The Perfect (Solar) Storm

by Catherine Russo • catcobb@mac.com

THIS YEAR, SOLAR ENERGY MAY FINALLY HAVE its day in the sun. Pardon the pun, but a confluence of factors such as rising energy costs, tax incentives that kicked in on January 1, volatile weather conditions and a rising environmental awareness nationwide are making solar energy an increasingly attractive alternative to traditional energy sources in the U.S.

Dale Gulden, CEO and half owner of Bradenton’s Solar Direct, has been working since 1986 to position his company for just such an opportunity, and plans to continue to capitalize on what he calls an emerging ‘green mainstream.’ He began the company after working for several years with another solar startup, and quickly embraced the idea of renewable energy sources. Finally the American public is starting to as well, for years lagging countries like Japan and Germany. “

In terms of renewable energy, Japan makes up 50 percent of the world’s use, Germany 25 percent and the U.S. joins the remainder. Yet we are the number one polluter and consumer in the world! But our people are finally seeing the writing on the wall,” he says. “I’m now getting calls from individuals and contractors who two or three years ago would give you every excuse in the book.”

Solar Direct sells a wide spectrum of solar products and services to more than 30,000 customers annually, and since 1996 has sold the products through its Internet presence (www.solardirect.com).

Gulden says that moving toward an energy-responsible future requires developing new methods of communication. “This means our mission must be to raise the bar of on-line access to renewable information and assistance, and to empower consumers into making moral, ethical and responsible choices,” he says.

To that end, he says, the company has hired a PR agency from Windermere, FL, Thorell Associates, which specializes in socially responsible public relations. Baby boomers are now moving into the green mainstream, according to Gulden, an area once dominated by hippies.

“Solar is now hip, part of the ‘eco-chic,’” he says.

Indeed, despite nearly two decades in business, the past few years have been the fastest growing. Revenues hit $1.2 million in 2000, fluctuated a bit, then grew 160 percent in 2004 and Gulden expects them to exceed $5 million this year. Margins range from 30 to 50 percent, depending on the product. Following 9/11, the company had four employees, including the founders. Today it boasts 20.

While Solar Direct does not manufacture its own products, it uses 350 different products from solar energy suppliers around the world. Vertically integrated, it custom designs, brands and installs solar packages for individuals, contractors, businesses and government agencies. For instance, it recently installed a system at the U.S. embassy in Nigeria and at the Boy Scouts of America Sea Base Training Camp in Marathon, FL.

Gulden and co-owner Kirk Maust initially focused on the solar heating market but soon became involved in emerging technologies, specializing in NASA-developed heat pipe and geothermal heating and cooling systems. It now focuses on residential and commercial markets.

Maust, COO, earned one of the country’s first degrees in solar and renewable technology (Penn State, 1981, under mechanical and nuclear engineering). He oversees all engineering and troubleshooting for designing and executing the installation of small and large solar projects and saw the need early on for an Internet presence, now the primary generator of business.

Currently 60 percent of Solar Direct’s business comes from outside of the state. While some of that is due to Florida’s lack of incentives, another reason is ecommerce. “Somebody in Tampa can open the Yellow Pages and find whatever it is he needs. The guy running a cornfield in Nebraska, however, has much fewer options,” Maust says. “Our energy supermarket online has made us the largest distribution point for solar pool heating products and accessories.”

Roger Locke, director of sales for TCT Solar in Jacksonville, has collaborated with Solar Direct on a number of projects. He says Gulden has managed to be successful despite a very difficult environment. “We had few tax credits or incentives for years, then the dot. com bust and September 11, but Dale never gave up,” says Locke. “So now he is poised to benefit from a number of things converging together to make solar a great place to be.”

Gulden says that the stress on renewable energy is here to stay, and legislative initiatives will continue to dot the landscape as governments search for alternative ways to power their constituencies. Indeed, he is thrilled about the energy bill President Bush signed last summer. The Energy Policy Act of 2005 (EPAct 2005) is something he has been anticipating for years.

Why? Because for the first time since 1985, homeowners who install solar energy systems will receive a tax credit worth 30 percent of the system cost, capped at $2,000. And they can get separate credits for systems that generate electricity (called photovoltaic) and ones that heat water. A previous credit passed by Congress in 1978 allowed for purchase of solar water heaters, but the new credits will encourage purchase and use of such things as solar ovens, refrigerators and a plethora of other alternative power sources. As it stands right now, the tax credits will expire at the end of 2007.

