Eos Energy Solutions Guidance for PA Solar Rebates

In July 2008, the Pennsylvania Legislature passed, and Governor Rendell signed, the Pennsylvania Alternative Energy Investment Act, providing $650 million in funding authorization and tax credits for alternative energy and conservation.

The $650 million authorization includes two set-asides for solar; $100 million for supporting the installation of solar energy technology and another $80 million for solar-related alternative energy production projects. Neither pool of funding is available for allocation — yet.

The $100 million is being administered by the PA DEP. The Act provides the administrators with much latitude in determining funding levels and eligibility, and no final regulations have been published.

We believe the following is appropriate interim guidance, but it all remains subject to changes in the final regulations:

1) Eligible Applicants
Homeowners and small businesses are likely to be the only eligible applicants for the $100 million of solar grants being administered by the PA DEP, where "small business" is defined as having less than 100 employees.

It does not appear, at this time, that municipalities, school districts, non-profits, nor larger for-profit entities will be eligible for this initial round of $100 million in rebates.

The 2008 Pennsylvania Alternative Energy Investment Act also allocates an additional $80 million to solar industry development. The $80 is being administered by the Commonwealth Finance Agency. As of January 2009, that agency has not yet provided any guidance on draft regulations. Those funds may or may not be accessible for grants by entities excluded from the $100 million rebate program. The status of those funds can be checked at http://www.newpa.com/index.aspx

2) Rebate levels
The rebates are capped, by statute, at 35% of system cost - but the actual rebates are likely to be less than 35% of total costs for most systems. The initial rebate levels will probably be in the $2.00 to $2.50 per watt range. These rebate levels would be less than the starting rebate levels of the successful California and New Jersey programs, but greater than the current (2009) California and New Jersey rebate levels. At $2.00 to $2.50 per watt, solar power investments produce a healthy ROI, when combined with the federal solar investment tax credit, and even a modest SREC value.

For commercial systems, the rebate levels are likely to be graduated, such that larger systems get a smaller effective rebate amount on a per watt basis. For example, the first 10 kW of a 30 kW commercial system may subsidized at a level of $2.50/watt while the remaining 20 kW may be subsidized at a level of $2.00 per watt (yielding an effective rebate level of $2.17).

These draft rebate levels are less than the $3.00/watt assumptions used by Eos in some customer pro formas, prior to the fall of 2008. However, over the past six months, solar modules prices have fallen by an amount approximately equal to the decrease in projected rebate level. If you have a contract with Eos that is pending final rebates, we will be sending a revised final pricing analysis once the final regulations are promulgated.

3) System size caps
Residential systems eligible for rebates are likely to be capped at 10 kW; the commercial system size cap may be as high as 200 kW.

4) System efficiency requirements
The PA regulations are likely to require the rebate money go only to efficient solar power systems. For example, if an array is mounted on a sloped roof, it may have to be oriented to within 45 degrees of true south to be eligible for a rebate. Also, all arrays may be required to have only a minimal shading factor — perhaps as stringent at a 15% maximum shading factor.

Some "rebate-pending" systems designed by Eos prior to Fall 2008 do not meet one or more of these efficiency standards. If you have a contract with Eos that is pending final rebates, we will be sending a revised analysis once the final regulations are promulgated.

The website of the Office of Energy and Technology Deployment of the PA DEP may contain more specific regulation details as they become available.

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