Using a series of case studies, sample feasibility studies, and a review of technology, financing, sales, and operations and maintenance, we build to a final day when you and your fellow students present your prospective projects.  Click here for the syllabus.

Here is the text you will  use. Planning and Installing Photovoltaic Systems is technically complete enough that you can really dive in, or just refer to it when needed.  I believe this is the best current overview and reference on PV--it covers what is happening in Europe and the world, for PV is a globally applicable technology.

I hope you can join me for this course.  First session is Saturday, 2 April from 9A to 5P, then five Tuesday evenings from 630P to 930P, capping off with Presentation Day on Saturday, 23OCT from 9A to 3P with a debrief afterward over pizza and beer w your fellow students.

Click here for UCBX’s online enrollment site.

1. Solar demand would evaporate without subsidies, and
2. Subsidies would be better spent on R&D rather than covering a percentage of installation costs.

My response on point one was that all we need is a level playing field.  The energy industry is the most subsidized industry in the world, and policy driven initiatives—such as reducing our dependence on coal, putting a real cost on carbon loading the atmosphere, or getting the US military out of the job of securing imported petroleum—as well as reducing the carbon intensity of our economy, means that solar incentives is money well spent.

Current solar value is 10% greater than unsubsidized cost, and energy payback is even greater—cSi takes <3years of energy to produce the entire installation, and will produce energy for ~25years.

Point two underestimates the importance of an installed base and agile capital markets in driving cost compression and learning rates.  R&D has provided us with innovative, even exotic, technologies, but solar is driven increasingly by balance of system costs [everything but the module & inverter] that are proven out in the field and with lower costs driven by more effective installation methods.  The balance of systems costs are now 20% higher than module costs—R&D in balance of systems is driven by the number of installations and how quickly you climb the learning curve.  To drive learning you need to drive installations—solar is a new model of distributed energy generation, not reliant on huge transmission towers.  Instead, this critical tool in our energy independence is reliant upon property owners who get the math, financiers that can capitalize the upfront costs, and agreeable utilities.

A level playing field, and recognition of the importance of cost compression and learning rates in preparing for our nation’s future.  Not to much to ask for, is it?

The stakes are high.  AB32 was a piece of bi-partisan landmark legislation that helped launch California’s clean tech industry.  Cleantech is creating more jobs in California right now than any other sector—10x more. To gut this science-based approach to climate change before the movement spreads to DC, oil refiners Valero and Tesoro are spending an estimated $120M on this proposition to kill  suspend this legislation  [“AB32 Would Be Suspended, Likely for Many Years”].   They propose to gut it by suspending AB32 until unemployment remains below 5.5% for four consecutive quarters—something that doesn’t happen very often:Why?  AB32 introduces a cap and trade program, among other tools, to motivate large emitters to reduce their greenhouse gas [GHG] emissions.  Valero and Tesoro are presently mandated to report on emissions from, and clean up, their refineries in LA and near SF [their Benicia refinery is the 8th largest emitter of GHGs in California] at their cost.

AB 32 was designed to align our state’s economy with a healthier and more innovative future less dependent on foreign oil.  [click here to see China’s progress on same].  Since AB 32 was passed, 60% of all venture capital in the USA has been invested into California cleantech companies.  Record amounts of private equity have poured into California, startup companies financed, and jobs created by the thousands.  Northern California is emerging as the center of the US cleantech industry, largely as a result of AB32.

President Obama and Congress have failed to pass a USA clean energy bill.  California’s clean energy future is underway, launching a clean-tech industry with AB32’s science-based approach to the climate, incentivized by a landmark climate law, and fueled by strategic investors such as Sharp, MEMC and First Solar.

The Texas-based players behind Prop 23 intend to stop this California job-creating revolution—before it gets to Washington DC.  These high stakes have caused George Schultz, former secretary of state during the Reagan administration, to take a leading role in the campaign against Prop 23.

