UBS x IPS Energy Transitions Interview

Energy Transitions: About UBS 

UBS is a multinational firm that offers financial advice and solutions to private, institutional, and corporate clients. They have a focus on driving positive change for their clients, employees, and society at large, with a long standing strategy to play a leading role in sustainability for their industry.

 

Eric Pasi, Impact Power Solutions

Eric Pasi, Chief Development Officer, IPS 

As Chief Development Officer for Impact Power Solutions, Pasi has helped organizations analyze and adopt clean energy strategies nationwide.  He is extremely passionate about renewable power, entrepreneurship and the climate crisis. In 2020, he released his first book called “CleanWave: A Guide to Success in the Green Recovery” where he outlines the past, present, and future of clean tech, and its role in a post-COVID19 and post-George Floyd recovery.  

 

 

Interview Transcript

Julie 

Day and welcome to the UBS energy transition call with IPS solar. My name. My name is Julie and I’m your event manager. During today’s presentation, your lines will remain on listen only. If you need assistance at any time please key star zero on your telephone and an operator will be happy to assist you. I would like to advise all parties this conference is being recorded. And I’d like to hand over to john Wyndham, please proceed.

 

Jon 

Thanks, Julie, and welcome everybody to our latest installment of the UBS energy transition call series. So, in this call series, we continue to try to connect to UBS institutional investor clients with energy experts, the innovative companies that are enabling or driving the energy transition. Today we’ll be talking solar development, particularly community solar development with impact power solutions, or IPS. IPS is a full-service clean energy development company with an extensive track record of developing rooftop and community solar projects in the US. So very happy to have with us today from IPS. Eric Pasi, who’s the chief post development officer, and the author of a recent book, clean wave a guide to success in the green recovery, a book that is on my post nights stand as we speak. I was talking with Eric about halfway through it’s really interesting book more from sort of a perspective of people building their careers in the industry, and some sort of just sort of basic fundamentals of the industry shares Eric’s story. It’s also got some interesting interviews with some leading figures in the industry. So, as you’re interested in clean energy, do take a look. Clean wave, it’s available on Amazon. That’s why I got it. Anyways, this is john Wyndham. I run Alternative Energy and Environmental Services here at UBS I’m sure most of you are familiar with. Before I hand it over to Eric for some opening comments, just a few sorts of logistics. The format as today’s call will be a conversation between me and Eric we will open up to Q & A about a half hour and maybe a little bit longer. Julie who’s the operator will provide instructions on logging any questions after the presentation. And as always, if you prefer do feel free to email me questions if you’d like me to ask them, I’ll ask them for you. And obviously, as time permits, I’m sure most of you have it if you found your way to this call, but my email address is john.Windham@ubs.com. And then lastly, as a US research analyst, we are required to provide certain disclosures for all calls, the disclosures were included in the invite to this email. The short of it is this call is not a recommendation by UBS to transact in any security. A full list of disclosures is available on ubs.com. All right. With that, Eric, really appreciate you taking some time out of your day to speak with UBS and UBS investor clients. I’ll turn the floor over to you, but much appreciate you being here.

 

Eric

Thanks so much, Jon. And greetings. My name is Eric Pasi. I’m the chief Development Officer at Impact Power Solutions, also known as IPS solar. And as Jon mentioned, I’m the author of a recent book called CleanWave: A Guide to Success in the Green Economy. I’m thrilled to join you all today to talk about the rise of community solar in the US and trends for corporate procurement. Also, today with an introduction to myself and Impact Power Solutions and provide some context about what community solar is and where it’s going. And intersperse a few stories from our company’s experience in the space, and then I’ll wrap up with Jon and some Q & A. Impact Power Solutions is a full-service clean energy development company. For over 30 years, we have worked to deliver customer solutions ranging from rooftop installations to multi megawatt community solar gardens, and our company’s purpose is and always has been to, to positively impact people power and the planet with solar energy. The company was founded by Rob Jacobson in 1991. And through 2010, primarily focused on residential and small commercial installations. And in the past decade, we’ve shifted to become the Midwest, commercial solar leader, and one of the largest community solar developers in the country. According to the most recent rankings by solar power World Magazine in 2020. We provide two options for our clients traditional onsite solar, which could be on the roof or on land adjacent to their facilities, and communities. So, beyond our work with mostly corporations and public entities, we specialize in workforce development, and equity projects, including solar for the black community in Minneapolis near our headquarters, and work in indigenous communities like our ground breaking projects with Red Lake nation in northern Minnesota.