Businesses that purchase solar equipment will also receive a credit worth 30 percent of the system cost in the same two-year time period, and that credit has no cap. “What people need to understand is that this is a tax credit, not a deduction. That means it is a dollar-for-dollar amount right off the top. This is big,” says the CEO, “and we are all going to benefit from it with money savings and a hopefully greener environment.” The EPAct 2005 requires that in 2007-2009 at least three percent of all electricity consumption must be derived from renewable sources. In 2010 to 2012 it rises to five percent, and 2013 and beyond, seven and a half percent. Says Gulden: “This is just the tip of the iceberg.”

The Sunshine State?

Roughly 20 or more states around the country have passed legislative incentives rewarding consumers using renewable energy sources such as solar, with California usually at the forefront. For instance, the California Public Utilities Commission passed in January the California Solar Initiative (CSI), an historic long-term plan that allots $3.2 billion for solar energy rebates in that state for the next 11 years, providing for the installation of approximately 3000 MW of solar energy.

Contrast this with Florida, whose only real nod to solar is a sales tax exemption that went on the books in 1997, and finally became permanent last May.

Quite simply, says Gulden, Florida is known as an energy laggard. Hopefully that will change soon, as the governor’s office recently announced it is working on a new statewide energy plan. “We are hoping that the state finally sees the light on this, so to speak, and makes some sweeping legislative changes including incentives for solar and other renewable sources,” says Gulden. “With close to a thousand people moving into this state everyday, the state cannot afford to ignore this. And we are the Sunshine State, for goodness sakes!”

Despite the lack of legislation, however, many builders of new homes are beginning to ask for solar packages as a standard, particularly if the buyers are coming from other countries. Incentives can make a big difference in ultimate costs, too. For example, a person living in a state with various tax incentives can receive significant savings on the purchase of a solar system long before the lower energy bills are even factored in.

Say somebody in Long Island pays $42,900 for a system. Because of where they live, they’ll receive $22,400 for the Long Island Power Authority Rebate, $3,750 in state tax credits, and the two grand credit from the newly created federal government program. “This is before they start getting lower energy bills and renewable energy credits from the power companies,” Gulden says.

Locke of TCT Solar says that now is the time for everything to finally converge to make solar very attractive. Tax incentives, high costs of traditional power sources, power outages. “The value proposition is high,” he says. “There is nothing you can put on your house and get your money back as fast as you can with solar.”

The Technology

So how does it work? While a full scientific discussion of the technology is impossible in this venue, we’ll give a short overview of the technologies. Some options include the more simple systems for solar pool and water heating or the more complex photovoltaic (PV) devices.

Solar pool heaters use an existing pool pump to circulate the water through the heater. It is usually located on the roof and warms the pool. Solar pool heaters are the most common in Florida and extend the swimming season to almost year round.

Solar water heaters, on the contrary, utilize a circulating pump and some type of temperature control, while passive systems do not have any moving parts and rely on the basic principle of physics – that hot water rises and cold water falls. With solar water heaters, he says, a family of four can save roughly $650 per year, yielding a tax-free return on investment of 17-35 percent.

PV devices generate electricity directly from sunlight via an electronic process that occurs naturally in certain types of material. Electrons in crystals are freed by solar energy and can be induced to travel through an electrical circuit, powering any type of electronic device or load. They can be used to power small devices such as road signs, calculators, homes or even large stores or businesses.

Gulden says that solar electric systems are becoming more popular due to the generation of free electricity, plus the added security of power during outages.

“When Wilma went through South Florida last year, we could barely keep up with the volume of telephone calls of people wanting solar systems immediately,” he says. While the costs can seem prohibitive – a three- to four-kilowatt PV system can range from $20,000 to $40,000, and solar water heaters are usually somewhere between $3,000 and $5,000 – the cost savings can be dramatic.

“The immediate results from the installation of a PV system are a dramatic 20- to 80-percent reduction in electricity bills,” he says. “Say your utility bill is $900 monthly on a 3,000- square-foot home. That’s a substantial savings that will pay for itself in less than a decade.” Gulden adds that often the cost can be factored into a low-interest mortgage. Aside from the attractiveness of reliable power during hurricanes, these systems avoid price hikes and many offer do-it-yourself installation.

“Usually the day after a hurricane is a perfect beach day, but the power is still gone, if only for a short time. But think of what retirees on fixed incomes can do with this,” he says. “The systems are very low maintenance with no operating costs.”

Locke of TCT Solar says that Gulden is in a position of extreme growth potential: “It’s the perfect solar storm.”