Distributed Renewable Energy Operating Impacts and Valuation Study

Developing a Winning Business Case for Solar DE Deployment
system prices, for example, may be too high on a purely economic basis until they reach a
tipping point in terms of quantity which, in turn, drives costs lower. That tipping point may be
achieved either through subsidies or market pull or a combination of both.
A winning business case needs to build upon broad scale solar energy deployment and market
maturity to be successful. Achieving this success necessarily involves taking into account value
factors beyond strict economics. The winning business case involves multiple benefits.
6.6.1 Customer Pull and Perception
The perceived value of solar DE can be as high, or higher, than the financial. As larger segments
of the public become attuned to issues in the environment their willingness to pay a premium
expands. This has been evidenced in multiple areas from green power premiums to hybrid
vehicles.
Customers may also exhibit willingness for engagement in solar installations for reasons beyond
the financial, since it directly impacts one of their largest investments: their homes, their
businesses, or both. They must devote roof space, be accepting of the visual change in
appearance (especially for residences), and be willing to take on an additional technology which
over time requires servicing and repair. 4 In some areas, homes with solar DE may also have a
higher value, either perceived or real. Empirical results from solar communities in California
support this premise. Some developers are working on “net zero” communities which they hope
will draw additional buyers willing to pay a upfront premium for the offsetting benefit of lower
utility bills into the future, as well as supporting a more sustainable environmental lifestyle.
Similarly, in some communities financial institutions have offered energy efficient home buyers
increased borrowing capacity based on the theory that reduced energy bills allow for better cash
flow. There still needs to be additional work done in this regard, as well as in working with
appraisers to capture the value of the solar system in the assessment of home prices.
6.6.2 Carbon Credit
There remains great uncertainty as to the outcome in assigning value to carbon, with an
enormous disparity in assumptions about carbon prices and the method for capturing the value.
Regardless of price, the assumption is that carbon will be monetized either through a carbon tax
or a cap-and-trade program. Moving beyond the theoretical, there are unanswered questions as to
who will capture the financial benefit: the customer (business or end user), utility, or a third party
owner of the solar DE system.
Calculating the value of carbon will be important economic factor in the later years of the Study
as the number of solar DE systems grows and begins to impact future generation planning. As
can be seen in other sections of the Report, solar value is captured in reduced line losses, avoided
system expansion and reduced purchases of thermal energy. While it may be the utility capturing
the value of the reduced losses and avoided system costs and passing it through to the customers,
it may be the customers themselves picking up the carbon reduction credits.
In today’s market, the value of carbon reduction through solar installations is still qualitative and
difficult to capture, however, it is not a static situation. Currently, there is uncertainty in
4 Some solar providers such as Sun Edison are offering turnkey, maintenance-included options.
Distributed Renewable Energy Operating Impacts & Valuation Study R. W. Beck, Inc. 6-19