Rooftop solar is becoming the new craze for homeowners and businesses located in certain deregulated energy states. Solar, along with its tax credits and financial incentives, allows energy consumers to reduce their electricity costs and participate in the energy transition. However, even the most efficient solar systems can’t meet the energy needs of certain commercial users, particularly during nighttime or periods of high energy consumption. This is where purchasing supplemental electricity from retail energy suppliers becomes critical. This article explores strategies for purchasing electricity in the retail markets to cover gaps in your solar energy production, ways to lower energy costs, and important energy contract language to consider.
Purchasing Electricity Supply With Rooftop Solar
During peak sunlight hours, commercial solar systems generate enough electricity to meet part or all of the building’s energy demand. Surplus production can often be exported back to the grid, and when solar production falls short, grid electricity is relied upon to fill the gaps and meet the building’s demand. This is typically accomplished through net metering energy policy where credits are issued to the consumer for overproduction, and utility energy rates are charged for grid consumption.
Businesses located in deregulated states can further reduce energy costs by shopping for electricity among several retail electricity providers. These third-party energy supply contracts allow the business to pay less for the electricity it is consuming outside of the solar production.
There are several key factors, however, to consider when shopping for electricity when your building has solar panels installed. Let’s explore some of these considerations in more detail below.
What To Consider When Purchasing Electricity When You Have A Commercial Solar System
Your business’s energy consumption patterns and the terms of the energy supplier’s contract are the two most important aspects to consider when shopping for electricity outside of your solar array.
Energy Usage Patterns
First and foremost, it is important to consider your business energy consumption patterns. Those with unpredictable loads, such as manufacturing facilities, might need to pay a premium to contract with a retail energy supplier for a fully-bundled fixed electricity rate. Since most suppliers pre-purchase energy futures to hedge their costs, the unpredictable nature of the load might cause the supplier to charge a risk premium. On the other hand, businesses with consistent, predictable loads should be able to negotiate more aggressive pricing with suppliers due to the lower level of risk associated with supplying them with electricity.
Bandwidth Contract Clause
All retail energy contracts contain energy bandwidth clauses, or swing clauses, that dictate the amount of energy a customer can use within a certain tolerance of the forecasted usage. Suppliers charge higher rates for larger bandwidth allotments and lower rates for tighter restrictions. If a customer uses power outside of the usage allotment, they are typically charged the going market rate for the excess power. On the other hand, when not enough power is used, the pre-purchased, fixed-rate energy is sold to the market for a profit or loss and affects the customer’s overall price for electricity. Customers should consider working with an energy broker or consultant to fully understand the price risk associated with these types of clauses.
Material Change Language
Material change language requires energy customers to communicate any significant changes in energy usage to the retail supplier before they occur or face penalties. Since suppliers take on the risk of the index market through financial hedging tools, they need to be aware of a significant drop in energy consumption. Installing a solar system in the middle of an energy supply contract could trigger a material change and come with hefty supplier penalties. It is best to understand the terms of your contract and how material change clauses are enforced prior to signing a third-party energy supply agreement.
Capacity & Transmission Tags
Energy capacity and transmission costs are calculated by capacity and transmission tags, which are a consequence of energy demand. Since certain solar energy systems can help users reduce peak demand, capacity and transmission tags should be looked at closely prior to signing a new supply agreement. While a standard commercial rooftop system will not reduce demand, a solar+storage system could lower a building’s peak demand. It is important to verify that the supplier is charging you based on your reduced capacity and transmission tags, and not the tags prior to the solar installation. Seeking the advice of an energy broker when negotiating these contracts is wise for businesses with solar and storage assets.
RECs
Finally, for businesses looking to participate in renewable energy and claim that they are purchasing 100% of their electricity from renewable sources, renewable energy credits (RECs) are important to consider. While the energy production from the solar array is considered to be green, the excess power needed from the grid may not be. Businesses can contract renewable energy from suppliers by purchasing RECs in the secondary market. Most retail energy providers offering green plans will bundle these REC purchases into the agreement and procure the necessary RECs on behalf of the customer. If 50% of a building’s load is covered by solar, and RECs are purchased for the other 50%, it can claim its power is from 100% green energy sources.
Want Help Exploring Renewable Energy?
Rooftop solar, when paired with tailored electricity supply agreements, represents a transformative approach to energy management. This hybrid setup not only reduces energy costs but also supports sustainability goals and ensures reliable power for businesses of all sizes. This can become an essential strategy for businesses seeking to stay competitive and environmentally conscious.
If you’re ready to optimize your energy strategy with customized electricity supply solutions, our team of experts can help you navigate the process. Contact us today to learn more about tailored energy plans and to maximize your savings.
