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Author: Kurt Blum

Is it Time to Safe Harbor?

In this week’s edition of Kinect with Kurt, we’re going to depart from our normally tech-focused subjects to talk about Safe Harboring. If you or your customers have been putting off procurement until after the election, there are now just a few short weeks to preserve eligibility for the 26% federal income tax credit (ITC). On January 1, 2021, the ITC drops to 22%, with the potential to leave large sums of money on the table.  

Consult Your CPA or Tax Attorney

This may go without saying, but this article is for informative purposes only and is in no way meant to be construed as or replace sound legal advice. While we do our research and try to provide the most accurate and up to date information, we are not tax attorneys or even tax experts.  Every business and project is unique, so please consult your accountant or tax attorney before making any decisions related to safe harboring solar equipment. 

Safe Harbor: What is it?

If you’re not familiar with safe harboring, the basics are pretty simple. To receive the current 26% ITC for commercial solar projects, the taxpayer has two options. The first is to begin construction before December 31, 2020, by performing physical work of a significant nature and maintaining continuous work without interruption, from commencement to commissioning. This is often called the physical work test. The second option is to begin construction by incurring at least 5% of the project’s ITC eligible costs in 2020, often referred to as the 5% of cost test, or just 5% test. Each option comes with its own set of pros and cons, but the 5% test is usually more practical for solar installers and the most commonly used.  

The Physical Work Test

The physical work test requires the commencement of “physical work of a significant nature” and continuous work on the project until commissioning. Preliminary work such as design, permitting, or securing funding does not qualify as physical work. Perhaps more importantly, work involving assets already held in inventory does not qualify as significant work either. The “customized equipment” rule, though, allows for custom-built components, that are “outside the manufacturer’s specs”, to be used for safe harbor as the beginning or continuity of work. In theory, this could include custom components like racking or transformers. The physical work test is by far, the more challenging method and requires more documentation, time, and legal expense to utilize effectively. IRS rules for the physical work test are vague, and there are no specific standards for what qualifies as the beginning of physical work or the continuation of that work. Installing racking, electrical equipment, or inverters will most likely qualify as physical work. Still, the onus to prove the start and continuation of work lies with the party attempting to claim the ITC. This route also requires more careful planning and foresight. Pictures of your ground-breaking ceremony on New Year’s Eve probably won’t meet IRS standards. 

The 5 Percent Test

The 5% test is generally considered to be more straightforward and requires that the project owner incurs at least 5% of the total ITC eligible project cost on or before December 31, 2020. Because of the price relative to total ITC eligible project cost, purchasing inverters and/or modules is a common and less complicated way to meet the 5% benchmark. There are several essential steps to follow if you go this route:

  1. The taxpayer can incur the cost of safe harbor property that is equal to or greater than 5% of the total ITC eligible project cost. Under this scenario, the taxpayer doesn’t necessarily need to have paid for 100% of the safe harbor property before 2021 as long as they have been transferred ownership title of the property on or before 12/31/2020.
  2. If the taxpayer is unable to receive ownership title on or before 12/31/2020, then the taxpayer can still be treated as having incurred the cost under what is known as the 3 ½ month rule.  Under the 3 ½ month rule, the taxpayer pays for the safe harbor property in full on or before 12/31/2020 and then has the reasonable expectation of taking delivery of the safe harbor property within 3 ½ months of making said payment.

While the 5% test route is generally more straightforward and preferred by market participants, there are some important considerations and potential drawbacks. All contracts and other documentation need to be legally binding under federal and state law where the project is being installed. Installers need to carefully maintain records such as receipts and equipment serial numbers. Project costs can increase due to overruns so purchasing equipment costing more than 5% is a wise decision. While 5% is a relatively small portion of the project’s total cost, that number can run into the millions of dollars and tie up substantial capital for small and medium-sized companies. In a rapidly evolving solar industry, grandfathered equipment that helps you meet your 5% threshold may become outdated by the time the project is commissioned. 

How Kinect Can Help

No matter your safe harbor needs, Kinect Solar is here to help. We have modules, inverters, and module-level power electronics (MLPE) in stock that all qualify for safe harbor. Our expert account managers can walk you through the process, arrange easy payment, and provide you with all the documentation required for safe harboring. Kinect also offers procurement services for major projects. Using our relationships with leading manufacturers, we can coordinate product delivery to meet safe harbor needs and help ensure the financial success of even the largest projects.  

