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:
- 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.
- 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.
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.
(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.
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.
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.
- 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.
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.
Welcome to the inaugural Kinect Solar Tech Blog!
My name is Kurt and I’ll be your host as we dive into the most relevant and interesting solar technology topics of the day.
To kick this off, we’re going to explore thin film, specifically First Solar’s Cadmium Telluride (CdTe), technology. Like many of us in the solar industry, (unless you work in the utility scale sector) I’ve known of First Solar (FS) but have rarely installed their modules or worked with them directly. Because of this, First Solar is a bit of a mystery, even amongst some of the most seasoned solar veterans. That’s now changed with First Solar’s entry into the distributed generation market so let’s take a closer look and find out what this unique technology is all about.
We’ll start from the beginning and take a look at the manufacturing process, which differs significantly from standard crystalline silicon (c-Si). Instead of growing a crystal ingot and cutting it into cells, the glass portion of an FS module is coated with thin layers, or films to build the components of the module. This is a high-tech, highly automated process that has more in common with manufacturing a flat-screen television than it does with a conventional solar panel.
Speaking of manufacturing, First Solar is the largest solar manufacturer in the U.S. (the western hemisphere for that matter) with an annual production capacity of nearly 2 GW in their two Ohio factories. Manufacturing facilities in VietNam and Malaysia bring their total global production capacity to 5.5 GW annually.
Module Size and Frame
Unlike the previous generation Series 4 modules, Series 6 modules are about the same length and a bit wider than typical 72 cell modules. In another departure from Series 4, Series 6 modules have a full under-mount frame that’s compatible with standard mid and end clamps and most manufacturer’s racking. For mounting purposes, Series 6 modules include SpeedSlots™ that enable clamping solutions for automatic alignment of the modules on the rail. Another unique characteristic of Series 6 modules is that the glass portion of the module sits on top of the frame instead of being pinched by it. This allows for less soiling and better snow shedding. Added bonus, they look pretty cool too.
Figure 1: Side View of FS-6 Module
Performance and Efficiency
Though thin film modules may have a lower nameplate efficiency rating under standard laboratory testing conditions, they can offer energy yield advantages in real world conditions, particularly in hot and humid climates. Due to their low temperature coefficient as well as impressive spectral and shading response, First Solar thin film modules can deliver more usable energy per nameplate watt than conventional silicon-based modules. The end result can be a lower ($/MWh) levelized cost of energy or LCOE. We’ll look at this in more detail in future discussions.
Durability and Degradation
Of course, if modules don’t last, high efficiency and impressive flash testing don’t mean a thing. With over 20 years and 25 GW of deployed systems, First Solar has a wealth of real world, long-term knowledge to pull from. FS modules are warrantied for 25 years at a low 0.6% annual degradation rate. Long term studies have shown that degradation rates for deployed systems tend to be as low as 0.4% per year depending on local environmental conditions and system design. And due to the nature of the materials and manufacturing process, FS modules are immune to cell-cracking that can rob c-Si modules of productivity.
Electrical and Wiring
As you may have heard, voltage of the new Series 6 modules is high – really high, by 4-5 times your typical c-Si module. Open circuit voltage for the 420W bin class clocks in at a whopping 218.5V. This of course means significantly shorter strings, typically 6 modules and sometimes as little as 5 modules in colder climates like Minnesota or New Hampshire on a 1500VDC inverter. Fortunately, First Solar has teamed up with BoS manufacturers like Shoals to manufacture wiring harnesses that make wiring easier and more cost effective. These wiring harnesses parallel smaller strings into single strings that connect into one inverter input, much like longer series strings of c-Si modules. See Figure 2.
Figure 2: Wiring Harness with 36 FS-6 Modules on one “string”
Environmental Footprint and CdTe Toxicity
Finally, let’s look at the environmental aspects of thin film CdTe technology. Because of the resource-efficient manufacturing process, First Solar modules have the smallest carbon footprint of any module on the market. Thin film modules use less water and semiconductor material and take less than 4.5 hours to manufacture from start to finish, all under one roof. Compare that to crystalline silicon manufacturing, which can take up to 3 days across multiple factories and even continents to see a finished product. Due to these efficiencies, First Solar modules also have the fastest energy payback time in the industry.
First Solar also offers industry leading global recycling services, which allows for more than 90% of the semiconductor material and approximately 90% of the glass to be recovered and reused in new First Solar modules and other glass products.
