FEATURE

Solar Energy for Cold Storage

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any cold storage facility operators have implemented building envelope improvements that deliver substantial energy efficiencies. However, even the most efficient facility still consumes a massive amount of energy. When does it make sense to reduce your company’s vulnerability to rising utility prices by generating power on-site? This article provides an updated look at the most common form of distributed energy generation for cold storage facilities: photovoltaic, commonly referred to as solar or PV. It presents objective guidelines for quickly assessing your PV potential and discusses new risks and rewards that impact project returns.

Feasibility: What is Your PV Potential? Solar is economically viable only under certain conditions. A certified and competent contractor will provide you with detailed engineering, solar production and financial analyses, but you can save time and money by doing your own preliminary assessment of sunlight, savings and space.

Is solar energy an option for your company? Check out this update on the feasibility, risks, and rewards. By Tom Millhoff

approximate the potential savings or “avoided utility cost” of generating energy yourself by taking a summer energy bill and dividing the total dollar amount by the total number of kilowatthours consumed. The result will likely be somewhere between \$.07/kWh and \$.18/kWh – your “savings score.” If your utility has a solar incentive, calculate its \$/kWh value over 20 years and add it to this score. For example a Seattle facility’s monthly energy bill might be \$8,000 over 115,000kWh, or \$.07/kWh. But there’s also a \$.12/kWh solar incentive over 5 years; spreading this over 20 years we get \$.12 x 5/20 = \$.03/kWh incentive. Their savings score is .07+.03 = .10.

Space Bigger projects are better at covering the fixed costs of engineering, development and financing. This is determined by the size of the project, what we call a “space

score.” To find yours, award 1 point if you have 50,000 square feet of unshaded, solar-viable space, and an additional 1/10 point for each incremental 50,000 square feet thereafter. Now multiply your Savings Score and Space Score together. If the total is less than 0.50, put this article down and get back to work – solar probably can’t save you money. If your score is more than 0.85, call your CFO… you have outstanding PV potential! And if you are in the middle, read on.

Comparing Cases With great sunlight, expensive energy and plenty of space, Giumarra Vineyards in Bakersfield, Calif., scores a trifecta at 1.1. A larger project in Seattle benefits from a generous rebate (paid at \$.12/kWh for 5 of 20 years), but cannot overcome lack of sunlight and inexpensive energy… the project scores .41 and won’t be compelling:

Sunlight For PV, sunnier is better. Using this map, (detail at www.nrel.gov/gis/solar. html ) determine your solar resource as measured by the kilowatt hours per square meter per day. For example Bakersfield receives 5.8 kWh/m2/day, Seattle gets 3.4. Call this your “sunlight score.”

Annual average solar resource data are shown for a tilt=latitude collector. The data for Hawaii and the 48 contiguous states are a 10 km satellite modeled dataset (SUNY/NREL, 2007) representing data from 1998-2005. The data for Alaska are a 40 km dataset produced by the Climatological Solar Radiation Model (NREL, 2003).

Savings

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Author: Billy Roberts - October 20, 2008

2. 2 >

3. 0

4. 0

5. 0

6. 0

<6 .8

With any distributed generation project, the goal is to generate energy for less than what the utility charges. You can

kWh/m2/Day

This map was produced by the National Renewable Energy Laboratory for the U.S. Department of Energy.

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Bakersfield: Sunlight (5.9) x Savings (\$.19) x Space (1) = 1.1 Seattle: Sunlight (3.4) x Savings (\$.07 cost + \$.12 rebate x 5/20yrs) x Space (1.2) = .41

Of course, incentives, policies, energy pricing and weather vary dramatically across regions. If your math suggests solar may be economical, or if you are aware of other special circumstances that may affect your score, we recommend you engage a firm with solar contracting, engineering and financing experience to assist you with a more detailed feasibility analysis.

What’s New: Risks and Rewards We can best appreciate what’s new in solar by understanding what remains unchanged.

PV Technology: Thanks to massive investment in global production capacity, flatpanel polycrystalline photovoltaic technology has won the priceperformance war, trumping sexier but costlier technologies like Solyndra. This is a mature (some PV panels have been operating for more than 40 years) and stable technology, with modest productivity gains over the last few years.

