The potential benefits of large scale solar continually rears its head in the mind of commercially property owners. Is it worth it? Is it not?
You read a success story now and then and think, maybe I will take that meeting with ABC Solar Co. After the meeting, a financial road map complete with all options (ownership, lease, mixed use) is delivered to you with each outlining your path to the highest returns. Then you start to feel it.
The uncomfortable pressure to move quickly. Feels a little like a bad used car buying experience where the sales person doesn’t want to see you walk off the lot and think things through. This pressured feeling results in many buyers pushing the entire project to the back burner and doing nothing. Is this the best choice?
Well, there is a bit of an inherently designed “gotcha” in the Massachusetts SMART program and some solar customer representatives are better at explaining this than others. With SMART, there is a very good explanation as to why project owners should act with a bit more urgency than with most other projects. Without a doubt, the Massachusetts SMART program is one of the most progressive renewable energy incentive programs in the country. However, there is one pushy little fly in the ointment. We suspect SMART was designed this way to create an incentive to act quickly, but has it missed the mark of this intention?
The SMART program is divided up into eight blocks. These blocks are predefined and based on electric capacity. They decrease in value with block 1 being the highest value block and block 8 being the least valuable. Starting with block 1, each block is filled until all blocks are filled and the program reaches its cap. At this point, the program is officially closed to new projects.
How are blocks filled? Simple- first-come, first served. The fly in the ointment appears when a building owner is initially presented with economics reflecting their project being in block 1 but there is no accompanying explanation with regards to the financial risks of holding off on the application process.
Now, should the owner delay in making a decision, things can get messy. When the owner waits and decides to apply for the project after some time has passed, allowing higher value blocks to fill, they end up with their project placed in a lower value block. This in turn, results in their project being lesser in value than what they had expected.
The solar sales representative knows deep in their heart that the owner will receive the highest return on investment if they act promptly, so they attempt to push them quickly towards making a decision. It is at this point that the property owner begins to feel a bit pressured. Fortunately, the apprehension of being rushed can be avoided with a clear and upfront description of SMART and what the owner should expect based on the project timelines.
At the end of the day, solar installations historically have a very successful track record, both operationally and financially. Installed systems have met their production targets, incentive programs have delivered the expected returns, and manufacturers continue to deliver panels with warranties that are in excess of the projected life of the system – all of which seems too good to be true.
So while no one likes being rushed, solar continues to be a very smart investment to hedge against the continually increasing price of energy. With regards to SMART, understand that your sales representative pushing for your attention may actually be their way of acting in your best interest.
Author: Frank Urro- Frank is a Financial Analyst for NRGTree