Creating jobs is not easy—but good jobs are what California, and the USA, need right now.  It takes capital, technology, incentives, and committed customers.

“One of the biggest challenges for government is convincing investors that incentives will remain in place long enough for them to earn a profit, and suspending existing regulations won't help with that.” 

And by voting NO on Proposition 23, California voters will send a message that good jobs, energy independence, and a clean energy future, matter.  This is too important to leave to the politicians in Congress.  Leadership starts at home.

Vote NO on 23 on 2NOV.

In order to receive a cash grant for eligible energy property, such property must either (1) be placed in service during 2009 or 2010 or (2) be placed in service after 2010 and before a specified termination date, but only if the construction of such property began during 2009 or 2010.  We have to either substantially start construction or meet a safe harbor requirement of incurring or paying >5% of total construction cost [no planning, financing, or land costs included].  Treasury guidance here.

The real issue is how you demonstrate that construction has begun prior to the end of 2010.  Here is a very helpful FAQ from Treasury that helps to define what they mean by beginning construction.  A “developer-friendly” look-through rule is described in Q16A, Q17, and Q18.

For most of our projects, we will be providing a copy of the construction contract, a certificate for payment for completed work, and an independent engineer’s report including:

1. a detailed construction schedule,
2. project budget, and
3. description of work commenced including all invoices for work performed,

to Treasury to confirm our grant eligibility.

I moderated a panel on Getting the Carbon Out, and had the chance to frame solar and other renewables as the third step in a coordinated carbon reduction campaign.  Gratitude to event organizer Melody Spradlin for putting this together, and kudos to fellow presenters Stephanie Glazer and Tim Chadwick for a really informative session.

Over the course of an hour and fifteen minutes, we walked our CORENET friends through the steps of understanding and curating your corporate real estate portfolio in a future where leadership is increasingly defined by how you manage the carbon intensity of your operations.

Click here for a copy of Stephanie’s carbon accounting presentation [1MB pdf].  Click here for a copy of Tim’s Improving carbon [and energy] efficiency presentation [2 MB pdf].  And click the slide below for a pdf of my relevant slides on implementing renewables[200k pdf]:

A very relevant question was “How would you understand what to do with an older 100,000SF building you just bought?”  My approach is headcount focused, since most companies look at revenue per employee, RSF per employee, and have readily available utility bills.  Here is my take:

1. Understand energy use per employee—California average is 7.5MWH/person, I have one client whose use is currently 43.75 MWH/employee [pharma]--so this number needs to be put in context with your industry peers.
2. Have an energy audit done of the building—PG&E can do this for you.  They identify lighting upgrades, VFD swap-outs, and EMCS options that can help frame the easy wins on focusing carbon intensity.
3. Look at renewables, primarily solar, in locations where shade becomes an asset—parking, rooftops, western glazing.

One particular point that resonated well was the fact that fuel cells, if natural gas is your feedstock, are dirtier [800# CO2/MWH] than PG&E’s current mix of generation [635# CO2/MWH].  Won’t be long before permitting a fuel cell will trigger CEQA compliance issues, requiring environmental impact analysis and mitigation measures.  I am a big fan of fuel cells run off of landfill gas, digester gas, or captured methane from CAFO--but natural gas is too useful a feedstock for fuel cell applications.

The other point that hit home was, thanks to AB 2473, permitting of all types of solar systems in California “shall not be willfully avoided or delayed”.

And did I mention that installed PV costs a third less on a capacity basis, lasts three times as long [10 yrs v 30 yrs], produces zero C02 emissions, and costs a helluva lot less to operate than a fuel cell?

The steel structure looked great—with a camber built into the beams, the proportions felt right and the design was complementary to the parking structure—not an easy move to pull off.

We expect this system to meet roughly ten percent of the adjacent office building’s demand, and with the lease financing we proposed, it was cash flow positive for the first five years, and you own it after ten [with a small buyout].