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Price Flattening Overproduction has forced panel prices down dramatically. Retail commercial system costs have plummeted from about \$8/watt in 2005 to less than \$4/watt today. Surviving panel manufacturers are reacting to the resulting margin erosion by constraining output. As supply aligns with demand, we anticipate instances of PV component price increases into the future. The marketplace agrees there is no good rationale to wait for new innovation and panel price declines: Solar attracted more than half of all clean energy investments in the G-20 countries last year, and the vast majority of commercial projects used flat panel PV technology. So, what’s new?

Mounting Solutions Independent refrigerated warehouse operators seeking to preserve roof integrity are attracted to a new class of inexpensive, light weight, nonpenetrating solar roof mount racking. Agricultural producers with on-site cold storage energy loads have more acreage and thus often opt for groundmounted single-axis tracking solutions, which follow the sun’s rays and thus generate 20 to 25 percent more energy per panel. Facilities with large staffs and parking lots are increasingly opting for

HelioPower’s 500kW tracker-mounted solution powers Giumarra Vineyards cold storage.

shade structures, which provide both functional shade and power.

Financing and Tax Incentives The optimal financing vehicle will again depend on your requirements and local conditions. In some municipalities, Property Assessed Clean Energy (PACE) financing is or will soon be available; PACE allows a tax district to issue a bond which finances up-front costs of solar and energy retrofits. The bond is repaid by annual assessments on that property’s tax bill, thus deferring your firm’s capital costs. Because the loan is attached to the property (not a company), credit qualification is easier. Solar projects completed by December 2013 are eligible for a 30 percent tax credit through 2016. In 2012, the 50 percent bonus depreciation for qualifying solar projects sunsets. Both of which can be carried backward or forward. For those cold storage operators who lack the tax appetite to monetize these tax incentives – or who seek to preserve their capital budgets - there is a wide and growing range of thirdparty financiers and financing vehicles attracted by PV’s stable, predictable returns. Under a Power Purchase Agreement (PPA), a third party can bear the cost of designing, developing, financing, building, owning and operating a solar facility on your property, and your firm buys the energy at a predetermined price from that system owner. This approach works well for credit-worthy firms seeking predictably priced energy and no operational responsibility. 21

Financing costs are often lower under a “True Lease,” whereby the lessor claims the tax benefits of ownership and is permitted to depreciate the asset over its lifetime and claim tax credits. The lessee can deduct the lease payments as a capital expense from ordinary income taxes. Unlike a PPA, the lease payments are required regardless of system performance, but performance risk is easily mitigated by engaging a contracting firm that provides operations and maintenance services. Cold storage operators who cater to storage of agricultural products will find particularly attractive subsidized True Lease rates. The key conclusion is that financial engineering is just as important as physical engineering for solar. If you are considering a financed solution, choose a solar contractor with a dedicated financing division.

Energy Analytics Sophisticated energy developers are creating value for their clients by

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wrapping solar projects in broader energy analytic engagements. Because of their mission-critical and predictable energy load profiles, cold storage facilities are well suited to such approaches. For example, where time-of-use (TOU) electricity pricing is available, it is possible to combine solar with tariff-switching strategies and “arbitrage” utility pricing by overproducing electricity to generate bill credits at peak retail rates. These credits are then used to buy inexpensive off-peak energy, thus using the utility grid as a free battery with a built-in pricing advantage to the solar facility owner. Demand response and emerging peak event pricing programs present similar opportunities for savings.

risk in geographies that face current or future emissions regulations and fines. Renewable Energy Certificates (RECs) have substantial current or future market value in some states, and firms with strong sustainability missions will find obvious marketing advantages. Green is good, but in the end I recommend you let economics guide your solar decision.

Green Is Good

Of course there are also sustainability benefits to PV project deployment. California solar owners will soon have the potential to generate “cap & trade” offsets, and solar will mitigate

Tom Millhoff (TMillhoff@HelioPower. com or +1 775 830 0448) is the Vice President of Business Development for HelioPower, Inc. an integrated energy solutions firm.

Additional Resources •

The Open PV Project at http://openpv.nrel. gov/ provides real-time status of the solar photovoltaic market in the United States. The National Renewable Energy Laboratory (http://www.nrel.gov/ is a federal laboratory dedicated to the research, development, commercialization and deployment of renewable energy and energy efficiency technologies.

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A real look at solar for cold storage

This article helps facility managers determine if they will receive a valuable ROI from installing a solar system. The included map helps k...

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