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June 17, 2013

Solar Industry: It’s on us now

Contributed Photo Greenskies Renewable Energy of Middletown has built up its project base with the help of Connecticut’s many policy changes to help the clean energy industry grow.

With the Connecticut General Assembly’s passage of two more clean energy programs in June, the industry now has every available tool a state government can offer.

“The pressure is now on our industry to perform,” said Michael Trahan, executive director for trade group Solar Connecticut. “The governor and the legislature have given us the tools. Now we have to go out and produce.”

One of the latest tools — submetering — expands the availability of solar, fuel cell, and other clean installations to multi-unit buildings. The other tool — virtual net metering — allows for larger installations and for renewable power to be sold competitively.

These come on top of other policy changes since Gov. Dannel P. Malloy took office in 2011. The development of the Zero-emissions/Low-emissions Renewable Energy Credit program, or ZREC/LREC, provides utility ratepayer funds to lower the costs of renewables. The Commercial Property Assessed Clean Energy, or C-PACE, program gives low-cost financing to business property owners to repay improvements using energy savings.

“It has been a truly transformative set of policy since Gov. Malloy took control,” said Mike Silvestrini, president of Middletown solar installer Greenskies Renewable Energy. “We’ve been fortunate to be rooted in Connecticut and see the market grow around us.”

The ZREC/LREC program garnered 954 first-round proposals in 2012, even though electric utilities Connecticut Light & Power and United Illuminating had funding for 363 projects. The competition for the awards is meant to drive down REC prices and allow utilities to approve more projects.

Connecticut companies like Greenskies have seen their in-state revenues grow, and the program has attracted outside firms like SolarCity from California and Renewable Resources from Scotland. The state now has 83 solar installers.

The six-year program will end up awarding $1 billion through 15-year contracts to winners at a set rate based on the electricity they produce. The second round of winners will be announced in mid-July.

“We’ve seen substantial growth in the industry because of interest in the ZREC program,” said Paul Michaud, executive director of the Hartford trade group Renewable Energy & Efficiency Business Association. “CT, through the ZREC program, is a model for other states.”

Since C-PACE launched in January, the Clean Energy Finance & Investment Authority has received 136 applications from businesses, even though only 44 of Connecticut’s 169 municipalities have signed onto the program.

C-PACE partners business property owners, municipalities, and private financers to pay for renewable energy and energy efficiency improvements at a lower cost than the energy savings. The first approved C-PACE project, the Westport Avenue shopping center in Norwalk, will save the property owners $17,800 in energy costs annually while they pay $17,700 each year for the improvements. The owners essentially receive $100 every year to install solar and improve lighting with no upfront payments.

“C-PACE takes away the biggest roadblock that property owners say they have to start an energy project: upfront costs,” C-PACE Director Jessica Bailey said.

Connecticut’s multiple clean energy programs has led to businesses bundling the incentives. Many of the C-PACE applicants, including the Norwalk shopping center, reduced the amount of financing they needed by including ZRECs or LRECs in proposals.

“It certainly helps the economics of the deal,” Bailey said.

The new clean energy tools approved by the legislature will lead to further bundling.

With submetering, owners of multi-unit buildings charge their tenants individually for electricity and heating based on usage. The new law allows the building owners to pay for renewable energy such as fuel cells and solar arrays by passing those costs onto tenants.

To decrease the cost of those systems, submetering landlords can apply for ZRECs or LRECs. With the help of these programs, the tenants may end up paying less for their electricity than they would for power from the main grid, Michaud said.

“Submetering is a game-changer,” Michaud said. “It allows customers to tap into renewable power that they haven’t had access to before.”

Connecticut’s virtual net metering law allows municipalities, state agencies, and farms to build renewable systems up to three megawatts. Rather than using whatever power is needed onsite and selling the rest back onto the grid at lower prices, the law lets the system owners sell the renewable electricity to up to five other ratepayers in the vicinity, including other farms, municipalities, or businesses critical in emergency situations, like gas stations and grocery stores.

“They can get the benefits from utility-scale renewable energy,” Michaud said.

The virtual net metering law can be pared with the state’s microgrid program, which seeks to create localized power generation for critical facilities that will keep electricity flowing even when the main grid goes down. The $15 million pilot for the microgrid program yielded 36 proposals, and the legislature approved another $30 million for bonding when those pilot funds are expended.

“We are seeing the emergence of real fundamental changes in the electric infrastructure,” said Jessie Stratton, director of policy for the Department of Energy & Environmental Protection. “That huge transmission grid and the large centralized power plants may not be the end all, be all.”

Also helping the clean energy industry create localized sources of power is the property tax exemption for renewable installations. This ensures business owners don’t lose their energy savings through increases on the municipal property tax bill.

CEFIA has a number of other programs designed to build the clean energy industry, especially the residential solar program that provides direct funding for arrays on top of homes.

The industry was worried about the fate of this program after the General Assembly planned to raid $30 million of CEFIA’s funding to balance the state budget.

At the last minute, the General Assembly decided to take $15 million over two years instead of $30 million. The legislature also approved a plan to make CEFIA whole by taking excess funds from the state’s energy efficiency programs to replenish part or all of the $15 million.

CEFIA is confident the net result is its funding levels will remain the same, CEFIA spokesman David Goldberg said.

Eventually, the state wants the clean energy industry to stand on its own without these incentive programs. While policies like submetering, virtual net metering, and even C-PACE can continue, programs like ZRECs and the residential solar incentives will expire, and the state must decide whether to continue with subsidies or let the industry go onto the next stage.

The plan behind the incentive programs is to drive down costs through efficiencies and economies of scale to the point where subsidies are no longer needed.

“Our job is to deliver on our promise,” said Shaun Chapman, SolarCity director of power and electricity markets. “The only way we can drive costs down is by getting out there and doing the work.”

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