I was reminded that design is only as good as the execution—and PV is a game of inches—we fight for every percentage point of performance.  We believe module mismatch losses are avoidable—you are building a thirty year system—and throwing away a couple of percentage points of yield just because you don’t have time to sort modules by performance is baffling to me.  In the end, systems deliver a yield, and it seems unwise not to practice the same care in construction that we did in developing the system.

Grounding is an essential, but poorly understood, component of system design.  “Lugless” grounding design is a great concept, but ground faults are such a danger that you need to be sure that no shock hazard exists in module frames, metal structures or enclosures.  Installation should proceed as if everything conductive is at lethal potential to ground—until a megger or multi-meter proves otherwise.

It’s all in the details.

Solar has grown--and is forecast to continue to grow—at a 60% CAGR.  Tremendous amounts of capital are needed to augment the federal and state incentives available to clean up and smarten how we generate, distribute, and use energy.

And it is a global opportunity.  Solar is moving from a policy driven market to one driven by economics—and is scaled optimally for private equity investors.  Wind is an oligopoly and primarily offshore, the smart grid is, and will continue to be, a policy driven market—customers are afraid it will make their energy bills go up, and energy storage is way too early in the cycle to predict what a successful business model would look like.  Solar has a variety of technology, finance, and execution opportunities that can benefit from the $5 to $15M that a private equity fund can provide.

For that matter, I still don’t know what a successful business model in the solar sector will look like, but I do know two key elements will be: site control next to either loads or transmission w/ capacity, and project finance.

Prior to the talk, I was asked to address how the industry was going to survive after the subsidies disappear. 

With Senator Reid now saying that carbon trading is not going to happen for a while—the brown power industry continues to get a massive subsidy to use the air we breathe as a dumping ground--at no cost.  And China is set to start carbon trading next year.  All we ask for is a level playing field.  Price peak power realistically, value the renewable attributes of solar power transparently, charge a fair price for use of our clean air and water, and we don’t need the subsidies.

Taught at UC Berkeley’s Downtown Center (425 Market Street, San Francisco),  I use the feasibility report as the framework for understanding what goes into a profitable project.  Click here for a current draft of the syllabus.  Here is the course overview:

This course may be a great use of ~20 hours of your time if you really want to dive into what comprises a feasible solar project.  The course capstone is a day of student team presentations on 23 OCT.  You and your team present your feasibility report on a potential solar project of your choosing.

What is new this semester?  We will discuss the $700M in Clean Renewable Energy Bonds that have been allocated to hosts in California, and what it will take to get this financing tool more widely used. Understanding Utility Feed in Tariffs and how to use them to capitalize projects.  And what is the future of PACE—Property Assessed Clean Energy financing—after the Fannie Mae/Freddie Mac smackdown of this tool.

You will learn a great deal from your fellow students—you will be working with them to understand, underwrite, and present potential solar investments.  We use Microsoft Excel [or Google Docs], Google Sketchup and Google Earth as evaluation tools—give yourself a headstart, download them now [they are free] and start to play with this software to understand how these tools work.  All course materials will be available on a class-specific Google Groups site that serves as the online partner to your classroom work.  Here are the texts I use:

           and           

Course intent is to build a foundation for getting commercial solar projects identified, quickly selecting the feasible ones, and putting them on a track to a real deal.  Planning and Installing is technically complete enough that you can really dive in, or just refer to it when needed.  I believe this is the best current overview and reference on PV--it covers what is happening in Europe and the world, for PV is a globally applicable technology.    When you do a feasibility study, you want it to lead to a project, and the study isn't going to do it on its own. I added Strategic Selling because no one has a project until someone sells something.

My perspective is that of a seasoned solar developer with over twenty years of commercial real estate investment and development experience here in Northern California.