But you may ask, isn’t cadmium a highly toxic substance that’s detrimental to human health? While cadmium is toxic, cadmium telluride is a stable, inert compound that’s insoluble in water and has an extremely high melting point of around 2,000oF. Think chlorine (Cl – a highly toxic gas) which, when combined with sodium (Na) becomes table salt (NaCl – the stuff we need to live) with quite different properties. Furthermore, the cadmium and telluride used in First Solar modules are byproducts of the zinc and copper refining industries. The circular economy at its finest.
Well, that’ll do it for our first Kinect with Kurt solar blog. We’ll discuss these topics further in depth in later posts.
Until next time, thanks for reading and to paraphrase the venerable Ron Burgundy, you stay sunny planet earth.
Lauren Carson Interviewed by The Solar Maverick
Lauren and Benoy share knowledge on topics from how the solar panel industry has seen new trends take effect because of the increase and decrease in tariffs, how the solar panel market continues to grow and create openings for niche companies, and how to approach not just becoming an entrepreneur but also being a female entrepreneur in the male dominated solar industry.
About Benoy Thanjan
Benoy Thanjan is the Founder and CEO of Reneu Energy and he is also an advisor for several solar startup companies. Reneu Energy is a premier international solar energy consulting firm and developer and the company focuses on developing commercial and industrial solar and utility scale solar plus storage projects. The company also sources financing for solar projects and hedges energy and environmental commodities. Reneu Energy has brokered $27 million in environmental commodities transactions.
Benoy received his first experience in Finance as an intern at D.E. Shaw & Co., which is a global investment firm with 37 billion dollars in investment capital. Before founding Reneu Energy, he was the SREC Trader in the Project Finance Group for SolarCity which merged with Tesla in 2016. He originated SREC trades with buyers and co-developed their SREC monetization and hedging strategy with the senior management of SolarCity to move into the east coast markets. Benoy also worked at Vanguard Energy Partners, Ridgewood Renewable Power, and Deloitte & Touche.
About Lauren Carson
Lauren Carson, with over 8 years of experience in the solar industry, is the CEO of Kinect Solar, the leader of liquidation and wholesale business for solar electrical components and solar power generation equipment, transformers, electrical cable, and generators. They work with local installers and manufacturers to move excess inventory to their customers that span the globe from local installers in Austin to farmers in Belize and hotels in Fiji.
Insight from this episode:
- How the solar panel business market is affected by tariffs.
- How solar panel businesses can be impacted by local, state and federal policy.
- How solar panel supply and demand can affect the import market, pricing and drive new trends.
- Why tariffs affect where businesses start to pop up or move to.
- How to approach being a female entrepreneur in a male dominated industry.
- Strategies for finding a niche in the market.
- Reasons to start small and slowly scale as an entrepreneur.
Quotes from the show:
- “Our mantra is ‘We solve panel inventory problems’” Lauren Carson, Episode #22.
- “The solar panel market really is a commodity so supply demand dynamic impacts by local, state and federal policy are very very apparent.” Lauren Carson, Episode #22.
- “I’m seeing as well in the development cycle, everyone is adjusting their engineering to take advantage of these more efficient solar panels to get higher production from their solar systems to get a higher return.” Benoy Thanjan, Episode #22.
- “There’s been a massive jump in solar panel efficiency, I think there’s still a lot of people sitting on the older wattage panels and I think we’re going to continue to see those prices go down for the more legacy wattage panels.” Lauren Carson, Episode #22.
- “It’s extremely stressful at times; there are financial stresses and there are personnel stresses but I wouldn’t trade it for anything. I think my favorite thing about having my own company is getting choose the people I work with.” Lauren Carson, Episode #22.
- Tips for entrepreneurs: “Staying scrappy and focusing on one little piece of what you do and also finding one customer that’s willing to pay you for something, and then growing off of that success, and just being patient.” Lauren Carson, Episode #22.
- “I think you mentioned a great point; everyone feels like they need to have this structure set up but obviously business is about generating revenue and adding value to your clients. Sometimes people get lost in all that other stuff rather than focusing on what’s important.” Benoy Thanjan, Episode #22.
- “People are willing to help, and it’s all about adding value. It’s almost like mentorship in a sense…mentorship has been very important for me and developing my business.” Benoy Thanjan, Episode #22.
- “In regard to being a female entrepreneur in a male dominated industry: “You have to let it roll off your back; if you hold onto that and think about how it’s setting you back then I think it starts to become a reality.” Lauren Carson, Episode #22.
- In regard to being a female entrepreneur in a male dominated industry: “In general, we have a great industry with great people and I have looked at it as a positive.” Lauren Carson, Episode #22.
- “The Grid” by Gretchen Bakke
- “Ego is the Enemy” by Ryan Holiday
- “Traction” by Gino Wickman
- “Never Split the Difference” by Chris Voss