Navigating Solar Options for Businesses

Business owners in Massachusetts can access solar energy, and depending on how the deal is structured, they can save on their electric bills and benefit from tax incentives and credits. Under the Green Communities Act of 2008, the Massachusetts Legislature permitted each distribution company to construct, own and operate up to 50 megawatts of solar energy. This legislative provision opened the door for businesses to create partnerships with electrical distribution companies, leveraging the opportunity to further reduce costs.

Now, energy brokers and their subcontractors make up a large portion of the selling and arranging of solar contracts. Numerous state agencies are involved. The Massachusetts Department of Environmental Protection, in conjunction with the Massachusetts Clean Energy Center, issued guidelines to assist with the siting of solar energy systems; the Clean Energy Center’s website is especially helpful. The Department of Energy Resources also plays an important role in the siting of solar projects, especially those participating in the SMART solar incentive program. In addition, the Commonwealth operates a renewable energy trust fund providing up to $10 million statewide to support renewable energy projects, including solar.

Currently, business owners can utilize passive solar, which is when a building is designed to collect, store and distribute solar energy as heat, or solar produced by photovoltaic modules, which are arrays of cells containing semiconductor materials that, with the help of an inverter, convert solar radiation into electricity. The photovoltaic modules are usually in the form of building-mounted roof panels or ground-mounted solar arrays or canopies (the “Solar Energy Systems”).

There are three main types of ownership and delivery of Solar Energy Systems: (1) direct ownership, where the customer owns the land and the Solar Energy System and therefore benefits from any tax incentives or credits; (2) third-party ownership, which is either through a lease or a Power Purchase Agreement (“PPA”) – with this type of ownership, the third party receives the benefits from any tax incentives or credits; and (3) a community shared solar option that allows customers to support solar energy without installing panels. With this option, the customer pays a subscription fee for the community-shared option to receive net metering or solar credits from a large off-site Solar Energy System.

The following should be considered when negotiating a solar lease or agreement:

• Compliance with building codes, zoning, and local rules
• The length of the lease and the effect on the future sale of the property
• Easement vs. lease
• The impact of future changes in technology
• The business viability of the third-party provider
• Indemnification
• Insurance
• The amount of fees being paid to each party
• Provisions for price increases
• Tax incentives and credits vs. the cost of ownership
• The cost of moving the solar panels if necessary
• Decommissioning time and cost
• Termination provisions

The state has done a great job making solar energy available. The cost savings and environmental stewardship make it an attractive option.