I hope you can join me for this course.  First session is Saturday, 11 September from 9A to 5P, then five Tuesday evenings from 630P to 930P, capping off with Presentation Day on Saturday, 23OCT from 9A to 3P with a debrief afterward over pizza and beer w your fellow students.

Click here for the enrollment site.

He uses watts as the metric to understand the scope of the problem instead of metric tons of carbon—this translates human activity more easily into demand for renewables—and the nation-size scope of the solution required.

The article searches for a

“…focus on ways in which affluent societies can make dramatic reductions in energy use without reducing their perceived quality of life—a challenge that involves wrestling with human nature as well as physics.”

Appropriate now because renewables are a part of a well thought out climate change plan.  And reducing the carbon intensity of a site’s operations won’t happen if profitability is impacted, or the effectiveness of the employees is diminished.

Saul created a website,  Wattzon.com, to enable you to measure the effect of your current lifestyle. 

Here is a video of Saul’s carbon/energy audit of his own lifestyle, and his personal climate change plan.

Why is this important?  You need to measure before you manage.  First step is to measure what you are doing, and express it in terms that translate easily into action—defining what you are doing by its energy use.  You can then make better choices on lifestyle vs energy consumption.

Why now?  I like Tom Friedman’s take on the Power of Green--the first one to figure this out will create the jobs, equity, and lifestyle that the world will want.  And will get us away from importing 70% of our oil, the largest single component of our trade deficit.

Why change?  A new approach is needed to maintain focus.  Per Saul, “I know very few environmentalists whose heads aren’t firmly up their ass.  They are bold-facedly hypocritical, and I don’t think the environmentalism movement as we’ve known it is tenable or will survive.  I don’t think we can buy the argument anymore that you get special dispensation just because what you’re doing is worthwhile.  Right now, the main thing I am working on is trying to invent my way out of my own hypocrisy.”

And the change is a really nice filter on your purchasing/consumer self and towards living much higher quality lives.

Nice to see solar is starting to make a contribution, and with the requests that are coming in, this share looks to triple over the next three years.  It is still a fraction of wind and geo-thermal, but with costs coming inline with other renewables and the peak-ish demand profile of solar, there is going to be a lot of sunlight harvested and turned into clean energy for the California economy.

Now it’s about discovering what the off-taker’s investment threshold is, and how you compete for investment dollars.

Most of my corporate customers use discount rates of seven to nine percent—solar now meets that easily with the value put on RPS compliance using tradable RECs.  Investment solar gives you mid-teens returns if you are a corporate owner [not subject to passive loss restrictions].  Not a bad return on investment given the low risk of solar energy production. 

Simply put, CREBs are a financing tool to put solar on public schools—a noble intention. 

California government agencies were allocated about $640M of these bonds—Palo Alto Unified School district allocated over $20M, Mt. Diablo USD allocated over $50M, San Diego USD allocated $74M for 111 projects, and LAUSD received over $120M for 90 projects.  These allocations are good for three years.

Problem is, the $1.2B 2005 allocation of “old CREBs” authorized under the Energy Policy Act of 2005 never got much traction—only $50M of them were issued.  A real missed opportunity.

Part of the problem is that CREBs are allocated on a smallest to largest basis, but you needed to aggregate about $10M of CREBs to have the costs of issuance be covered by the two percent cost cap allowed.  The other part of the problem is that public agencies have their credit rating re-examined every time they go back to the market—and risking your agency’s current rating for a small issuance of CREBs could be a bad career move these days.

The bonds yield about 6% pretax—and since they are paid in tax credits, borrows can use 70% of the payment to offset their federal tax liabilities.  To make the bonds attractive, bondholders have been asking for either discounts or interest payments in addition the federal tax credits—these have been averaging about 1 to 1.5% to make them equivalent to munis.  Repayment is established through a sinking fund, and the power savings can be redirected into this interest bearing sinking fund account.  Currently, the tax credit can be stripped by the issuer or holder and sold separately.

