in Texas, the state sales tax is 6.25% (i.e., the sale price x 0.0625). In addition, depending on your locale, a district, county, city or other type of sales tax may apply.  It may not look like a big number, but when you pay an extra 6.25%-8%+ per month those points really start to add up!

Luckily, there are several industries and property types that are eligible for sales tax exemptions on their utility bills. Even better: if your business has been charged sales tax on your utility bill and your business is actually exempt, your entity may qualify for a sales tax refund.

In addition to negotiating a great rate and undertaking efficiency measures, there are other ways to impact your bill for the better.

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Do Your Business Qualify for a Sales Tax Exemption?

Now for the big question: Does my business qualify for a sales tax exemption and refund on its energy bills?

Truth be told, the coveted circle of who’s eligible for sales tax exemptions and refunds isn’t as small as most people think. Many types of businesses and residential properties do qualify.  In fact, here are just a few of the eligible industries.  Some may surprise you:

• Agriculture
• Audio & Video Production
• Bakeries
• Beverage Manufacturers
• Chemical Plants
• Clay Supply
• Electronics
• Food Manufacturers
• Golf Courses
• Horticulture
• Lumber Supply
• Medical Device Manufacturing
• Mining
• Pharmaceuticals
• Oil & Gas
• Printing
• Refineries
• Textiles

With regard to residential properties, the following types of entities may qualify to receive sales tax exemptions – and maybe refunds – on utility bills:

• Apartment Buildings (must have master meter)
• Assisted Living Facilities
• Condominiums (must have master meter)
• Mobile Home Parks
• Nursing Homes

This list is not exhaustive, so consult with a trusted energy advisor to see if your business qualifies for tax exemptions.

Many business owners automatically self-select out of these industries because of their own conceptualization of their companies. Also, some business owners do not want to spend time and money on required studies and paperwork.

However, your business may be considered a member of one of these industries without you realizing it. Similarly, the measurement and study requirements may not be as onerous as you might expect.

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How Do I Benefit From Sales Tax Exemptions?

If you recognize your business in that list above, that’s a great first step. However, simply knowing you’re in a sales tax-exempt industry isn’t enough to drop that charge from your utility bill.

Like all good things in life, you have to make it official.

According to the State of Texas’s Rule 3.295, all businesses that manufacture goods or otherwise alter products must conduct a predominant usage study before being able to benefit from sales tax exemptions.

According to the Texas Administrative Code, a predominant usage study must determine the portion of your business’s electricity usage that is required to power the production or transformation of products or other tax-exempt activities.

If 50 percent or more of your utility bill goes towards tax-exempt operations, you’re in luck! You qualify for a sales tax exemption.

However, if you’re not a certified engineer, you cannot DIY. Predominant usage studies require the seal of an engineer to be deemed valid.

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Is My Business Exempt Forever?

Not necessarily. Technically speaking, predominant usage studies do not have a specified time frame for expiration. If there have been substantial changes to your business operations, facility, or machinery, it’s likely you will need a new study. Some retail electric providers (REPs) crack down on businesses with old predominant usage studies – and it’s their prerogative to decide what qualifies as “old.”

If you haven’t done an update on your predominant usage study in the past few years and your business has gone through one of the major changes listed above, or there’s been a change in ownership, you may need to have your predominant usage study updated.

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I Think I Qualify! Where’s My Refund?

If you discover that your organization qualifies for sales tax exemptions, you may be able to recover up to four years – yes, 48 months! – of paid taxes in the form of a refund.

However, there are several factors to consider before jumping on that refund opportunity. For example, there’s a fee to complete a predominant usage study. In many cases, there are ways to off-set or completely cover the cost of the study with a refund or as part of a broader energy management program.

Also, you will need to find and select an engineer or firm to conduct the study, and, unfortunately, you can’t just send in the study and get a check! Someone will have to prepare your refund request in compliance with IRS rules, submit it, and work with the comptroller to obtain approval.

However, don’t just toss this item into the “too hard” basket. Consult with a trusted energy advisor to determine:

1. If your business should truly be sales tax exempt
2. If you stand to receive a refund and how much
3. The best, most cost effective way to get a predominant usage study and a check from the IRS.

It may be much simpler than you think and a terrific way to impact your operating budget now and for years to come.

In addition to the numerous paths you can take to obtain traditional energy (aka, “brown power”), there are a host of renewable energy options and design solutions that can help meet your goals and exceed your expectations. The key is to find an energy advisor who has the experience and expertise to help you navigate all of these considerations to create a smart energy solution for your business.

From purchasing renewable energy credits (REC’s) to installing an independent, onsite solar power system, you have many options for customizing your energy.

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Be sure to talk to your trusted renewable energy advisor about these three considerations to ensure you’re getting the best deal to support your green goals (both the cash and eco kind).

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Consideration 1: On-Site v.s. Off-Site Solar

Thanks to major advances in technology that have made solar power more applicable and accessible to businesses, solar power is no longer a one-size-fits-all solution. Rather, you have the option of choosing to procure energy from off-site sources such as through paper transactions or to build an on-site system.

There are four main options for going green that give you the freedom and flexibility to find the smartest strategy for your unique situation:

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On-Site Solar

• Power Purchase Agreements (PPAs) – A great option for businesses that can’t afford the large lump sum investment of building their own solar power system, a PPA is an arrangement in which a developer builds the solar system on a business’s property free of charge and then “sells the power generated to the host customer at a fixed rate that is typically lower than the local utility’s retail rate.”
• Solar Acquisition – Occurs when a consumer purchases a behind-the-meter solar array, such as when a business purchases their own photovoltaic system and remains grid-tied in order to engage in net metering.

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Off-Site Solar

• Renewable Energy Credits (RECs) – According to the EPA, “RECs are issued when one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource.” The value of the credit is determined by several factors, including the facility location, system build date, and emissions rate.  RECs can be procured on your behalf to “green-up” current or future “brown power” contracts.
• Retail Electric Provider (REP) Products – REPs are energy providers that use the local utility company to deliver the electricity they generate to their customers. They often provide better rates and service than public utility companies and offer various renewable products.  These products may contain a percentage of renewable power or be entirely green.