A little bit about me: I joined IPS in 2007, straight out of college, at that time was extremely passionate about the climate issue and clean energy And I recognize that solar was on a 40% year over year growth curve, which, amazingly has continued to this day. In 2016, I took on the chief development officer role at IPS and have contributed to growing annual revenues by more than 1,000%. Arriving today near 200 megawatts of developed and constructed project, which is enough to power roughly 40,000 us homes in 2019. We were partially acquired by smart pitch ventures which is led by a group of former utility executives based in the DC area. And this is fueled additional growth for our company as we strive to hit one gigawatt of distributed solar by 2025. As mentioned at the top I’m also the author of the recently released book CleanWave: A Guide to Success in the Green Recovery, which guides readers through the past, present and future clean tech while offering actionable solutions for jobseekers. More info can be found at cleanwavebook.com.

So now I’d like to get into the heart of today’s discussion which centers around community solar and give a little bit of background and perspective. Most people have known about solar for decades. In the 20th century technology traditionally powered things like remote pumping equipment, the space station, and other off grid solutions. Green tide really got it started in the 80s and 90s. As illicit cannabis use users grow or they stay in Northern California tempted to reduce their electricity consumption and avoid protection from law enforcement and that hippie mentality really power the industry for decades as in this niche technology. And our primary clients were typically people with expendable income and ideals. Until the most recent decade where solar electricity has become has exploded in growth. Solar is now the leading new energy source in the world, where costs have dropped by a factor of five in the past decade. It took 50 years for solar to reach 1% market penetration and only five years to double it. One of the fastest growing segments in solar recently has been community solar. For years, the only option for most residents and organizations wanting to adopt solar was to physically install equipment on their property. Early last decade, a few states including Colorado adopted the nation’s first community solar program so effectively allowing ratepayers to subscribe to solar panels that were not located on their home or building. Those early programs allowed for third party developers like IPS to build businesses around identifying and acquiring land securing interconnection rights, and finding subscribers to make these projects a reality. The typical model centers around an offset solar project that produces bill credits through an agreement with the utility. The community solar garden operator markets, subscriptions to the garden to residents and other organizations want to save money, usually with no initial capital investment. So it’s a pay as you go or solar as a service option. And the solar, the subscriber pays the solar operator monthly and earns a net saving usually around 10%. And the operator is responsible for ongoing maintenance and subscriber management, and the utility retains the environmental attributes to meet their renewable energy goals. Community solar has several advantages compared to onsite solar projects. First, it’s fungible, a subscriber can transfer their subscription to another party. If there’s a default by the subscriber the crew, a crew doesn’t need to show up at their home and tear off panels, the product owner can simply transfer the subscription to another party or another person. And this has significantly improved the underwriting process for these assets. Secondly, and most obviously, the cost to install the equipment at this scale is more competitive than installing on site solar. Third, policy folks and advocates love the ability to provide clean energy access for disadvantaged communities, and those typically unable to install panels on their homes or businesses. And fourth, the tax revenue, land lease payments and other societal benefits including pollinator friendly habitat, agrovoltaic, reducing pesticides and soil erosion all accrue to rural communities who need these benefits the most.

I’ve mentioned community solar is booming across the country. While early growth for community solar installations was led primarily by three key markets New York, Minnesota and Massachusetts. A growing list of states with community solar programs have helped to diversify the market. There are currently more than 20 states with active programs and significant legislation pending in a handful of larger states, like Michigan and Pennsylvania. This is all setting the stage for record year in 2021 was anticipated total capacity reaching three and a half gigawatts. And this represents nearly $10 billion in deployed capital. Now we’re on pace for at least 2.5 billion this year on Minnesota community solar, is how our company really, really started to take off. It’s the largest program in the country. In 2013, the state legislature passed the solar JOBS Act. And just this last month, we hit a record of 800 megawatts of operational capacity, which is about half of the state’s total capacity, and it makes it the largest community solar program in the nation 25% of the total market. These projects produce enough solar to supply energy to 195,000 homes according to the Department of Employment and Economic Development. And data from Xcel Energy shows that the bill credits for all customers totaled more than $2 million in February of 2018. And that number is only growing. It was one of the original developers in that program, which is now obviously the largest and the most successful in the country, and we were lucky to be a local company building on decade’s worth of relationships with similar stories emerging across the country. One example of this centers around a small cheese and bison ranch owned by Ed Eichten. Ed and his family own a cheese manufacturing facility in Chisago County, Minnesota just northeast of the Twin Cities. In 2011. Our company installed 140 panels to power their facility and I personally pulled together the interconnection agreements, the grant paperwork and helps his banker underwrite the $200,000 loan. The next project was a success and led to a really easy conversation just a few years later, when I outlined the concept of leasing an entire 40 acre hayfield for community solar. I had no idea what what I was doing at the time, the company had never done a project of that size, but most of those early days, were about faking it until we made it and we formally announced the county’s first community solar project in June 2014. It wasn’t necessarily going to be the first and we weren’t necessarily sure it was going to happen, but that didn’t stop us from from being bold. And the development process included utility applications, local permitting, financing, and a lot more all of which helped. It was similar to what we’ve done a few years earlier, but at a much larger scale – 125 times larger. Applications were finalized and financing fell in place and was really strange to see how everything lined up to become viable. And nearly two years from the day we announced Construction began and our company was off to the races. That project provides solar bill credits virtually to the local school district, an elder care facility in the area, also the cheese manufacturing plant and a wastewater facility in a neighboring county. And Eichten’s community solar garden has about 20,000 solar panels providing subscribers with nearly a million dollars in annual bill credits, and offsetting 2 million pounds of co2 per year. As of this year, our community solar projects in aggregate are producing about 40 times as much impact. So I’ll pause there is just a snapshot into the community solar market both locally here in Minnesota but also nationally. Since that time, IPS has expanded in the new markets like Illinois, Virginia and Mexico, and are excited to see the growth of the industry over the next 10 years. Thanks, Jon.

