Los Angeles is currently facing a range of climate-related challenges such as severe drought, record-breaking temperatures, and devastating wildfires. In response to these increasingly frequent extreme weather events, the city has set ambitious climate and renewable energy goals. The Los Angeles Department of Water and Power (LADWP), the largest municipal utility in the United States, is working to support these goals through several solar programs: the Solar Incentive Program, the Community Solar program, the Net Energy Metering (NEM) program, and the Feed-in Tariff (FiT) program.
Here we will break down LADWP’s FiT program and explore how LA businesses can leverage it to lease their rooftop space to implement a new income stream.
LADWP’s FiT program does more than just help the City of Los Angeles meet its sustainability goals; it can also help local LA businesses realize a new source of revenue. By putting your building’s unused roof space to work with solar, you can enjoy consistent guaranteed income year after year for a period of 20 years. The current fixed price being offered by LADWP is 14.5 cents per kWh production for 20 years. With this in mind, Pivot Energy estimates the average payment to energy producers will be in the range of 60K-100K annually.
There are two main ways that businesses can implement LADWP’s FiT program. The first is through direct solar installation ownership. In this scenario (commonly referred to as behind-the-meter), a building owner purchases its solar array outright and the solar energy produced is used to offset the energy which is being consumed by the building. The other option for building owners (referred to as front-of-meter) is to lease their unused roof space to an experienced and trusted solar developer like Pivot Energy. In this scenario, building owners enjoy consistent lease payments from the developer without having to deal with LADWP fees, installation costs, or maintenance costs. According to a UCLA Luskin Center for Innovation report, these leases could total $6.3 million to $10.5 million in annual revenues for building owners in the City of Los Angeles.
Through the LADWP FiT program, local LA businesses can make money on their unused roof space while contributing to a cleaner energy grid and a more resilient city – it truly is a win-win situation.
A feed-in tariff (FiT) is a tool designed to promote investment in renewable energy sources by compensating energy producers (buildings or landowners) at above-market rates for the energy they export to the grid. FiTs typically involve long-term contracts (about 15-25 years) and a guaranteed price per kilowatt-hour produced. This security encourages investment in and development of renewables that might not otherwise take place. FiTs are used in the U.S. and around the world, where they have been particularly successful in Germany and Japan.
LADWP’s FiT program was launched in 2013 when the Board approved the 150 MW FiT Program. The original goal of LADWP’s FiT program was to encourage renewable energy development within the Los Angeles Basin to meet the state-mandated 50% Renewable Portfolio Standard by the end of 2030.
The program allowed for the construction of solar installations on commercial, industrial, nonprofit, multifamily, government, warehouses, carports, and unbuilt land within the City of Los Angeles. Through the FiT program, anyone who invests in solar (i.e., local building owners, solar developers, and third parties) can sell the electricity generated by their solar array back to LADWP at a fixed price for up to 20-years.
Already the largest FiT program in the nation, the LADWP FiT program reached nearly full capacity in September 2019 and was authorized a 300 MW increase from 150 MW to 450 MW shortly after. This expansion updated several important aspects of the program, including increasing the single project capacity limit from 3 MW to 10 MW.
As of 2019, LADWP’s FiT program has generated over $500 million in new solar investment for the City of Los Angeles and is projected to reduce 68,500 metric tons of greenhouse gas emissions annually once all projects are interconnected.
As we mentioned at the start of this article, FiT is one of several programs LADWP offers that support the City of Los Angeles’s climate and renewable energy goals. Another popular program for LA businesses is the Net Energy Metering (NEM) program. While FiT allows a building to generate revenue by selling the solar energy it produces back to LADWP, NEM enables a facility to offset its electricity consumption with the energy it produces.
Because of this, the NEM program only pushes building owners to size the installation to their individual energy needs. On the other hand, the FiT program strongly encourages the maximization of rooftop space utilization.
What’s great is that building owners don’t have to decide between the two. If you partner with an experienced solar developer like Pivot Energy, you can implement a hybrid installation that allows you to enjoy NEM incentives while maximizing your roof space for FiT solar generation.
If you are ready to start making money from your unused rooftop while simultaneously supporting clean energy in Los Angeles, Pivot Energy is here to help. We offer lease options that are simple to understand and that begin making you money as soon as your system starts producing energy.
Contact us today.