RENEWABLE ENERGY:

Small businesses grab green power grants

This is the third in a three-part series tracking stimulus funds for renewable energy. Click here for part one and here for part two.

Auto dealer Lem Rachels owns a wind turbine that federal money for clean energy helped buy. What Rachels lacks at his Shelby, N.C., business is wind.

His 35-foot tower turns infrequently, sending scant green power into the grid.

"It's probably about as bad a location as you can get for wind," Rachels said of his spot, near the South Carolina line. "If you were hunting out a wind location, this is not it."

The same federal program that paid Rachels also helped cattle rancher Philip Ketterhagen, who put 48 solar panels on his barn in Burlington, Wis., southwest of Milwaukee. Ketterhagen's system makes far more power than he uses, and the local utility compensates him for the extra.

"Knowing that electricity is being generated without having to burn fuel, it feels good to be able to see that," Ketterhagen said, adding, "If all hell broke loose, we would be able to generate the energy we need to sustain ourselves."

The business owners are among the hundreds of small companies that since last year have installed renewable power systems and recouped part of their costs through a program launched by the stimulus bill. Aimed at creating jobs and growing the green energy economy, the effort gives grants equaling as much as 30 percent of a project's cost for solar, wind and other renewable energy developments. Those awards come in place of tax credits companies could otherwise claim.

Money paid to small businesses represents a sliver of the total spent so far. Of the $5.4 billion doled out, 98 percent has gone to large-scale developments where the resulting grant totaled more than $1 million each, a Greenwire analysis shows. But small businesses also have sought the money, with wide-ranging outcomes for green energy production.

There is no minimum level of green power production required in order to qualify for a grant, according to the Treasury Department, which pays the money. Treasury does not rank applicants. If a business qualifies under the rules of the legislation, it receives a check.

The Obama administration and renewable power businesses praised the program's results, saying that if there are projects producing little energy, they are rare.

"From the biggest wind farm to a business that installs a few solar panels on its roof, projects large and small are contributing clean renewable energy to our domestic supply and creating jobs in the process," said Treasury spokeswoman Sandra Salstrom. Developments under the program have added about 8,000 megawatts of green power, she said, enough to power more than 2 million homes.

One government watchdog, however questioned whether the grants have successfully promoted widespread adoption of green energy. The program's structure inherently favors large businesses because they can more easily obtain financing and take on large costs, said Tyson Slocum, director of Public Citizen's energy program. At the same time, he said, large projects hit obstacles with grid connections and zoning, he said.

"There's better ways to target incentives for smaller-scale recipients," Slocum said, like tax benefits targeting those businesses and individuals. Also, he said, the grant program risks funding nonproductive products because the award is based on the cost of the development and not how much power is generated.

"When you focus on capital financing of projects, you are not providing the incentives for output," Slocum said. "You are providing the incentives to build the thing. For renewable energy the good thing to focus on is to pay for the production of the facility."

The grant program, however, has been very popular with the large renewable companies and their advocacy groups. Enacted when stimulus legislation became law in February 2009, it offers a new option that many see as preferable to tax credits already on the books.

Previously, large wind, biomass, geothermal and a few other green electricity producers took tax credits of 2.2 cents per kilowatt-hour of energy generated. Solar, fuel cells and small wind developers received a credit equaling 30 percent of their qualifying costs. But those were useable only at tax time or if they could be sold to an investor. The grants can be used even by those lacking much taxable income and are paid within about 60 days of a project launching operation.

"For the solar industry, the Treasury grant program has provided alternative financing flexibility that we didn't have," said Monique Hanis, spokeswoman for Solar Energy Industries Association. "It allowed more people to go solar that might have been sitting on the fence."

That is bringing down the cost of solar, she said, and speeds improvements in the technology.

Vertical problems

A total of 406 businesses have received grants of less than $25,000. They include Rachels, who garnered a grant of $2,682.

Rachels had been thinking about adding wind or solar, wanting to help generate some of the power his business uses. The federal program, along with a hefty state grant, cemented his plan, Rachels said. North Carolina provided a 35 percent tax credit.

"I was trying to make a statement about the average guy making an investment" in renewable power, said Rachels, 57, who wants to sell electric cars and put in a charging station. He also wants to install solar on the building.

His business, Lem's Auto Sales, sits off a highway that links Ashville and Charlotte. He put the windmill where it could be seen from that road. Rachels picked a vertical turbine -- a tall tube with the rotor shaft arranged vertically -- because he believed it is lower maintenance.

Given the lack of power the wind turbine makes, Rachels said, the cost savings he sees on his electricity bill are "insignificant." He is considering raising the tower another 10 to 15 feet to access more wind, or adding some other upgrade, he said, "where it will produce more."

But for now, Rachels does not regret buying the turbine. He might be out $5,000 or $6,000 after his two incentive payments, he said, but there are other benefits.

"That unit is a landmark now on the highway," Rachels said. "I couldn't put a billboard up that would give me any more recognition."

Rachels is not the only grant recipient with a vertical wind tower that is not making much energy.

Business consultant Lynn Hocker, 54, had one installed outside his Whispering Creek retreat in Bedford, Pa., about two hours southeast of Pittsburgh. Hocker received a $3,630 grant for that turbine.

