Businesses warm to solar energy: Tax credits and USDA grants put investment within reach

Since its first brew in 2009, Maine Beer Co. co-founder David Kleban has taken pains to be an eco-minded business owner.

Kleban participates in 1% for the Planet, Garbage to Garden and offsets 100% of the electricity Maine Beer consumes by purchasing wind credits. He stocks the restrooms with hand dryers and recycled toilet paper.

But recycled toilet paper is one thing. Investing $200,000 to install a solar system is another thing entirely.

Maine Beer recently had a 212-panel solar installation that Kleban hopes one day will produce 100% of the company's electricity. He expects the investment — 55% of which was offset by the combination of a federal tax credit and the U.S. Department of Agriculture grant — will pay off in eight to 10 years.

Given that the panels are expected to last 30 years, “it was a no-brainer,” says Kleban, who launched the business with his brother Daniel and is based in Freeport. “You have to pay for electricity one way or the other. If anything can pay for itself and do the Earth, people and animals good, then you do it if you can afford to.”

Kleban is one of a small but growing legion of small business owners who — even in the absence of state incentives — is installing solar power, saying that it's never made more economic sense than it does now. Many are rushing to take advantage of lower prices, a federal tax credit and new USDA grant funding that take the sting out of the cost — which can be anywhere from $15,000 to $500,000.

Last year was the biggest year on record for solar installation in Maine: systems generating 4.5 megawatts were installed, up from 2.5 megawatts in 2013 and 1.7 megawatts in 2012, according to the Interstate Renewable Energy Council, or IREC, a Latham, N.Y.-based independent nonprofit. While IREC does not break down what portion of those systems were installed by small businesses and no one tracks it, local solar industry professionals say interest has never been higher.

“In the past, we've had to go and find people,” says Phil Coupe, co-founder of ReVision Energy, the largest solar installer in Maine. “As more systems go up, and there's more awareness and consciousness, we've had more people who came to us.”

Coupe estimates that they have installed up to 100 systems for local businesses, including Oakhurst Dairy, Rockport Marine, Black Dinah Chocolatiers, Coffee By Design and L.L.Bean, plus institutions like Maine Audubon's Gilsland Farm headquarters.

“We're definitely talking to more businesses this year,” says Rob Taisey, owner of North Yarmouth-based Assured Solar Energy, which just finished its installation at Maine Beer's Freeport site. “Businesses like the idea of locking in energy costs. The price of sunlight doesn't go up and down.”

Many say that the solar power may have a contagious aspect to it. In fact a study published in the August 2014 issue of Journal of Economic Geography concluded that people are more likely to adopt solar if their neighbors make the switch. That said, this dynamic tends to be stronger in states like New Hampshire and Massachusetts where there are state incentives, says Coupe. The power of proximity is a key catalyst of the Solarize movement, a grassroots effort to promote solar adoption, says Vaughn Woodruff, owner of Insource Renewables of Pittsfield. In February, Insource and Assured Solar Energy were selected by Freeport to launch Solarize Freeport, a community bulk purchasing program modeled on efforts in Portland, Ore. The effort has spread to Vermont, Massachusetts and California. Residents purchase solar in bulk and lower the costs of installation by about 10%. In Freeport, 38 residents and one business have signed up so far, slightly exceeding their targets, Woodruff says, adding that he frequently gets inquiries from customers who have seen it elsewhere.

“It is neighbors seeing how their neighbors buy and that being the trigger,” Woodruff says. “And that happens on the business side too.”

Businesses look to bottom line

Though small business owners say there is a feel-good factor with solar, the bottom line to their decisions was in fact the bottom line.

The average price of an installed commercial solar system has dropped more than 50% since 2010, according to the Solar Energy Industries Association (SEIA), a Washington D.C.-based trade group.

Still, some are rushing to take advantage of a 30% federal tax credit for solar installations, which is set to be reduced to 10% in January 2017. Some solar systems are eligible for five-year accelerated depreciation if claimed as a business expense.

In January, the Maine office of the USDA expanded eligibility for its Rural Energy for America Program (REAP), which offers grants for up to 25% of the cost of renewable energy systems and energy efficiency projects. It widened the geographic boundaries of eligibility to encompass 12 communities in close proximity to Portland, including Freeport, Yarmouth, Cumberland, Windham, Gorham, Saco, Old Orchard Beach and Biddeford, as well as rural areas in Falmouth, Westbrook, Scarborough and Cape Elizabeth.

“We have more solar project applications now than we ever have,” says Virginia Manuel, state director of the USDA Rural Development program. “It's really growing in popularity.” This year, there's $1.25 million available for REAP grants.

Federal programs are especially important since, currently, there are no state-level incentives in Maine. Rebates of up to $4,000 for commercial solar projects ended in 2013. However, the Joint Committee on Energy, Utilities and Technology did vote on a resolve directing the Public Utilities Commission to work with stakeholders to develop a solar incentive policy and present its findings back to the committee by Jan. 30, 2016.