 

Jon

Perfect. Thanks for that, Eric. Julie, why don’t you go ahead and provide instructions on how participants can log any questions. And then I will get the conversation started.

 

Julie

Of course, if you do wish to ask a question, please press star one on your telephone, that star then one on your telephone to ask a question.

 

Jon 

Perfect. So Eric, really appreciate your sort of comments. Opening up, I just want to dive in a little bit more because community solar, in particular is probably, you know, less focused on oftentimes by institutional investors sort of in between, you know, the other large market cap list of names or, you know, either residential, or module manufacturers like for solar, which does much more sort of utility scale. So, you know, I see one of the interesting things about solar is it’s so modular right? You go down to definitely have a system that was one module 360 something watts, or we’re building, you know, large farms that are 400 megawatts in Texas right now. Can you talk a little bit about, you know, I know there’s no typical system and since they can change, what’s sort of the average size on for these systems. How much land area do they take up, just sort of the basics like that for community solar for people on the call? Thanks.

 

Eric

Yeah, so community solar sits in a space, that’s obviously, much smaller than utility scale. When we think of utility scales now, often 1000s of acres of solar panels, community solar is typically much smaller, because it interacts with the grid on the distribution level on the distribution network. And so we’re looking at projects that are anywhere from, say, five acres to 40 acres. And this makes community solar much more palatable, you know, from a permitting perspective, with local counties and jurisdictions. Compared to taking up, you know, large swaths of land, we do run into similar situations, with, you know, the use of prime farmland and other issues, land use issues, but it’s often much easier for these projects to get done. And so we’re not talking about millions of panels, I mentioned, the Eichten’s community solar project was about 20,000 panels and 40 acres. And that’s typically the size of the projects that we see. Now, it’s difficult on the investment on the investment side to underwrite and execute on one project. And so what we’re typically seeing in the market is a pooling of portfolios of projects that then reach a certain thresholds where, where capital can come in and efficiently support these, these assets.

 

Jon

Got it, thank you. And for these ground mounted systems, you know, one of the big trends in utility scale has been the move from fixed tilt to single access trackers. On this sort of smaller scale systems. Do you tend to use trackers? Or is it mostly fixed mount? Just curious?

 

Eric

Yeah, so, there’s actually a double benefit with trackers now. So when we started on these projects, and kind of the mid 2010s, all projects were, were fixed. And, and that was because of the kind of leading thought of these systems having longer lifespans, especially in climates, northern climates, like the northeast and the Midwest, having to deal with the constant warming and cooling of the climate, on an annual basis, just just wreaking havoc on moving parts. And so we wanted to keep things simple. What we found, actually, is that the tracking systems help to shed snow in the winter and obviously, in places like the Northeast and Minnesota with significant snow accumulation, that’s extremely important. So boost the performance of the systems, not just from tracking the sun on a during the each day, but also with the ability to shed the snow. And the operations and maintenance costs for tracker as become much more of a known quantity after having installed you know, 1000s of megawatts at this point. In climates like ours, the other technology that we’re seeing, that’s very Akin and also happening in utility scale projects, is bifacial solar panels, and then the trend towards larger solar panels. And so when I started, the largest panel that we could get back in 2007, was about 200 watts. Now, we’re, you know, using or trending towards 500 to 600 watt panels. Granted, these are larger panels and require two people to install them. But we’re starting to see that that’s the most efficient way to install the equipment. And so those are there many parallels between utility scale and community scale solar projects in terms of the design and installation processes.

