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More Companies are investing in Solar Projects

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167487036 SIZED (1)We are seeing more and more companies making investments is solar lately.  One of the reasons is the price of solar panels have decreased over the last few years.  Even through federal tax credits have been reduced or eliminated, there are several states that offer tax credits that makes it an great investment with a higher payback and better return on investment.  Wal-Mart recently made an announcement to drive either production or procurement of renewable energy annually to reflect a 600% increase in 2010 levels.  Another major commitment the company made was to reduce kWh per square foot or energy intensity required to power Wal-Mart’s buildings by 20% compared to 2010 levels.  These two commitments will avoid 9 million metric tons of greenhouse gas emissions.  Wal-Mart projects to have a decrease in GHG even with major growth in stores and sales if projections are accurate.  Wal-Mart hopes to install solar on at least 1,000 facility rooftops by 2020.  Currently they have 200 solar projects in the US.

MGM Resorts has plans for installing a large rooftop solar unit in Las Vegas.  The 20,000 panel, 6.2 MW installation will be MGM’s first solar project in the US.  At peak, the solar unit is projected to produce 20% of Mandalay Bay’s power.  This will reduce in a lower demand on the grid.  Mandalay Bay will buy the energy created by the solar unit though a power purchase agreement.  A Power Purchase Agreement is a financial arrangement in which a third-party developer owns, operates, and maintains the solar system, and a host customer agrees to site the system on its roof or elsewhere on its property and purchases the system’s electric output from the solar services provider (SPPA)  for a predetermined period.  This financial arrangement allows the host customer to receive stable, and sometimes lower cost electricity, while the solar services provider or another party acquires valuable financial benefits such as tax credits and income generated from the sale of electricity to the host customer.

With this business model, the host customer buys the services produced by the PV system rather than the PV system itself.  This framework is referred to as the “solar services” model, and the developers who offer SPPAs are known as solar services providers.  SPPA arrangements enable the host customer to avoid many of the traditional barriers to adoption for organizations looking to install solar systems: high up-front capital costs; system performance risk; and complex design and permitting processes.  In addition, SPPA arrangements can be cash flow positive for the host customer from the day the system is commissioned. We are seeing the business model being implemented for a lot of the Resort and Casinos in Las Vegas.  UPS has decided on a different model, instead of renting the roofs to a 3rd party in exchange for lower rates the company has decided to own and operate the solar units.  In 2012 we saw a decline in prices for solar panels and equipment.  UPS continues to replicate the own and operate business model.  They have several facilities in the US that generates a total of 2.6MW in the US.  This can produce more than 3.5 million kWh annually.  As prices in solar units continue to decrease we should continue to see more companies implement the own and operate model verses the model of renting rooftops to 3rd parties in exchange for lower rates.  Is your company investing in renewable projects, if the answer is no – now is a good time to investigate the options because the price is right.

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