The tower spins enough to make power about two months out of a year, he said, and even then, "it's really spotty." When he was looking to purchase the turbine, Hocker said, sales people said that it would produce about 2,000 kilowatt-hours of power a year. In reality, it is closer to 400 or 500 kilowatt-hours annually, he said. His power bill hasn't shrunk as a result of that windmill.

"I don't think there are any cost savings," Hocker said.

Hocker blamed both the lack of wind in his area and the design of the turbines. If they spin too slowly, he said, no power goes to the grid, and if they spin too rapidly, he said, they shut off.

"The small wind needs to be done very, very cautiously," Hocker said. "Had it to do all over again, I would definitely not have done the wind."

Vertical turbines can be problematic, said Andy Kruse, vice president of business development at Southwest Windpower, which makes residential-scale wind turbines. A small wind industry group is working to have requirements that turbines meet certain quality standards, he said.

"Most vertical access turbines would not pass," Kruse said. Asked why the turbines are included in the grant and tax credit programs if they are faulty, he said that "we couldn't say don't include vertical access. That could potentially be a messy lawsuit."

It is not clear how Treasury will handle low-performing projects that received grants. The program requires recipients in their applications to project energy generation. Then for five years they must file reports stating their power production, and if it differs from estimates, explain why.

Treasury would not specify whether there would be any repercussions, saying only that it was on a "case by case basis."

The structure of the program prevents any kind of widespread problem with poorly producing projects, said Tom Vinson, director of federal regulatory affairs for the American Wind Energy Association. The grant pays 30 percent of the cost while the business pays the balance.

"If you have to pay 70 percent, that provides a very strong economic incentive," Vinson said, to ensure that the development is productive.

Other small businesses that installed wind reported positive results. In Bay City, Mich., north of Saginaw, a company that sells renewable power to others put up a small windmill on site. In addition to wanting self-generated power, "we're using our wind project to promote small wind for homeowners," said Doug Sommer, owner of Accent Building Corp. The company won a $5,258 grant.

"We had the motivation, but we wouldn't have been able to do it without the additional financing," Sommer said.

The windmill appears to be cutting about $25 a month off power bills that previously averaged about $100, he said. It is not a perfect before-and-after comparison, he said, because the company now is keeping its storefront open longer.

There have been very good surprises, he said. One month the power bill fell to $1.33, Sommer said, adding "a month the wind blew every day."

Going all-in

While his wind turbine might not be making much electricity, Hocker, with the Whispering Creek resort, praised the other projects he installed because of the grant-in-lieu-of-tax-credit program. He received state help as well, with Pennsylvania providing a 15 percent tax credit.

At his 30-acre retreat, Hocker installed a solar array that shifts to track the sun. He received a nearly $23,000 grant for that project. During the summer, he said, those panels produce three times the amount of electricity the facility uses. He gets credit for that surplus with his utility that he can use in the winter.

Hocker also purchased geothermal heating that recouped a $5,071 grant. He received less money for that than he expected, he said, because the grant was 10 percent instead of 30 percent and certain costs were deemed unnecessary. But the system cut his use of wood and heating oil, he said.

"Overall we are saving a lot of money, and we are a clean-energy site," Hocker said.

Other recipients also installed multiple renewable systems. Cattle farmer Ketterhagen, 62, put in both the solar panels on the barn and solar thermal for the water heater used by his rental unit. He received a $3,554 grant for that solar thermal project.

Between the two efforts, Ketterhagen makes enough extra energy that he takes in about $160 a month from the local utility.

Family-owned business Cutthroat Clams in southwest Florida also opted for both solar panels and solar thermal. The company, which plans to also farm fish, built a barn to house that work and to serve as a commissary selling food items. They had 20 photovoltaic panels installed on the roof and also put in a solar hot water system. The two projects together received nearly $15,000 in grants.

"Our goal is to be off the grid eventually," said business owner Tammie Heeb, 47.

Because the local utility just installed a net meter to measure how much power the system makes, Heeb does not know yet what cost savings the systems will bring.

Smallest grant

The renewable energy grant program's biggest award to date is $218.4 million to the Windy Flats project in Goldendale, Wash. The smallest is a $428 grant to a company called Inovus Solar, a technology business in Boise, Idaho. That money paid for 30 percent of one solar light pole.

Inovus makes light poles equipped with a thin solar material that is wrapped near the top, said Nic Kawaguchi, Inovus' business development manager. Those poles work either attached to the electrical grid or alone, he said, because of a battery pack in the base.

When Boise received stimulus bill money to replace downtown street lights, Kawaguchi said, Inovus decided to see what it might qualify for in the same legislation. After learning about the grant program the company wanted to use it as a selling tool, letting customers know that if they purchased solar street lights they might get back up to 30 percent of the costs.

But because it wasn't clear whether the street lights qualified, the company decided to apply for the grant for one pole that the business owned.

"We're looking at it not really in terms of dollar amount," Kawaguchi said, but "more just in terms of the fact our product qualified for it. It definitely has helped us in being able to tell our clients, 'We got this; you should be able to apply for it.'"

Because most solar street lights are purchased a year or more in advance, Kawaguchi said, there has been limited interest. But a few customers have applied for and received the grants, he said.

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