Federal Incentives

The Federal stimulus package of 2008 included incentives to reimburse purchasers of solar energy systems – with no maximum limit. Time-frames and funds available are limited.

State Incentives

Virginia Governor Tim Kaine announced in October 2009 the release of $15 million in incentives for investment in renewable energy. Time-frames and availability are limited.

ROI (Return On Investment) Timeline

• Based on typical residential solar energy system of 5.5watts installed for $48k.
• Return on investment rate based on electricity rates rising at 8% per year.

Installation – Day 1

Contractor costs, initial investment.

State Credit – 3 months

Payback 30% (+/-) of system.

Federal Credit – 1 year

Payback 30% (+/-) off system.

Payoff – 5 to 10 years

Cost $0k

+ Free supplemental energy

One method of creating a solar panel is accomplished by following roughly these steps:

1. The solar cells are Cleaned
2. Several solar cells are Electrically Connected in Series
3. They are then Placed together in a frame
4. They are then Electrically Connected to the Frame
5. Protective glass is applied
6. Protective coatings are applied
7. All components are bonded together
8. The completed panel is tested

Simply stated, a Solar Panel is what you use to convert light from the sun in to electricity you can use.

Shockoe Solar from Bernie Stanley on Vimeo.

Several local contractors attended a meeting last week about the project, which is funded through the American Recovery and Reinvestment Act (known on the street as stimulus spending).

According to some Richmond solar companies, a stipulation on who may bid excluded any Virginian outfit from consideration. The guidelines require that the contractor have seven years’ experience performing photovoltaic solar installations and in that time have installed three 50-kilowatt systems.

“There aren’t three of those projects in the entire state,” said Bernie Stanley, who launched Shockoe Solar last year. “It precludes anyone from Virginia to even compete on this. We’re not even allowed to bid unless we meet the qualifications.”

Stanley estimates that the majority of interested vendors at the meeting were put out of the running by the qualifications, and only a handful of large out-of-state contractors will be able to meet them.

Stanley had planned to do a joint venture with Colonial Webb, another local contractor. But because neither company has the number of needed systems under their belt, he said he isn’t planning to spend any time putting a bid together.

Only 13 of 58 interested vendors listed on the FedBizOpp.gov site are from Virginia. Stanley said he spoke to a few out-of-state contractors who flew into Richmond for the meeting who said they wouldn’t be able to qualify, either.

Stanley said one of the few firms that would qualify was Maryland-based Sun Edison, which has been in the photovoltaic business for 20 years.

The proposed system is between 115kw and 200kw, which is relatively large compared with most installations. But Stanley and other local firms say that just because it is bigger doesn’t make it more complex.

“It doesn’t matter if you do one, 10 or 20. You’re just multiplying,” said Stanley.

“They’ve set these qualifications as if there is some sort of mysterious complexity involved in these large projects,” said Stanley. “It’s not easy, but it’s not rocket science, either.”

He believes they were set that way to make it easier for the GSA to review each contractor’s qualifications and check references, figuring that if they had done three large systems then they must be qualified.

But Stanley said that with such narrow qualifications it’s likely only two or three firms will apply, and that means less competition and a higher price.

According to the request for qualifications, the project cost is between $1 million and $5 million. The funding is part of a $1 billion stimulus appropriation to make green improvements to government buildings across the country.

“It would cost $1 million to $1.2 million if it was done by a local contractor. I guarantee it will cost at least $2 million if someone out of state does it,” said Stanley. “It will be considerably higher, and the taxpayer will have to pay for it.”

Stanley said he has written a letter to the GSA expressing his concern and said his input was received and would be discussed. But Stanley isn’t holding his breath that the qualifications will be amended before the Oct. 16 due date.

Stanley isn’t the only solar installer crying foul.

“At a time when stimulus funding is being distributed and intended to stimulate the local economy, it’s really discouraging that the qualifications are like this and it’s going to go to someone out of state,” said Blue Crump, founder of Cityspace Solar.

Crump said it appears as if the qualifications were tailored for a small group of particular companies.

He said his company still plans to bid the contract and is searching for an out-of-state contractor to partner with in order to qualify.

“At least trying to keep some of the federal dollars intended for Virginia here,” Crump said.

The winning company could send in their own crew and board them in town until the job was done, or it could end up sub-contracting a share of the work to a local company.