When considering onsite options like a PPA or Solar Acquisition, an important factor is the amount of space available for either a ground, roof, or covered parking installation. While most people assume a solar power system – also known as a photovoltaic or PV system –  has to be installed on a roof, ground mount installations can be more cost-effective and produce more power.  Similarly, a carport array is an environmentally friendly way to get covered parking (which is a fantastic employee benefit) and may be tax-deductible!!

As the renewable energy market becomes more diverse, it’s critical to consult with a trusted energy advisor about which method maximizes value for your business.

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Consideration 2: Renewable Energy Financing

Another common misconception is that in order to take advantage of renewable energy sources, you need to buy a PV system outright. However, there are several options for financing your renewable energy initiative.

Before shrugging renewable energy aside because you don’t have the cash to throw at a new PV system, consider opting for a solar PPA or lease. Each comes with a different set of liabilities, upfront costs, and tax benefits.

With a PPA or lease, the owner of the system can take advantage of tax equity savings for exempt organizations like schools and potentially pass on some of the earned value on to the buyer (you!). Another benefit of PPAs and lease agreements is that the liability of the equipment lies with the official owner, which is one less thing you have to worry about as you run your business.

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Consideration 3: Location

A third common misconception is that if you opt for purchasing renewable energy credits, you must buy them from within your state. However, that’s not necessarily the case.

Ultimately, the decision comes down to how “green” you want to get. For example, in Texas, wind-generated energy is usually the cheapest and will likely continue to get cheaper since policymakers are working to get rid of the renewable requirement statewide.

Similarly, Texas has the largest wind capacity in the nation and is continuing to grow its wind-generated energy volume (which is why it’s not uncommon to see massive wind turbine blades rolling down the freeway on flatbed trucks!).  According to the U.S. Energy Department, “in 2017, wind-generated about 15 percent of the electricity in Texas, up from less than 13 percent in 2016.”

The price and benefits that come with your choice of renewable energy sources depend on where that energy was generated and how it travels to reach your light switch.

If you’re considering making the green switch to renewable energy, consult with a trusted energy advisor first. There are numerous factors involved that an expert can help you navigate to make the smartest choice.

Since the last quarter of 2018, everyone’s ears have been perked up to all things eco-friendly. When the U.S. Global Change Research Program, the Intergovernmental Panel on Climate Change, and the U.S. Geological Survey all say that the planet is in peril if we don’t change our energy consumption, the world takes notices.  Similarly, everyone is always interested in saving a little green ($$$)!

Thankfully, we’re close to having the infrastructure and tools in place to be able to maximize the potential of renewable energy and ride the green tidal wave to a healthier ecosystem and bank balance.

These are six of the most promising energy trends you should be watching in 2019.

1. Storage

Solar power is an incredibly valuable resource. The men and women working to develop this technology have come leaps and bounds in recent years. However, one major problem still exists: the sun doesn’t hang out in the sky 24 hours a day.

Therefore, solar power is perpetually an unpredictable and fluctuating resource. However, thanks to recent and continued advancements in solar storage options, we’re getting closer and closer to solving this intermittency issue and bringing costs way down.

This year, we can expect to see incredible improvements in the reliability and longevity of solar power storage solutions that will make going solar a far more viable option for all.

2. DER & Microgrids

Distributed Energy Resources (DER) is a combination of distributed energy generation networks and energy storage systems. DER systems are often placed strategically throughout an energy distribution network. These systems may include solar power systems, fuel cells, microturbines, or even combustion engines.

Microgrids are similar but have the added benefit of being able to operate independently of the main grid. Not only do DER and microgrids allow facilities, local communities, and even larger regional areas to operate autonomously, but also they provide relief to the larger energy grid, which reduces congestion and other systematic problems.

Of all the energy trends, DER and microgrid systems have the potential to make a dramatic impact on the health of our energy infrastructure and planet because they can be implemented privately, giving the power to change the course of our environment to the people most impacted by it.

3. Declining Cost of Solar Energy

Thanks to the increasing popularity of renewable energy and the incredible advancements in technology, we’re seeing a dramatic drop in the cost of going solar.   In fact, “the cost to install solar has dropped by more than 70% since 2010, leading the industry to expand into new markets and deploy thousands of systems nationwide,” says the Solar Energy Industries Association (SEIA). This is one of our favorite energy trends since the immediate cost of going solar often deters would-be-good-doers from making the switch to renewable energy.

Around the country, we’re seeing a rise in grid parity – which occurs when the cost of renewable energy equals or dips below that of traditional electricity.

In some areas, the price per kilowatt-hour has gone down to as low as $0.02 for wind and $0.028 – $0.045 for solar, as of Q3 2018 according to reports from SEIA. We can expect to see this price continue to come down throughout 2019 and beyond.

4. Taxes & Tariffs

The Federal Investment Tax Credit (ITC) is a solar tax credit that allows an entity to deduct 30% of the installation cost of its solar power system on annual federal taxes. However, this tax credit is scheduled to step down on an annual basis to 10% for the calendar year 2022.

On the flip side, we have to deal with fluctuating tariffs on things like crystalline-silicon solar cells, modules, imported steel, aluminum, and inverters necessary to build solar power systems.

There’s a direct correlation between the application of new tariffs and the price of solar elements. For example, the price of solar panels (also known as modules) was on a steady decline until the Section 201 Solar Tariff case appeared in 2017. Until the final decision was made on whether or not to enact the tariff, the price of modules gradually increased.

In February 2018, the tariff was imposed and added a 30% tax on imports. While the market took a hit initially, the prices have started to come back down again as the market builds confidence in the fact that the U.S. will continue to push toward renewable energy sources despite fluctuating circumstances surrounding trade with China.

As the policies surrounding renewable energy ebb and flow, it’s critical to understand the ever-changing landscape in order to find the most opportunistic time to act.

5. State Level Push to Go Green

On the state level, many such as Texas, New York, and California are adopting greener policies. States are enacting legislation that implements various green policies such as requiring a certain percentage of the state’s energy to come from renewable energy sources to those geared towards increasing efficiency. These requirements will increase gradually over time to ensure the state continues to move in the direction of the green wave.

