Ohio Energy Mgmt Conf Economics of. Alan Frasz Vice President. Copyright 2010 Dovetail Solar and Wind 1

Why renewable energy? Renewable energy systems are an investment in our quality of life, our national security, and our environment Solar systems provide energy independence and insulation from utility cost increases Payback is improving as modules become more efficient and lower cost, and as traditional energy sources continue to become more expensive Federal & State incentives greatly reduce payback time Scarcity of fuels and environmental impact dictate t that t we change our energy strategy! t Copyright 2010 Dovetail Solar and Wind 2

Typical Questions Is solar really viable in Ohio? What s this going to cost me? What will it do for me? What will I save? How do I convince my management team (or spouse) that this is a good idea? What other benefits or concerns should I be aware of? What are the important t evaluation criteria? Copyright 2010 Dovetail Solar and Wind 3

Dovetail Solar and Wind Founded in 1995 - one of Ohio s oldest & largest renewable energy design and installation firms Implement Solar Electric, Wind, & Solar Thermal systems throughout Ohio and surrounding states Offices in Athens, Cleveland, Columbus, Cincinnati, Toledo and Southern Michigan Over 185 systems installed (more than 2 MegaWatts) Copyright 2010 Dovetail Solar and Wind 4

Sample Installations Raymond Ku home Sean Jones home Twenty First Century Energy Corp. Apple Hill Orchards Kilpatrick Farm Melink Corp. Cincinnati Zoo Schott Education Ctr. Copyright 2010 Dovetail Solar and Wind 5

Our Key Tenants Provide clients outstanding value Reliable, high quality systems Energy cost savings Sustainable business practices Utilize USA made components Create local direct and indirect jobs Utilize trained, NABCEP certified installers and licensed electricians and engineers Renewable Energy makes good economic sense for Ohio Copyright 2010 Dovetail Solar and Wind 6

Does Solar Work in Ohio? Ohio Insolation: A measure of the amount of sun falling on a specific location Germany Even with less solar energy resource, Germany has 1,000s of times more solar energy production than Ohio. Copyright 2010 Dovetail Solar and Wind 7

Solar Electric Systems Photovoltaics (PV) Photovoltaic cells convert sunlight into direct current (DC) electric energy Inverter(s) convert to AC power compatible with your building & the grid Variety of types & styles Non-mechanical, maintenance free Work for 40+ years Copyright 2010 Dovetail Solar and Wind 10

Thin Film Solar Multiple material types Amorphous Silicon Cadmium Telluride Copper-Indium-Gallium- Diselenide (CIGS) Efficiency: 6-10% Can Be Made Flexible Potential for Lower Cost Per Watt Ohio University, Innovation Center Copyright 2010 Dovetail Solar and Wind 37

Thin-film solar technology is a good fit for large ground-mounted arrays where power density is not as much of a factor Photos courtesy of Univ. of Toledo & ADG Copyright 2010 Dovetail Solar and Wind 40

Solar PV System Components Solar Array Power Inverter(s) Balance of System Wire, Conduit Fusing, Grounding Disconnects Meters, Monitors Charge Controller* Battery Bank* * Optional components Copyright 2010 Dovetail Solar and Wind 41

Solar s Time Has Arrived Reliable, Proven Technologies Improved Efficiencies Good Material Availability Significantly Lower Prices Enhanced Federal Incentives Solar Renewable Energy Credits (SRECs) Copyright 2010 Dovetail Solar and Wind 43

Solar Performance Has Improved Improved Module Efficiencies Example: 2006: Sharp 200 watt 12.3% efficiency i 2010: Sharp 240 watt 14.5% efficiency 18% efficiency available in commercial products for premium $ Copyright 2010 Dovetail Solar and Wind 44

Solar Prices Have Dropped Typical Module Cost 2006: Sharp 200 watt $5.00 per watt 2010: Sharp 240 watt $3.00 per watt Installed System Cost 2006: ~ $8.30 per watt 2010: ~ $6.15 per watt Copyright 2010 Dovetail Solar and Wind 45

Federal Tax Incentives Available Federal Investment Tax Credit (ITC) 30% Tax Credit on Reimbursed System Cost Must be installed by 2016 As of 1/01/2009 No Cap on all systems Now for Solar Electric, Solar Thermal, and Wind systems Can receive a 30% Federal 1603 Treasury Grant (cash) in lieu of 30% ITC Only for 2009 & 2010 Projects Copyright 2010 Dovetail Solar and Wind 47

Accelerated Depreciation Federal Modified Accelerated Cost Recovery System (MACRS) for Solar & Wind 5 year Depreciation Schedule for Businesses Ohio State Depreciation is also 5 years Copyright 2010 Dovetail Solar and Wind 48

Ohio Solar PV Non-Residential Grants Ohio Dept. of Development, Energy Office NOFA #08-09 Non-Residential Grant based on system size $3.50 per watt Minimum 10,000 watts Maximum $150,000 or 50% of cost Example: 20,000 watts = $70,000 Must be in Investor Owned Utility Area FirstEnergy, AEP, Duke, DP&L Copyright 2010 Dovetail Solar and Wind 49

Ohio Solar PV Residential Grants Ohio Dept. of Development, Energy Office NOFA #09-04 Residential Grant based on system size $3.00 per watt Minimum 2,000 watts Maximum $25,000 or 50% of cost Example: 4,000 watts = $12,000 Must be in Investor Owned Utility Area FirstEnergy, AEP, Duke, DP&L Copyright 2010 Dovetail Solar and Wind 50

