Craig Noxon: Hello, everyone! Welcome to Solar Tea Time. I’m Craig Noxon, I’m VP of Enterprise Sales at REC Solar. And my special guest for this month is John Hostetter. He’s the Senior Director of Products at REC Solar. Before we get started a little housekeeping, as always, I wanted you to all be aware that your line is muted but you can type questions inside the Webcast under the questions tab. And we’ll try and answer those at the end at the broadcast and if we don’t get to them we’ll certainly follow-up with you via email.
OK, that’s it for the logistics. Let’s get to the topic of today which is Solar + Storage. All the questions and comments we’ve had come in at Solar Tea Time, Solar and Storage by far is the one that comes up most and it’s the trending topic. It’s high tea time that we do so. Lucky for us we have John on hand as our expert to introduce the topic. And in future of Solar Tea Times we’ll be able to delve into this topic a little bit more but we have 20 minutes here. John, thanks and welcome to Solar Tea Time. I hope you have a cup of something caffeinated, some tea perhaps because this is a big topic to cover. So, we’ll get started right away with some of the questions that came in.
First and foremost, John, maybe you can shed some light and kind of open the floor.
What’s new with solar and storage and maybe you can then delve into any specific policy changes that we should be aware of.
John Hostetter: Great. Well, thanks Craig. I appreciate the introduction and it’s a good question to start off with. Here in California where I am, there’s the Self-Generation Incentive Program which has been open for the last couple of months. And what that is, is it’s usually abbreviated SGIP and it’s an incentive program that reduces the cost of installing storage and it favors Solar + Storage. It’s a little bit like the old CSI Rebate Program for solar and that it is a tiered structure, essentially what that means is over time the rebate will be less valuable for those projects. So the incentive is intended to get projects installed in the near term, help the industry get the cost down and get the word out about storage. It’s a great program. Definitely ask about it if you’re considering a project.
What do you mean by that John, that it’s over time the incentive drops down somewhere to ITC or some other programs that become less valuable in the years to come?
John Hostetter: Exactly, exactly. As more and more projects get built with Solar + Storage and claim this incentive program, the value per project goes down. There’s a fixed amount and then periodically as more projects are installed, the dollar value per project is reduced.
Craig Noxon: OK.
John Hostetter: That’s exactly right. And then also here in California, the major public utilities are along with the CPUC are evaluating a proposal to change the time of use buckets on their rate tariffs for commercial customers. So what that means is that they’re going to change how much the customers are paid and when they pay those various rates. And rather than get too in the weeds there, the upshot is it’s going to change the relative value of solar and storage to customers. For most customers, it’s going to increase the value of storage especially when coupled with solar. And so it is making the combined project better than either one separately.
Craig Noxon: And why is that, John?
Why is it better if it’s combined with solar?
John Hostetter: Specifically with the time of use shift the utilities are changing when you pay certain amounts for power and so the way it used to work and the way it currently works is during the middle of the day when solar is producing the best that was also the most valuable time for solar to produce. And the proposals put forth by the various utilities are changing that so that those high time of use buckets, those high time of use rates are later in the day so they don’t line up quite as well with solar. But with storage, you could still get the benefit of that. You can still use that power at the most financially beneficially time.
And then there’s a few other things going on as well but the summary is that many of the time of use rates are going up and so that is also beneficial for storage.
Craig Noxon: You mentioned California.
Can you speak a little about solar and storage outside of California?
John Hostetter: That’s a good question. Massachusetts, Hawaii, New York and Colorado all have programs in development or are just about to come out and they’re going to benefit storage a little too varied to get into in a short time frame. But if you’re considering a project and you have some a facility in one of those locations, we can certainly help you with the specifics. Across the United States, the Federal Investment Tax Credit, the ITC is going to be beneficial as well. You can claim ITC on the storage potion of your project as long as you’re also installing solar. So you have to install them approximately at the same time and then they have to end up with the same owner. So, if you’re going to own them both yourself or if you’re going to have the same financier for both of them, then you can claim ITC on the value of the entire project.