“What I do see often: Because out-of-state contractors can meet these specific qualifications, they are awarded the job, they get more funding and more money for the project, and still try to subcontract it,” said Crump.

The GSA official overseeing the project did not respond to requests for comment.

Also of note to BizSense readers who follow green energy, Gov. Tim Kaine will announced the details of a new stimulus-funded incentive for alternative energy systems available to businesses and individuals today.

Al Harris covers green energy for BizSense. Please send news tips to Al@richmondbizsense.com.

The General Assembly rejected a $2 million tax credit program for renewable-energy systems this past session, but that’s small change compared with the $39 million in federal stimulus money the state of Virginia wants to dedicate to fund development of solar and wind energy systems.

That is more than half of the $70 million the state will receive from the U.S. Department of Energy to fund energy programs. The state Department of Mines, Minerals, Energy is in the process of divvying up those funds and seeking final approval from the federal energy agency, according to the Washington Business Journal.

Officials said they plan to divide the $39 million three ways: one pot for local schools and government buildings, one pot for state-owned buildings including universities and prisons, and another pot to pay back residents and business who install systems. The programs could start as early as July, according to state officials.

Jeff Yago, who has headed DTI Solar in Gum Springs for more than 30 years, said incentives for residential and commercial systems would be helpful to the burgeoning state solar industry.

“Virginia doesn’t have anything along the lines that other states do; for example, Maryland and North Carolina have good incentives for solar,” Yago said. “Because electric rates are fairly low here in Virginia, it would be nice to have something help to make systems more economically attractive to homeowners.”

Yago said even though many industries are suffering through the recession, solar is still growing because of continued media-driven interest in “green” energy. His business, which designs and installs systems across the country, has grown steadily every year and hasn’t dipped during the recession.

“We tend to deal with higher-end clients,” Yago said. “Most of our projects I would classify as custom design work.”

Yago also offers training programs to people interested in getting into the solar business. He said the number of people contacting him about training has quadrupled from the previous year.

One of the solar business newcomers trained by Yago is Livewire owner Henry Clifford.

Clifford has incorporated solar installations into his existing technology integration business he started eight years ago. At the time he said he took a gamble on an emerging trend, and now he is confident solar is the next big bet.

“The adoption curve is well established,” Clifford said. “We are in the early adopter phase — these folks may be ‘green’ with a lot of money, or they think it is neat, they want publicity for their company or they are looking for a tax shelter.”

Clifford is preparing for the spike in demand when the state decides how to spend the energy stimulus.

“I’d say demand right now is fairly flat given the environment, but I anticipate in the coming months we will see a tremendous spike,” Clifford said. “The way we are positioned is perfect because we can scale up as soon as the market decides to scale up.”

Clifford said he has the capability to execute one to four jobs a day, but he is still waiting for the “skies to open.” He said that government support is the key to unlocking the flood gates. With solar energy three times move expensive per unit than Dominion’s rates, he said government incentives are needed to kick-start the industry.

“Germany is a world leader in solar,” Clifford said. “And that’s the way they did it.”

Bernie Stanley is another recent addition to the local solar industry. BizSense profiled his business Shockoe Solar in January. He had just completed his first installation and was the only employee.

Now he has completed six projects and hired three employees.

Stanley is slightly more conflicted when it comes to government subsidies for solar.

“I am very excited for Virginia to have an influx of funds for renewable energy,” Stanley said, “but I would rather see solar and renewable energy survive and thrive as a natural progression with capitalism as the mechanism.”

Stanley recently finished the first residential photovoltaic system to go through the permitting process in Hanover County. He is currently working on a project with the Better Housing Coalition to install solar photovoltaic electricity and solar hot water systems on a new day-care center being built in Richmond’s Northside.

He anticipates hiring two additional employees to take on the anticipated increase in prospects coming later this year.

Stanley has been working hard to get his name out there by registering as a vendor with the state, running advertisements and setting up an information booth at the Strawberry Hill Races and the Richmond Earth Day event. He said his competitors are doing the same.

“I have architect and engineers tell me they were getting ready to talk with someone from North Carolina or Maryland,” Stanley said. “They don’t know we are here so we are screaming out as loud as we can.”

With a well-funded slate of incentives coming their way, the spotlight is starting to shine on the the area’s many forward-thinking solar startups.

