US Commercial Solar Sector has Lagged, but Now Looks Cleared for Takeoff
The commercial and industrial solar power sector has not yet taken flight in the same way that residential and utility-scale solar has in recent years. But to many in the solar industry, that just screams opportunity. The C&I solar market is a strange animal for several reasons, but changing economics, regulations and technology appear to be creating new growth opportunities.
In the US up to this point, solar developers and offtakers of the power have gravitated more toward large, ground-based installations or smaller, individual household-level deals in the residential space. Corporate entities have been stuck in the middle, leaving acres of potentially power generating roof space vacant.
Part of the reason is economies of scale and the relative ease of financing projects that generate more megawatts than smaller commercial counterparts. Alternatively, creative financing mechanisms, leasing options and the bundling of assets for sale to other investors has helped residential solar system growth.
“Both residential and utility scale have been on these hockey stick growth curves. Commercial industrial has been growing, but it’s not a hockey stick,” David Meyers, Executive Vice President of Sales & Marketing at Borrego Solar told Breaking Energy in a recent interview at his office in Oakland, California.
But much of the low hanging fruit may have already been picked and now developers and other solar market players are beginning to look to the higher branches, Meyers suggested.
Ground-based systems offer several advantages, “You can put things in places where the solar resource potential or wind resource potential is much better, and you can avoid shading issues,” Sonia Aggarwal, Director of Strategy at policy research group Energy Innovation explained during a recent interview at their San Francisco, California, office. “Commercial and industrial rooftops are often flat, which is different than most residential roofs, and mounting the solar panels on racks can require roof penetrations and cause other roof issues,” she added.
Addressing some of the roof-specific issues that can be encountered with commercial projects, Meyers said companies deal with things like “whether there are other things on the rooftop, how old the roof is, how much snow it can hold. You have this whole list of things that have to line up in order to do it on a rooftop. That’s why we’ve gravitated towards ground mounts and the regulatory structures have enabled it.”
SolarCity acquired ZEP Solar a few years ago because they were interested in the company’s innovative snap-together system for residential applications. “One reason we were attracted was they were doing a commercial system too. Now we are doing a vast majority of our commercial installations using this system, Jonathan Bass, Vice President of Communications at SolarCity said in a recent interview.
“It allows us to install a lot faster than in the past,” said Bass. “The challenge with commercial flat roofs is you have to minimize penetrations but that means you have to ballast it so it doesn’t fly off the roof. Solyndra was working on this but it was too expensive and didn’t pencil out,” he added.
In addition to allowing faster solar panel array Installation – three days instead of three weeks – more panels can be incorporated with the commercial mounting system called ZS Peak. Bass believes more of this kind of innovation will come and help boost commercial solar growth.
Progressive Policies Opening Doors
Ironically, Massachusetts and New York have been doing more from a policy standpoint to promote commercial solar market growth than California in some respects. Virtual net metering is creating opportunities for developers, business owners and municipalities that want to install solar.
“In California, for example, when you have a rooftop, again, part of what has to line up is how much it’s going to cost to generate the solar power and what the customer will pay for that versus the rate structure that they’re on,” explained Borrego’s Meyers.
“Again, it’s tightly coupled. Where you have virtual net metering in Massachusetts, even on a rooftop you can separate those two things out so that you can produce the power on a meter that’s on one rate and provide credits to a different meter. It’s more loosely coupled. You have more options,” he said.
If you think of the solar value chain as being made of links all welded together, you can’t make them all flexible, but you can add flexibility around the rate structures and renewable energy credits (RECs).
Policies that allow the decoupling of certain links in the solar value chain increase the opportunities for doing economically viable commercial deals. “Where decoupling can help, for example, is if I own a commercial facility and am thinking about getting solar, I have to make sure that I have the electricity consumption to support that, said Meyers. “If my tenants might change from let’s say a high energy-intensity business to a low one, I don’t want to take that risk because then I have nothing to do with that energy.”
“In this case the energy’s being sold to someone else. You have the physical risks. The roof has to be a fit, but as long as that physical structure is going to be there for 20 years, I can sell the credits to somebody else. That makes it less risky,” said Meyers.
California has numerous solar-friendly policies, but sometimes trying to craft these measures in ways that satisfy the needs of wide-ranging stakeholders can end up watering them down. Sometimes there’s too many cooks in the kitchen.
“If we have one Holy Grail here for California, it would be to have virtual net metering similar to Massachusetts and New York. It’s our top regulatory priority,” Meyers said.