Navigant Research Blog

Solar Tax Credit Extension Enables Growth in Commercial Sector

— January 12, 2016

clean energy backgroundDexter Gauntlett also contributed to this post.

The 30% solar Investment Tax Credit (ITC) has officially been extended through 2021. The solar industry is now expected to continue its steady growth over the next 6 years and avoid the worst of the so-called 2017 cliff. Before the extension, the commercial ITC was scheduled to drop to 10% after December 31, 2016 and result in a sharp decrease in installed solar capacity in 2017 (shown in the chart at left below).

Under the recent extension, projects that start construction by 2019 will receive the current 30% ITC, while projects that begin construction in 2020 and 2021 will receive 26% and 22%, respectively. All projects must be completed by 2024 to obtain these elevated ITC rates. Navigant Research recently revised our solar capacity forecast to reflect the ITC extension, reducing the 2017 cliff by increasing the installed solar capacity from 2017 to 2022.

Expected Capacity Before ITC Extension

Andrea - Before ITC Chart

(Source: Navigant)

Expected Capacity After ITC Extension

Andrea - After ITC Chart

(Source: Navigant)
Note: Capacity is forecast in MW DC for these charts.

The extension of the commercial ITC has opened a new window of opportunity for commercial building owners over the next 6 years. Because of this, it is especially important to provide resources for the commercial sector to facilitate the decision to go solar. Navigant Consulting has been working with the U.S. Department of Energy (DOE) Better Buildings Alliance (BBA) for 2 years to promote solar PV for commercial buildings.

In 2015, Navigant focused on two commercial sectors identified as having untapped potential for commercial solar development: healthcare and hospitality. We also focused on leased buildings across all commercial sectors, which face particular barriers to installing solar PV.

Navigant interviewed solar developers, trade organizations, hotel groups, hospitals, building owners, and building tenants to better understand the benefits and barriers, technical and financial considerations, and strategies for installing solar PV systems in these sectors. We discussed some of our findings last year, and the following guides were recently published by the BBA:

In addition to these guides, the BBA published 10 case studies highlighting successful solar PV projects completed for healthcare facilities, hospitality businesses, and building owners that lease their buildings. The case studies include roof, carport, and ground-mounted systems ranging in size from 30 kW to a 5.5 MW portfolio of projects across multiple states. These case studies are all available on the Renewables Integration page of the BBA website. Stay tuned for additional BBA solar PV resources in 2016.


California’s Role in the Rapidly Expanding Community Solar Market

— October 28, 2015

Community solar (also known as shared solar) has become a hot topic across the United States over the last couple of years as residences and businesses seek alternatives to conventional energy sources. According to a National Renewable Energy Laboratory (NREL) report released in April, about half of all homes and businesses in the United States cannot host a PV system of adequate size on their property. The community solar market has the potential to increase PV deployment by 5.5 GW-11 GW from 2015 to 2020.

Today, 13 states and the District of Columbia have shared renewables policies in place, and many other states are considering programs. Utilities across the country are embracing community solar, viewing it as an opportunity to retain their customers and compete against the burgeoning self-generation solar PV market by providing a utility 100% solar option. Navigant colleague Richelle Elberg discussed one such project in a blog earlier this month detailing how Tucson Electric Power’s Residential Solar Program is a win-win for solar proponents and utilities.  

Navigant Consulting is currently collaborating on the Community Solar Value Project, one of 15 projects chosen for funding in 2015 by the U.S. Department of Energy’s SunShot Initiative under its Solar Market Pathways Program. The project aims to increase the scale, reach, and value of utility-based community solar programs through project design and the integration of demand response and storage.

California’s Role

California is one of the four states paving the way. In late 2013, the California state legislature signed into law Senate Bill (SB) 43, the Green Tariff Shared Renewables (GTSR) Program bill. The GTSR Program is intended to expand access to eligible renewable energy resources to all ratepayers who can’t access the benefits of onsite generation and to also create a mechanism where customers can meet their electricity needs from eligible renewable energy resources. SB 43 set a statewide program cap of 600 MW as well as utility caps. It required California’s investor owned utilities (IOUs) to propose a voluntary shared renewables program to the California Public Utilities Commission.