It isn’t just happening in Richmond, either. The Virginian-Pilot reported last week about growing alternative energy industry in Hampton Roads.

Stanley, as far as he knows, is the only solar panel installer in Central Virginia. But that could change if Gov. Tim Kaine’s proposal to give businesses and residents a tax credit for going solar is approved by the General Assembly.

As part of his Renew Virginia initiative, the governor wants to give a tax credit of up to $8,000 to individuals and $20,000 to businesses for installing photovoltaic systems. The amount would be determined by the size of the system, with a $1,000 credit awarded for each kilowatt the system produces. (For example, a four-kilowatt system would be eligible for $4,000 and would produce four kilowatts at any given time.)

Virginia homes and businesses are already eligible for a 30 percent tax credit from the federal government, but it hasn’t quite been enough to stimulate the industry here. Stanley said solar contractors in other states are watching and waiting for state incentives before setting up shop in Virginia.

“As soon as state incentives come into play, they are going to swoop down like a hawk,” Stanley said.

But Stanley hopes his head start will put him ahead of the curve if the incentive plan is approved. He has already been approached by Dominion Virginia Power, AlphaGraphics and a commercial developer, which are interested in the possibility of installing solar systems.

He said his local roots and contacts will give him a competitive advantage down the road when out-of-state companies come to cash in on the potential boom in solar demand.

While Stanley waits for his next solar client to commit to a project, he will focus on promoting the business. He spent a few thousand dollars on radio ads, which have generated about eight calls in the past two weeks. He also bought a pink ’85 Cadillac limousine that he is decorating with logos to draw attention to the company.

Stanley’s new beginning as a solar panel contractor is a direct result of the bad economy. He has spent the past decade working in home construction, specializing in building home additions. In the past year, he has gone from building a new addition about every month to just one every few months.

“You couldn’t sit and watch the news and wonder what kind of job I ought to get and not see the word ‘solar’ pop up,” Stanley said.

He started to research solar panels and found a training class with Sharp Electronics in New Jersey. The class was sold out, but Stanley signed up for the waiting list. A spot opened up, and Stanley spent two days and $500 to learn about all things solar.

To be able to provide clients with the option to go solar, Stanley had to buy a Solmetric Suneye, a device used for measuring sunlight and calculating the amount of electricity that could be produced at a particular site. That cost about $1,800. Factoring in his travel expenses to attend the class, Stanley’s initial investment was close to $3,000, and that’s when he formed the company to capitalize on his newfound solar know-how.

Stanley’s first project is the solar array at Locke A. Taylor’s veterinarian clinic. The 5.5 kilowatt system will only provide a small portion of the building’s electricity, but it will produce about 5,900 kilowatt hours http://en.wikipedia.org/wiki/Kilowatt_hour a year and provide about $90 in monthly savings. The average household uses more than 10,000 kilowatt hours a year, according to the Department of Energy.

The total price tag for the 24-panel system is $43,000; Stanley’s profit margin is about 20 percent. Part of the clinic’s cost is defrayed by a federal solar incentive of $13,000. The clinic will also be eligible for an additional $19,000 in accelerated depreciation benefits over several years.

If the state incentives were in effect, the clinic would be eligible for an additional $11,000 tax credit, which would bring the cost to them down to nearly nothing in the long run. Stanley said the clinic expressed interest in installing a second array of the same size if Virginia’s incentive plan is approved.

Kaine’s plan is capped at $2 million, with half allocated for business and half for individuals. Stanley said it is a start, but it really isn’t that much in the grand scheme of things.

“That’s 2,000 per kilowatt – that only adds up to 1,000 kilowatts of power you can produce for $2 million,” Stanley said.

But he said that is enough money for dozens of jobs here and across the state.

A 1,000-kilowatt system would produce enough electricity to run about 1,000 homes for one hour.

Stanley is the first to admit that going solar isn’t the cheapest source of electricity, but for businesses he said it is an effective public relations tool and an effective tax strategy.

“It won’t make financial sense to do it to save electricity; it has to be a PR thing. At some point along the way they have done the math and figured out the PR is worth it,” Stanley said of one of his potential clients considering installing solar panels.

Right now, without incentives, solar is generally too expensive for residential use. But Stanley says that as the price of coal-generated electricity rises and solar technology advances, residential solar will become more cost effective.

Al Harris is a BizSense reporter. Please send story tips to Al@richmondbizsense.com