 

Jon

Thanks, Eric, you mentioned a few sort of examples of customers, you know, I’m in Massachusetts and other places very supportive of community solar, we have a town that has half a megawatt facility on top of a legacy landfill that’s been enclosed. The high school has a large system on top of its roof. Would when you think about, you know, for the market or IPS, you know, what’s the composition of the end customer how much is sort of, you know, public governments compared to corporations. Just sort of talk through a little bit of the end customer.

 

Eric

Yeah, so it really depends on Market to Market. In Minnesota 87% of the load for the entire program is served by commercial customers. And that is A-typical compared across the nation in a market like Illinois, there are incentives to have a larger composition of residential subscribers so it’s not uncommon in that state to see 75% or more of the garden, providing subscriptions to residents. And you also see in newer markets this trend toward providing low to moderate income subscribers access to these projects. And so in Virginia, for instance, it’s a requirement essentially to have 30% of a particular community solar project providing subscriptions to low and moderate income subscribers. For IPS, we’ve in Minnesota, because it’s been a more commercially dominated market, our clients are typically school districts, and municipalities. And so one of the kind of secondary benefits that we’ve offered to our clients is curriculum development and continuing education credits for educators to come in and learn about how to bring these 21st century learning opportunities into the classroom. Some of our other clients have been corporates that are looking for ways to help to address ESG opportunities. And so those might be folks like Hormel or Cargill, or, you know, larger corporations. And so it depends on Market to Market in terms of what the program requires. But we are seeing an increased interest or for the program managers and programs themselves to require more and more residential subscriptions.

 

Jon

Got it. And I think you said this before, but just sort of in general, is it multiple off takers for one community scale project, or, you know, multiple customers where you’re pulling together? You know, more than one, say, school district and a corporation and you sort of get everyone together? And then they sponsor one project? Is that’s kind of the idea?

 

Eric

Yeah, so the program requirements, typically, you’ll need at least five subscribers in one garden. And so, in most, you know, most of our gardens, we’ll have seven. And that’s, you know, to reduce the risk in case one defaults or is unable to participate in the garden, we can still meet the minimum requirements. But in most states, there’s, there’s kind of a minimum threshold of about five subscribers to energize the garden or to continue operating the garden.

 

Jon

Great, you got it. And we’ll get more into this, how do you sort of do the customer acquisition if you weren’t on on that. And but I’m just curious, could you dive a little bit more into them? Sorry, I know, some of these questions are sort of pretty basic. But I think it’s important for the audience to understand how this works is relatively new topic for a lot of people. And so there’s, there’s sort of three parties have added correct. There’s you as the developer of the project, and then a separate owner of the project, and then, in your example, the seven off takers, they jointly own the project, or they’re simply off takers. And I’m interested in how the economics work for the sort of off takers. Is it again, it probably depends, but is it at wholesale rates? Are they netting that off against whatever their commercial rates are? Just how the economics work for all the different entities involved in making this happen?

 

Eric

Yeah, it’s very different from markets to market. In Minnesota, for instance, when we started the program, off takers were being compensated at retail rates. And so that retail rate depends on what customer class you are. So if you have residents, you know, you qualify for a higher retail rate if you’re a commercial client then it’s lower based on kind of industrial rates. And so we went through an entire process of identifying what the actual value of solar is in the state. And so that was a regulatory process with utility where we identified you know, everything from transmission and distribution, benefits and the energy only costs and all these other societal benefits for renewable energy attributes to boil down into specific value for solar. That’s what’s being used in Minnesota. That’s what’s being used in New York for instance, and then you’ll get into places, like deregulated markets, like Illinois, where the community solar project is only offsetting transmission is only offsetting the energy value. And so transmission and then distribution charges are not included in that. But there is like a, there’s a rec, renewable energy credit that’s associated with some of those projects. So it does get quite complex. You, you asked a little bit about kind of the makeup of the project, a developer can also be an owner operator, you know, we typically will put these two investors at commercial operation or at notice to proceed. But many developers will choose to try to keep these balance sheet and work with a tax equity investor, and others in the capital stack to get these projects across the finish line. The subscribers don’t actually own anything, they just entered into kind of a long term arrangement to purchase the bill credits. At a slight discount. I mentioned 10% kind of a placeholder, obviously that changes from Market to Market and subscribers to subscriber. But typically the benefits for them are kind of in the marketing aspect and just participating in community solar, and then financially and saving about 10% of their utility costs.

