ACHRNEWS

Cashing in on Solar Thermal Energy

September 24, 2012
installing solar panels
While the price of energy continues to rise, more and more homeowners are seeking energy independence through renewable energy sources including solar energy. In turn, a growing number of HVAC contractors are adding solar installations, solar thermal technology, solar-equipped air conditioning units, and more to their repertoire. Contractors utilizing the sun’s rays are touting not only increased profits, but worldwide environmental benefits as well.

Cost Effectiveness

It is estimated that a 3-ton air conditioning unit requires just over 3 kilowatts (kW) of solar power to operate. The average installation cost of a 3-kW solar system is estimated at $24,000, according to the Department of Energy’s Office of Energy Efficiency and Renewable Energy.

Utilizing federal and state tax incentives, solar systems, which are estimated to remain functional for at least 25 years with minimal maintenance, are remarkably affordable.

For example, let’s examine a $24,000 system installed in New Jersey. The system would qualify for the Emergency Economic Stabilization Act of 2008 (EESA) 30 percent tax credit, worth $7,200. New Jersey also offers a state incentive worth 75 cents/W, which equates to a $2,250 savings. Following first-year incentives, the unit’s purchase price drops from $24,000 to $14,550.

The unit would generate approximately $448 in annual electricity savings, and would be eligible for a $2,631 Solar Renewable Energy Credit (SREC) Annual Renewable Credit, saving an additional $3,079 annually. The final first-year price, after all incentives and projected savings is $11,471. Assuming the unit would continue to save a homeowner at least $448 in annual electricity costs, and would remain eligible for the $3,079 SREC credit, the system would pay for itself in less than four years.

Another example, in Oregon, produces even more favorable results. A $24,000 system, minus the $7,200 federal tax credit; the $8,400 in savings through Oregon’s 35 percent state credit, and a projected $4,500 savings provided through an Energy Trust of Oregon rebate at $1.25/W cuts the initial $24,000 cost to $3,900. The operating cost is easily recouped through electricity savings in very little time.

Photovoltaic Profits

Mike Kelleher started the Kelleher Corp. in 1968. The company, located in Richmond, Va., first focused on oil heating, but has continually evolved over time, adding air conditioning in the 1970s, and electrician work shortly thereafter.

Mike’s son, Joe, elected to extend the company’s reach in 2008 by offering solar panel installations. The company now proudly heralds the solar aspect of the business in its name, Kelleher Heating/Oil Cooling Plumbing Electrical/Solar.

“We felt that balancing the oil side of our business with the renewable, green, futuristic images of solar would be helpful to the company’s image,” said Joe Kelleher. “Also, the advanced photovoltaic inverter technology has aligned with mini-split inverter technologies we are seeing coming out of many countries worldwide. We feel our company is more up-to-date thanks to our solar involvement.”

Kelleher said contractors must invest in a few inexpensive tools, and encompass some electrician knowledge, to begin offering the technology. “An electrical contractor’s license, some insurance, filling in a form, and some UL-certified equipment is pretty much all you need to do to get started in the business,” he said. “The start-up tools really aren’t that bad either. You’ll need a solar pathfinder, a solar isolation meter, and the necessary multi-meters. We also use Google Maps to view the area, and make sure that there aren’t too many obstacles in the way of the sun.”

When selling the technology to potential consumers, Kelleher said it is very important to concentrate on the financial savings, rather than the technical energy terms.

“It’s best to present the idea of solar energy to the consumer in terms of cost savings. If you can convert watts to kilowatts, that’s great, but be sure to show a prospective homeowner what they are paying, and what the solar installation will save them — that’s really all you need to do.”

Kelleher tells customers that typical solar panels are good for at least 25 years. At 10 cents per kWh, the consumer could be generating net-zero electricity costs in 20 years or less. “It’ll take about 20 years of operation, but after that, we’re marketing the last five years as essentially free electricity,” he said. “Homeowners may also gain more savings based on use, the size of their home, and how much energy they send back to the utility grid.”

Kelleher said contractors should seriously consider joining the solar revolution, before it is too late. “The critical mass in the industry hasn’t gotten to a point where it is too late,” he said. “My father always said, don’t be the first, but don’t be the last. I feel we’re right in the middle, and as electric rates go up, people will be well served to dive into this.”

