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October 31, 2019

When Tax Dollars and Investor Financing Are Lost on Solar Power

The moment we see a scummy pool, dirty teeth, or stained clothes – we clean them immediately. These visual cues demand our attention. And we intuitively understand the importance of regular washing and “servicing.”

With solar photovoltaic (PV) installations, however, most problems are invisible, and thus, remain unaddressed. That’s because solar panels are 100% silent – whether they’re working or not. And the only indication that something might be wrong comes in the form of higher-than-average electricity bills.

But that’s assuming anyone is paying attention.

At Aeterna Energy, we’ve seen many large governmental PV systems that have underperformed for years – often with no one accountable for the lost savings that continue to accumulate month after month. In fact, federal, state, and municipal agencies frequently lose millions of dollars from their solar investments, simply due to neglect. This means blown budgets and a non-existent, or even negative, ROI.

And rarely are these losses contained to the governmental organizations themselves. Many of the investors who help finance these projects also forfeit lucrative returns.

In this article, we’ll explore how this happens, who is ultimately responsible, and what steps can be used to safeguard these solar savings.

Why Solar PV Systems Don’t Always Work

Solar PV is one of the most resilient energy generation technologies in the world. But like any technology, it still needs regular servicing. Even something as simple as dust buildup can reduce a system’s power output by up to 20%.

And that’s just dirt.

When you factor in corrosion, shoddy workmanship, and normal wear and tear, performance suffers even more. According to a Department of Energy survey of large-scale PV installations on governmental buildings, the above problems can easily lead to a 15-20% reduction in total solar power generation.

And these performance issues aren’t limited to large PV installations either.

We’ve also seen many smaller government agencies forfeit $40,000+ in potential savings in a single year due to neglect. Just imagine how much larger those losses become if problems continue to fester year after year:

  • Under the best case scenario, the payback periods of these investments become longer, with many projects taking 10 to 15 years to break even instead of the originally projected 6 to 7 years.
  • Under the worst case scenario, the ROI can actually be negative. In effect, the solar installation represents a net loss instead of net savings. Worse still, none of the environmental benefits materialize if solar-enabled governmental buildings must increasingly rely on grid electricity to power their operations.

Fortunately, the fix couldn’t be simpler. Regular servicing, cleaning, and the occasional repair is all that’s needed to bring those solar savings back to where they should be.

But who ultimately is responsible for this intervention?

Government Agencies as Solar Watchdogs

Expecting municipal, state, or federal decision-makers to intervene seems reasonable. After all, they’re the ones who commission the solar installations. And they’re also responsible for paying each month’s utility bill.

But here’s one of the great ironies. 

The larger the agency, the less likely it is that any individual person is accountable for those lost savings. It certainly isn’t anyone in the billing department. With thousands of invoices to manage every month, it’s far too easy for outlier “utility bill” spending to go unnoticed.

You’d think that gentle reminders would help. Once alerted of the issue, surely someone will intervene, right?

But sadly, this usually isn’t the case. 

Most accounting departments have zero idea what their agencies’ monthly solar savings should be – nor do they receive PV system monitoring reports that allow them to track those savings over time. In fact, there’s often no mechanism to determine whether their agencies’ solar panels are working at all.

Moreover, the typical bureaucrat doesn’t have a vested interest in saving his or her department more money. Again, this is particularly true when working for larger agencies with sizable budgets. Even with constant reminders from solar experts (like Aeterna Energy), moving the needle is very difficult. 

Local Citizens as Solar Watchdogs

Because most governmental solar projects are partially financed with public funds, taxpayers certainly have a vested interest in seeing their money spent wisely – especially when doing so provides for cheaper power, lower taxes, and cleaner air. 

But it’s unreasonable to expect them to closely monitor the PV systems they help finance. For starters, most citizens aren’t aware of solar-related performance issues at the governmental level. And even when armed with sufficient knowledge, they lack the agency to intervene.

However, there is one final group that can and should get involved – namely investors. 

Investors as Solar Watchdogs

Although most governmental solar projects benefit from public tax dollars, there are also investment groups that help finance the power purchase agreements and solar leases that make these installations possible. And these stakeholders expect to see returns.

But as an investor:

  • You likely don’t receive solar monitoring reports for the projects you finance. This should probably change moving forward.
  • You’re also unlikely to see any of the monthly utility bills that get paid. This should probably change as well.

However, you do see your dividends diminish over time when one of the solar projects in your portfolio starts to underperform. And those losses should act as a catalyst that prompts you to action. If you’re not seeing the returns you were expecting, this means the PV systems you helped finance aren’t delivering the savings that were promised.

And at that point, you basically have 2 choices:

  • Cut your losses and walk away.
  • As the investor, demand that the government agency in question take a closer look at the solar PV system you helped finance. Only then can the underlying problem be identified and corrected. Usually the agency that has installed solar under a PPA or lease has a “set payment structure.” If the system is underperforming, it isn’t their problem. The 3rd party administrator for the investment group is responsible only to the investors to produce the best possible generation and savings dividends. The 3rd party administrators are in a trust situation with the solar  investment groups.

Let Us Help Protect the ROI of Your Clean Power Investment

Solar is a fantastic technology that can deliver substantial savings for all government agencies, handsome returns for investors, and lower public cost for its citizens. And by reducing reliance on dirty fossil fuel, these clean power investments also benefit future generations as well.

However, these returns are greatly diminished if easily correctable problems go ignored. And thus, all stakeholders theoretically have a vested interest in identifying and fixing any issues that might negatively impact PV system output. But more than any other stakeholder, investors have the means, influence, and incentive to ensure that solar performance issues are corrected as soon as possible.

To learn how Aeterna Energy can help you reclaim those lost savings and extract the most value from your clean power investment, schedule a free consultation with us today.

Book a Commercial Energy Analysis Today!

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