Making cents of solar.
Euro-Asian Automotive President George Rode is far more colorful than your average auto repair shop owner.
You can tell by the deep purple petunias blooming in front of his business on Franklin Boulevard and also the row of wisteria - dangling purple blossoms - all along the auto yard parking lot.
Instead of painting his company logo on the side of the business, he opted for a mural of a countryside with thatched hut and more wisteria. "My marketing person flipped out, (saying) `That's the stupidest thing I've ever heard,' ' Rode said. "But it makes the community more livable to me."
That's the kind of thinking that made Rode the first to build a solar energy generating system on top of his business expressly to sell power to the Eugene Water and Electric Board through the utility's month-old Greenpower program.
Rode is a member of a highly successful entrepreneurial class in Eugene noted for its willingness to dabble in innovations that aren't just contributing to their company's bottom line.
They include grocer Rick Wright, mill owner Deborah Noble, vintner Jeff Wilson-Charles, real estate investor Tom Bowerman - and dozens of others.
Like Rode, they're deciding to go into the solar electric business despite sky-high start-up costs: Even a modest 12 kilowatt system comes with a $100,000-plus price tag.
Then there's the opportunity cost: The returns aren't nearly as great or as immediate as some other investments they could easily make.
Still, business owners are committing to 200-, 300- and 450-kilowatt solar power projects slated to come online in Eugene in the next few years. The latter would be the largest-ever solar installation in Oregon.
Their willingness to experiment is positioning Eugene to cope when the price of oil reaches the stratosphere and/or global warming requires a sharp curtailment in the use of gasoline. The green power infrastructure will be in place, and EWEB will be practiced with the technology, said Mat Northway, who oversees conservation programs at EWEB.
"We're lucky," he said. "We'd have a different (entrepreneurial class) if we were in a different city."
This is not to say that building a solar energy system is charity work for these business people, especially today with the alignment of an unprecedented set of federal, state and local solar power incentives.
The federal government offers a first-year dollar-for-dollar tax credit to cover about one-third of the cost of a new solar power generating system.
That tax credit was passed as part of the Bush administration's energy plan in 2005, and it's set to expire at the end of 2008, although there's a strong push in Congress to extend it for a full decade.
Oregon gives a five-year, dollar-for-dollar tax credit to cover the second third of a project's cost, although the state requires businesses to spread the credit over five years.
The Oregon credit is perennial, and solar lobbyists are busy during the ongoing Legislature trying to boost the credit to cover 50 percent of start-up costs.
The bill sailed through the House on a unanimous vote in April, cruised through the Senate environment committee weeks later and now awaits a hearing in the Senate revenue committee.
One more perk covers the final third of a solar installation's cost: Accelerated depreciation on the equipment, deducted from both state and federal taxes.
With all these start-up incentives, some businesses eventually recoup 105 percent or 110 percent of their initial investment, and that's without counting any of the earnings from selling power to EWEB, said David Parker of the Eugene-based Advanced Energy Systems. Parker installed the Euro-Asian solar power generator.
Now, along comes EWEB with its power-purchase incentive contracts to sweeten the deal. Right now, the utility is offering 10-year contracts with a price guarantee of 15 cents per kilowatt for businesses that send electricity back to the grid.
The systems even include a separate meter to accurately count the outflow and measure payments sent back to EWEB's participating business customers.
This sets it apart from earlier EWEB arrangements that first fed the solar power into the business and then sometimes shipped the excess to the grid.
This cutting-edge arrangement that buys all a business' solar power for a premium rate is known as a "performance incentive."
A similar incentive program - though much larger at 50 cents per kilowatt hour - has filled Germany's pasture lands with photovoltaic arrays and converted the country's pig and sheep farmers into harvesters of the sun.
"The Japanese and the Germans are just knocking us dead," said Tom Bowerman, who put in the first large-scale business-based solar array in Eugene.
"They are making investment in solar electric technology in ways that we're looking like peons in comparison."
California, New Jersey and Washington adopted versions of the performance incentive system and found it's caused a shakeout of subpar solar equipment makers because the equipment buyers have to produce electricity to get paid.
"It gets the economic indicators pointing in the same direction you want the industry to go. It means that performance and longevity matter," said Christopher Dymond, who oversees the solar electric program in Oregon.
EWEB's 15-cent guarantee is the first significant performance incentive in Oregon, Dymond said. "Tied with the state tax credit, it really becomes powerful," he said.
"It's at the point now where utilities can offer just a little incentive, and with a little incentive, utilities can have a huge throttle control on how much of this is done," Dymond said.
EWEB goosed the throttle with its pilot incentive project beginning in 2002, and it found the response from Eugene's entrepreneurial class was immediate.
The utility estimated it would take five years before there were enough projects to total 200 kilowatts, Northway said. "The second year we were fully subscribed - boom."
Rode said his motivation for putting a solar array on Euro-Asian Automotive and on his other repair business, Autohaus, was threefold.
Seventy percent of the drive to participate grew out of his concerns for the environment, he said. Twenty-five percent came from his "testosterone"-fueled attraction to gadgets. Only 5 percent was driven by business concerns.
"It's No. 3. It's way down there. There's much better ways to make money than this," Rode said.
The solar arrays don't pencil out unless the business is successful and has sufficient tax liability to benefit from the credit for five years.
The business has to have good credit and may have to put up a critical asset, such as its building, for collateral on a loan to build the solar generating system.
"You have to decide you want to spend a half million dollars of your own money to do something like that too," said Rick Wright, CEO of the Market of Choice parent company, which covered the roof of one store with solar panels and is investigating whether to put systems on several others.
The business also must have an agile accountant to work through all the various state, federal and local tax-based incentive programs - never mind EWEB's performance incentive contract.
But Eugene entrepreneurs forge ahead because they see a responsibility to the future to guide where the power comes from, Northway said. "Even if you can't make it all locally, you can still make sure you're responsible for making it someplace.
"Maybe it comes from windmills on the Columbia or geothermal plants on the Cascades or photovoltaic panels in Southeast Oregon or on our homes right here in Eugene. It will be a mix of resources," he said.
It's a way to act locally.
By claiming the state and federal tax credits, businesses can, in effect, capture a stream of tax dollars and corral them in the Eugene.
EWEB gets to buy power from customers rather than big, commercial enterprises in faraway places. "It's a nice closed loop thing," Northway said.
The solar program gives entrepreneurs the ability to put their federal tax dollars into something they believe in, rather than any number of unpopular national causes, such as the Iraq war.
"It's a social way to direct your tax dollars," Rode said.
During an interview about the system, Rode turned suddenly to his solar contractor and ordered yet a third generating system for a building he owns along West Seventh Avenue that houses Tile by Design.
"It's such a fine program," he said, "I'm going to do another roof full of them."
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Business; The future is bright for local entrepreneurs plugging in to guaranteed rates and an array of incentives|
|Publication:||The Register-Guard (Eugene, OR)|
|Date:||May 13, 2007|
|Previous Article:||EWEB program allows businesses to sell solar power.|
|Next Article:||BUSINESS DATEBOOK.|