 

Jon

Got it, thanks for that, Eric. Very helpful. And one thing I want to loop back back to was customer acquisition, which is, you know, obviously, it’s a pretty big part of the cost stack on residential. I know here in Massachusetts, I get mailers quite frequently about residential customers that can join in, in sort of community garden solar farms. How do you go about connecting with municipalities or governments that want to do this in corporations? Is it more of the sort of you know that they’re seeking you out? How much are you getting your name out there and sort of a marketing effort to just talk a little bit about how that customer acquisition works in the community solar market? They’ll be very helpful.

 

Eric

Yeah so I did quite a bit of customer acquisition, when the when the program first rolled out. We would go to school board meetings, we would go to go to city council meetings and meet with facilities managers, and energy managers. And so the B2B aspect is quite a bit easier if you could imagine, to fill out these these projects. We do work with, they’re known as aggregators. In our industry, just specific companies that are specifically going out working with residential subscribers. And there are several models there. The prevailing one that kind of came out of the gate was advertising via social media, places like Instagram, and Facebook, to people with like-minded interests that had an environmental tilt, they want to protect the environment and also save money, those that was really the low hanging fruit. And then other organizations popped up, that actually went door to door or are going door to door to contact residents to participate in these programs. And that’s a lot much harder list as you can imagine. And so the costs, the ongoing costs to service, the subscriptions in these cases can often represent 5% to 10% of the income for a project. So it can be relatively significant. But when we’re talking about the cost to install this equipment, being much more competitive, I talked about that at the front end. And then you’re getting closer to retail rates for the actual energy. There’s typically room in these projects to support subscription management, subscription acquisition, on behalf of the project. So there’s definitely a higher cost both in initial costs to secure subscriptions and then also to manage the subscribers ongoing with residential versus commercial, but you often can’t escape that in these markets that are requiring more residential participation.

 

Jon

Got it, thanks, Eric. And maybe we’ll get into your real quick before we get to the line into some of the like the most focus in the market right now and really topical issues on just be interesting as someone sort of out there, you know, executed on these projects. Any comments about sort of labor availability? It’s sort of been a big issue with with a lot of companies, the inability to get a workforce in place. If you just talked about that a little bit to be helpful. Thanks.

 

Eric

Yeah, we’ve actually fared quite a bit better than other industries as you can imagine, we often meet We were recognized as an essential business early on in the pandemic, so we did not have to let a lot of our, our labor force go. And I think that’s been a challenge for some of these other industries, including hospitality, and retail. But where we are feeling squeezed in the current market conditions are supply chains. And that’s just obvious to note, you know, that we use steel in our projects, we use semiconductors and silicon, which is, you know, been short, in the, in the kind of early quarters of this this year. And so that’s really where we’re starting, where we’ve been seeing the issues. Also, with, with China shutting shipping down or constraining the shipping earlier, this this quarter had a huge impact on delivery schedules for our solar panels. And then also, you know, in the supply chain, we ran into, and I’m not sure if you were going to bring this up, yet or not, but also just forced labor issues. And so the the industry itself has made huge commitments to understanding how and where forced labor was an issue with our projects, which was not a you know, less than 5% of the solar modules in the supply chain were affected by this. But we’ve we’ve made tracking those types of panels, kind of paramount, and making sure that that no US projects are utilizing or sourcing panels from from those areas. So as opposed to labor being the primary issue or concern, it’s been been materials.

 

Jon

Yeah, so you hit on a couple of topics, there, that Yeah, what were the other two questions? Let’s dive into those a little bit more. I mean, so steel prices are a lot, right? I think its like 300 and something percent, at least for utility scale things around 12 cents a watt used to be the cost for tracking, but 50% of the cost of goods sold is the steel, you got all you know, freight, all these other things going up. How’s that impacted when you’re thinking about projects that are on the drawing board that are maybe not committed to yet, but moving forward next year? Does it cause you to not to pencil out or want to wait and see if sort of commodity prices normalized? How do you manage the volatility? Does it make more sense to sort of wait on normalized prices? Or is it more of you in the industry that “these are the prices where they are today, we can still get the economics to work for people?”

 

Eric

Yeah, I think for us, it’s the ladder, and we need to turn through projects, revenue needs to continue at the company, we can’t just kind of sit and wait so we’ve will typically as a developer, need to eat those losses in those situations. However, for larger projects, like utility scale projects, I think that is having an effect to delay the construction of these projects into next year. And so we are anticipating that as an industry kind of seeing that some of these projects are being pushed the next year. The other side to that is, you know, the constraint on the silcon side, which, you know, has been all over the place to cell phones, computers, everything has been affected by the silicon shortage. And, and so we are anticipating that those prices will also drop next year, so it doesn’t necessarily affect the community solar market as much as it does for these larger scale, where project margins are much thinner on utility scale side.