There are few other requirements that storage has to be mostly charged by the solar which if you’re analyzing them at the same time and working through the project at the same time rather than using two separate vendors or you’re going to gain some benefits, some synergy from talking to one company who can help you with both of these. Both so that you can claim the ITC as well as make sure that you’re seeing the full value of both of them, getting the synergy out of both of them from the effect of analyzing them both at the same time, you’re going to see reduced equipment and installation cost and a short overall installation timeline if you do both at the same time also.
Craig Noxon: If you just doing storage without solar, you don’t get ITC credits for storage.
John Hostetter: Correct.
Craig Noxon: Yeah, OK. Let’s move on into the next question which is.
What are good candidates for solar and storage? You can talk about it from a business and from a geographic standpoint.
John Hostetter: From a business standpoint, in general, you’re going to look for large spiky loads. And what does that mean? It means motors, pumps, heavy machinery that turn on and off at one time or where we see lots of testing in laboratories, processing plants those sorts of things. When you’re talking about let’s say agriculture, some of the agriculture rates are not really beneficial even though they have large pumping loads which are intermittent. It’s worth talking to with somebody and doing some analysis there to see if it’s going to work for you or your specific situation.
However, there are many Ag customers where it is going to work better and you know as I mentioned whether it’s a processing plant or storage facility those tend to look a lot better than some of the pumping. But again, pumping does have to have the right profile it just depends on whether the rates are truly supported. Office buildings, they can work as well and heating, ventilation and air-conditioning loads tend to be quick. It tends to be uncontrolled and so when the building heats up, the whole building heats up at once and so a lot of those HVAC equipment tends to turn on at one time. And you know computers, people come in right after lunch or even in the morning and they turn those on so they also tend to have some of those spiky loads.
We’ve seen schools and other types of facilities as well that have excellent load profiles. You know what? It really comes down to with any customer with a large utility bill specifically the demand charge is something that we’re going to want to target with solar and storage. The thing about storage is that it’s very dependent on both the rate tariff, what is the utility charging you for as well as the way you use your power? And so, it’s worth doing that analysis.
And then what do you analyze and how are you– how do customers know if they are good candidates for solar + storage?
John Hostetter: Well, we’re going to look at your site and we’re going to analyze it for what is your energy use profile and how you are using energy and when you are using energy? Are you using enough energy that solar is required? Are you using energy in a manner and at a time of day that the storage is going to be effective at reducing your out of pocket spend? We’re going to look at your interval data which is the recording of how and when you have used power over time. And then combine that with our ability to predict what the storage is able to do for you as well as the solar production we can craft a solution that is best for the customer.
Craig Noxon: OK.
John Hostetter: For some specific examples, I won’t give customer names to keep them private. But we’ve worked with some companies that are big box stores that have bought this for distribution and customer-facing sites. Some of those customer-facing sites look great and some of them not so much. It really depends on the usage profile and the rate structure that they’re on. And then similarly with their distribution sites, while some of them will do it, some of them are not good fits so where it’s not going to be financially beneficial, we’re happy to tell the customer what is going to be best for them.
Craig Noxon: Mm-hmm.
John Hostetter: We’d rather be a good partner that way.
Craig Noxon: John, I’ve seen that the solar industry kind of continues to move not just from where it’s better than utilities in places like California and Hawaii, it’s moved to the East Coast, we’re seeing installations in the Midwest kind of all over these days. Where is storage in that trajectory? Can you compare this with the solar from a geographic standpoint?
John Hostetter: Yeah, absolutely. There’s some result to solar where you have a very large market in California and then Hawaii is a good market for solar and some of the other states depending on their utility and support for solar. And then quite a few of the Northeastern states, again, depending in the utility structure and support of solar is how the solar industry has developed. The storage portion of that especially when combined with solar lines up very closely.
California is a great market for storage. We tend to have higher rates here in California in the way that support storage. Hawaii, Hawaii has some special concerns that make storage very appealing out there. Here on the mainland, there’s a lot more just electrical infrastructure, we call that the grid. And our power tends to be cheaper than the islands. And so, Hawaii has special needs for storage that really help make everything work better out there.
