Compared to residential solar projects, commercial solar projects involve a considerable degree of complexity. Part of that has to do with the number of players involved. In a commercial project, you will likely have to coordinate with many more organizations and individuals. These include the building owner and tenant(s), an engineering firm (if you don’t do all the engineering in-house), local permitting agencies, financing partners, and third-party organizations that commission the system.
The roles that solar companies take in commercial projects also vary. It’s common in commercial solar for several different firms to manage different aspects of the work. Depending on the skills of your solar company and the scale of the project, you may be involved in only the project design or installation, or oversee the entire process.
In this article, Part Two in our Unlocking Commercial Solar series which delves into a variety of aspects of commercial solar, we discuss the different actors involved in commercial solar projects. If C&I solar is new to you, we hope this article (and series) help you get the lay of the land!
Who’s Involved in a Commercial Solar Project?
Let’s take a look at some of the different actors that play a role in a C&I solar project, including the customer(s), the organizations that facilitate different parts of the project, the external organizations whose approval is needed for the project to proceed and operate, and the financing providers. We’ll discuss how each of these entities fits in and what they do.
The Customer
It goes without saying that you’ll be working closely with the organization choosing to install solar, but what that looks like in the commercial sector may be less straightforward than a residential project. For one thing, the commercial building owner—who makes the decision to install solar—may not be the same as the organization occupying the building. Depending on the project you may also need to coordinate with the building occupant; they may even be an integral player in the process.
The Property Owner
The key stakeholder you’ll be coordinating with during the sales process and throughout the project is the owner of the property where solar will be installed. They will be the ones to decide if the solar project is worth investing in. As we discussed in Part One of this series, the type of customer can vary widely—from a local “mom and pop” shop to a major corporation.
And, despite the name “commercial solar,” government entities, schools, and even non-profit customers are also included in this sector. The type of customer and project site that you’re working with will play a major role shaping the sales, financing, and project development process.
We’ll delve into the commercial solar sales process in more depth in a future article, but it’s crucial to understand the goals and concerns of the building owner to close the sale. For instance, if the company that owns the project site leases it to a tenant and doesn’t pay utility bills for the property, then energy savings won’t be enticing to them. But highlighting other solar benefits—like tax savings, increased property values, or the ability to get longer leases from tenants could be what closes the sale.
The Building Tenant (sometimes)
If the building owner is not the occupant, you may also need to coordinate with the tenant of the building. For instance, you might need to coordinate with them during the installation of the project to ensure roof access. In some cases, the tenant may be a core stakeholder helping to drive the development of the project.
For example, as we’ll discuss in a future article in this series on C&I solar financing, in some cases the project financing can involve a lease agreement between the building owner and the tenant in which the tenant agrees to purchase the resulting solar power from the building owner. In this case, the tenant company may be actively involved in the sales and project development processes.
Parties Involved in Implementing the Solar Project
As noted above, the process of designing and installing a commercial solar project and obtaining the necessary approvals for the system to operate involves many different players managing different aspects of the project.
In fact, as noted in our profile of a commercial solar project designed in Aurora for the International Brotherhood of Electrical Workers, this is one of the reasons for the greater complexity in the sector. Not only are there more actors who need to coordinate, this division of responsibilities between companies can make it “challenging for electrical contractors who want to transition into a leading role to gain familiarity with the full range of project requirements.”
Here we detail the different organizations involved in a commercial solar project and what they do.
Prime Contractor / EPC
Companies experienced with this kind of project development often serve as the lead and manage all aspects of the project from start to finish—either doing all parts themselves or coordinating with subcontractors. These companies are often referred to as EPCs (short for Engineering, Procurement, and Construction). The EPC will be the customer’s point of contact, and may retain other subcontractors for specific roles.
The exact arrangement varies by project. This Solar Power World article explains what an EPC does and highlights some of the different ways that project responsibilities can be structured.
Solar Engineering
The engineering requirements of a C&I solar project are significantly more complicated than for a residential project, as we discuss in our primer on some of the key differences between residential and commercial solar. As a result, it often makes sense to retain a firm that specializes in this area to ensure that the project is up to code.
A key part of this is reviewing the electrical engineering of the project and ensuring the system will function safely and effectively. In many cases, civil and structural considerations must also be evaluated, for instance to ensure that the roof can support the weight of the project and that the project can withstand wind and weather it will face.
The engineering firm will ensure that the project can pass permitting requirements, and will also typically manage the process of getting permitting approval.
