With the dramatic decline in solar technology prices, more businesses and commercial property owners are taking a serious look at solar power. That brings more competition for a limited supply of commercial solar incentives offered by utilities or by government agencies -- incentives that can make or break the economics of a solar power project.
To secure a rebate or other incentive, the applicant must be fully prepared to act swiftly when the program window opens. Losing the incentive usually means that the economics fall apart and the project will not be built. This amounts to significant wasted effort identifying the project, laying the groundwork and obtaining internal approvals -- all for nothing.
Depending on the rate and structure of incentives, the cost of not obtaining incentives could be a five to seven percentage point reduction in the internal rate of return (IRR) on the proposed solar project, assuming a cash ownership model. For a typical commercial project of about 1 MW, failing to capture available incentives could add several years to the pay-back period and add anywhere from $500,000 to $1 million towards the net cost. This can certainly make the difference between an economically viable solar project and a “no go” decision.
Consider another example from a specific commercial solar incentive program. Westfield, the leading owner of shopping centers in the U.S., recently secured a rebate from Los Angeles Department of Water & Power’s (LADWP) $20 million Solar Incentive Program to install a ~750KW solar system for its Century City mall in Los Angeles. The program has declining incentive levels as certain installed megawatt (MW) targets for LADWP are met, and the availability of incentives depends on an annual budget allocation. The solar community widely assumed that the 2012 allocation could be the last round of commercial solar funding through this program. When the LADWP program window opened on July 2, no one really knew how long it would take to fill up the queue. In fact, the effective time window for the program was less than 48 hours.
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