Solar Energy in
the Bakery
By Matt Lugar
Thank you, Matt. I want to commend you guys for
placing me after these guys, the energy efficiency guys
at Lime Energy. Typically speaking it is really good
to start with energy efficiency measures before you
go solar, but I am here to talk about solar energy and
what I would like to start out by doing is seeing a show
of hands of anyone in the room who has started any
research into going solar for their businesses as of now.
Has anyone done that research yet? All right, there are
a few out there. And then beyond that, anybody else
who actually has a sort of working knowledge has had
any education about solar? A little bit here and there.
Okay, good. Just to get a sense because I am going
to go into some Solar 101 in my presentation sort of
entry level stuff and it is get to gauge of what people’s
understanding is and their background.
(Slide 2) I will talk a little bit about who we are just very
briefly and then go into solar energy, how it works from
sort of a very practical level and how it works in terms
of interconnecting with the utility grid. We are going
to talk about financial incentives that are available and
the gentleman from Lime Energy also mentioned some
things about rebates. That is one of the incentives that
I will talk about.
The financial structures that are available right now in
the United States in particular to allow the facilitation
of going solar, these are large projects...they are
multi-million dollar projects typically for commercial
businesses. So I am going to go over to map out...
there are other ways to do it beyond just using your
own capital to go solar and I have got a couple of case
studies at the end.
(Slide 3) Just very briefly about my company. We
founded the company in 2004. We are based in
Rohnert Park, CA just north of San Francisco. What
we do is we specialize in commercial and utility grade
solar energy plants. We do a lot of work in municipal
entities as well. Agricultural, manufacturing, mining
and general commercial operations. We did, in fact,
last year complete the largest installation on a winery
Matt Lugar began his career in the solar energy
industry in 1996. His current responsibilities in
solar energy are coverage of all sales and sales
management supervision in oversight including
strategy and marketing direction. Prior to joining
Stellar, he most recently was a founding member and
executive at the solar financing and project developer,
Tioga Energy based in San Mateo, CA where he was
responsible for sales and marketing. Prior to Tioga for
over four years he managed the sales organization
for the U.S. Division of the world’s largest solar PB
manufacturer, Sharp Corporation, leading the growth
of that division from its early stages of operation. In
addition, he was Product Development Manager for
Entergy Corporation in New Orleans, LA, where he
was responsible for the research and development of
several green energy-related products for Entergy’s
3.5+ million regulated and deregulated customers.
Mr. Lugar received a Master’s in Business Administration
from the Georgia Institute of Technology in Atlanta,
GA and a Bachelor of Science and Natural Resources
from the University of the South in Sewanee, TN.
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in the U.S. for Foster’s Wine Estates Americas and also
last year we were acquired by ITOCHU International
and ITOCHU Corporation, which is a very large Fortune
Global 500 company.
(Slide 4) A little bit about Solar 101, really breakdown.
On the left-hand side at the top what we are looking
at here is just basically the sun strikes the surface of
the solar cell and it creates a direct current. It is very
simple, it is very clean, and it is almost like magic. They
are moving parts and it does not break down. The
materials are benign that are involved in this process.
We are talking about glass, aluminum, and silicon.
Those are the standards materials that are in most
solar technologies. There are a few new technologies,
thin films, that are coming out that are very interesting
with the promise of reducing costs and improving
productivity through greater efficiency, but in some of
those materials that are used, the thin films are a little
bit different...some different compound besides just
straight silicon or sand.
(Slide 5) When you kind of zoom out and you look at it
on a bigger picture scale, how it works for a commercial
business or any entity who wants to go solar, when
you have the solar panels that will be on your roof or
out in the field or in your parking lot, for example, that
creates when the sun strikes it direct current energy
(DC energy), the same thing that a battery gets. You
have to put that through what is represented in the red
box, which is an inverter that takes the direct to current
energy and turns it into alternating current, which is
what the red needs to receive, refunnel that through
your breakers which is where the interconnection point
is for the utility and then we either pump the energy into
your energy or back out to the grid through the meter
where a process called net metering occurs. You are
consuming some energy and you are producing some
energy. Again, back to the point that I made earlier,
the gentleman from Lime Energy did a good job of
explaining and I wholeheartedly agree, do your energy
efficiency measures first and then let solar come in, or
other renewables or other types of backup generation
technologies to clean up the rest of what is left.