In Texas, Senate Bill 898 now requires each political subdivision, institution of higher education, or state agency to reduce electrical consumption by at least five percent each fiscal year for ten years beginning September 1, 2011.

Over in New York, the New York Independent Service Operator (NYISO) is working to reduce carbon emissions. A new proposal recommends legislation that will raise the cost of energy for carbon-emitting resources, which encourages the development of cleaner generation.

6. Corporate Eco-Consciousness

For the past several years, we’ve seen companies such as Coca Cola, Marriott, and Target take a stance on social issues. However, with the booming interest in all things earth-friendly, many corporations are now making their opinions heard as they relate to the environment.

Several companies, including Budweiser, Apple, and Google, are committing to running their companies completely on renewable energy. These economic leaders are now becoming eco-friendly leaders and are setting an example of how even the largest operation can be converted to green, clean energy.

This new trend is already gaining massive attention and traction. In fact, it’s been aptly named the “RE100” campaign, which stands for the goal of achieving a 100% renewable energy model by a set date. More than 160 companies around the world are evaluating their operations, creating concrete plans, and committing to a deadline for sourcing 100% of their power from renewable sources.

The Sweet Spot of Energy Trends

When it comes to maximizing the potential of key trends, it’s all about finding the sweet spot. That spot is the intersection of improved quality and technological advancements + decreased cost of adopting the trend.

For example, for the past 20 years, most solar energy providers have been too expensive to make good business sense for buyers. However, as the technology has improved and the cost of design, engineering, and development has come down, we’re seeing that sweet spot emerge.

If you’re interested in riding the green wave while saving money for your business and helping protect the planet’s future, consult with a trusted energy advisor and ask about where the sweet spot is for your business.

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However, many people aren’t sure what a microgrid is, if their business/entity might need one, and – if so – how to go about purchasing one.

Whether your business has gone solar already or you’re still wondering if solar energy is the right move for your organization, getting to know the inner workings of the microgrid system can make you a smarter energy buyer – especially while we as a nation continue to push more aggressively toward renewable energy and stabilizing energy availability.

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What Is a Microgrid?

A microgrid is a small, localized version of the energy grid at large. To better understand what’s up with the “micro” version, let’s take a look at the energy grid itself.

The energy grid is the network of energy generators (which includes coal, natural gas, and renewable sources), transmission lines, and distribution lines that connect to the end-user. This network is subject to numerous challenges, such as congestion, downtime due to repairs and upgrades, and price volatility from a changing fuel stack i.e. think the increasing number of coal-based generation plants closing/retiring, to name just a few.

Microgrids have recently emerged as a strategy for combating some of the challenges associated with being grid-tied. Microgrids allow connected energy users to disconnect from the larger energy grid and operate independently, as needed.

The majority of the time, a microgrid will remain connected to the larger grid. However, if there’s a power outage, temporary price spike, or maintenance issue on the main grid, a microgrid allows those connected to it to tap into the energy they generate on site.

To power a microgrid locally, you’ll need your own form of power generation. While some people use diesel generators, more and more energy consumers are turning to green forms of distributed generation like solar panels and local battery storage to power their microgrids.

Not only does this system provide stability in an unpredictable energy market, it can also reduce energy costs if you’re generating your own power and need a place to store any excess you generate for use in low-production times.

This versatility and self-reliance is what makes microgrids an attractive option for healthcare facilities, large institutions, and communities.

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Microgrids for Businesses & Institutions

For some businesses and organizations, a power outage is simply not an option. From universities to hospitals to corporate offices, microgrid systems are popping up around the country.

In 2017, Tyler Technologies – a software company with a large corporate campus located in Plano, Texas – became one of the first companies in North Texas to make use of a microgrid. Thanks to solar panels installed on the roofs of the company’s north and south buildings and a storage system set up on-site, Tyler Technologies is able to operate with power independently for hours at a time if there’s a power outage on the public grid.

In 2018, the Kaiser Permanente hospital in Richmond, California, became the first to establish a microgrid fueled by renewable energy. The microgrid not only allows the hospital system to continue to serve patients without interruption during a power outage or a brownout, but also it is saving the facility incredible sums of money thanks to on-site energy generation and storage.

As greater numbers of corporations adopt environmentally-friendly principles and practices, the microgrid system is becoming increasingly popular. Furthermore, advancements in technology are making microgrids a more viable option for businesses of all sizes.

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Microgrids for Communities

Microgrids are also being developed for use with individual communities. For instance, in Brooklyn, New York, the Brooklyn Microgrid is allowing members of the community to generate, share, and store energy within their own neighborhood. The microgrid system connects “prosumers” – households or businesses that are generating energy through renewable sources – with consumers who need energy.

The Brooklyn Microgrid also supports EV charging stations that can be used to charge electric vehicles. The entire microgrid uses a distribution system that manages energy use, load balancing, and demand response. In all, individuals connected to the Brooklyn Microgrid are benefiting from more efficient, sustainable, and affordable energy generation, distribution, and use as a united community.

As the United States heads more toward renewable energy sources, microgrid technologies will become increasingly important. If you’re wondering if a microgrid is a right move for your business, consult with a trusted energy advisor. Now may be the perfect time to make the upgrade.

As public awareness of environmental struggles increases and the move toward alternative fuel sources becomes more interesting, greater numbers of people and businesses are looking to solar as a hopeful part of the solution.

However, decades of obscure news, deals, and promises surrounding the word “solar” have people confused.

What’s true about solar and what’s a myth?

Last week, we explored how solar actually works. This week, I’m going to demystify one of the biggest misconceptions about solar for you: net metering.

What Is Net Metering?

Many people have heard the bold claims that when you go solar, you’ll have the opportunity to make the energy company “buy back” any excess energy your roof produces and they start seeing dollar signs.

While it’s certainly an appealing scenario, that’s not really how it works. When people refer to this “buy back” program, what they’re actually referring to is net metering. In truth, it operates more like a credit system than a true source of profit.

