The solar energy industry looks to a bright future
By Stephen Bennett
For fuel oil dealers seeking to diversify, selling and installing solar-powered systems is an option with renewed potential, experts said. The industry is looking forward to robust growth in part because a five-year extension of a solar investment tax credit was included in a tax and spending package approved by Congress and signed by President Obama.
The continuation of the tax credit “will lead to more than $133 billion in new, private sector investment in the U.S. economy by 2020,” Rhone Resch, president and CEO of the Solar Energy Industries Association, said in a statement after passage in December of the omnibus appropriations bill, which included the solar investment tax credit. “And much of this growth will come from small businesses, which make up more than 85% of America’s 8,000 solar companies,” Resch said.
Some fuel oil dealers have diversified into retailing and installing solar-powered systems, among them Falmouth Energy in Falmouth, Mass., whose owner and president, Christopher LeBoeuf, said of the tax credit, “To be quite frank I wasn’t sure if our solar business would be able to continue after 2016 if that had gone away. To have that federal tax credit in place is key to survival of that product at least for the next several years.” LeBoeuf added, “We didn’t invest as much into the business in 2015 because of the uncertainty of that tax credit going forward, but now that we know it’s going to be in play we can start pushing ahead with growing our solar business.”
Falmouth Energy launched its solar venture about four years ago. “We do primarily residential solar,” LeBoeuf said. “I wanted to be able to provide a solar energy product for the customer that has been with us, buying their home heating oil with us, who’s been coming to us for their plumbing services–the residential customer that knows us, that trusts us. Those are the customers that I wanted to do business with–and we have.” The company has signed up several new residential accounts as well, he said.
Installations tend to be for generation of electricity rather than for domestic hot water and space heating, LeBoeuf said.
“The financial benefit for residential customers on the solar thermal the past several years has not really been there,” LeBoeuf said, because of the comparative advantage of installing a high-efficiency natural gas, on-demand water heater, for example.
But LeBoeuf said, “I do see that changing. The price of doing solar thermal is coming down” in part because Massachusetts is going to be incentivizing customers to install solar thermal, he said.
In the meantime, “most of our [solar] business has revolved around the solar PV [photovoltaic] product to provide electricity for homes,” LeBoeuf said. “A lot of that is driven by state incentives. The state has instituted a solar loan program to allow more residential customers to own their own solar array rather than do a leased product. That’s going to help a lot more consumers enjoy the benefits of solar.” LeBoeuf added that he wasn’t counting on such incentives to last indefinitely. “Those are lessening as the industry gets a better foothold,” he said.
While solar is “not a huge piece of our business,” LeBoeuf said, “it’s still an important piece. It’s a product that I get excited about and it’s continued to grow for us.” The installation crew isn’t “out every day doing installations,” he said, but it “stays busy.”
Overall, Falmouth Energy’s solar business is trending upward. “It’s a long sales cycle with solar,” LeBoeuf noted. “We definitely have a lot of installations in the pipeline.”
The company has learned some practical lessons since it began in the solar business. Attending a solar energy exposition early on helped Falmouth Energy identify vendors offering products “we wanted to work with,” LeBoeuf said.
“There are lots of vendors out there that you can get your solar panels from, your racking and the other products you need for your installations,” LeBoeuf said, but buying direct from manufacturers could be problematic, he reported.
“We found that the best way for us is dealing with local electrical wholesalers,” LeBoeuf said. “That’s where we found the best service as well as access to product.” Before learning that lesson, he said, “we were getting stuff shipped in from across the country or the Mid Atlantic [and] we’d get 48 panels and one would be broken. Then you’re fighting with the shipper. We found that to be a hassle.”
Availability of product was an issue up until about a year ago, LeBoeuf said. When it started, Falmouth Energy was ordering a Japanese brand of solar panels, but after the tsunami in 2011 and the resulting Fukushima nuclear accident, panels from that manufacturer were in such demand in Japan that Falmouth Energy had to switch suppliers. Today the company is using panels made by LG Solar, part of LG Electronics, Seoul, South Korea. “Over the past year we’ve been able to have a steady supply of the LG panels that we like,” LeBoeuf said.
Arden Steiner, a principal of Affordable Fuels, a fuel oil dealer in Middleburg, Pa., is a partner in a company called Rayviance, which markets a solar-powered system by that name.
Bucknell University last year installed four Rayviance units at a science building on its campus in Lewisburg, Pa. The building’s heating and hot water are provided by a natural-gas powered steam boiler that needs approximately 400 gallons of “makeup” water per day–new water introduced to the system, Steiner said. The Rayviance units work to boost the temperature of the new water so that when it is introduced to the steam boiler “it’s not coming in at ground temperature,” which ranges from 58 to 70<deg. symbol F> depending on the time of year, Steiner said. The solar units can pre-heat the new water to about 120 to 180<deg. symbol F> before it is introduced to the steam turbine, which helps save Bucknell on consumption of natural gas, Steiner said.