Solar Renewable Energy Credits Sell Environmental Attribute of solar energy generation to utility that t is required to produce quantity of clean power or equivalent offset This is in addition to savings from the electricity produced d by the solar system Dovetail offering contract for $250 per SREC (25 per kwh) for next 5 years (or $303 for 3 years) Can represent significant value for larger commercial systems in Ohio Ex. 43.7 KW Solar System produces 48,134 kwh/yr = $12,033 per year at 25 /kwh Copyright 2010 Dovetail Solar and Wind 53

Solar Renewable Energy Credits Alternatively we can provide up front cash for your SRECs upon system installation ti Dovetail offering contract for $1,150 per Kilowatt (1,000 watts) In exchange for SRECs for 10 years Provides substantial immediate cost reduction or down payment on solar system Ex. 50 KW Solar System = $57,500 cash payment Copyright 2010 Dovetail Solar and Wind 54

System Payback Depends on client specific parameters: System size, orientation, tilt angle, efficiency Solar irradiance or average wind speed at turbine Current electric usage & Utility rate(s) Tax rates Financed amount & loan interest rate Any planned efficiency improvements or increased usage Copyright 2010 Dovetail Solar and Wind 55

Impact of Electric Rates A key element in calculating payback for a system is the impact of future electric rate increases Wide range of rate structures across country 7.5 up to over 25 per kwh Usually assume conservative 4% annual rate increase for financial projections For Ohio, many assume >8% annual increase in next 3 yrs as we transition to new regulations Compounding effect has major impact on your future electric rates Copyright 2010 Dovetail Solar and Wind 56

Example: 52.4 kw Commercial System System Cost per Watt $6.07 per STC DC Watt Federal Tax Bracket: 35.0% Location's Avg Peak Sun Hours: 4.0 (Akron area at 10 tilt) Starting Average Utility Rate: 10.1 /kwh Estimated Annual Production: 56,900 kwh/yr Estimated First Year Utility Savings: $5,790 SREC income: $14,225 per year for 5 years List System Installed Cost $318,000 Ohio Energy Efficiency AEF Grant -$150,000 Federal Tax on Grant Buy Down $52,500 Federal Tax Credit 30% Investment Tax Credit -$95,400 MACRS 5 yr Accelerated Depreciation -$102,249 System Cost After all Incentives $22,851 Payback 3.7 yrs. ROI >22% Copyright 2010 Dovetail Solar and Wind 60

32.kW solar installed Spring 2009 Electric bill down 80% for summer months Payback in 3 years Essentially free energy for 32 years after that Plus receive ongoing SREC income Copyright 2010 Dovetail Solar and Wind 64

Melink Corporation Milford, OH Headquarters LEED building Initial Dovetail installation in April 2006 10.9 kw Array largest Ohio commercial system at time Mounted on ballasted racking at 10 tilt on cool white membrane roof Added another 10.9 kw in April 2007 Added a 3 rd 10.5 kw in May 2008 Total array now 32.3 kw Copyright 2010 Dovetail Solar and Wind 65

Melink Awarded LEED GOLD Certification in May 2006 PLATINUM in January 2010 Operating cost < $0.50/sqft Melink is saving $35,000 per year in energy costs, over $100 per day $170,000 Increase in Property Value LEED cost 10% more, 6 yr payback Copyright 2010 Dovetail Solar and Wind 67

Tangible Benefits Lock In The Cost of Electricity Reduce Impact of Electric Rate Increases on Business Cash Flow (or your home budget) Move a portion of operational expenses to depreciable capital costs Provide more predictable operational costs Copyright 2010 Dovetail Solar and Wind 69

Other Tangible Benefits Increased Property Value A Solar PV System Increases the Resale Value of Your Property Government funded study found that home Resale Values increased by $20 for every $1 of reduction in annual utility cost Example A 3.7 KW Solar System produces 4,168 kwh per year = $542 per year Increase in Property Value = 20 x $542 = $10,840 Increases as Utility Electric Rate increases Copyright 2010 Dovetail Solar and Wind 70

Going Green Has Market Value We at Johnson & Johnson take our corporate responsibilities seriously. By investing in solar electric generation, we make active our commitment to the environment. John Subacus Director, Facility Management Janssen Pharmaceutica Products, L.P. Copyright 2010 Dovetail Solar and Wind 71

Environmental Impact Example A 32.3 KW Solar Array over 25 years avoids: 1,328,000 lbs of CO 2, the leading greenhouse gas 4,263 lbs of NO x, which creates smog 3,859 lbs of S0 2, which causes acid rain 263 lbs of particulates which cause asthma Or: 2,162,000 miles driven in an average car Or: planting 11.4 acres of trees Copyright 2010 Dovetail Solar and Wind 72

Financing Alternative 3 rd Party Ownership 10 to 20 year Power Purchase Agreement Typically set at 85% to 100% of utility electric cost 3 rd Party Purchases & Owns System Retains all grants, tax credits, depreciation & SRECs Has Roof Easement and provides system maintenance Pay 3 rd party for renewable power instead of Utility during Agreement period (at least 6 yrs.) Option to purchase system (buy out agreement) for small fee at end of period No Capital Cost, Operating Cost Savings during contract (and much higher with buy out) Copyright 2010 Dovetail Solar and Wind 73