Taking the Sun to a Whole New Level
Microgrid Energy is a company dedicated to people, profit, and planet. It does not just work on solar power, but rather emphasize energy efficiency that puts less of a drain on the grid. We spoke with Vice President of Business Development Steve O’Rourke about the solar prospects, the challenges the company faces, how rebates are affecting business, and the future of the industry as a whole.
Missouri voters passed an initiative petition in 2008 that required a Renewable Portfolio Standard (RPS), which would create a rebate of $2 per watt for solar power systems on customers’ properties and require utility companies to increase the use of renewable energy until desired targets were met. This would effectively create the solar industry in Missouri.
The two original owners founded Microgrid Energy in 2009. They complemented each other well, with CEO Rick Hunter having the vision and marketing skills and his partner having the technical and engineering expertise. Vice President of Business Development Steve O’Rourke joined in 2010 as a contractor.
“We differentiated ourselves from other solar companies in several ways. First, we focused our efforts on the commercial sector. More importantly, we emphasized the importance of energy efficiency along with renewables and talked about the building as an integrated whole – combining energy efficiency and conservation with clean, affordable solar energy,” explains Steve.
As Microgrid’s marketing efforts continued to attract residential business, it was ultimately decided that it no longer made sense to keep sending homeowners to its competitors. To serve both market segments required two different business models.
“We decided to create a sister business unit and brought in a separate ownership team to run that business. We rebranded the company as Microgrid Solar so that customers would have an immediate understanding of what business we were in,” says Steve.
Microgrid has always positioned itself as a ‘triple bottom line’ (3BL) company. When Rick Hunter started Microgrid, he wanted to create a company that was not solely motivated by profitability, but also by social and environmental responsibility. The sustainability movement received a tremendous boost when Walmart announced its intention to select vendors based in part on the sustainability of business practices. Microgrid always promoted the 3BL aspect of the company and how solar fit into its customers’ own efforts, but didn’t have formal accreditations to demonstrate that commitment.
Enter B Lab, a non-profit group that assesses companies around the world on factors of environmental and social performance and issues certification.
“When we discovered B Corp’s certification program, Rick immediately saw a great opportunity to validate our long-held claims with a third-party verification program,” says Steve. Microgrid’s business emphasis on clean energy for the environment, along with its business practices, yielded a particularly high score in the environmental category. Their participation in the St. Louis Green Business Challenge also provided a wealth of sustainability practices to implement.
“It’s not just about solar; it’s about energy efficiency,” says Steve. This has been Microgrid’s mantra all along. He goes further to state that energy efficiency is more of a journey than a destination because there is virtually no end to the number of ways to reduce the demand for energy. The company has always encouraged its customers to consider both because renewable energy can be a greater offset if one reduces the overall load.
The rebates made solar economically feasible in Missouri. Depending on the amount of sunshine available, financial incentives are necessary unless there are high energy prices, and Missouri has some of the lowest rates in the country. When Microgrid started, solar was selling for around $8 per watt, so the $2 per watt rebate was only about twenty-five percent of the cost. By 2013, commercial solar was selling for about $3 per watt, so with the tax credit and benefits, solar power was a near giveaway.
“We had to quickly staff-up to handle the increased demand. That year, the Missouri Solar Energy Industries Association (MOSEIA) supported an amendment to the state law to phase out the rebates over time so there would be a gradual reduction in the financial incentives,” says Steve.
Solar installers came from all over the country to take advantage of the selling boom. When the rebate was set to expire, Microgrid concentrated its sales efforts increasingly on solar, encouraging its customers to get their solar array while the incentives were at their peak. It now has hundreds of customers with whom it can work to improve energy efficiency.
“In our own offices, we implemented a variety of measures that a tenant could cost-effectively implement, like lighting and controls, power management and other policies. Our employees actively participated in ways to reduce our energy needs, both at work and home,” explains Steve.
When the rebate was suspended in 2013, it was sooner than anyone expected. Microgrid had to shift its sales focus quickly from solar energy to energy efficiency while ensuring that all of the systems sold in the fourth quarter of 2013 were installed by the rebate deadline of June 30, 2014. However, the payback on energy efficiency projects is not nearly as strong, and customer willingness to invest in those improvements much more limited.
Thankfully, in 2015, the Property Assessed Clean Energy (PACE) program gained some traction in Missouri. PACE enables property owners to invest in clean energy and energy efficiency with no capital outlay. The projects must have a payback within twenty years, and the project costs are paid from a special property tax assessment that is tied to the building rather than the business. This enables businesses to implement smart energy efficiency measures without having to use oftentimes scarce capital, which can usually be put to better use on projects with a high return on investment.
“So it’s simply an economic development tool for municipalities to use to improve their building stock and create local jobs. It also enables them to help meet any carbon reduction goals that they may set,” explains Steve.
Steve believes that solar energy is poised for tremendous growth in part due to the Federal Investment Tax Credit that was extended in December of 2015. The extension phases out the tax credit over five years, and projects have to be started (rather than be finished) by year-end to qualify for the credit. This gives Microgrid a great opportunity to continue to grow and reduce costs as energy prices continue to rise.
Solar has already established grid parity in several markets without the financial incentives. Grid parity is achieved when the installed cost of solar is equivalent to the cost of grid power. Since there are no fuel costs for solar, the systems are capital-intensive and require very little operation and maintenance over the twenty-five-year warrantied life cycle.
“When you purchase a solar array, you are essentially buying the goose that lays the golden eggs. When you take the net cost of the solar array – after the tax credit and depreciation benefits are fully realized – and divide that by the warrantied lifetime production of kilowatt hours of energy that are expected, you come up with a ‘levelized’ cost of energy, and that is almost always less than the current cost of grid power. As grid power continues to increase in cost, your cost of solar energy stays flat, so that provides the predictability that businesses want,” explains Steve.
In the technologies associated with solar, there are continual advances in traditional crystalline modules, along with the efficiency and reliability of the inverters that convert the DC power to AC power for grid-connected systems. When solar become more mainstream, there will be less resistance from permitting and zoning agencies, reducing the soft costs that make solar more expensive than it needs to be.
As advances in crystalline silicon push toward the theoretical maximum, the National Renewable Energy Laboratory (NREL) expects alternative technologies like thin film to provide greater efficiencies at lower costs. Since solar energy can be better harvested from more diffuse light sources with thin film, we may see that used more in the skin of a building. Traditional crystalline solar modules perform better in direct sunlight, and produce optimal results when they are facing the sun.
There are also solar cells currently in development that are transparent, which could enable us to harvest solar energy through windows. Hexagonal-shaped cells can be used to build solar roads, which could charge electric cars as they pass by.
“Much of this is still economically unfeasible, but then, so were the first solar panels that were introduced in the 1970s. But, it’s a great economic development tool to create good-paying jobs that are not easily outsourced,” says Steve.
Steve believes that eventually we may see solar become so mainstream that it becomes ‘plug and play.’ The market is already seeing solar modules with built-in inverters to produce AC power. As battery prices fall, there will be more pop-up solar arrays with built-in storage capable of powering lighting and electronics. There will likely be a rise in DC lighting and appliances to further lower the cost of solar by reducing the need for power electronics to a charge controller.
“We’ll also see improvements in building technologies so that new buildings are much more efficient, requiring half the energy that they currently need. This, combined with efficiencies in solar, will enable the net-zero energy building to become more common.”