Net metering is the utility company’s billing mechanism to make sure that you are fairly compensated for the excess energy your home’s solar power system produces without actually having to write you a check.

Think of it like a checking account. Each month, your solar power system captures, conditions, and converts sunlight into electricity. This is akin to any income you earn and deposit into your checking account.

Then, your building draws from that source of power so that you can keep warm in the winter, turn on the computer, and power the lights strung around your Christmas tree. This is akin to withdrawing funds from your checking account.

Oftentimes, particularly in the summer months, your solar power system will generate more electricity than your facility  uses. When this happens, the excess energy has to flow somewhere, so it goes to the utility company, who uses it to power other parts of the grid. The excess energy is the net difference between what you “earned” and what you “spent.”

Earn. Spend. Net.

The utility company keeps track of what excess energy you’ve contributed and generates a credit to your utility bill.

Then, on days when your solar power system doesn’t generate enough energy to cover your usage – such as in the winter months when days are shorter and skies are cloudier – you can draw from that credit you’ve earned with the utility company to cover your electricity needs.

The Caveat‍

In most cases, net metering programs don’t provide the full retail value for the excess energy your roof generates and here in Texas, it’s up the Retail Electric Supplier (REP). For example, let’s say you generate $12 worth of kilowatt-hours (kWH). You most likely won’t receive a $12 credit on your energy statement.

In some areas, there are added benefits of going solar that could increase the number of credits you receive. For example, in Austin, residential solar power system owners receive a Value of Solar (VOS) credit for every kWh their roofs generate – not just the excess energy. With Austin’s VOS system, consumers receive 9.7 cents per kWh, as long as their systems meet certain standards for best practices.

Although net metering is not a one-to-one system or some sort of futuristic revenue stream, it’s still a highly viable method of saving money on your utility costs.

Net Metering Policies in Texas

While net metering follows the same basic principles everywhere, there are specific policies that govern the process, which are made on the state level. These policies vary widely, so it’s important to familiarize yourself with your state’s specific rules.

Net metering policies are constantly changing from state to state, making some states more solar-friendly than others. Currently, New Jersey is the most solar-friendly with exemplary sales tax and property tax exemptions, performance payments, and net metering values.

On the other hand, Louisiana is considered to be the least solar-friendly because the state recently did away with net metering policies that once benefited property owners and the electric grid. On a grade scale, Texas received a C on its 2018 solar report card and comes in 34th place in the ranking of the most solar-friendly states.

Ultimately, the goal of net metering policies is to encourage homeowners and business owners to install renewable energy systems and produce more clean energy. Ideally, net metering will help states achieve renewable portfolio standards (RPS), which are ever-changing and evolving.

The Power of REPs

Until there are national policies governing solar power and net metering – which could take more than a decade as America finds its footing with renewable energy in general – expect that net metering policies and the benefits of going solar will vary based on several factors.

In Texas, one of the largest factors affecting net metering policies comes down to the retail electric provider (REP). The policies are made at a state level and vary by utility. In deregulated areas, this means the net metering programs or lack thereof are up to the discretion of the REP.  The REP you choose to work with can make a tremendous impact on how much going solar can actually save you.

For customers in deregulated areas in Texas, there are a handful of REPs with progressive net metering also know as “solar buyback” programs. Our friends at Sunfinity have compiled a great snapshot of REP programs for residential service.

With commercial service, there may be even more choices for maximizing value with net metering. For example, MP2 offers clients the option of whether excess generation is credited at full retail – buying down the retail rate – or credited on a performance basis at real-time prices.

Given that there are more than a dozen key factors that affect the long-term worth of a solar power system, it’s best to work with a trusted energy advisor to find the right fit for you.

Eventually, the hope is that emerging technologies such as solar power storage batteries – also known as microgrids – will further allow consumers to make moves away from being grid-tied, which ultimately provides you with the most freedom.

Until then, as solar energy policies are changing every year, you can have a profound impact on the future of Texas’s solar policies by becoming an informed voter, learning the lingo surrounding solar, and asking questions of energy experts.

What questions do you have about net metering and going solar? Let me know in the comments below or get in touch for a consult on your unique energy situation.

Resources

• https://www.seia.org/initiatives/net-metering

• https://www.solarunitedneighbors.org/learn-the-issues/net-metering/?gclid=Cj0KCQiAi57gBRDq
• ARIsABhDSMpg2o0RnddO1uKm3vsbK-uDSc17pbaogltAoYJsoGa8glUlzFXgVBoaAjEzEALw_wcB

• http://www.ncsl.org/research/energy/net-metering-policy-overview-and-state-legislative-updates.aspx

• http://programs.dsireusa.org/system/program?fromSir=0&state=TX

• https://quickelectricity.com/2018-solar-panel-incentives-texas-net-metering-buyback-programs/

• https://www.solarpowerrocks.com/texas-solar-power/why-texas-dont-mess-with-solar/

While it’s certainly true that renewable energy has the potential to save our planet and save money in the process, there are a few challenges we must overcome before it will become a sustainable, reliable tool.

Rather than tossing renewable energy into the “too difficult” bucket, let’s weigh our options and take stock in the countless opportunities we have at our disposal today thanks to some incredible advances in solar technology.

Understand the Inner Workings‍

In order to maximize our potential use of solar energy, we need to first understand how our current technology works. Then we can make improvements to harness the power of the sun to power our booming society.

There’s a misconception that solar flows in a linear fashion. Many people believe it works like this: sunlight hits roof, solar panels capture energy, coffee maker turns on and refrigerator stays cold.

It’s not quite that simple.

Solar power systems are made up of small units known as photovoltaic cells. These cells convert sunlight into energy on a molecular level. Technically, the energy is captured when sunlight (made up of photons) disrupts the structure of molecules within the photovoltaic cells by breaking electrons free from atoms.

This process creates electricity, which is captured in the form of direct current (DC) energy.

Next, the DC energy flows into an inverter, which converts the DC energy into alternating current (AC) energy – the kind your house likes. This process is also referred to as “conditioning the power.”

