By Dan Whitten, Vice President of Communications, Solar Energy Industries Association
Prominent announcements from companies such as Apple, Walmart and Target of installing solar on their facilities has made the rest of the commercial and industrial sector take notice. And the message is that, in many places, solar is now a cheaper way to power buildings than the alternatives. That’s why we are seeing broad investment from companies large and small.
Solar has grown by leaps and bounds in the last decade. Initially a solution for select homeowners, and later a low-cost option for utility-scale projects, solar energy is now coming to a commercial facility near you. And if you look closely enough at the opportunities, it may very well be a solution for your own company.
The solar industry has seen an uptick in corporate adoption since 2015. According to SEIA’s 2017 Solar Means Business report, which tracks commercial solar installations, top corporate solar users installed 325 MW last year, up 43 percent from 2015. These additions bring the U.S. to 2,562 MW of installed commercial solar projects, which span across 40 states plus Washington, DC and Puerto Rico.
Solar energy is a cost-effective way for businesses to generate electricity they need for manufacturing, distribution, storage, retail and many other applications. Whether on a facility roof, ground-mounted or off-site through an independent power producer, corporate demand for solar is soaring as thousands of America’s top brands and small ‘mom and pop’ shops are making the switch and seeing the savings. This didn’t happen overnight.
Just a decade ago, solar was nothing more than a minor ripple in America’s energy landscape. The rooftop market was small and niche, utility-scale installations were limited and electricity generation was counted in megawatts (MW) rather than gigawatts (GW). In 2008, Congress extended a 30 percent solar investment tax credit (ITC) for eight years and permitted utilities and companies paying the alternative minimum tax to qualify for it, along with residential and commercial customers.
This move set the solar industry in motion for good. From just 2 GW installed in 2009 to more than 53 GW through 2017, solar energy has become a mainstay and growing player in the U.S. energy market, with enough installed capacity to power more than 10 million households.
While strong federal policy has helped the industry nationally, it is important to have state- and municipal-level policies. These policies bring solar to communities like yours and mine, reducing costs, creating jobs and boosting economic activity and making solar more accessible to homes and businesses.
State incentive programs and rapidly-declining prices are driving development in the commercial and industrial (C&I) market, demonstrating again how important policy is to the growth and development of solar.
The top ten states for solar predominantly employ some combination of three different policies. Net Metering, which supports rooftop and distributed solar; Renewable Portfolio Standards, which primarily support utility-scale solar; and effective Interconnection Standards, which allow projects both large and small to seamlessly connect to the grid.
It is no coincidence that states that adopt these policies are home to more jobs and solar energy production. States such as California, North Carolina, Nevada and Massachusetts have, for the most part, implemented policies that are friendly to the development of solar, and it shows in their production.
For years, the industry’s top states remained largely unchanged, but recently the U.S. solar market has diversified. In 2017, 28 percent of installations were completed outside of the top ten state markets – this tops the record of 20 percent market share that these states achieved in 2016. States on both sides of the political spectrum are opening their eyes to the vast economic benefits of solar, which has become an apolitical energy source and job-creator.
Over time, the U.S. solar market has faced many challenges; one being a lag in corporate adoption of solar in recent years. Corporate interest in solar energy is booming, yet adoption lagged compared to the residential and utility segments. In 2015, the industry began greater outreach efforts with the broader real estate community to understand their needs, educate them about solar and develop resources.
For example, SEIA’s annual Solar Goes Corporate events bring together commercial end-users, such as real estate owners, along with solar industry professionals to discuss opportunities, challenges and solutions to going solar. This event began in 2016 with the hope of building relationships and turning corporate interest in solar into adoption of solar.
One challenge brought up by both tenants and real estate owners is the split incentives issue – the party paying for a solar system is not the party paying for electricity. SEIA published a white paper that explains how Property Assessed Clean Energy (PACE), a financial tool where payments are made through tax assessments, can solve the split incentives issue.
To reduce transaction costs, SEIA’s Commercial & Industrial (C&I) Committee recently developed a model Power Purchase Agreement for C&I systems. We also published the Solar Energy and Commercial Real Estate: Insights for your Investment Property. Using this document, commercial property owners can increase revenue, lower operating expenses, negotiate lease extensions and increase the net present value, or NPV, of their buildings. The C&I Committee is also working on addendums for PACE financing and energy storage.
While SEIA’s Solar Means Business report does not explicitly track it, off-site procurement has been a major driver of corporate solar procurement in recent years. GTM Research counts 31 operating off-site corporate projects, plus 21 in development.
These projects allow companies to tap into economies of scale by siting projects in areas where larger system sizes are possible. Major tech companies like Facebook, Amazon and Microsoft have all recently announced contracts for off-site purchases, indicating that this trend is expected to continue growing as both solar developers and corporates become more familiar with the transaction.
The non-residential solar market in 2017, which includes C&I installations, grew by 28 percent from 2016, notching its fourth straight year of annual growth. Looking ahead, the C&I market is going to be facing some challenges. Commercial installations are expected to decline in 2018 as incentive changes in major states like Massachusetts and California take effect. Commercial adoption may also be slowed in the next few years due to impacts from new tariffs on imported solar modules.
This does not mean that the C&I market is without significant opportunities. Commitments from businesses to use 100 percent renewable energy, increased use of electric vehicles and the rapidly-declining cost of energy storage and solar systems themselves are all expected to drive corporate interest in solar going forward. Past 2020, commercial solar capacity is expected to see higher growth rates as tariff declines lead to lower prices and the opening of new state markets.
SEIA will continue to work out any obstacles to the investment by individual businesses, while building relationships and educating businesses on the benefits of solar. Even with challenges, solar is an attractive and prime opportunity for American companies and real estate brokers to see a positive impact on their bottom line.
Solar energy in much of the country is simply cheaper than electricity from other sources, and our goal is to make the decision to go solar an easy and profitable one for companies of all sizes looking to benefit from this clean, American energy revolution.
Bio: Dan Whitten is the vice president of communications for the Solar Energy Industries Association (SEIA), the national trade association for the U.S. solar industry. Before SEIA, Dan spent more than 15 years as an energy and environmental journalist, including as a Bloomberg News energy reporter in Washington, where he covered legislative, regulatory and financial aspects of U.S. climate and energy policy debates.