I don’t understand why California’s Investor Owned Utilities don’t make a market in these bonds—they have the tax appetite, they have a vested interest in seeing solar distributed generation more widely adopted, they would have first crack at buying the system SRECs to offset their RPS requirements, you have a market size of north of $500M—seventy to a hundred megawatts of solar created—and the halo effect of sponsoring solar on schools would be huge.  They could buy these bond in private placements, so a school district’s credit ratings would not be publicly bandied about.  They seem like the perfect buyer for the school’s new CREBs.

What don’t I get here?

This is the perfect way to cover the upfront cost of energy efficiency and renewable energy, and has spread nationwide—seventeen states in the last 18 months have authorized similar programs.  Scientific American calls it A World Changing Idea.  Harvard Business Review identifies it as 2010’s Breakthrough Idea Number 5 [pdf here]. 

Cost of capital [aka assessment rate] hasn’t been set yet—but probably not too far off of Sonoma County’s Energy Independence Program’s [SCEIP]  seven percent [deductible as a property tax expense]  assessment rate with a 15 or 20 year term.  Sonoma allows you to borrow up to 50% of the assessed value of the property, and you also get the Treasury Cash Grant and California Solar Initiative incentives for solar if you are eligible. The assessment goes with the property, eliminating any due on sale clauses typical with current lease programs offered. Commercial property owners will need to get consent from their lenders—most banks are on-board with PACE, since the value of the asset increases by more than the cost of the improvements.

This program can pay for an entire Green Package--solar electric, solar hot water, sub-metering and demand response, real time monitoring, lighting retrofits, and HVAC retrofits.  These Green Package improvements are a great way to add value and distinguish your property in a very competitive real estate market.  And the payback time goes to zero—improvements with a roughly five year payback amortized on your tax bill over fifteen or twenty years.  Think about this for your next lease renewal—a tenant incentive that adds real value to your property.

Noted is the fact that 50% of Sonoma County’s investment to date has been for PV—a natural step for our climate.

The first step is getting a PG&E or equivalent energy audit and then reviewing your current baseline and real estate with us to discuss project feasibility.

Your property not located in San Francisco?  You are in luck if you are in Sonoma County [application here .pdf] —and programs are in development elsewhere in the Bay Area with deployment expected later this year.  CaliforniaFIRST, a program available from Renewable Funding, is recruiting pilot counties and cities.  Want to get a program launched in your community?  Start here.

UPDATE:  Go Live date postponed. “Money awarded from the ARRA funds through the State Energy Program (SEP) was provided recently, and there are legal considerations about the proper use of this money and how it affects program requirements that still need to be figured out before the program is ready to launch.  All of the information available on March 1 will be put up on the website at www.greenfinancesf.org and the program is now expected to roll-out on or before April 1.”

My Investment Solar course, taught at UC Berkeley Extension’s Downtown Center [425 Market Street, SF] is now accredited for 30 CE hours.  If you are a LEED AP, take the course and you are good for the next two years!

Next class starts 13MAR2010, so enroll now—space is limited.

The big idea behind the CSI was to lay out a ten year glide path of incentives that decreased in step with projected system costs.

Step 6 down to Step 7 is percentage-wise the biggest decrement in the glide path, and it is difficult to see where we are going to be able to take ten percent out of the cost stack to restore equilibrium—or recruit investors at a 75bps lower return.

If we look at what has happened historically, you get an idea of what the next several months are likely to look like—a rush of epic proportions to get your claim reservation form in when we get close to the end of this step.  The vertical bars represent reservations made per month.  Note for Step 5 the monthly reservations volume tripled as the end neared.  This analysis was done by the good people at Santa Clara County [PBI numbers are governmental, not commercial] and says it all:

Here is where we presently stand:

We are encouraging all of our site hosts to move with us now.  For most of our partners, this next step down is a mid six figure loss on the value of their investment—easily preventable by Doing It Now.