In addition to Hawaii, there’s a few of the Northeastern states as well as, let’s say Colorado, that have programs that are going to financially make storage more viable as well as rate structures and utilities that understand the value to them of the customers having some storage. It’s going to make more senses up there. You know that’s not to say that in the middle of the country or other places that I haven’t mentioned are going to be bad for storage but it’s worth or doing some analysis.
Craig Noxon: OK. The third question we’ve kind of touched on that is how does a company pay for Solar + Storage?
And is there a benefit for doing both at the same time?
John Hostetter: Yeah, absolutely. Companies can pay for solar and storage the same way they’re going to pay for any of the other – any of their other infrastructure projects or energy projects, right? So, if they have funds available they can certainly purchase via cash, internal financing or cash in the bank. They can go to their own financial institution or bank and get their own financing. Whether that’s a loan or lease, I know that many banks can do either one of those for their customers. And then the energy vendor that you’re working with is going to essentially sign an EPC contract and treat it more like a cash sale from their perspective.
There are lots of different financing means available though. For those customers that don’t necessarily have a pile of cash waiting around for them to spend it on a capital improvement project, there are PPAs and lease programs available. We can certainly provide a PPA that allows the customer, our customer to save money every money right out of the gate with essentially no money down, no money upfront and then, very low risk. There are performance guarantees and well understood production and performance on both sides of that system.
Craig Noxon: Yeah.
John Hostetter: There are other more innovative financing structures available where you might have a PPA for the solar and capacity or lease-like payment for the storage. The details are a little bit too much to get into in the time we have available today but those are available.
Craig Noxon: Speaking of customer questions.
How do you choose a vendor when you evaluate the storage? What should people be looking for?
John Hostetter: That’s an excellent question too. One of the things that I always recommend is, you look at not just the company you’re buying from, right? Is this a company that has your best interest at heart? Compare performance metrics. If you’re only going to look at one performance metric for storage, then you would say that you should look at the roundtrip proficiency of the system. Is it as is competitive and not worse one on the market you know? And so what that means is that’s a measure of how much energy is lost when you are charging and discharging the battery?
Craig Noxon: Uh-huh.
John Hostetter: There’s going to be some off the heat and just efficiency with the equipment and so forth. And that’s a number that has to be published. And so go ahead and ask the vendor what their offering you then. I also recommend looking at the details of the warranty of the actual equipment that’s being offered. Some warranties are much better than others not just as far as links, duration of warranty but also what are they actually warranting? How many cycles per day is the battery able to do and still have that warranty? How many cycles per day are they expecting it to do? Not just what does it warrant to do but what are they expecting it to perform at? And then how much power is left in that battery at the end of warranty? Those can vary tremendously across the industry. And so you want– you want one of the better warranties then.
Craig Noxon: OK.
John Hostetter: Any time you’re talking about warranties, you want to make sure that the company that is providing those warranties has a depth and financial stability in the marketplace. Are they having financial troubles or are they the kind of company that has shown they can withstand the test of time.
Craig Noxon: We have time for one last quick question and it’s somewhat related but the question is.
Which storage products does REC work with and how do they compare with other storage product in the market?
John Hostetter: Mm-hmm. And so, we allow ourselves the flexibility to choose the best products on the marketplace for the customer. We don’t like to lock ourselves into any one specific piece of equipment or vendor because we want the flexibility to choose what’s best for the customer and bring them a solution that’s going to work best for them. There’s an old analogy where if a hammer is your only tool then everything starts to look like a nail. In the solar and storage and other energy marketplace, if you only one have one product that you can sell, then you’re going to recommend it to everyone even if it isn’t necessarily the best fit for them. And you’re going to tell people it’s the best because it’s the only thing you have. Whereas what we like to do is give a solution and propose a solution that we feel is the best for the customer not just for us.
Craig Noxon: It’s about time we wrap up, so thanks for sharing the Storage insights for our listeners. If anyone would like to talk more to John or to I about solar and storage, feel free to email us at solarteatime@RECsolar.com. You can also email us if you have any additional questions and we will get back and answer those for you. Please join us next month when we will be giving tips from a CFO on how people should sell their ideas and projects internally. So, thanks John, on behalf of REC. Cheers! Bye!
John Hostetter: Thanks, Craig. Cheers!
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