From where Abel Zalcberg sits in his office at OFM headquarters in Holly Springs, North Carolina, he can’t see the 250-kilowatt solar photovoltaic system on the roof, but its ROI is a glaring factor in his bottom line. His company — an office and school furniture manufacturer, distributor, and wholesaler — will produce over 300,000 kilowatt hours (kWh) of electricity per year with the solar farm, and it won’t use a watt of it. It’s all sold to Progress Energy, a Raleigh-based power company. OFM’s 20 year contract with Progress guarantees 18 cents per kWh on energy generated from the panels. That means Zalcberg has a front row seat to the sustainable business show.
“That’s about $60,000,” Zalcberg chuckles, “just for being there.” Those panels weren’t cheap, though. In fact, the whole enterprise — cost and installation of 1,042 solar panels — will set the company back about $1.3 million. It’s the kind of money that makes small businesses sputter on their best green intentions.
Zalcberg says it’s a challenge many small businesses have in today’s economy where it’s difficult to stay alive, much less make such an investment. Even with facilities in Phoenix and Taiwan, the 30-person OFM is very much a family-owned small enterprise. But it was just a matter of getting educated. “If they really knew about tax credits and depreciation, if they could subsidize it, the return is tremendous. It is a business decision but also a commitment to be green,” says Zalcberg, who’d heard about solar farms from another local business as well as his bank.
OFM didn’t have to put their money on the table up front. “The banks loved this project, and they don’t love much these days,” Zalcberg says. When shopping for a loan, he had two financial institutions doing battle over who would offer OFM the money.
It may sound strange in an economic climate that has banks holding tight to their funds, but President Obama’s budget proposal for 2011 includes about $40 billion in loan guarantees for innovative clean energy programs and funding for solar development has increased 22%.
OFM’s solar farm is part of Progress Energy’s SunSense Commercial Solar PV program, which was spurred by legislation voted in by North Carolina’s General Assembly. Scott Sutton, a spokesperson for Progress Energy, says the company is encouraging small businesses to install panels in an effort to comply with legislation that mandates that 12.5% of energy come from renewable sources.
With a cap of 5 megawatts per year total for businesses generating solar power, SunSense is designed to encourage a variety of small businesses in different areas to apply for the contract. Sutton explains, “We put a kWh cap on it too, so that we won’t have a large commercial enterprise come in and take up the whole thing.” Sutton says he fully anticipates Progress reaching the 2010 limits with nine other large-scale arrays like OFM’s and plans to roll out a residential program later in the year.
Though Progress Energy’s typical rate for consumers is around six cents per kWh and the SunSense contract buys solar power at more than double that, Sutton says the cost is absorbed by the over 1.5 million Progress customers in the Carolinas. It’s nominal, notes Sutton, “only about forty cents on a monthly bill. But it provides true financial incentives for businesses.”
Which brings us back to Zalcberg’s bottom line. When applying for the bank loan, he used OFM’s building as collateral to finance 100% of the solar array. “These are not the type of loans that have traditional monthly payments. The government will give us a 30% grant — not a tax credit — 60 days after the farm is in production. You commit that money to the bank. It’s paying for itself. Nothing really comes out of pocket,” he explains.
The project essentially pays for itself in five years. But Zalcberg is not stopping there. He has plans to build two more arrays in the next 24 months as well as continue to green the building with LED lighting and switch the fabrics and foams in OFM’s furniture to renewable and fully recycled materials.
From an environmental point of view both initiatives are important for business, says Zalcberg. “With materials you can see and feel it, it’s the future of what people are going to buy. The solar part can’t be seen but it is certainly the right thing for the environment, an important part of the package. It does cost up front. If you are able to manage it the short term, everybody benefits.” And in this age of economic uncertainty Zalcberg notes, “I could retire on that money.”