 

Jon

Okay, that’s super helpful. Thank you. And maybe one more on, you know, obviously, western China has been quite a bit in, in the news. And there’s sort of two views out there. I’m sort of wondering how your customers are thinking about it, and how you think about as a company. There’s the one idea that “Well, okay, there’s a supply chain in a particular part of China that we’re going to be concerned about.” And then what do you hear some other people talk about is “Well, that’s an artificial line. Meaning it’s not a separate political entity, in a sense, China essentially run by the Communist Party. These are administrative regions. And so do we feel comfortable with this, pretending like this line sort of matters, or, you know, do we kind of want to de-emphasize China in general in the supply chain?”  I just want to know if your customers are focused on this, I know you are, because just from reading the book, I think you care about doing what’s right in the right way. Is this something that’s bubbling up from customers? How are they talking about it? Or is it more pushed by IPS since you want to do things the correct way?

 

Eric

Yeah, we obviously do want to do the right thing, and it’s not necessarily only for our clients, but I think we think about our partners, and our team members. I mean, we, ethically we don’t want to be, you know, working on projects that have an adverse effect, whether it’s environmentally or socially, and that affects our team, as well. So yep, from that standpoint, it’s a pretty hard line in the sand and from our clients perspective, one of our clients, for instance, is Target Corporation. We do quite a bit of on site work with Target. This was a thing that got flagged early on, so what we did was make a commitment, along with others in our national Solar Energy Industry Association to say that we will not be sourcing panels from Western China. And the industry has gone so far as to implement tracing, as I mentioned, traceability protocols, and so we can understand that, where they’re sourcing these, these panels from, but you’ve mentioned de-emphasizing China, as a source for these products. And within the previous presidential administration, there was a heavy emphasis on imposing import tariffs and other things, especially in the solar arena. And so the industry itself is dispersed from China over the last five years or so, to doing more manufacturing in places like India, Vietnam, other Southeast Asian countries, and then also domestically, where we’ve seen kind of the announcement from First Solar here just a few months ago, expanding their operations in Ohio significantly. And so I think, as an industry, we recognize that, as a company the importance of this issue, and then our clients are as well. And so we’re kind of taking those signals and moving forward by making sure that we’re on the on the good side of sourcing solar panels and other material that we use in our in our projects.

 

Jon

 Yeah, perfect. Yeah, we’re sure many investors noted that for the First Solar announcement, I think was $680 million investment into 3.3 gigawatts. So yeah, it was a pretty clear commitment by First Solar that at least they see some advantages of manufacturing in the United States. I have several questions that have been emailed to me from participants, so thank you for those and do keep them coming. If you have any more against john jon.windham@ubs.com. But before I get to the emailed questions, Julie, are there any questions on the on the line live? Thanks.

 

Julie

I have one question from the line of Colleen H, please go ahead.

 

Colleen

Thank you. This is Colleen from Natural Resource Services in Minnesota. And, Eric, we’ve seen your growth from Minnesota, and across the United States. What I’m wondering is what you’re seeing at the permitting level, as far as changes from 2010, really to 10 years 11 years later. And if there’s anything that we can do to try to preempt our county or a township in being favorable about permitting solar in the region, and particularly what changes you’ve seen in the last 11 years?

 

Eric

Thanks for the question, Colleen and it’s great to hear your voice by the way. We we’ve seen quite a bit of change, really, in the last, you know, I would call it even just five to six years, when these projects are being permitted that community solar projects I mentioned. You know, it’s easier to permit one 40 acre project versus a 400 or 4000 acre project. However, in states like Minnesota now where we have about 800 of these things across the state, it does get, you know, communities do feel fatigue, right. And so we’re starting to see opposition not necessarily, you know, somewhat unfounded opposition. And so what I mean by that are folks are just even though the current the permitting processes in these jurisdictions allow for solar there, they’re choosing to put it up moratoriums, they’re choosing to say, you know, no more community solar projects in this area. And so we’ve had to go, you know, in some cases, address potential legal remedies to get these projects done. And that really starts to take effect, the longer that these programs are in place. And so a few things that we would find helpful and know in Minnesota is that their property tax issue is limited to projects that are larger than one megawatt in scale. So I think there’s a way to make sure that there’s more economic benefit accruing to the counties and to local jurisdictions, in these cases, and I think that will help. We’ve had to go through everything of you know, like installing screening, and, and trees to basically, you know, obscure the systems from the road or from adjacent residences. And I think the solar community can do a much better job of citing and making sure that we’re not imposing these projects, into the community in areas that are going to be confrontational. And, you know, I think with the growth of agrovoltaic, I mentioned it a little bit earlier. But some counties, you know, are pushing back on the, on the on taking out the use of prime AG land. And even though, you know, we were helping to rejuvenate the soil by installing, you know, and you know, a lot about this Colleen, but installing pollinator friendly habitat that restores health to the soil, we’re not using pesticides, we’re not turning over the soil every year, allowing for a dual use underneath these panels, like agrovoltaics or we’re installing low growth crops. I think the more that things like that happen, and we’re providing additional benefits beyond just revenue to the farmer, to lease land, the more benefits that are occurring to the to the communities, the easier that process will be for us to get these projects done.

