News & Press

Builders: Subsidies Not Needed for Survival

San Diego Business Journal

April 23, 2012

Government subsidy programs aimed at increasing the building of renewable energy projects may have ended, but several local solar power system builders say that won’t stop them from growing.

“We had our best year ever in our history,” said Desmond Wheatley, chief executive of San Diego-based Envision Solar International, a designer and developer of solar systems that cover parking lots.

Last month, Envision Solar struck an agreement with General Motors’ Cadillac division to supply all of its dealerships with its tree solar systems. While Wheatley didn’t say how much the contract was worth, he noted that Cadillac has 152 dealerships nationwide, and the agreement will be a huge boost for the 6-year-old business.

Borrego Solar Systems, a Mission Valley-based developer, builder and operator of solar panel systems, also is enjoying good business and expects an even better year in 2012, despite the expiration of federal grants and other government subsidy programs last year.

A grant program that provided up to 30 percent of the project’s cost and part of the federal stimulus package expired at the end of last year.

“This (federal grant expiration) is not going to affect us as much as it will other companies,” said Ned DeWitt, Borrego Solar’s vice president of sales. “But it’s easier to finance projects with grants than it is with tax credits, and I expect the expiration of the grant program will have a negative impact on the solar industry.”

DeWitt said privately held Borrego Solar generated more than $100 million in revenue last year through building about 40 solar projects. This year, the company expects to do about 60 projects, although DeWitt provided no estimate on sales.

Industry Will ‘Survive’

Still, the spigot of government money that was flowing freely into the renewable energy industry several years ago has slowed considerably, giving rise to fears that if these subsidy programs are cut, building renewable projects will be much harder to do.

“I agree it gets harder to get projects done, but we’re getting projects done that make economic sense … The solar industry isn’t going away and will survive,” said Tom Millhoff, vice president of business development for Heliopower Inc., a turn-key, renewable energy engineering company.

Millhoff said the federal tax grant was a temporary measure and was replaced by a tax credit program that had been in place for years.

Among Heliopower’s recent customers are water treatment facilities, food processors, and affordable housing projects. Last year, the business built a 67.5 kilowatt solar power system for a 108-unit apartment project owned by Community Housing Works. Heliopower and Community Housing Works obtained about $500,000 in combined federal and state grants, including one grant program that California no longer funds called Multifamily Affordable Solar Housing.

While MASH is no longer around, the state offers another rebate program aimed at affordable housing on thermal heaters, Millhoff said.

DeWitt of Borrego Solar works with a variety of customers, including school districts, hospital districts, corporations, offices and affordable housing projects. In San Diego, the company has worked with about two dozen customers, including Stone Brewing Co., building a 400 kilowatt solar system at the Escondido beer plant.

Government Help Not Vital

The big advantage that turn-key companies like Borrego, Envision Solar and Heliopower provide is a full array of services, including designing, engineering, constructing and operating the solar systems. Customers can get the projects completed with very little or no upfront outlay of capital, and even without extensive government subsidies, said Wheatley.

“I believe that our product will survive and even flourish, even if we’re in a no-incentive environment,” he said.

In many instances, the renewable energy system companies provide the necessary financing themselves, or arrange with other parties to get the money.

Borrego Solar equity partners U.S. Bank and East West Bank have funded the company to the tune of $100 million in multiple rounds.

Turmoil within the industry, particularly in the wake of the Solyndra LLC scandal wherein a California maker of solar panels squandered a half-billion-dollar federal loan, has also caused increased difficulty in getting financing. But many local industry sources say alternative energy projects still make a lot of sense and will continue to get built.

“This industry is convoluted, it’s confusing, and it’s ever-changing, and on top of all that, it’s extremely competitive,” said DeWitt. “At the same time, it’s the same as it ever was.”

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