While this may sound like a nice, linear process, it all hinges on one major factor: the sun. And as we all know, the sun isn’t always shining directly on your solar panels at just the right angle, around the clock.

Being Grid-Tied

When solar first hit the market, there was this fantasy that energy consumers could fire their utility company and live “off the grid.”

Unfortunately, that’s not quite the reality.

Even if you do go solar, you will still need to be tied to the electrical grid. Here’s why.

Once your energy is converted from DC to AC through the inverter, the electricity is then funneled through your energy meter. In most cases, any excess energy your solar panels produce that you don’t use right away is sent to your utility company.

When this happens, your electricity account with the utility company is credited for the extra energy you’re producing. In the evening, when the sun isn’t shining down on you and your solar panels are taking a break, you pull any power you need from the utility company and draw from those credits you’ve earned.

This process is called net metering and is all the rage in the solar industry right now.

Altogether, the solar power process depends on the sun. When the sun isn’t shining or when it’s a particularly overcast day, you may need more added support from the utility company. Conversely, on particularly bright days, your solar system may generate more electricity than you need.

The naturally unpredictable nature of solar energy means that we must all work together to maximize the sun’s rays when they’re available and make extremely efficient use of stored energy when they’re not.

Battery Backup‍

An alternative or supplement to net metering is the solar power storage battery. Solar power storage batteries come in three varieties: lead-acid, lithium-ion, and saltwater.

Rather than your overflow AC electricity heading over to the utility company to be processed under net metering, solar power storage batteries allow you to collect the excess energy your solar system captures to supplement whatever you may need after daylight hours.

Early generations of these batteries were extremely expensive and inefficient. Then, in 2014, Elon Musk shocked the world by giving away several of his patents for electric car batteries. While some business advisors gave him side-eye and considered bringing in the guys with the straight jackets, others saw his plan for what it was: a necessary step to help the world take a major leap toward sustainable energy.

Thanks to Musk’s bold move, we have skyrocketed forward in the advancement of battery technology for solar-generated power. Still, storage batteries are relatively new to the solar power world and are still going through evolutions for maximum cost efficiency.

The latest iteration is a solar cell-battery hybrid called a solar flow battery that is shattering previous efficiency standards. Clearly, the horizon is ripe with possibilities.

As a business owner, you’re likely at an advantage. Unlike homeowners who consume more energy in the evening hours (off-peak power) – when the sun isn’t shining and they need help from “Big Utility” to power the oven and Amazon Fire Stick – you likely shut things down just around the time the sun is heading to the other side of the world.

With the right set up, solar power can be a smart investment for business owners as we head toward more renewable energy sources.

Wondering if solar power is right for you? Consult with a trusted energy advisor before making the switch to see if solar is a smart move for your business and finances.

Resources

• USGS. (2018). Federal Lands Greenhouse Gas Emissions and Sequestration in the United States: Estimates for 2005–14.  https://pubs.usgs.gov/sir/2018/5131/sir20185131.pdf
• Musk, Elon. (2014). All Our Patent Are Belong To You. https://www.tesla.com/blog/all-our-patent-are-belong-you
• Jeung, T. (2018). This Half Battery, Half Solar Cell Hybrid Could Be a Total Game Changer. https://www.inverse.com/article/49423-efficient-solar-power-battery-makes-sunlight-portable

Do I go green? Do I go with a fixed-price or index? Will retrofitting my lights affect my contracted price? These are all valid questions that are crucial to making the best decision for your utility expenses.

Meanwhile, there’s a term that is frequently misunderstood and can add up to a big line item on your budget:

Nodal.

A nodal market or nodal congestion (also referred to as hub-to-load-zone basis) was a hot topic several years ago that’s finally taking effect in the Texas energy market. Though thrown around widely, many energy consumers don’t understand what it truly is or how it can impact their bill.

Texas has been a nodal market for eight years now, so it’s time to learn what’s going on with nodal.

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What is a Zonal Energy Market?

To fully comprehend where we are, it’s helpful to look at where we’ve been.  The current energy landscape is organized by either a zonal energy market or a nodal energy market. To understand the nodal energy market, you must first understand its predecessor: the zonal energy market.

Before December 2010, the Texas energy market was organized into four congestion-management zones. These zones determined the price of electricity, which would be paid to the energy generator. The MPCE – or the market-clearing price of energy – is the price that actually balances supply and demand.

Electric generation often occurs far from the point of consumption. As a result, the lines that transmit power can only carry so much at once time; this results in “congestion,” which causes unreliability within the system. To reduce this congestion, the grid operator sets a balancing price that effectively controls generation.

The zonal market was designed to improve the reliability of available energy. However, the system has some significant limitations.

When congestion occurs, the Electric Reliability Council of Texas (ERCOT) can “balance” the source of energy generation between zones in order to reduce congestion. However, ERCOT is unable to use the same tactic within zones. Furthermore, a lower cost generator may be forced to curtail its production, which ultimately increases the electricity price to the end consumer.

Not good.

What is a Nodal Energy Market?

Under a zonal energy market, the customers in a given zone are required to pay for the minority that creates significant congestion (think: the energy consumers way out on the end of the power lines). The zonal market design essentially socializes the congestion costs.

Under a nodal energy market, there are 4,000 delivery points, known as nodes, across the state. The energy travels along transmission lines from the generation source to one of those 4,000 nodes and can be measured before it reaches the end customer. With such a well-distributed network, areas of congestion are much easier to identify.

Additionally, nodal energy market pricing provides a more granular picture of generation and transmission in order to pinpoint areas of congestion. This allows the state to prioritize infrastructure improvements to those congestion areas and to understand where to place new generation units.

With the nodal market, the socialized fees are gone, market and operating efficiencies are improved, and the rate at which the market-clearing price is calculated is reduced from 15 minutes to 5 minutes.

By the way, in addition to all these changes, the MPCE is now called SPP (Settlement Point Price).

In all, a nodal market reduces costs to consumers, improves transparency, reduces congestion, and provides valuable insight that can guide improvements and resource allocation.

How Did Nodal Begin?