The absence of state-level incentives can make solar a tough sell, says Woodruff. The cost of a system can be recouped in as little as six years. Often, though, smaller businesses want to see their capital investment pay for itself within as little as two to four years. “And that's a challenge” Woodruff says. “But solar is also a different kind of investment. You're talking about a product that replaces an escalating operating cost that will last for 30 years. A lot of other capital expenditures won't get that. And solar electric systems really have minimal operating and maintenance costs over their lifespan.”

Nationally, solar installation is expected to keep growing this year, but expiration of the tax credit looms and threatens to stall growth — especially if no state incentives emerge, Woodruff says. If there's a surge in demand for solar installation next year, as businesses rush to take advantage of the tax credit before it is reduced, that could put pressure on the market.

“This year, it's a buyer's market,” says Woodruff. “In 2016, it's going to be insane between everyone rushing to get things in before the end of the year. We might see some equipment shortages, or spikes in equipment costs. The labor pool is going to be pretty tight. Companies might have a hard time ramping up. The tax credit due to expire in 2017 is the great uncertainty that clouds everything right now.”

Follow the sun for greater savings

To Kleban, the investment in solar is just another extension of the company's “Do what's right” credo that's engraved on its bottle caps. Its 20 employees are also eligible for a 401(k) plan, a fully funded pension plan and health insurance.

“We wanted to prove that we could start a company and do what's right,” Kleban says. “We didn't want to just start another business that squeaks by making pennies and can't afford health insurance for ourselves or anyone else.”

Why not just continue to purchase wind credits to offset electricity use?

“It's like going from buying fresh vegetables from a farmer's market and having your own garden,” Kleban says. “Why wouldn't we produce some power if we can?”

The timing seemed right, given that they were already seeking $600,000 in financing to buy fermenters for their new brewery.

“It sounds like a lot of money and it is,” says Kleban. “But I also knew the federal tax credits were only going to go through 2016.”

The solar installation includes 164 panels on the rooftop and another 48 panels on two 20-foot by 21-foot trackers that follow the sun

Even beyond the savings on the investment, the solar array may also generate a marketing boost. The gigantic installation on Route 1, just south of the exit for I-295, is impossible to miss. On a recent Saturday afternoon, customers could be seen checking out the solar installation and taking pictures.

“If your $200,000 project is building brand loyalty with a certain customer, or even helping you gain customers, you really can't put a price tag on those things,” Kleban says.

Other small businesses that have converted to solar say that while the feel-good factor, well, feels good, the financial factors were the driving force.

In Portland, Aikido of Maine owner Gary Small says solar fits the studio's own practice of teaching a Japanese martial art that's based on harmony and mutual assistance.“Protecting the environment really fits in with our view of creating harmony, protecting the universe, ourselves and each other,” says Small. “But you have to be able to pay for it. The economics still had to work.”

Since Small had 30 panels installed on the roof in June 2013, at a cost of $35,000, the electric bills have dropped from $150 per month to $20 for 10 months of the year. “In eight years, to have free energy is a pretty good investment,” says Small.

Also in Portland, Coffee By Design co-owner Mary Allen Lindemann said the company installed solar panels at its Washington Avenue building in 2012, forecasting that the investment would pay for itself within seven years. CBD saves about $2,000 a year on electricity costs. The system generates more electricity than anticipated, so the payoff may happen in as little as five years.

Jody DeCesere, who operates Wiswell Farm in Orrington, had Insource Renewables install an array of solar panels in November to power the farm's fans, greenhouses and furnaces. “The cost of oil, gas and electricity has just continued to climb and climb and climb,” she says. “You might be able to judge what you're going to have to pay employees or what you're going to pay for plants, but the energy costs were the one unknown every year. This will help offset that.”

Back in Freeport, Alice Pelletier, owner of Mainely Hair, had always wanted to install solar on the building that houses her salon, her home and a rental apartment.

“The energy source is free and clean, and it gets you off the grid,” she says. When she heard about Solarize Freeport, she decided the time was right. Though she doesn't qualify for the federal tax credit or the REAP grants (because the building is only partially used for her business), it seemed like a smart investment of $27,000 for the long term.

“I don't necessarily get value for my business now,” she says, “but it's a good investment for the sale of the building, when the time comes.”

In 2011, the owners of Black Dinah Chocolatiers installed solar panels on a 500-square-foot barn on Isle au Haut where they made chocolate. The commercial kitchen had two refrigerators, a freezer and three other pieces of electrical equipment.

“We were consuming a lot of energy and we needed some way of offsetting that,” says co-owner Steve Shaffer. “The island was the perfect place to do it because everything there is so much more expensive.”

The critical factor for Shaffer, was the promise of recouping his $35,000 investment in just seven years.

“It was an economic investment that made a lot of sense,” he says. One day, he would like to add even more solar. But such an endeavor would have to wait until the financials work.

“Being sustainable has a lot of components. It's not just renewable energy,” says Shaffer. “It's also making sure that people are paid fair wages and that the business survives.”