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Solar Power & Light Aims for another Innovation That Will Put Even More

Power in Peoples Hands

Without question, the success of the solar industry still depends upon the

governments game changing policies. These policies enable solar to compete with

other forms of non-renewable energy production. On the federal level, it is theInvestment Tax Credit (ITC) that permits the owner of a solar system to receive a

tax credit for 30% of the systems total cost. On the state level, it is the Renewable

Portfolio Standard (RPS) that each state has chosen to adopt, or in the case of 26

states, not to adopt.

In Ohio, the RPS requires that electric utilities obtain an increasing percentage of

their electricity from solar generating facilities each year. In 2011, the solar

requirement is.030% of each utilitys total energy sales. If an Ohio utility company

sells 10,000,000MWh (megawatt hours) of electricity, then 3000MWh must come

from solar. So far 8 of the 24 RPS states have implemented a solar alternative

compliance penalty (SACP) for each MWh that a utility falls short of compliance. TheOhio SACP for 2011 is $400. To avoid the SACP, the utility can either build its own

solar farm to generate the 3000MWh, or it can purchase 3000 Solar Renewable

Energy Certificates (SRECs) generated by an independent solar generator, like Solar

Power & Light. Purchasing 1SREC gives a utility credit for 1MWh of required solar

electricity. Generally, as long as the price of an SREC is below the SACP, a utility will

choose to buy the SREC.

The purpose of this SREC in lieu of SACP policy is to incentivize the proliferation of

solar systems by creating bankable cash flows for the Solar Power & Lights of the

industry. This cash flow can represent 20-40% of the total project costs and greatly

reduces the time to a return on investment. The states set the solar requirementsfar beyond what the utilities could realistically develop alone, so there would be

predictable shortfalls, and thus, demand for independent developers (SP&Ls)

SRECs. SRECs are bought and sold through brokers, utility RFPs, and website

auctions, much like stocks or commodities are traded. One major difference

between an SREC and stocks or commodities is that there is no intrinsic value to the

SREC. The value is based on avoiding a legislated penalty, so if the penalty goes

away, so too does the value of the SREC. This could happen if the state government

repealed its RPS legislation or if utilities install enough of their own solar to meet

the RPS. In addition to the cost of the penalty, SREC prices are also determined by

good old fashioned supply and demand; which means the price could also plummetif independent solar developments exceed the RPS and flood the market with an

oversupply of SRECs. Conversely, if there isnt much solar installed, there will be a

low supply of SRECs and therefore a higher demand and price for them. To

summarize Economics 101, low supply leads to high demand and higher prices,

while excess supply leads to low demand and lower prices.

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Given a low supply of SRECs, there may be instances when utilities would pay even

more than the cost of the SACP for an SREC. This is because the RPS permits

utilities to increase their customers bills to offset SREC costs, but not SACP costs.

The SREC amounts to an equal increase in revenue for the utility, while the cost of

the SACP amounts to a direct reduction of profit. As long as the price of an SREC is

below the $400 SACP, a utility would choose to buy the SREC. In 2011, at an SACPof $400, the price of SRECs has ranged from $200-$401.

SP&L is pleased to report that its first SRECs from the buyCASTINGS.com system

were sold at the peak of the Ohio market, for $401 an SREC. This successful

transaction was a fitting capstone to SP&Ls inaugural solar development project. It

is a rigorous certification process to ensure the integrity of the SREC market does

not follow in the footsteps of other financial markets infamous corruptions. SP&L is

proud to have attained PUCO (Public Utility Commission of Ohio) certification and

approval to trade its SRECs through PJM GATS (Generation Attribute Tracking

System).

Since the sale of SRECs are integral to making solar projects bankable, SP&L is

encouraged by the recent strength of the SREC market that is exceeding analyst

projections. Even more so than the stock market, experts are at a loss to make

reliable predictions about the future of the SREC market. There are many variables

that can affect the value of an SREC, but most influential of all is state legislation,

and whether the politicians elected in the future will continue to enforce the pro-

environmental policies of their predecessors. The value of the SREC market is based

on the RPS (Renewable Portfolio Standard) state law. This law fines the utility

companies for either not generating a certain percentage of their power from

renewable energy, or for not buying the comparable amount of SRECs from

independent power producers who are generating that renewable energy, like SP&L.

What we know now is that the SREC market in Ohio is very strong, especially

considering PUCOs recent ruling to enforce the RPS and not let First Energy off the

hook for its 2010 renewable energy requirements. SP&L believes this is as strong an

indicator as any for the future strength of the solar industry.