In December 2010, Texas initiated the move from the zonal system to the nodal system. This shift was in response to a request from the Public Utility Commission of Texas (PUCT). After struggling to find a solution to the zonal market issue throughout the 2000s, the PUCT asked ERCOT to create a nodal wholesale market that provided a market framework similar to other organized markets – such as those in New York, the Mid-Atlantic Region, New England, and the Midwest.

With a host of potential benefits, the main goal was ultimately to save money through a more precise allocation of transmission congestion costs that would enhance market transparency, efficiency and operations. A study conducted in 2008 by the PUCT calculated that electricity consumers would save $5.6 billion during the first 10 years of operations under a nodal market due to increased market efficiencies.

However, many Texas business consumers were left wondering how exactly the change would impact their utility bills.

How is Nodal Working 8 Years Later?

Since its implementation, we have seen ugly price spikes, notably those in the West Zone during the summer of 2012 and, most recently, the summer of 2018. While all the fracking is undeniably great for the US economy and natural gas prices, it is creating quite a strain on the electric grid in West Texas, specifically in the West Oncor and AEP utility territories.

In fact, some West Texas customers resort to running on diesel generators while waiting for their substation. Unfortunately, just as quickly as the poles and wires are built to serve a load, more load continues to outpace the available energy supply.

While we hope the nodal system ultimately benefits all of Texas, the area formerly known as the West Zone can continue to expect temporary spikes while the transmission improvements are underway to address the unprecedented growth in far West Texas. In other words, West Texas is experiencing growing pains!

Based on past ERCOT endorsement dates and their respective anticipated service dates, there is a two- to three-year waiting period between the time ERCOT endorses a transmission improvement project and the anticipated completion of the project.

The far West Texas region from Odessa to Riverton and Bakersfield to Solstice received its endorsement in June 2017 and is expected to have service between May 2020 and March 2022. The next portion of the far West Texas initiative from Riverton to Sand Lake to Solstice, Kyle Ranch to Riverton, and Horseshoe Sprint to Riverton received its endorsement this past June. The anticipated service dates have yet to be determined.

Understanding Your Bill Under a Nodal Market‍

As a business customer in Texas, the best way to continue navigating the not-so-new nodal market design is to stay informed and understand exactly what it is you are purchasing. While terminology can vary across providers, nodal charges are typically described as “basis” or “trade hub to load zone.”

These terms refer to the price difference between the energy price at the source (the generator) and the energy price at the destination (the load zone). The price at the load zone is an average of the prices at various nodes in a zone.

If you’re not sure whether your energy product is priced to the hub or the load zone, or whether it includes nodal congestion, ask your provider or a trusted energy advisor. If you are in an area of high risk, such as West or South Texas, ask for additional information on congestion price spikes, request historical price data, and consider your risk appetite before making a hedge.

Resources

• https://www.energyvortex.com/energydictionary/transmission_congestion.html
• https://trieagleenergy.com/Docs/Nodal.pdf
• https://webberenergyblog.wordpress.com/2010/03/14/what-a-nodal-market-means-for-texas-and-ercot/
• https://www.electricchoice.com/blog/texas-launches-revolutionary-nodal-power-grid-how-will-this-affect-your-bill/

While many of us love ogling a historic-looking building and subscribe to the “if it ain’t broke, don’t fix it” philosophy, there is one thing lacking in old buildings:

Energy efficiency.

If you work or live in an older building, listen up. Here’s your guide to applying new energy-saving tricks to old buildings while still maintaining that historical charm.

The Old Reality

According to the U.S. Energy Information Administration, as of May 2018, 18% of the energy used in the United States goes toward powering commercial buildings. Another 32% goes toward industrial activities and 20% powers residential homes.

Unfortunately, research has shown that about 30% of the energy used in commercial buildings is wasted. In fact, by implementing a few strategies to increase energy efficiency, commercial buildings could eliminate that wasted margin.

Mindset Matters

Energy use is practically invisible. Unless you’re staring into the lights above your head contemplating the amazing way they function, you’re likely not thinking about your energy consumption.

That’s why it’s so important to start with a mindset shift. Whether you want to see a drop in your energy bill before the end of the year or you want to make saving 30% on your total energy expenses in 2019 a New Year’s resolution, make a deliberate choice to reduce how much energy your buildings use.

One way many property owners have found success in making this mindset shift is by looking at the actual numbers in their energy bills. How much energy did your building use last month? How about the same time last year? By comparing monthly usage statements – especially for months that have had similar weather patterns – you can get a concrete idea of what your energy consumption has been.

Then, you can deduct 10% and set that as your next month’s goal. Once you achieve that goal, cut back another 10%.

You can also use the “Point, Aim, Shoot” approach to develop a more comprehensive strategy for setting and meeting your energy efficiency goals.

Not sure how or where to cut your energy use? Let’s dive into that now.

Establish Best Practices

If it’s your place of business or house, you set the rules! Whether we’re talking about commercial or residential property, the person who pays the utility bill typically carries the most clout. This means that you’re in the perfect position to establish some best practices that will help reduce your building’s energy use and thereby lower your energy bill.

Start by creating a list of best practices you want your team to follow for operations and maintenance around monitoring, lighting, and office equipment. Some of my favorites include:

• Stopping by your building at night to see what’s on after-hours that shouldn’t be. This can be eye-opening for building owners and occupants.
• Establish power-on and power-down times for all office equipment.
• Schedule quarterly maintenance checks to ensure all heating, cooling, ducting, and lighting equipment is working efficiently and is free of damage.
• Establish a “No eyes, no lights” rule so that any room that is unoccupied is also unlit.
• Use “smart” power strips that ensure electronics and other equipment that are always plugged in are not drawing power when they’re not in use.
• Install UV window films, shades, or blinds to help maintain internal temperatures and to relax the demand on your heating and cooling systems.

Next, have a chat with everyone in your building about the importance of increasing awareness surrounding energy use. Introduce them to the list of best practices you’ve put together and encourage everyone to take these strategies to heart; most of these strategies will be useful to your team in their own homes, as well, and could save them money on their personal energy bills.

