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Businesses across the U.S. are actively pursuing clean energy options to fuel their operations. Solar power in particular is more ingrained in our daily lives than ever before — even in your coffee! If you’ve visited a Texas Starbucks recently, you may have enjoyed a hot and steamy cup of solar-powered joe. In April 2019, the coffee company inked a deal to power 360 stores in the Houston and Dallas areas with solar energy.

And that’s just one example.

Several factors influence the decision to use solar energy, whether it’s to become more eco-friendly, meet investor demand for sustainable energy, or cut costs and increase profits. As more companies start seeing the switch to solar as a smart business decision, they must determine how to best achieve those green energy goals.

You don’t see solar panels atop your local Starbucks, so how is it powered by the sun?

To answer that question, we want to show how businesses – including yours – can adopt solar power as part of their green energy strategy.

How Businesses Get Solar Power: 3 Methods

Today, businesses have a plethora of options and tactics available if they want to become more environmentally friendly, but it often starts with an investment in solar. While solar panels can be a good start (since you have the available real estate on the roof of your building), they aren’t the only way to harness the power of the sun’s rays. In fact, your business has three main ways to make the switch to solar power, and they’re divided into two categories: 

  1. Offsite solar. This is the method used by Chariot Energy to provide solar to homes and businesses. By developing utility-scale solar farms that add solar-powered electricity to the electric grid, it does involve the production of SRECs.
  2. Onsite solar. This electricity is generated onsite and directly powers a facility. Since it isn’t added to the grid, it doesn’t involve the production of Solar Renewable Energy Credits (also referred to as SRECs), that are often traded in special markets. 

First, let’s dig into the details of offsite solar, as this is the strategy most companies pursue.

Offsite Solar for Businesses

It’s pretty simple: If a business claims it uses solar power and it doesn’t have panels feeding electricity directly into its facility, then it’s using offsite solar. This form of solar power involves the buying, selling, and trading of SRECs. As we discuss in a related blog post, these credits represent all solar power that solar energy generators, like Chariot Energy and our affiliates, generate and add to the grid. For companies who are looking to substantiate their reduction of greenhouse gas emissions and become a more environmentally conscious company, SRECs are a real, tangible way of doing so.

While there are many ways to buy, sell, and trade SRECs, the three most popular are as follow:

  • Tax equity investments
  • Power purchase agreements (PPAs)
  • Rooftop solar panel installations 

The latter of which is arguably the most popular form of investment in solar.

1. Solar Tax Equity Investments

Solar tax equity investments are an unorthodox investment, but nevertheless just as effective as other options for corporations. It’s a means of investing in specific solar projects, including the ones we work on at Chariot Energy. In fact, this is the type of deal Starbucks sealed with a solar power generator in April 2019.

Because of the intricacies of financial agreements, these investments can quickly become complicated. Thankfully, we’re here to help! Using our Starbucks example, here’s how solar tax equity works in a nutshell.

  1. Starbucks enlisted the help of the U.S. Bancorp Community Development Corporation (USBCDC) to facilitate the transaction in order to power its Texas stores regionally with solar power.
  2. With the assistance of the USBCDC, Starbucks invested in the development and construction of two solar farms to power 360 of its stores in the Houston and Dallas area.
  3. In return for its investment, Starbucks received SRECs to indicate its reduction of greenhouse gas emissions as well as offset its tax liabilities.
  4. By choosing this option, Starbucks intentionally invested in local solar infrastructure without putting panels on all of its stores. </p>

In essence, companies that select solar tax equity as an investment opportunity receive a two-fold benefit: not only do they buy green power in the form of SRECs, but they also help build local solar energy infrastructure.

2. Solar Power Purchase Agreements (SPPA)

The definition of an SPPA lies in its name: Companies agree to purchase solar power in the form of SRECs. The difference between PPAs and tax equity is that, rather than directly investing in the construction of solar projects, portfolios, and/or farms, power purchasers only buy the product (i.e. electricity) of solar power generators.

There are two types of PPAs: Financial PPAs (FPPAs) and physical PPAs (PPPAs). Here’s the difference: 

  • With a Physical PPA, your business actually receives the solar electricity purchased via your regional electric grid. 
  • With a Financial PPA, your business does not receive the actual solar electricity purchased. It’s added to another electric grid that’s not connected to your business.

Which begs the question:

Why enter a Financial PPA if you’re not actually receiving the electricity you buy?

It boils down to the SRECs and their ability to verify emissions reductions. While companies don’t actually receive any of the energy they buy, they’re still reducing their Scope 2 Emissions. These are the greenhouse gas emissions created by the generation of electricity needed to power a business’s facilities. Thus, the purchase does represent a substantial reduction in their greenhouse gas emissions via SRECs, which they must retain.

In contrast, companies who choose a Physical PPA do receive the electricity they purchase. This, in turn, enables companies to claim their actual facilities are powered by solar energy. They aren’t just offsetting their carbon emissions via other means.

In short, both FPPAs and PPPAs are financial arrangements; but in physical PPAs, power generators actually supply the electricity that powers a company’s facilities from the local power grid.

2.1 Energy Aggregation

A form of power purchase agreements, energy aggregation is the perfect option for businesses with smaller energy needs or for those that don’t have the funds to invest in the creation an entire solar farm (i.e. Starbucks). That said, even large businesses like Salesforce, Gap Inc., and Bloomberg have teamed up to buy solar power.

Here’s how energy aggregation works: Because it’s difficult for individual smaller commercial businesses to purchase renewable energy in bulk, energy aggregation enables them to team up and purchase green power in bulk. In turn, this lowers the overall cost for each of them. This method helps smaller companies use clean energy, no matter their size!

Onsite Solar for Businesses

 3. Rooftop Solar Panel Installations

Onsite solar is similar to offsite solar in that they both reduce Scope 2 Emissions. However, the difference is that, because onsite solar panels directly power the facility they’re attached to, their power doesn’t go to the grid. This means they don’t generate SRECs.

For a business to generate these credits, they must purchase power from generators that add electricity to the grid or sell the excess power produced by their onsite solar panels to the grid. Still, for companies such as Target, Walmart and Apple, onsite solar panels serve as a wonderful means of reducing their impact on the world while also significantly reducing or completely neutralizing their electric bills.

Weighing Your Options

As you can tell, you have lots to consider when you begin investigating solar power for your business. And so the question remains: Why do businesses choose one form of solar over the other? Actually, they don’t have to choose just one! Companies can implement a variety of these methods to lower their carbon footprint all the while reducing their operating expenses.

Are you a Texas business seeking to work with a Texas power company that uses green energy? Contact Chariot Energy today, and we can walk you through your complete set of options!

And hopefully, next time you get a coffee, you’ll think: This better be sunshine-brewed…

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