(Slide 6) I have got a couple of slides that illustrate
electricity rate trends. This chart actually shows from
1970 through 2005. This is from the EIA, an unbiased
third party group that looks at energy rates historically.
And what I am illustrating here is that energy rates are
going up, there is no question about it. These are rates
that are commercial rates in most of the sort of hot solar
energy states and I am going to get into what states
those are in just a few minutes. This is more specific
to California. (Slide 7) This is PG&E, which is one of the
big utilities in California. The tariff question...we did
this study from the year 2000 up to literally just a few
months ago. I mean you can see in the State of California
the rates have gone even steeper and I would say that
if you looked at the Northeast and again Lime Energy
showed a nice map of the U.S. that showed where some
of the different rates that they would map up perfectly
in terms of the benefits of solar energy as well as the
energy efficiency. So California rates are going up at a
heavier clip than most other parts of the country.
(Slide 8) This chart is...if you look at the bottom axis,
this is 24-hour cycle. What I am showing here at the
top is a typical building’s load profile across a number
of different months through a 24-hour cycle. At the
bottom this is when solar energy is being produced
by a solar array on your facility. There is some vertical
lines here and what I have done is broken it out based
on time of use electricity rates so that what you can see
is, if you look at the very top of the chart, in the middle
45.8 cents per kilowatt hour is the most expensive time
during PG&E and again this is a California tariff. When
the solar energy is being produced, you are offsetting
the energy at that very expensive period of time and
you would be getting credits during that period of
time. Other states around the country have similar
tariff structures where time of use where the utility
charges you or credits you if you have a generating
source during different rates during different times of
a 24-hour cycle. This is very valuable in terms of the
analysis and looking at the savings that solar energy
provides. These were offsetting the most expensive
energy during the day.
(Slide 9) So what can solar do for your business?
The idea is to save money. We want to really offset
those expensive rates as I just said. You are hedging
against future energy costs. Ultimately, and it is a little
gimmicky in a sense, but the fuel for solar energy is free.
Solar energy does not cost a penny. Once you have it
installed, there is no fluctuation of that fuel cost, it is just
sunlight. So what you are doing is you are stabilizing
and making your operating costs even more predictable
by taking a portion of your energy with solar.
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And then, of course, and again as was mentioned
earlier which is fantastic, the green or sustainable
image is absolutely paramount these days. Businesses,
municipal entities, residential customers, everyone
wants to go green. It is a real thing, it is a real trend and
I kind of downplay it a little bit because ultimately as I
have been in this industry for a long time, back in the
‘90s the green part was what we were really focused
on. It was not economically viable. The beautiful thing
that I observed and being lucky enough to be a part
of an industry like this over these many years is seeing
the economics catch up. It does make economic sense
in a number of places and I will talk about that in a
second.
(Slide 10) All right, let us talk a little bit about the
financial incentives that are available to go solar. First
and foremost the tax credits and grants. These can be...
as of right now there is a 30% Federal Investment Tax
Credit which for solar energy lasts through the end of
2016. There is a 30% Federal Grant in Lieu of Tax Credit
which was put in place last year in the Stimulus Bill and
as long as we begin installation before the end of this
year qualified for that grant and that is a 30% grant,
it is cash. It is an incredible incentive that is in place
right now.
Prior to some of the big tax credits and grants there have
been cash rebates and these are really dollars...just cash
dollars paid based on the size of the solar array that is put
in place. What this does is it actually incentivizing the
company who is designing and selling your system to
put in more watts, but it does not necessarily incentivize
efficiency, which is why ultimately on the third bullet
point, which are performance-based incentives were
put in place. Performance-based incentives or PBIs do
incentivize efficiency. In other words we want to get the
most kilowatt-hours to be created by this power plant
per kilowatt of rated capacity. And again this is really
ultimately to benefit you and the utility companies who
are supporting these programs.
At the bottom of each one of these I listed some of the
states where these types of incentives exist. Again in
a couple of slides I will show a map that shows where
some of the hot solar states are and give you a resource
where you can go to find information about solar
energy incentives.