If you’d like to take advantage of the 26% ITC but can’t take delivery within 3 ½ months, our sister company SunLogix Global is here to help with a multitude of logistics and warehousing options. 

Parting Thoughts

With nearly a year of pent-up demand and the impending 4% drop in the ITC, the solar industry is poised for a strong finish to 2020 and a robust 2021.  However, the solar coaster will no doubt continue its up and down trajectory. We’ve seen the attempted repeal of tariff exemptions for bifacial modules.  An explosion at the GCL silicone factory threatened the supply chain. Glass shortages are causing price increases and production delays across the industry. And that doesn’t include the global pandemic that’s impacted everyone’s business. That was just this year.  

With all that in mind, now may be the ideal time to safe harbor and lock in ITCs for those projects in your near-term pipeline.  

Until next time, thanks for reading and you stay sunny planet earth.

Everything you need to know about bifacial modules

(Part I) – 5 Minute Read

In this week’s Solar Coaster/Election Coaster edition of Kinect with Kurt, we’re going to examine bifacial modules.  Unless you’ve been doing nothing but binge-watching Cobra Kai for the past few weeks (and who could blame you for that), you probably heard that the bifacial tariff exemption was revoked by President Trump. Enter Judge Katzmann of the US Court of International Trade, who blocked that proclamation and issued a 2-week restraining order against the president.  Who knew that was even a thing?  So, bifacial modules will remain exempt from tariffs, for a little while longer at least.  Mercifully, this blog is not about tariffs or politics, so let’s dig in.

A Brief and Incomplete History of Bifacial Modules

Like many great inventions that profoundly impact our lives including microchips, barcodes, and big cars with tail fins, bifacial solar cells can trace their history back to the 1950s.  The first solar cell developed by Bell labs and unveiled to the public in 1954 was bifacial – an n-type bifacial, interdigitated back contact solar cell, in case you were wondering. Bifacial modules have been with us ever since in one capacity or another.  Russian satellites implemented bifacial technology in the 70s.  The Swiss used bifacial modules beginning in the 90s to serve the dual purpose of energy production and noise barriers along roadways. And who could forget the Sanyo HIT Double bifacial modules from the aughts? Pretty impressive panels at a massive 200 watts circa 2008, and that was before backside gains!  In the past few years, with the tariff exemption and decreasing manufacturing costs fueling their popularity, bifacial modules have come into their own. Large developers have been scooping them up for utility scale projects to take advantage of increased energy yield and potentially lower levelized cost of energy (LCOE).  Meanwhile manufacturers and 3rd party organizations like NREL have been trying to accurately measure bifacial performance to determine how these modules perform under the vagaries of real-world conditions.  

Bifacial Technology for Beginners

Simply put, bifacial modules are manufactured so both sides of the solar cells can be exposed to light and produce power.  A glass or clear back sheet replaces the opaque back sheet and aluminum cell backing found on most monofacial modules. Typically, the front side absorbs direct sunlight while the backside captures sunlight reflected by the ground, rooftop, clouds, other solar modules, and so on.

Bifacial modules utilize PERC technology as well as PERT and Hetero-Junction technology like typical modern monofacial panels. They can be poly or monocrystalline but, following industry trends, tend to be mostly monocrystalline these days. Like monofacial modules, bifacials have an STC or nameplate rating based on ideal laboratory test conditions.  Because STC ratings only account for frontside production, an additional rating is assigned based on the percentage gain from the backside.  

So bifacials aren’t exotic or even new technology, but it’s worth noting that they do come with the bonus of real and potentially significant production gains.  Accurately measuring those gains though is where the story gets a bit more complicated. Before we jump into the sticky wicket (yeah, that’s a Cricket metaphor) of predicting back side gains, let’s look at some of the advantages bifacial modules can have over monofacial modules and some of the potential drawbacks. 