If you’re feeling generous, you could also incentivize good behavior and success. For example, if everyone bands together and helps you achieve your goal, provide lunch for the entire team or raffle off a smart thermostat. Ask for recommendations for incentives in order to build individual investment in the process.

“Retro” Is the New Cool

Retrofitting, that is.

As you begin to make mental and behavioral shifts toward reducing your energy use, prioritize strategies that will give you the biggest bang for your buck. Improvements that require capital expenditure but result in quick and dramatic ROI are your best bet.

Changes that take 2-4 years or less to recoup the investment are going to yield the biggest results. For example, retrofitting lighting fixtures with low-energy LED options can significantly reduce your energy costs over time.

Commercial lighting accounts for 44% of energy use and is one of the easiest pieces of the pie to control. In fact, simple control measures could reduce your lighting expenses by 10 to 30%!

Eliminate lamps that are redundant or inefficient due to overhead lighting.

• Replace bulbs and/or fixtures with high-efficiency options.
• Rearrange furniture or use window shades or films that block the sun’s energy but allow light to pass through in order to maximize natural lighting during the day.
• Set lights in common areas on a timer so they always turn off at a specific time of day even if the last person to leave forgets.

What other ways could you reduce your lighting use? Get the other people in your building talking and brainstorming options to foster a team attitude toward solving your energy use problem.

Monitoring Is Key

Sure, it’s nice and convenient to use the “set it and forget it” method for space heating and cooling. But that method leads to a great deal of energy waste.

Instead, make it a habit to check your building’s thermostat in the morning, at midday, and in the evening. If you live in a region of the U.S. that experiences dramatic temperature swings from morning to midday, adjusting your heating or cooling settings accordingly can save some major kilowatts.

If you are willing to make small to moderate investments, consider installing smart technology solutions. Smart thermostats and apps make the process of saving on your electric bill less labor-intensive without spending a fortune on building controls.

Similarly, meeting rooms and offices that are heated or cooled independently are often neglected. For example, it’s common to hold a team meeting in a conference room and to set the thermostat to 65 to make sure everyone is comfortable. However, most people leave the air conditioning on when they leave the room, which means the room stays nice and chilly with no one there to enjoy it.

Monitoring the actual needs of your heating and cooling systems can go a long way toward reducing excess energy use and lowering your energy bill.

By starting to take these energy-saving measures, you’ll begin to see significant results in the form of capital savings, which can be applied to larger projects or those that require a bigger investment. Making energy-efficient improvements also boosts morale as upgrades make occupants happier and increase the value of your property.

By shifting your mindset toward thinking of energy efficiency as a process that requires continuous improvements and optimization, you can reach your energy savings goals and share the pride with your entire community.

If you’re not sure where to begin, talk with a trusted energy advisor to create a plan that is perfectly tailored to you and your properties.

Resources

1. U.S. Energy Information Administration. How the United States uses energy. (2018). https://www.eia.gov/energyexplained/index.php?page=us_energy_use
2. Stauffer, N. W. (2013). Reducing wasted energy in commercial buildings. http://news.mit.edu/2013/reducing-wasted-energy-in-commercial-buildings
3. Energy Star. Buildings & Plants: Save energy. https://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/save-energy
4. Lucia Power. LMP-Tx. (2018). The Right Approach for Your Energy Efficiency Projects: The Case for Comprehensive Solutions. https://www.lmptx.com/blog/the-right-approach-for-your-energy-efficiency-projects
5. Energy Star. Buildings & Plants. Low- and no-cost energy-efficiency measures. https://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/save-energy/stamp-out-energy-waste

Your energy bill is one of the biggest factors impacting your bottom line; however, most business owners consider their energy bill a non-negotiable expense they’re forced to swallow.

Not true.

There are steps you can take to get the best deal on your energy contract and give your business more room for profit.

• Understand the Energy Market
• Keep Tabs on Regulation
• Know What to Lock In, Or Don’t
• Scrutinize Your Contract
• Don’t Be Afraid to Ask for Help

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1. Understand the Energy Market

Energy prices are constantly in flux due to a tug of war between supply and demand factors.

For example, factors such as extreme temperatures – like the heat wave we survived this summer that set record-breaking usage peaks or the brutal cold snap in January 2018 – and a 25% reduction in ERCOT’s coal generation put stress on the supply-demand chain. Households and businesses require more energy to cope with the wide temperature swings, yet there’s less power being generated due to the retirement of less efficient coal plants, such as Monticello, Pearsall, and SR Bertron. [2]

On the other hand, there’s never been a better time for natural gas and renewable energy sources, which supports the state’s supply when demand skyrockets. In fact, 38.8% of the total Texas electricity generated in 2017 was derived from natural gas. [2] While renewable sources of energy – such as wind – contribute significantly less energy to the mix, that contribution percentage has been steadily growing since 2010. [4]

Both demand and supply are variable as the United States attempts to figure out the energy puzzle, which translates into volatile energy prices for customers.

2. Keep Tabs On Regulation

The Electric Reliability Council of Texas (ERCOT) is the electric grid that serves 90 percent of Texas businesses and households.

Earlier this year, Texas electric prices doubled in the first quarter in response to the high demand and diminished coal-based energy supply. With Texas energy customers breaking records in energy usage throughout the year, ERCOT is uncertain about their ability to keep up and, as a result, prices have shot up.

Thankfully, ERCOT has announced that their Fall 2018 projections show that the energy supply will be able to meet demand, and things are looking up for winter. [5] However, a large part of this optimism is due to improvements in infrastructure, which have been quite costly. [6] Those costs are passed on to energy consumers in the form of more expensive utilities.

For example, according to the U.S. Energy Information Association (EIA), Oncor, Texas’s largest energy utility and part of ERCOT, “is planning to spend $1.2 billion to upgrade aging infrastructure and build new lines to accommodate large increases in electricity use associated with oil and natural gas extraction in the Permian Basin.” [6]

3. Know What to Lock In – Or Don’t

Fixed-price energy rates are attractive because they help business owners create budget stability. However, don’t be fooled by the word “fixed.”

