Standard Solar sees a bright future 

Tax incentives, new energy requirements help Rockville firm make commercial real estate inroads

Posted: 11:00 am Fri, August 27, 2010
By Tania Anderson

By the end of October, the University of Delaware will be partly running on solar power thanks to Standard Solar Inc., a Rockville-based company that has been offering this alternative power source since 2007.

The Newark-based public university will pay nothing for the solar panels and buy the solar power back from Standard Solar. The 70-person company says it’s on track to post its first profitable year in 2010 by installing solar systems on about 30 houses per month, as well as universities and commercial buildings.

Scott Wiater, president of Standard Solar, recently talked to The Daily Record about selling solar power during a recession:

TDR: How competitive was it to get the University of Delaware deal?
Wiater: It was very competitive. They had many responses. They narrowed it to a short list of finalists and invited those folks back for more questions and we were ultimately selected.

TDR: How does your company make money when the client, such as the University of Delaware, doesn’t pay for the solar panels?
Wiater: We make money by selling them the power. As a private company we can take advantage of the tax incentives. That, coupled with renewal energy credits at the state level and the revenue stream generated from the power, all make the deal possible. There’s no cost to the host and they get a savings on their energy. It’s a great investment for the folks talking advantage of it.

TDR: How has the market been for this type of technology?
Wiater: It’s a hot market right now. Typically once a potential host sees the economics behind doing a deal like this, they usually sign up to do it. The trick is educating them on the value of the energy being produced. It’s the federal-level incentives that make this possible. Since the existence of the investment tax credit in 2008, it’s taken off.

TDR: Who’s buying solar panels right now?
Wiater: We’re seeing a lot of government, which is a very hot segment for us. We’re also seeing higher education, and even K-12 schools. We’re also seeing property management folks, who put it on their buildings and enter into an agreement where they sell power to the tenant.

TDR: What buildings have solar power installed by your company?
Wiater: We installed a system at the Rockville Ice Arena. That was about the same size as the University of Delaware, which is 800 kilowatts. That’s an arrangement where that building is owned by a company that bought the solar system and they’re selling the solar power to their tenant, which is the Rockville Youth Hockey Association. Catholic University was another neat project because the buildings there are so old. We installed solar panels on three buildings and we’ll be doing three more. And one of our first commercial clients, which at the time was one of the largest solar electric systems on the East Coast, was the U.S. Department of Energy’s headquarters in Washington. That was two and a half years ago at just 205 kilowatts, so you can see the sizes are starting to increase.

TDR: How has the recession affected your industry?
Wiater: Certainly it has affected the commercial side, not so much higher education. Property managers might be hesitant to do any improvements. We’re feeling the impact of them being hesitant to do anything. With that said, we’ve grown exponentially year over year. It’s certainly not going to slow down in the near future.

TDR: What are your biggest hurdles getting customers?
Wiater: Really getting in front of the customers, the right audience. If we have the right decision makers and we go through our pitch, especially the financial people like the CFOs, they get it and want to move forward. But there’s been a stigma on solar as a tree hugger, hippie type of technology. But it’s truly a good investment with sound financials behind it.

TDR: What are the savings on average?
Wiater: It’s pretty particular to each client but typically we’re able to show a lower cost than what they’re buying today. The great thing about these arrangements where they buy the systems outright, they know their energy costs for the next 20 years. If we’re doing a power purchase agreement, that’s a 25-year contract where they’ll know how much they spending. It’s a great hedge against future inflation.

TDR: How receptive is the commercial real estate industry in Maryland to solar panels compared with other areas of the country?
Wiater: Maryland is fairly good. The tax incentives that the states offer affect how attractive solar panels are to the industry. Maryland just passed a new bill to increase the amount of solar required on buildings and they froze the scale on what renewable credits are worth. In the mid-Atlantic region, Maryland, Delaware, Pennsylvania, New Jersey and D.C. all have some kind of incentive package for solar. Virginia does not, which means there’s more business happening in Maryland than in Virginia.

TDR: How do triple net leases affect your ability to sell solar panels to the commercial real estate industry?
Wiater: It affects the size of the system. If it’s a triple net lease where the tenant is responsible for electricity, there are ways to break up the solar use and charge each tenant. But it’s hard to say how much solar energy is being used versus traditional power. A lot of property managers will get solar to cover the electrical needs of the common areas of the building.

TDR: What are the most important things a building owner should consider before investing in solar panels?
Wiater: It’s important that they go with a company that will be around long enough to back the warranties. These projects are long term and should last 25 years. They also need to consider the age of the roof, especially if it has to be replaced in 10 years. You can move the solar panels but it’s at a high cost.

TDR: Do commercial buildings with solar panels sell for higher price tags?
Wiater: Studies have shown that it appreciates a building’s value. The general rule of thumb is that for every dollar you save on your monthly electrical bill, your property appreciates around $20. It appreciates almost overnight after the tax incentives. You’re break even on day one if you factor in the appreciation of the building and the incentives.