And then the fourth on the list is one of the more
challenging concepts to grasp. The solar renewable
energy credit or some people call it Green Tags is a
tradable credit that is created on a 1:1 ratio with kilowatt
hours or megawatt hour that is generated off of that
facility. Again, this is a little bit tricky. These are typically
put in place in lieu of a cash rebate for a performancebased incentive. Ultimately they are performancebased because the REC’s are only being generated if
the facility is making energy.
All of these combined really just allow the facilitation
of going solar more easily. That is the whole point of all
of these incentives and there are programs all over the
country, which allow not only for solar, but of course
for efficiency as well and other types of green and
renewable energy technologies.
(Slide 11) This is the map I was referring to and ultimately
you can find a lot of this information at the bottom, at
the dsireusa.org web site, which is the database of
state incentives for renewables and efficiency. This is
database is very user friendly. I encourage you when
you are trying to figure out if your business or your
location is a good candidate to go solar, go to this web
site, click on your state and drill down into, to see if there
are incentives in your area which always are going to
help the economics.
Most of these incentives are driven by what are called
RPS’s or renewable portfolio standards and most of
the RPS’s out there are at a state level. However, there
are some federal RPS debates that are happening and
whether that is good or bad for the different renewable
technologies are sort of up for debate. In the U.S.
right now California and New Jersey still tend to be
the leaders in terms of which geographic locations are
supporting solar energy. It has nothing to do, by the
way, with where the sun is shining. If Washington State
which does have some incentives...I mean Washington
State solar works fine and that is some of the worst solar
resource in the country, but the reality is from your
perspective, you are looking to see if the economics
make sense. That is the policy and that is about those
incentives I was mentioning earlier.
Arizona, Colorado and Nevada and Pennsylvania, those
are all sort of good, strong programs that are growing
that are strong. Texas, specifically Austin, in fact, has
a really good program. Parts of Illinois, New York
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State and there are a number of others that I would
call simmering. You have got a lot of states that are
working on incentives to support solar, wind and other
renewables, but they might not be in place yet. Again,
typically speaking as with a lot of things, California tends
to lead the way in terms of some of the technologies
in trying to create models that allow other parts of the
country to enjoy these types of programs.
In Canada, interestingly Ontario and British Columbia
have incredible programs that are out there right
now. They are comparable to some of the European
and Asian solar markets. Again, it just gets back to
that policy issue. It depends on how much subsidy is
happening and how much support is happening at the
government level, whether state or regional.
And again, write down the DSIRE web site. This is
really good. Get the spelling right, because if you do
not then you might want to wind up on a web site you
do not want to go to. I have heard that before. That is
dsireusa.org.
(Slide 12) Okay, I have got three primary ways to go
solar. So if you are sitting in your shoes and you are
trying to figure out how can I do this, how can I go
solar? Capital purchase. This is using your own cash and
this could also be using loans, things that are on your
balance sheet. This is really tricky and again the guys at
Lime Energy said something that I say very often myself
when I am presenting which really gets to the heart of
the matter. Focus on what you do. Do not use your
capital necessarily to go solar and own a power plant.
There is going to be some operations and maintenance
involved and you can use other mechanisms where
there is literally no capital outlay to allow you to go solar.
For example, the Power Purchase Agreement. This is a
concept where a third party comes in and actually owns
the physical asset of the solar power plant that sits on
your roof or your parking lot or out in your field and
they just sell you the kilowatt hours. This is a virtually
risk-free way to deploy a $5 or $10 million solar project.
Let the other guys do what they do best, they are the
experts, right and they can own and operate that power
plant and make sure you are delivered the electricity
that you want.
Leasing is, of course, another way to do it. This is
probably of these three the least popular when it really
comes down to it. You get some of the benefits of a
PPA where you have got a third party owner, but like
a car lease you are still going to be responsible for the
operations and maintenance of the power plant. There
is not somebody else who is working on that for you
and ultimately you have got a fixed monthly payment
and no one is making sure that the power plant is still
cranking other than you. So it depends and this is a
good segue to this slide. I have a presentation up here
that I can send it electronically.
These are characteristics of these three mechanisms from
your perspective about what kind of responsibilities
and benefits you would have depending so you can
determine which makes the most sense for you. Is it
capital purchase, PPA or at least the most economically
feasible based on what you do with your business.