A fixed energy-only product is not the same thing as a fixed full-requirements product. To complicate matters, the terminology is not necessarily consistent from one supplier to the next. Educating yourself about the various components and jargon used to describe these products is key to saving on your energy bill and avoiding pricey surprises.

While you may be offered a “fixed rate,” it may not include unknown or unrealized cost components required for service. For example, a fixed energy-only product may hold your commodity portion steady, but does not lock-in all cost components which may be highly volatile.

Selecting a contract based on “sticker price” alone could result in detrimental effects to your anticipated budget.  Non-energy cost components such as transmission and ancillary services include the fees associated with operating and maintaining an electric grid. These fees are often defined broadly, which means they can include everything from infrastructure changes to changes in usage calculations to tariffs and rate class adjustments.

Taking into account your business’s propensity for risk and how these components relate are key to shopping like an expert.

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4. Scrutinize Your Energy Contract‍

Another important term to know is “MAC,” or material adverse change. While some form of this language, also referred to as a “regulatory change” clause, is in every energy contract, the way it is used may mean that your energy price could be changed from a fixed-price structure to one that includes deferred pass-through costs until they are realized on your bill.

Again, a huge mistake business owners make with regard to their energy contract is going straight to the listed price, assuming everything is included, and making a decision based on that figure.

Doing so is the equivalent of looking at the list price of a car and buying the cheapest option without seeing the actual product you’ll be driving off the lot.

Instead, use your newfound knowledge of the energy market, infrastructure changes, and terminology to take a closer look at the language that could be used to change “fixed” price products to pass through costs to your bottom line.

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5. Don’t Be Afraid To Ask for Help

It can be intimidating and time-consuming to shop for an energy contract smartly. While some business owners have a natural knack for negotiating complex contracts and deals with energy suppliers, others would much rather dedicating their time to running a business they love.

With enough time and research, you can become an expert at most anything. However, outsourcing energy management may be a better use of your valuable time.  In addition to scoring the best price, you can be sure you’re getting a great deal on what you truly need without any bank-breaking extras.  Asking for help from an energy advisor will mitigate risk and save the most precious commodity – your time.

Energy contracts may look intimidating, but you’re absolutely capable of understanding this critical aspect of your business.

By following these steps, you can up-level your business skills and protect yourself against tricky contract terms:

• Understand the Energy Market – Learn about which factors are driving supply and demand, and whether or not your grid is equipped to keep up.
• Keep Tabs on Regulation – Changes to infrastructure, tax laws affecting energy companies, tariffs, and energy laws can translate into significant pass-through costs to you as the consumer.
• Know What to Lock It In, Or Not – While “fixed price” may sound appealing, understand the context of the offer by reading the contract carefully for key terminology.
• Scrutinize Your Contract – Read your contract in full to understand exactly what you’re getting and not getting in your deal.
• Don’t Be Afraid to Ask for Help  – If you still have questions, consult an energy advisor for help. Rather than fearing the process and rushing through it to get it off your to-do list, it may be more efficient to outsource this critical purchasing decision.  time to enlist the help of a trusted energy advisor.

If you ever have any questions about your energy contract, don’t be afraid to ask. Post a question in the comments below or contact me.

Resources

1. Electric Reliability Council of Texas: www.ercot.com
2. http://www.ercot.com/content/wcm/lists/144926/ERCOT_2017_State_of_the_Grid_Report.pdf
3. “As 2018 Energy Prices Increase, Should You Lock In Rates?” from The Data Center Journal: www.datacenterjournal.com/2018-energy-prices-increase-lock-rates/
4. “Energy Trends To Watch In 2018” from Electricity Plans: https://electricityplans.com/energy-trends-to-watch-in-2018/
5. “ERCOT Expects to Meet Fall Demand, Optimistic About Winter” by ENGIE Resources: https://www.engieresources.com/ercot-expects-to-meet-fall-demand,-optimistic-about-winter
6. “Utilities continue to increase spending on transmission infrastructure” by U.S. Energy Information Administration: https://www.eia.gov/todayinenergy/detail.php?id=34892
7. “Three Components of an Effective Energy Management Strategy for Health Care Facilities” by Constellation: https://blogs.constellation.com/energy-management/three-components-of-an-effective-energy-management-strategy-for-health-care-facilities/

Shining Bright on your Bottom Line – More than Environmental Reasons

H-E-B, one of the region’s largest grocery chains operating more than 370 stores in Texas and Mexico, is shifting toward a more green-centric approach. The company reports that 6 stores are LEED® certified. In a continued effort to “improve the use of natural resources,” HEB recognizes that there are business reasons for “lower energy costs.”

Additionally, AMLI Residential announced that it would be installing solar panels across four Dallas area communities. In collaboration with Green Mountain Energy Co., AMLI is also purchasing 100% renewable energy for all common areas in Houston and Dallas. Not surprisingly, the move reflected more than just corporate trends toward environmental responsibility – 85% of AMLI’s residents said sustainability is of the utmost importance.

The Lightbulb Epiphany within the Education Sector

According to the EPA Green Power Partnership report released in April 2018, Texas claimed 4 spots in the Top 30 K-12 Schools, using roughly 38 million kWh of green energy annually. In case you are wondering – that is a lot. About 3,500 homes power per year a lot.

It’s not just K-12 schools. Higher education and universities are following suit. Rice University, for example, is leading the charge in new solar technology with partnerships agreements like MP2 Energy’s (apart of Shell) 3 MW solar panels. Similarly, the University of North Texas ranks in the EPA Top 10 for green usage at the university level. Last year alone, the campus accumulated over 100 million kWh at a 100% green power percentage.

Because of the improvements in cost and technology associated with going green, renewable energy solutions are now viable for most businesses, schools, government agencies, and industrial plants. In fact, if you are not actively considering making the switch, you are potentially losing on significant, long-term upsides – including customer satisfaction and lower energy bills.

Sources:

1.     https://solarindustrymag.com/texas-city-adopts-100-renewable-energy-goal/

2.     http://www.multifamilyexecutive.com/design-development/green/amli-commits-to-100-renewable- energy-at-texas-properties_o

3.     https://www.epa.gov/greenpower/green-power-partnership-top-30-k-12-schools