Bucknell recently installed electronic controls designed to collect data on water flow and incoming and outgoing water temperatures, among other information, to document the effectiveness of the solar-powered installation, Steiner said. That information is expected to be available this spring. Steiner hoped the information would verify what he called one of the strengths of the Rayviance design–that the units can be integrated with existing systems.
“One of the preconceptions is that you have to make an investment above and beyond just the solar equipment that you’re installing, or that you need to replace everything,” Steiner said. In some cases that may be true, but not in all.”If you’re happy with your equipment, if it’s still functioning very well, we’re going to help you integrate,” he said.
The data from the Bucknell project should reflect savings in natural gas, Steiner said. “We’re hoping to see 20% savings in [volume of] natural gas” consumed, Steiner said. “That’s our goal.” But he said, “If we save 10% we’re going to celebrate.”
The technology of the Rayviance units was developed for a project by the U.S. Agency for International Development in Nepal in the early 1980s. The units, constructed with type 304 stainless steel, aluminum, Pyrex and copper, are designed for a 25-year service life and minimal maintenance, Steiner said. Aluminum was added in the past year to help the units better withstand saline in coastal environments, where, Steiner said, “even the best stainless steel, over time, will corrode to a degree.”
For end users, the price of the units, which are made in three sizes, can range from approximately $5,500 to approximately $7,500, Steiner said. For dealers, a gross margin on sales of the units should be somewhere around 25%, Steiner and his partner, Dries van Wagenberg, said. They stressed that variables, including what a local market will bear, can influence that margin. Installation fees would likely vary according to local markets, they added.
Steiner estimated that the return on investment for a homeowner “is looking to be five to seven years and commercially we’re looking at three to five years,” though he said those were conservative estimates that could be bettered in certain cases, depending on variables, notably the prevailing prices of electricity, oil and natural gas.
Bob Takvorian, a business associate of the Rayviance partners, and a veteran of the wholesale oil industry who is based in Peabody, Mass., noted the “strong correlation between the price of heating oil and [interest in] the solar application.”
“With the price of heating oil continuing to fall,” Takvorian said, “people’s interest in spending extra money to install solar” is not a given. Rayviance aims to address that challenge by playing up specific attributes, Takvorian said, including that the units incur no additional electricity cost, require little maintenance, and, of special interest to fuel oil dealers, offer potential for a “hold and grow” program.
“If the dealer is creative he can come up with programs to hold [onto] his oil accounts by locking them into some sort of a term with the Rayviance system,” Takvorian suggested. Offering free maintenance of the solar units, for example, “basically costs [oil dealers] very little money” and keeps the oil account, Takvorian said. If financing can be made available to homeowners, dealers can offer a lease program, Takvorian said, where the homeowner pays for a solar system over time. Through that approach dealers can add customers, and grow their solar business, Takvorian said.
Promoting a better understanding of solar-powered systems in general and of the Rayviance system in particular, is a continuing effort, Steiner and van Wagenberg, said. The partners tour with a custom-designed 28-foot trailer that contains a functioning Rayviance unit. “People wash their hands with warm water after a thirty, forty-five minute presentation,” Steiner said. The partners toured New England, New York State, parts of Ohio, a number of states in the south, and Canada to spread the word about the system, meeting with fuel oil dealers, and participating in environmentally-themed fairs. Among the highlights was an appearance at a Mother Earth News Fair, for people interested in a “sustainable lifestyle.” The partners are booked to attend three more such fairs in North Carolina, Pennsylvania and Texas in 2016. The partners said they made presentations to the operations manager of the Cleveland Indians baseball team and property managers in the Cleveland area last year. Many office buildings in Cleveland still use steam, and some property managers are seeking less costly alternatives, Steiner said. Microbreweries are a potential market for the systems, he added, because they “have a great demand for hot water in the brewing process.”
Rayviance, which is based in Lewisburg, Pa., currently receives most of its units from a factory in Malaysia, but is in the process of shifting manufacture to the U.S., the partners said. Some 15% of units are made in the U.S. now; the aim is to increase that to 30 to 40% by the second quarter of this year, and to as much as 70% over the following two years, they said. In the U.S. the units are made in a metal fabrication shop in Honey Brook, Pa.
Dairy farmers in Amish and Mennonite communities are prospective customers, the partners said, in part because dairy farmers must sanitize their milking system every day.
That the solar device uses no additional power appeals to that market, Steiner said.