Bifacial Benefits

Here are some of the reasons you should consider bifacial modules:

  • Aesthetics: Like almost everything to do with solar, beauty is in the eye of the beholder, or homeowners association, utility company etc.  For me personally, dual glass bifacial modules can really add to the aesthetic appeal of a skylight, backyard pergola, or otherwise bland carport.
  • Higher Efficiency: Higher energy yields are a reality with bifacial modules and can reach over 30% in ideal conditions. Per the spec sheet (and complex mathematical proof on my part), a 400-Watt Trina bifacial module with a backside gain of 25% becomes a 500-Watt module.  Not too shabby!  Keep in mind that those gains depend heavily on a whole raft of variables that we’ll look into in Part II.
  • More Installation Options: Bifacial modules can be installed in any way monofacial modules can, but also excel in nontraditional ways. For instance, the Swiss highway sound barrier/ photovoltaic installation we spoke about earlier utilized vertically mounted modules.  
  • Easy Replacement: Bifacial modules utilize virtually identical technology as standard monofacial modules and have very similar mechanical and electrical characteristics.  So replacing monofacials with bifacials is often a simple process involving no more than a few design tweaks.
  • Higher Performance and Energy Density: With backside gains, production is increased and more energy per square foot is possible. Obviously, this is critical in areas with limited real estate for PV systems.
  • Increased Durability: Because most bifacial modules are manufactured using glass on both sides, the modules are typically stronger and more durable. This equates to lower degradation rates and higher long-term energy yields over the life of the installation.
  • Lower LCOE: Production gains (higher kWh/kWp compared to monofacials) as well as enhanced durability ultimately equate to lower LCOE – the holy grail of solar projects, especially at utility scales.  This translates to increased margin and who couldn’t use that these days.   

Bifacial Challenges

Like even the best things in life, bifacials do come with some drawbacks. Here are some reasons why bifacial modules may not be suitable for your next project:

  • Price: The most significant disadvantage of bifacial modules is price. The materials and processes used to manufacture bifacial modules are simply more expensive. This added price has prevented bifacials from being more prominent even though the technology is more than 60 years old. However, the tariff exemption (if it holds) and a decreasing price difference between monofacial modules make this only a slight detractor, if at all in some cases.
  • Racking: Specialized racking is needed to ensure that backside gains can be maximized.  This means that racking hardware needs to be moved to the module edges to allow light to hit the entire backside.  Single axis trackers, where bifacials can really excel, need to leave a significant space between module columns so the torque tube doesn’t “shade” the backs of the module (see Figure 2).  Many racking manufacturers, especially those focused on ground mounts, have products specifically designed for bifacials. The downside is that this can add to the price.  Although most bifacials now come with a frame, there are still some on the market that don’t, and those require specialized clamps to protect the module.
.                                                         Figure 2
  • System Design: We mentioned earlier that bifacial modules can replace monofacials fairly easily.  But, designers and engineers need to be careful and take higher currents and voltages into account. Most inverters are designed to accommodate the increased power of a bifacial system, especially at commercial and utility scales. However, designers will need exercise caution and account for power increases when selecting inverters, wiring, and other BOS equipment.
  • Installation: Because of those two sheets of glass, bifacial modules are heavier making installation and handling more difficult.  Wire management also becomes critical to keep from blocking the backside of the module, which can add to installation time and complexity. The good news is that manufacturers have adjusted their module design with features like shorter cables that practically eliminate wire management.  
  • Backside Obstructions: For rooftop installations, MLPE needed to meet rapid shutdown requirements are unfortunately going to hinder backside gains and most rooftop racking isn’t designed with bifacials in mind.  Imagine the rails running across the front face of the module and you get the idea. Really, any wiring or other equipment that’s hanging around the backside of the module has the potential to limit backside gains to almost nil. 
  • Production Modeling: Predicting the production of a monofacial PV array has become pretty straight ahead with tools like PV Syst and Helioscope.  But backside gains are based on so many variables that just aren’t that easy to account for. Therefore, accurately predicting annual production of a bifacial PV system becomes more difficult and will involve timely and expensive manual calculations by your design and engineering team.

Parting Thoughts

Ultimately, bifacial modules are here to stay, with some manufacturers and industry analysts predicting they will eventually overtake monofacials as the go-to technology.  So, it’s essential to learn about this technology today.  

In part II, we’ll look at those situations where bifacials prevail and what factors contribute to their success.  We’ll also attempt to determine what kind of gains are possible based on installation characteristics.

Until next time, thanks for reading and you stay sunny planet earth.