 6
  7. 7. Suite Suitability - Roof• Orientation – South or South-West• Roof space – 40,000 sq ft => 250kW system – Other equipment may use up roof space• Shading – None or very little• Roof condition – Membrane should last at least for 20 years (ideally)• Structural capacity – Roof structure must allow for additional 3-7 psf load to accommodate dead and wind load and possible additional snow accumulation Copyright GreenQ Partners Inc 7
  8. 8. How it looks Ballasted mounting from Unirac Example of a penetrating mounting systemBallasted mounting from SolarDock Copyright GreenQ Partners Inc 8
  9. 9. Costs of Roof Imperfections• Not true south orientation – 10o off => 0.2% less energy – 25o off => 1.5% less energy• Below optimal tilt (<30o) – 20o => 2.3% less energy – 10o => 6.3% less energy – Flat => 12.1% less energy (may lower costs)• Dirt & snow on panels – Higher tilt allows for better self cleaning Copyright GreenQ Partners Inc 9
  10. 10. Site Suitability - Electrical• Electrical room – Space for inverter, connector box, meter, disconnects, etc – Equipment weight – Equipment delivery constraints• Sufficient distribution line to your building Images are property of Satcom (top) and Xantrex. Copyright GreenQ Partners Inc 10
  11. 11. Site Suitability - Location• LDC capacity availability – Pre-application consultation with LDC is required to determine if project can be connected• Local weather conditions – Snow belt area will have higher losses than Toronto• Air cleanliness & dirt accumulation – You only harness the sun that gets to the panels Copyright GreenQ Partners Inc 11
  12. 12. How involved do you want to be?Greater involvementleads to greater: Develop & Own the system• Required investment• Return on investment Own the system• Risks Lease roof Copyright GreenQ Partners Inc 12
  13. 13. “Lease” OptionYou invite a company to install, own and operate a solarsystem on your roof and charge them fixed lease payment.• Investment required – No capital investment – Legal and organisational costs, pre-application assessments• Expected revenues: – Around $0.5 per sq ft of used roof per year• Risks – Roof: Leakage, structural damage, roof traffic, conflicting use during 20 years of contract, – Default of your solar tenant Copyright GreenQ Partners Inc 13
  14. 14. “Own” OptionYou invite a company to develop and install a system; youcollect payments for produced electricity from the OPA.• Investment required – Around $4,500 per kW of installed system, capital and preparation costs• Expected revenues – $450-500 per kW pa on a commercial scale system (100-500kW AC) – 11% IRR (100% equity financing)• Risks – Roof risks, same as in “lease” option – Performance risks, maintenance risks Copyright GreenQ Partners Inc 14
  15. 15. Owning a system: Performance FactorsPV technology Inverter • c-Si panels produce more kWh/sft of roof • Efficiency, Cooling, Life expectancy • Thin film panels are more tolerant to high • Reliability, warranty, service temperatures, but less productive • “Shadow resistant” panel designs help System design avoid some losses • Losses in cables, due to panelMounting heating, overshadowing, service needs, panel mismatch, etc • Orientation: ideal is true South and 30° tilt • Need for cleaning • Best performance tilt may be not cost • Downtime effective due to wind load • Array capacity vs. inverter capacity • Higher tilt => more roof space required, lower tilt => lower wind load Local conditions • Roof warranty and mounting warranty • Ease of temporary relocation • Local sun access conditions (shadow, smoke, dust, steam, etc) Copyright GreenQ Partners Inc 15
  16. 16. “Develop & Own” OptionYou develop an in-house team that can procure and installthe system. The rest is the same as in Own Option.This option is most viable for owners of multiple rooftops.• Investment required – Cost to setup in-house facility + per-system costs lower than in “own” option• Expected revenues – $450-500 per kW pa on a commercial scale system – 11% IRR (100% equity financing) on system• Risks – Roof risks and Performance risks as in Own option – Design and procurement (parts) risks Copyright GreenQ Partners Inc 16
  17. 17. Sample ProjectFor a 40,000 sq ft, problem-free roof one can expect:• System size of 250kW DC• Investments: – Feasibility & Organizational costs - $10-30K (depending on project complexity) – System cost (“own” option) - $1M• Revenues – “Lease” revenue - $20,000 pa – “Own” revenue - $110,000 - $120,000 pa• Bonus for “own” option – 50% depreciation rate on solar equipment; can used against other profits Copyright GreenQ Partners Inc 17
  18. 18. Project Progression1. Project Assessment – Evaluation of site suitability – How involved do you want to be?2. Project setup – OPA Contract Highest impact decisions are made at project assessment stage – Developer Selection – Project Financing3. Construction & Operation Copyright GreenQ Partners Inc 18
  19. 19. Project Setup - OPA Contract• The party that owns roof access rights should apply for OPA contract – The application fee is 0.5$ per kW (up to $5,000) – Application security of $20 per kW is also required. Refundable if project goes into construction• LDC approval for future system is required• Contracts are granted based on priority points• The processing time for an application varies, with “OPA target” of 60 days Copyright GreenQ Partners Inc 19
  20. 20. Project Setup - Developer Selection• Free assessment is never free and never unbiased• Look at IRR and risks; not just cost or performance• Warranties: for roof, equipment and performance; is developer worth the offered warranty? How is warranty going to work?• Maintenance schedule: who, when, how The decision you are making will be binding for at least 20 years Copyright GreenQ Partners Inc 20
  21. 21. Project Financing• Debt and equity financing is available from different sources• CEPP Funding for Ontario organizations can be used to cover soft costs• Bank loans may be obtained only for projects using bankable equipment – Banks will typically finance up to 70% of cost for projects that meet their criteria – Will require adequate project structure and documentation Copyright GreenQ Partners Inc 21
  22. 22. Other Aspects of Project Setup• Internal team set-up – Technical and technology advisors – Legal advisor – Financial advisor• Establishing project schedule and its impact on other activities• DBF or DBFM approach Copyright GreenQ Partners Inc 22
  23. 23. Construction – Major Concerns• Who is responsible for damages to roof? To system? – Cooperation with roofing company• Permitting and unexpected fees• Construction financing• Interference with primary business – Length of construction – Scheduling Copyright GreenQ Partners Inc 23
  24. 24. Operation – Major Concerns• Roof warranties during operation – Cooperation with roofer during construction• Roof repairs – Contractual provisions• System repair and maintenance – Defined maintenance plan – Problem response – timing & warranties – Value of monitoring system Copyright GreenQ Partners Inc 24
  25. 25. Taxation Considerations• Income tax – System costs are subject to 50% depreciation – In some cases depreciation can be used against other income• Property taxes – System should be treated as “equipment” – Rooftop PV should not affect property taxes Copyright GreenQ Partners Inc 25
  26. 26. ConclusionFor a landlord a solar PV project should notdiffer much from any other investment project: • All investment rules apply • No need to be a pro in solar to benefit from it • To maximize return – stay within core competence and assign direct solar risks to solar developer, who can manage them at a lower cost When done right, solar PV investment is like bond, but with 11% IRR Copyright GreenQ Partners Inc 26
  27. 27. Questions Copyright GreenQ Partners Inc 27