Solar Energy Solutions Business Model

Solar Energy Solutions Business Model

We are facing the necessary national challenge of increased reliance on domestic energy sources.   West Virginia has an extensive and growing renewable energy portfolio including solar, wind and biomass that requires promotion at the state and local level.  The state has adopted net metering policies but has fallen behind area states in tax incentives and utility rebates (  Rapid adoption of renewable technologies such as solar energy is less closely tied to cost or available solar resource, than available local, state and federal incentives.  Pickering Energy Solutions (PES), was developed to provide a commercially viable business opportunity for West Virginians in the areas of renewable energy development and energy efficiency.

A start-up solar energy company like PES can adopt one of several business models depending on the parts of the business they own or control.  Some solar panel manufactures and solar financing companies provide financing with a preferred network of installers.  Other large installers or groups of installers have offered a line of credit at a bank or a private investment fund.  PES is a vertically integrated company on a regional scale: managing capital, sales, installation, and after-sales service and maintenance.  The business model was adapted to the current fiscal and regulatory environment of the state and region.

The main tools used by PES to promote rapid adoption of solar energy include the Solar Lease and the Solar Power Purchase Agreement (PPA).  With a solar lease, the business owner “rents” the rooftop solar array equipment and is entitled to the benefits of using the system, i. e. the free power that the system generates.  With a PPA, the power generated by the system is purchased at a set price per kWh (kilowatt hour).  This price could be fixed over the length of the agreement or the terms could include an “escalation schedule” where the price would increase at agreed upon rates each year.  For both models, the business owner would have the option to buy the solar system at any time during the lease/agreement term or at the end of the term.  PES will monitor the system’s performance for the duration of the contract.

Companies like California based, SolarCity are successfully using this PPA approach for large facility customers.  Very few providers offer PPAs to the small to medium sized business.  The main reason is that transaction costs (allocation of risk, negotiating price and due diligence) consume any savings on small systems.  To address these costs, PES has adopted a take-it-or-leave-it contract where the seller (PES) assumes most of the equitable risk.  Next, PES uses index pricing (a percentage of the current utility rate at the moment) instead of long negotiations on price.  Finally, PES is working toward a standardized, “plug and play” system that can be removed and redeployed if needed thereby reducing risk if the business or facility closes.

PES is a new solar energy start-up that will allow expansion of solar energy opportunities for all West Virginians in the Mid-Ohio Valley.  PES is an example of a regional, vertically integrated solar energy company, owning all of the major parts of the solar business.

About PES:

Established in 2012, Pickering Energy Solutions is a growth oriented company focused on making renewable energy systems a reality for residential and commercial building owners through direct sales or through a Power Purchase Agreement or Power Leasing arrangement.

About the Author:

Lance McCoy serves as Communications Director for Pickering Energy Solutions.  Lance is a green-minded entrepreneur and is a Certified Photovoltaic Site Assessor through MREA.