SB 43 Utility Program Caps

Andrea Blog Table

(Source: Navigant Consulting)

Decision 15-01-051, published on January 29, 2015, established the steps for California IOUs to implement the GTSR Program, including outlining the two program components:

  • Green Tariff (GT): Under a GT, a customer pays the difference between their current generation charge and a charge that reflects the cost of procuring 50%-100% of solar generation for their electric needs.
  • Enhanced Community Renewables (ECR): Under an ECR, a customer agrees to purchase a share of a local solar project directly from a solar developer in exchange for a credit from their utility for the customer’s avoided generation procurement and for their share of the benefit of the solar development.

The rate design approved by this decision ensures that utility customers not participating in the GTSR Program do not bear any of the costs of the program, an important point of discussion at utilities developing shared solar programs across the country. All Renewable Energy Certificates (RECs) from GTSR projects are transferred to the IOUs for retirement on behalf of participating customers. Many community solar programs currently do not retire the RECs on the customer’s behalf, which may become a point of greater discussion in the future.

Projects are to be located within the IOU service territory and within reasonable proximity to participants of the GTSR Program. GTSR projects should be sized between 500 kW and 20 MW, with smaller projects considered at a later program phase.

Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric are currently in the process of rolling out their programs. Once launched, the programs will be open to new subscribers until January 1, 2019, or until the individual utility capacity caps are met.


Paving the Road to Zero Net Energy Buildings

— June 18, 2015

Meritage Homes is currently constructing one of the first zero net energy (ZNE) communities in Fontana, California, with completion of six of the 20 homes expected this July. This accomplishment signifies that California is moving toward the California Energy Commission’s goal of achieving ZNE buildings for all new residential and commercial construction by 2020 and 2030, respectively. As discussed in previous blogs, state policy is really important in driving ZNE, and California’s ambitious goal aligns with the U.S. Department of Energy (DOE) Net-Zero Energy Commercial Building Initiative.

Commercial ZNE Buildings in California

According to the New Building Institute’s (NBI) Getting to Zero database, over 60 ZNE commercial projects have been completed in California to date, and California has produced almost one-third of the nation’s ZNE buildings. Last month, NBI announced the California ZNE Watchlist, the first state list for tracking ZNE commercial buildings.

By 2025, Navigant Research estimates that California’s commercial square footage of new ZNE projects will reach 23,704,000 SF, or 7% of the commercial building stock, representing a compound annual growth rate (CAGR) of 49% from 2014. Based on Navigant Research’s Zero Energy Buildings report, the number of ZNE buildings is expected to grow, while square footage of individual ZNE projects is anticipated to decrease between 2014 and 2025, due to the increasing relative ease of reaching ZNE status in smaller buildings in the next decade.

Commercial Zero Energy Buildings, California: 2014-2025

ZEB chart

(Source: Navigant Research)

California Market Perception of ZNE and Integrated Design Concepts

On behalf of the California Public Utilities Commission (CPUC) and California investor-owned utilities (IOUs), Navigant Consulting recently conducted the Measure, Application, Segment, Industry: Integrated Design for New Construction Buildings study. It reports on the results of a survey of California Architecture, Engineering, and Construction (AEC) firms in order to understand how the current market perceives and understands ZNE and integrated design (ID) concepts. The survey revealed the following:

  • Although defined at the national and state levels, no market consensus exists as to what constitutes a ZNE building or the implementation of ID.
  • AEC firms are aware of energy efficiency and renewable energy IOU programs, but their depth of understanding regarding options for offsetting consumption via renewable power is limited.
  • AEC firms that operate in California may not be well-informed as to ZNE and ID resources provided by IOU programs.
  • Rebates are very well-known by AEC firms, but the degree to which they drive ZNE adoption is not clear.

From previous studies, California knows that ZNE is technically feasible, but a big effort is still needed to advance the market toward 2020 and 2030 goals. California’s aggressive ZNE target requires equipment engineering, building design, construction, and building operation vigilance. The market is in the innovator stage of adoption, so IOUs must continue to pursue ZNE pilot projects with incentives and offer ZNE design assistance and concept training to AEC firms. Building developers  need to continue to explore pathways to ZNE buildings beyond code energy efficiency levels, emphasizing measures expected for inclusion in Title 24 2016 and Title 24 2019. These things are already beginning to happen; California must keep pushing ahead.


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