(Slide 13) I am not going to go through all of these
points. I will just highlight a couple of them. Ultimately,
no upfront capital with PPA or leased unfortunately with
capital purchase you do. You can buy out since you
do not own it, you are going to have to bottom...on a
PPA in a lease, you typically can buy them out early for
pennies on the dollar for what it costs to install whereas
of course with capital purchase it is not applicable.
(Slide 14) Let us get into case studies. One, which is
very exciting for us, is a California bakery that we are
working with right now. It is a 70,000 square foot
footprint. They are a global supplier of basically artisanbaked goods. Their operation hours have been tailored
already to utilize the metering and the time of use rates
that I was talking about earlier, during off-peak hours.
The rooftop, like many of your facilities, I am sure are
covered with a lot of obstructions which we have to
work around. The beauty of solar is highly modular and
you can see in the picture, it can wrap around different
things and have no problem with roof constructions.
And this customer actually chose to use their own
capital to purchase the solar asset so they are going to
buy it out of their own pocket.
Total system cost is a little under $2 million. You have a
number of the incentives that are in place. The federal
tax credit or grant, the first year tax appreciation and
then, of course, electricity savings. So the net cost after
the first year is a little under $1 million and in this case
without what we illustrate here is actually without any
incentives, the payback is a little over eight years with
an 11.6% IRR. So this is...when you add in some of the
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other options that are available this gets even more
attractive.
(Slide 14) Some of the high-level specifications, it is
being installed this year. We are looking at a 400 kilowatt
project which is going to utilize basically all 70,000
square feet of that space. We are working around, as I
said before, some obstructions so if you discount that
70,000 square feet by maybe 30% or so, that is how
much physical space this project is going to take up.
And we are using Sharp Corporation’s solar panels which
are again one of the industry leading manufacturers of
solar panels and we are using Satcon inverters, again
an industry leader, and a number of other brands here
on the hardware that I will not go into.
(Slide 16) The second case study is a California rice
grower and processor. These guys are a leader in natural
organic and grocery specialty markets for rice products
and they did not have roof access so we opted to install
this system on the ground. The system is about $1.2
million and again a number of incentives that are in
place for this and you have got a relatively attractive
12.3% IRR groups and an eight-year payback. These
guys also opted to install the system using their own
capital.
(Slide 17) On the picture you can see there is an
automobile there on the left side of the image to give
you a sense of the size of this project in particular, how
large the solar panels are.
This was installed a couple of years ago. It is a little bit
smaller than the project we talked about, the bakery,
and again we used Sharp solar panels as well.
(Slide 18) And that is really my presentation. I would
certainly encourage anyone to...all my contact
information is here and I can take a few questions right
now.
volts DC going into your inverter and then depending
on what electricity service you have for your utility, we
may have to have a transformer on the other side of the
inverter going to the...
UNIDENTIED SPEAKER: These solar panels when you
install them what are the voltage on those?
UNIDENTIED SPEAKER: That is the clarification I
wanted on your install because I am looking at your
numbers and I am going, I do not now if you have got
structural enhancements in that figure.
MATT LUGAR: Well, they are usually strung in a series
to meet the inverter specifications. Each solar panel
typically is 30 or 40 volts on an individual basis so you
string those together in series up to the string voltage
of the inverter itself. Typically you have 14 or 18 solar
panels per string. So you have a couple of hundred
So the output on the inverters that we specify at this
commercial level are going to be single phase, three
phase and they make every option out there depending
on what service is in bakery.
UNIDENTIED SPEAKER: You can deliver with the
connection between the grid so that if the grid shuts
down you do not pump electricity into the grid?
MATT LUGAR: That is exactly right. In fact, it is basically
UL standards that the inverters have what is called an
anti-islanding feature which means if it senses that the
grid has gone down, it shuts it off because if you get
a lineman that is out there, we do not want our solar
power plant pumping energy back out to the grid and
shocking someone up on a pole.
UNIDENTIED SPEAKER: Minor install costs. When you
had that number up there, did that include structural
engineering studies and any building enhancements
that had to be made to the roof to support that...the
solar panels up there?
MATT LUGAR: So the question is, did the cost include
structural engineering studies and any upgrades that
might have been necessary? So I will split the answers.
The answer is yes to the first part. Our firm does
include structural engineering studies to the roof or
geotechnical surveys if it is a ground mount because
unfortunately talking about soils, it is a ground mount
as well. However, if there are upgrades needed, then
typically speaking that cost would be borne by the
customer. It is kind of hard...we cannot predict what
the structural and sometimes those are very expensive
so when we are going through the...