 

Jon

 Any other questions on the line Julie?

 

Julie

No more questions.

 

Jon

Okay, perfect. Time to get into some of the email’s questions. And I’ll sort of put some of these together in a topic that I think people are getting at. There are several people asking about storage, certainly a hot topic in the investment community right now. Eric, your thoughts on the opportunities for attaching storage to solar projects? I think they’re asking about both sort of commercial rooftop as well as community scale.

 

Eric

Yeah, it’s going to be the jelly to the peanut butter right? In in the next five years, that we won’t see solar projects without storage. Now that energy storage projects are moving forward, even independent of solar projects. And so in areas. In Virginia, for instance, we were out permitting a project and right behind us was a was a developer that was pitching an energy storage only project. And so the more penetration that obviously that we’re seeing with renewables, the importance of, of increasing the amount of renewables on the grid, we’re gonna need a corresponding increase in energy storage. So the prevailing process that most developers are going down with lithium ion being the leading technology. In the space we’ve seen other long duration storage projects popping up in Northwestern Minnesota  and in Eastern North Dakota, a really interesting one with Otter Tail Power. We’re starting to see a diversification of the types of storage that are needed. Obviously these heat events that are happening in the Northwest are accelerating deployment in some of those areas. We’re going to  see in the community side, I think, a recognition that bill credit rates are going to be tied to a time of day. We’re seeing in California that market is driven by time of day energy price, even down to the residential meter. For community solar the price signal that will likely happen is you are going to get a larger credit or bill credit if you’re offsetting power between the hours of lets say 2 or 4PM or 2 and 7PM and effectively allowing developers to interject energy storage to address deployment of that energy during those peak periods. That further aligns us with the utility, it addresses a few different things that will start to make sense and this is already the case in some places with pilot programs like Hawaii. So I think its obviously coming, we recognize it, for listeners that are familiar with the duck curve in areas of high solar penetration during the peak that happens later in the day and the valley during the high solar hours during the day and shifting that to a later time is going to be the goal of the utilities and ultimately a price signal with developers and price owners.

 

Jon

Got it. You made a couple of follow ups on other questions that tie into the storage topic. Investor asking I think you mentioned in your comments, and in five years, storage will be attached to most projects. What are the attachments now, are you doing storage attachments now to some of your projects? Or is it sort of coming in the future?

 

Eric

Yeah, on commercial projects it’s still rare for us. Unless we’re in areas with high where the market signals are, where it’s very apparent that storage is benefiting the project. And so what I mean by that is typically where an energy bill is divided between capacity, and energy. And so in areas where capacity demand rates exceed a certain dollar amount, typically $15 or more, then we can start to see the benefit to adding storage to the project. And in one case, we’ve got a project in a utility that has $30 per per kilowatt demand, the storage is actually decreasing the payback for that customer by two years. very lucrative, and some of those situations. policy really lagged behind with energy storage. And so, you know, some states are just now kind of getting pilot programs are rolling out where the market and the utilities already saying, Hey, this is this makes sense today. You know, let’s skip the study, we’ll skip the pilot program, you can go straight to implementation. So the market is leading a lot faster than then policy. So it’s going to take a few years to catch up. I know that with the most recent infrastructure discussed in the bipartisan proposal, which we’ve all heard about over the last couple of weeks, did not include provisions for clean energy. However, if a reconciliation budget or reconciliation bill does move forward, I think in all proposals with standalone energy storage tax credits, and that’s also going to help increase the deployment where today even only receive tax credit on coupled projects, solar and storage, we’re going to start to see more energy storage alone projects moving forward and some of that legislation, obviously will help to accelerate that.

 

Jon

Yeah storage is what we need. There are tax credits, but the ITC and the PTC for wind are the blunt instruments that are quite effective. They definitely helped in both the solar and wind industry get up to scale the United States. And from what I’ve heard, pretty bipartisan support for something similar for storage. I’ll tie in two separate questions from people asking about software. One related to how important software is coupling with storage and there’s decisions to be made to the electricity on the grid, would it feed the battery, discharge the battery, is the data and software there? Someone else was asking about how important is software in terms of the controlling the tracking system?