Russ Donnici, president, Mechanical Air Service Inc., San Jose, Calif., said competition for solar business is stiff in California.

“Although we have an electrical license, and offer solar PV [photovoltaic], it’s hard to compete with the solar companies, since it has become a commodity item,” he said. “However, solar thermal is a different item since it’s not such a commodity item. We have used solar thermal technology for domestic hot water and have combined it with radiant systems, pool and spa heating, and more.”

Donnici said knowledge is the key between success and failure. “My advice would be the same for any new line of work a contractor wants to add to his roster of services: training, training, and more training.”

Entrepreneur Jigar Shah utilized power purchase agreements (PPAs) to build one of the world’s largest solar companies, SunEdison, into a multimillion-dollar business.

PPAs are legal agreements in which customers purchase solar power from a specific energy provider at pre-agreed rates that are often equal to or less than market rates. When the agreement is in place, the PPA provider (typically a solar company or utility) secures funding for the project, then installs and maintains the solar equipment and monitors its energy production. Customers pay only for the power generated by the facility — not for the solar equipment or the installation.

Shah recommended HVAC contractors consider similar agreements for HVAC and/or solar equipment. “Electric utility rate increases and reliability present a big problem in communities nationwide. Commercial electricity prices, on average, have increased 4.76 percent each year for the last eight years,” said Shah. “By 2013, solar photovoltaics will reach grid parity for 330-plus utilities across more than 30 states, representing 22 percent of the total electricity sold. Renewable energy capacities increased 20 percent between 2010 and 2011.

“Solar is now the largest alternative industry in the world. There are a lot of people making a lot of money on this. No one was paying me for the roof before, now I’m earning revenue for the roof. There is no stopping the growth of this industry. Big box retail buildings are turning to solar power, government is doing it, prisons are doing it. Now, the question remains, do the HVAC contractors want a piece of that revenue? If they have the drive, the resources are available to make it happen.”

Modern-Age Manufacturing

Lennox’s SunSource Commercial Energy System is making it even easier for HVAC contractors to offer a solar solution.

The SunSource unit integrates with an Energence 3- to 6-ton rooftop unit, providing effective efficiency levels of 34 SEER and beyond.

The system includes a solar-ready, high-efficiency Lennox air conditioner or heat pump that has been specially enhanced to serve as the platform for the energy system. A Lennox solar subpanel provides the connection between the utility and the HVAC unit.

It is available in one to 15 roof-mounted solar modules that harness clean, sustainable energy from the sun and use it to run the home’s central heating and cooling system as well as other appliances.

The solar modules are connected directly to the rooftop unit, so electricity generated from the modules can power the rooftop unit and other equipment or appliances in the building.

The system can help a building reduce its dependence on the power grid during peak load times, which can help reduce demand charges that are incurred year-round.

“Lennox’s SunSource Commercial Energy System has generated a tremendous response from both customers and the HVAC industry. In the short time since product launch, the SunSource product line has won numerous awards, demonstrating the high level of interest and attention this product commands,” said Mike Walker, director of marketing and product management, Lennox International. “Building owners like the fact that this product can reduce their reliance on utility energy usage and help them achieve net-zero energy status. They also like the fact the solar panels connect directly to the HVAC unit, allowing a building owner to use the solution in a retrofit application and also eliminating the expense and difficulty of making significant changes to the building’s electrical system.”

A communication module allows online monitoring of system status, energy production, and environmental benefits in real time. This data is sent from each solar module through the power lines inside the building. The system automatically analyzes solar performance, 24/7. The data is viewable on a website, which gives a detailed picture of the system’s environmental impact and energy savings.

In addition to cost savings, building owners may also qualify for tax credits, rebates, government subsidies, and grants, which may significantly reduce the first cost of the system. Credits from utility companies can also be earned for energy that is sent back to the power grid.

“The energy savings and payback varies based on the building type, energy usage profile, and utility rates of each application. In addition, the breakeven point is also heavily influenced by the incentives available in the local market,” said Walker. “Any building owner who wants to reduce his or her dependence on the utility and insulate their exposure to future energy cost increases should consider purchasing Lennox’s SunSource Commercial Energy System.”

Champion AC, in San Antonio, proudly offers the SunSource system to its customers.