There is no question that government policies are essential to the solar industrys

growth. And there is no question that the solar industry must continue to grow if it

is to provide job relief to the millions of unemployed Americans. What remains

questioned though, are the side effects of these game changing policies, known

more commonly as handouts, subsidies and incentives. Are these policies merely aProzac prescription for our depressed economy, or are they actually digging up its

problematic underpinnings and rebuilding a more stable and sustainable foundation

for Americans to build their lives upon.

Critics of solar energy complain about the subsidies required to make solar

competitive with other forms of energy. Critics argue that the beauty of our

Capitalist economy is that unsubsidized competition drives innovation to higher and

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higher levels until a new player can compete on its own two feet in the

marketplace. This necessity to beat the competitions price and performance has

been the mother of all the greatest inventions we cherish today. Critics contend

that if we start subsidizing, we risk cutting out this fruitful source of innovation that

our economic vigor depends upon. One cant blame these critics for coming to the

defense of our economys life giver. It is understandable how they see subsidies asa threat to her unbending crucibles fertility. What would happen if a foundry

weakened the walls of its crucible? The crucible would burn away and allow molten

metal to pour all over the floor. Instead of valuable castings, all that would be left is

a big mess. A similar outcome for our economy is clearly something we should

protect against, and since a competition of ideas is just as fruitful for the shaping of

public policy as it is for products in the marketplace, we have everything to gain by

answering this concern as thoroughly as possible.

The below chart illustrates there isnt a source of energy the government doesnt

subsidize. Nuclear and coal receive more than solar

The source of the big stink over subsidies is most likely being caused from the same

source of our environmental pollution, the coal and oil industry. Yes, subsidies for

solar increased 533% from 2007 to 2010, while subsidies for coal and gas

decreased 30%. However, the combined subsidies for these supposedly cheaper

forms of coal and oil are still 368% greater than for the solar industry in 2010. The

subsidies for nuclear energy are also 220% greater than for solar.1

1. Source: Energy Information Administration, Direct Federal Financial Interventions and Subsidies in Energy

in Fiscal Year2010, July 2011, http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

Of course, it isnt prudent to justify an argument for solar subsidies based on the

otherwise overlooked and thus socially accepted subsidies of coal, oil, natural gas,

and nuclear.

Possibly the justification for the RPS cant be properly explained by whether it is

weakening or strengthening the walls of the crucible. What the RPS is really doing is

making the walls transparent, so it is now possible to see the hidden costs of non-

renewable energy processes that have been overlooked and allowed to get away

with murder. These processes have been responsible for threatening the very

ecosystem that makes life on Earth possible. Even more important to defend

against than the threat to our economys sustainability, is our planets. Without ourplanet, there is no need for an economy. This order of importance is one that hasnt

come naturally to Capitalism; however this operating system for our economy is to

survive, it too must adapt to serve the values that allow for its existence. It cant

continue to elevate profit determined by Generally Accepted Accounting Principles

(GAAP), over net values determined by more conscientious standards. The GAAP

standards are not high enough to hold accountable a corporate America that has

http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdfhttp://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

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been trained to see more value in one dollar than a clean river. An economy that is

focused only on monetary appreciation will sell the oxygen out of its own lungs to

earn one last dollar before dying. If Capitalism is to persevere, it must recognize the

higher and deeper level of values to uphold and maximize - values that uphold life

and the reason for even having an economy.

Is the RPS enough. It is at least a start and the training wheels we so urgently need

to help us make early progress to redefining our countrys course to a sustainably

better future. I think it is without question that the quality of life made possible from

a more dependable and just economy is an outcome we would all be willing to

invest towards achieving. But in order for our economy to be dependable, the

values it aims to appreciate, must first lead to a dependable planet. If we are willing

to invest towards achieving a sustainable economy, then wouldnt we also be willing

to invest towards achieving a sustainable planet

The question though, is which career, company, stock, mutual fund, political party,

country, charity, church, or school system do we invest in for such achievement?

is not equipped to account for obsolete o and in need of hopefully in time for a

which The RPS penalties for pollution and corresponding rewards for RPS Thshould

be enough to redefine the values that our

Are we increasing the temperature

We are making them transparent

SP&Ls mission has always been to empower people with the choice of using clean

solar energy for less cost than using non-renewable resources that pollute the

environment. Along its way of providing this service SP&L remained on the lookout

for more opportunities to empower its customers and discovered an investment

opportunity that would do just that. Not only would this investment opportunity

empower a customer to

another opportunity to empower people. This opportunity is the investment vehicle

that SP&L believes

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that have been at the root of our

Make the RPS even higher by getting the public to invest in

Will utility companies lose? No, they will just be forced to compete in a new crucible,

not

The crucible

With

The innovative buyCASTINGS.com culture from which SP&L was born is

The

Government incentives

Solar Renewable Energy Certificates are the latest

Market is uncertain. Nobody wants to invest in a There wont be stability in this

market until its investors