Solar Design
Designing the solar installation is another key part of the process. This includes the selection of system components like panels and inverter(s), decisions about row spacing and panel tilt and orientation, and what kind of stringing configuration will be used. In commercial solar designs, factors like walkway requirements must also be considered. Sometimes the installation company will do the design, in other cases the engineering firm will design the system.
A robust solar design software program can be extremely valuable in streamlining this process and ensuring a quality design from the outset, particularly for very large projects. For example, Aurora provides solar designers with tools for automatically detecting similar roof obstructions so that they don’t have to model hundreds of skylights or vents by hand. It also offers automated stringing, precise simulation of energy production and how much the customer will save given applicable utility rates.
Solar Installation / Construction
Installation is of course a key element as well. Sometimes the construction and installation of the project may be done by a subcontractor, or it may be implemented the same firm that did the design (and sometimes engineering). Installation expertise and attention to detail are essential to ensuring a quality system that will pass the commissioning process, which we’ll discuss in the next section.
Project Approval
There are several other entities involved in providing the necessary approvals for a commercial solar project. These include the utility, which provides the interconnection approval and permission to operate necessary for grid-connected PV systems, the local government permitting office, and (sometimes) a third-party organization that conducts project commissioning.
Local Permitting Office / Authority Having Jurisdiction (AHJ)
The local government in the area where the commercial solar project will be constructed will have specific permitting requirements to ensure that the project meets all applicable codes and standards, including local and state requirements. Much of the information necessary for the permitting process will come from the engineering firm, which will often manage the permitting application.
Permitting approval will come from the local “Authority Having Jurisdiction” or AHJ. Typically this is the local building department, but multiple agencies may be involved depending on the project. Among the code requirements that the project will be reviewed for are fire codes, building codes, and the National Electric Code. An inspection of the installation will be conducted by the AHJ prior to permit approval.
Permitting is widely acknowledged to be a significant pain point in the solar development process (for both residential and commercial projects. This is because permitting requirements vary so significantly, making it near impossible for developers to standardize their application processes, and due to the significant amount of time this process often takes.
The Electric Utility
The utility is also a critical player in a commercial solar project (assuming it is not a freestanding off-grid system). Because a grid-connected PV system will be feeding electricity back to the electric grid the local utility must grant permission for the project to connect to the grid.
Before the installation process begins—and typically before any financing agreement is approved—interconnection permission must be granted by the utility. To obtain this, an interconnection application is submitted with information about the system design, the property, and historic energy consumption at the site. Typically the installation company manages this application.
For commercial projects, it is sometimes necessary to upgrade transmission equipment to ensure that the grid can handle the volume of electricity that the system may send to the grid. These upgrades will also be reviewed by the utility in its consideration of the project.
Later, once the PV system is completed, utility approval is required again to give the system “Permission to Operate” (PTO). This often involves a site visit from a utility representative to inspect the system and ensure everything meets their requirements.
Commissioning Firm
After the installation and interconnection of the solar project, commissioning is an important final step in the process to ensure that the completed project is up to standards and will meet the needs of the client. As a report by the U.S. Department of Energy’s Better Buildings Alliance program explains, this process is often done by an independent third party to avoid conflicts of interest, though the design and/or installation firm may also conduct this process.
As the Better Buildings Alliance report explains, “The commissioning process is intended to identify [potential] failures and align the system with expected performance. Commissioning also serves as a quality and safety control process. This is the time when the contractor’s workmanship and adherence to safety requirements, manufacturer’s specifications, and engineering designs should be closely scrutinized.”
Solar design and engineering firm SepiSolar describes the commissioning process in detail in their case study of a 409 kW commercial rooftop system they were hired to evaluate before the asset owner purchased the system from a project developer. They highlight their review process and some installation errors that they flagged for correction before the deal was completed.
Financing Partners
Last but certainly not least, other key players are the financing institutions involved in funding the project. These may include banks or financing firms that specialize in solar and clean energy financing. On the other hand, if the company installing solar has the capital available, they may consider paying for the project outright and not involving external financiers. Because there are a wide array of ways that commercial solar projects can be financed with a variety of different actors, we’ll delve into financing in greater depth in a subsequent article in this series.
As you can see, part of the complexity of commercial solar projects stems from the many different actors and organizations that are involved in projects. Although there is a lot of variation in the structure of different commercial projects, having a clear understanding of the typical players in a commercial project and their respective roles will help you grasp what’s involved in this sector.
Stay tuned for subsequent articles in this series that will explore other aspects of commercial solar projects, including important considerations for how to sell a C&I project and financing structures for commercial projects and considerations for which financing options make sense in different situations.