“We are focused on being an energy-efficient organization and pride ourselves on providing green solutions for our customers,” said co-owner Tony Martinez. “Solar air conditioners are the wave of the future for the HVAC industry. The ability of the systems to integrate solar power into the utility of the home is beneficial and impactful for residents across the map.”

A Growing Market

In October 2008, the EESA was signed into law, significantly reducing the price of solar investments.

Experts believe that EESA has paved the way for dramatic growth in the U.S. solar market, estimating that solar energy will supply more than 28 gigawatts (GW) of electricity by 2016, which is enough energy to power more than 7 million homes.

EESA established a 30 percent tax credit for all residential solar installations from 2008 to 2016.

The credit was designed to allow alternative minimum tax filers, both businesses and individuals, access to the credit. Lawmakers expect the measure to create 440,000 permanent jobs and spur roughly $325 billion in private investment over its entirety.

A July 19 report released by the American Council on Renewable Energy (ACORE) states that the tax credit has been effective, as participating rooftop solar systems have generated a 10 percent rate of return. The analysis cited solar models installed by San Mateo, Calif.-based clean energy service provider SolarCity Inc. The analysis reveals, over a 30-year period, that a $10,500 tax credit for a residential system generates, on average, $22,882 in tax revenue. A $300,000 credit for a large commercial project may create $677,627.

The Solar Energy Industries Association (SEIA) said the residential PV market installed 94 MW in the first quarter of 2012, breaking the previous quarterly record set in the fourth quarter of 2011. Additionally, the commercial PV market set a new quarterly record for installations as the market grew 77 percent over the first quarter of 2011 to reach 289 MW.

The International Energy Agency (IEA) envisages that by 2050 solar energy could annually produce 16.5 exajoules (EJ) of solar heating — more than 16 percent of total final energy use for low-temperature heat — and 1.5EJ of solar cooling, which equates to nearly 17 percent of total energy use for cooling.

Maria van der Hoeven, executive director, IEA, believes solar heating and cooling technologies play an important role in achieving energy security, economic development, and climate change.

“Solar heating and cooling technologies can increase resilience against rising energy prices as most costs are incurred at the moment of investment; ongoing operating costs are minimal; and there is almost no exposure to the volatility of oil, gas, or electricity prices.”

Sidebar: Selling Points

The U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy shares the following sales tips, courtesy of builders who’ve had success promoting the advantages of solar systems:

• Use walk-throughs, models of house features, and model homes as education and sales tools. Hand out summaries of sample solar systems for browsers to examine. If net metering makes it possible in your area, let visitors watch the electric meter spin backward.

• Hold training sessions for consumers and tradespeople. Generate traffic through your models and educate potential customers at the same time. Manufacturers and installers often have excellent sales and training tools that they will share with their customers.

• Show your customers that lower utility bills can offset a higher mortgage payment.

• Hand out publications detailing the benefits of energy-efficiency and solar technologies. Reprints for articles about the benefits of going solar, especially if they mention you or your company, are powerful sales tools.

• Advertise. The website www.energystar.gov has information about designing advertising. Emphasize your energy efficiency and solar features to set you apart from the competition.

• Go for free publicity. Offer your expertise to print, radio, and TV journalists as an interviewee. Issue press releases and invite the press to your events. Editorial mentions are often far more powerful publicity than paid ads. And, don’t forget to publicize your affiliations with green building and HVAC organizations.

• Offer energy-efficiency guarantees. Some builders guarantee that their customers’ utility bills will stay below a prescribed maximum.

Sidebar: How It Works

In layman’s terms, solar energy is created as the sun’s radiant energy is captured by a solar cell, which converts the energy into electricity. In more technical terms, the bonds between silicon atoms are made of electrons that are shared between all of the atoms within a crystal. As light gets absorbed, one of the electrons in one of the bonds gets excited up to a higher energy level and is motivated to move around more freely than when it was bound. As that electron freely moves around, it creates a current.

HVAC systems use these solar modules to collect the sun’s energy and convert it into electricity, which directly powers an air conditioning unit. Excess energy is returned to the utility company, where it can offset part of a customer’s utility bill. Today’s modern tracking systems have the ability to monitor performance, measure savings, and provide various environmental benefits.

Publication date: 9/24/2012