MATT LUGAR: In fact, neither of those need any
structure, the bakery, that the rooftop system needs...
we actually just did that review a couple of months
ago and it does need structural upgrades. It is a good
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roof; it is a new roof material. And then there were a
no geotechnical work that needed to be done on the
ground mount.
UNIDENTIED SPEAKER: A couple of questions on how
fast the technology is moving. The panels in watts per
square foot or panels that had also like thermal hot
water vacuum pool or building integrated whatever it
takes, flex...final grouping. How is all that technology
coming along?
MATT LUGAR: Okay. Let us start with the building
integrated. Building integrated technologies are
really cool, sexy, the look great on a building. They are
extremely expensive typically speaking. It depends on
what kind of building integrateds we are talking about.
Some of the peel-and-stick thin films which actually
my company works with as well that it rolls out for
example onto a flat roof can be very effective in certain
applications and being that it is completely flush with
the roof, you almost do not even see that it is there.
Now, the downside is most thin films even still today
with a lot of the promise that is coming, they are just
not quite there in terms of efficiency yet so you wind
up with a little bit of degradation that occurs over time
that does not occur with the more traditional crystalline
technologies the one with the glass and silicon. So
they are good. I mean, it is always going to be a sitespecific analysis and we would...because my firm and
most integrators that are like us are relatively agnostic
in terms of technology, we can take a very unbiased
approach and find the best solution for the application.
If you are getting into a high-end architectural building
integrated that is whole different story and again the
cost is going to go through the roof and architects love
that stuff. The next one, solar thermal blended with...
what I am talking about is photovoltaics, I try not to use
that word, it is a tough word. Most people do not like
it. We shorten it for PV, but it is solar electricity. The
question is about blending solar electricity and solar
thermal.
There are a few companies out there that are trying to
blend these two things where you use the back heat that
is generated on the back of the solar panel for example
and you can use either hot water thermal or hot air
thermal. These are passive solar technologies versus
active, which is what I am talking about. But nothing
has really gotten out there to the point where it is really
commercially viable or economically viable. I have
talked to a lot of companies that have some really great
ideas. I am fortunate; I live in the Bay area. I know a lot
of Silicon Valley people who are just right on the front
edge of some of that work and I would predict in five
years we might see it become more common to see that
blend of the two technologies together. My guess is this
going to be more applicable in residential applications
first and then we would probably see larger commercial
applications after that. Now what was the third?
UNIDENTIED SPEAKER: Watts per square foot.
MATT LUGAR: Watts per square foot. That is getting
really to the heart of the efficiency. Right now we are
sort of at that shallowing part of the curve in terms of
efficiency improvements with this technology. Solar
photovoltaics were invented by Bell Labs back in the
1950s. The incredible thing is that the first cells that
were made back then are still putting out electricity so
when you think about the advanced in technology that
we have had since then, the product that we are making
now is going to be around for much longer than any of
us in this room. It is going to be making electricity for
100 years or more.
The watts per square meter have again a shallowing
part, point of the curve. We are not seeing those big
leaps anymore. It works today. Maybe getting into a
nuance of your question, it is not like the computer
industry where we are having these huge leaps which
makes last year’s machine or a machine two years ago
obsolete. The stuff works today. There is no reason to
hesitate to wait for the next best thing tomorrow. It just
does not make sense.
UNIDENTIED SPEAKER: Very quick, does it make
more sense to lessen the capital expenditure up front
by taking out the inverter and running just specific
building systems like lighting on PC as opposed to
putting it in the inverter and then feeding it back to
the grid?
MATT LUGAR: I have seen that before. It is actually
surprisingly uncommon to do that, but there is no doubt
that it would improve some of the efficiencies. You
then have to factor in when you go to direct current,
you have to deal with maybe larger copper wires so
you have and you are never going to get a copper wire
that is so large that it would not offset the cost of the
inverter, but you can certainly pull off of the solar array
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powering DC loads first and then still run maybe what
is left through an inverter to AC power. I mean anything
is possible. And again it is electricity, it is very easy to
do, very custom design systems.
MATT STANFORD: If you have any more questions we
will see him afterward.
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