 

Eric

Both are very important, I think we’ve seen, I’ll talk to the tracking person and the storage. So we’ve seen companies like Nextracker, who I believe is kind of preparing an IPO. We’ve seen ACI that that went public earlier, earlier this year with an astounding evaluation. I can’t remember off the top of my head, but really kind of forcing a lot of folks in the industry to think going public right now, the thing to do, which I believe the answer is likely yes. But Nextracker, whose competitor is ACI has really led the way, and Dan Trigger is the CEO over there, kind of a luminary, and also just a public, big public figure in our community pioneered this idea that when you’re looking at the topographical map, you’re looking at the production of these systems, there’s ways in which you can even design the array both from physical standpoint as well as from a profit standpoint to maximize the production of these systems. And so, their claim is that this software, they’re able to eke out several percentage points more in production, which is critical, in many cases, especially in these large systems. So the software really has taken off there. And I know that competitors have caught on to that and making sure that their software offerings are up to speed with Nextracker. On the flip side of that, energy storage, it’s even more important, because we’re not talking about, you know, tweaking a tracker, you know, by three degrees. In a certain part of the day, we’re talking about instantaneous microseconds of, given the ebb and flow of these, devices. We are starting to see kind of leaders and in that, in that space, developing the software, and also the modeling for, for developers to and so we use a product called energy tool base, which takes in the 15-minute data from our commercial customers, 15-minute data for the entire year, breaks that down. And then is that modeling of you know, how much What if you had 200, maybe 200 kilowatts of solar and 200 kilowatts of battery storage, and then we can help us optimize the size of system that makes the most sense in terms of economic and other attributes. So, if you had to do that, you know, by hand or, you know, any other way is to the impossible. And so, the software is really kind of led over the last few years in the energy storage space. And it’s absolutely critical in making sure that these systems are fully optimized and economic for our clients.

 

Jon

Perfect, thank you Eric. We sort of covered the policy with the the comments, and one specific participant was asking that you mentioned some states, Massachusetts, Wisconsin, I’m going to forget the last one, maybe New York, happen to have pretty supportive community solar programs right now. Any states we should keep an eye on in a year or two?

 

Eric

Mostly recently this year, New Mexico passed their legislation which has taken several years and that’s what we’re kind of seeing on the policy front I that once a bill is introduced it really takes a couple of seconds for it to kind of build momentum, get the right co-sponsors and, then come to a compromise with utilities and other stakeholders. And so Pennsylvania is the next one that’s kind of up, it’s been through the wringer for few sessions in a row. There’s a lot of optimism for that stage, because it’s one of the largest energies or using states in the country. So that’s one worth keeping an eye out for. I mentioned, initially, also in that category, Wisconsin, Delaware, and some Western states, including California, and once, California implements a program, which right now they just have seen the aggregation that is likely to be the biggest market or could be the biggest market in the country. So I’d say near term, Pennsylvania, kind of midterm at Wisconsin, Michigan, and, and Ohio and some of these other markets.

 

Jon

Perfect. And with that, we only have about a minute and a half left. Eric, before I hand it back over to you for any closing comments. Just a quick thank you for all the participants that emailed questions, really appreciate it. And thanks, Juloe the operator for helping us out today. This is our last call in June in the US energy transition call series. We’ll have some more calls in July. And then since 2018, we’ve been running this we typically take August off of the call periods, but don’t worry, we will keep it up and running back in September. And I appreciate all the clients who are supporting the call series, it really does make a difference and our ability to keep doing it. And then lastly, and most importantly, Eric, thank you for taking the time out of your day. You are the exact type of speaker when this call series that we were looking to have on. People that are actually on the front lines actually doing this work to talk about the issues in an honest and forthright way. Eric, really enjoyed the conversation today. I’ll turn it over to you for any closing comments.

 

Eric

Thank you so much Jon, it’s been my pleasure to be here and talk with you all today. I have been very fortunate to be on this journey here over the last 15 years, 14 years, and the one way that I’ve been paying it back in your word is to leave the door open. For others to come in behind me. We’re seeing that the clean energy revolution is going to need 5 million new workers in the next decade so I wrote this book called CleanWave: A Guide to Success in the Green Recovery, cleanwavebook.com. If you’re interested go check it out. And then also, you know, just again, allowing me to be a part of this conversation on behalf of Impact Power Solutions. Ips-solar.com is our website. And again, we help corporates across the country implement on-site and off-site solar projects. Thanks again to you Jon and UBS for hosting.