Viewpoint -- Greening Your Enterprise and Supply Chain: How Solar Energy Can Add Shine to Your Bottom Line

If we stripped all subsidies -- both direct and indirect -- from fossil fuel electricity generation, solar would be less expensive than fossil fuels.

To meet consumer demand for "green" business, corporations are under incredible pressure to tackle the global warming issue. Manufacturers, for their part, must deliver environmentally-friendly products and implement new environmentally-friendly policies and processes across their enterprise and throughout their supply chain.

Throughout the past decade, corporate environmentalism and corporate social responsibility (CSR) have quickly become critical issues facing manufacturers worldwide, arguably ranking second only to globalization. Today, manufacturing companies are trying to figure out how to protect our limited natural resources, and even more importantly, how to reduce their own carbon footprint and its corresponding environmental impact.

The Options: Stay in the Black or Go Green

Many executives are currently weighing their options: take the bottom line hit and transform their company and supply chain to be environmentally-friendly, or focus on maximizing efficiencies, minimizing costs and keeping their bottom lines in the black. The reality is this is not an "either-or proposition."

In my frequent discussions with manufacturing company executives around the country about their current or planned renewable energy initiatives, there's an easy solution: solar powered energy can increase your green quotient and add shine to your bottom line.

Renewable energy is a relatively nascent industry. So it's only natural that as manufacturers get serious about reducing greenhouse gases and reducing fossil fuel usage, they're wracked with uncertainty over which approach to cutting carbon emissions makes the best financial sense. And often, they're not sure how to get started with these initiatives.

So let's make it simple. An alternative energy strategy is easily implemented if you have the right team in place. More importantly, a focus on renewable energy can save money both in the short- and long-term. Who said you can't go green and keep your bottom line in the black?

With the bottom line always a consideration, the first step in planning for a solar power system implementation is often the financial analysis. And, any company should continue to assess sustainable initiatives with the same scrutiny as they would any other capital project. From the perspective of ascertaining a return on investment, the first imperative is separating perception from reality.

Fossil Fuel Industry Myths

For the past decade, the deep-pocketed fossil fuel industry has waged a powerful and protracted public relations war on renewable energy sources, particularly solar energy. Their efforts have been effective, but with one major problem: their characterization of the solar power costs are not based on fact. They're based on self preservation and have created fear, uncertainty and doubt among corporations and state and federal legislators.

In fact, if as a nation, we stripped all subsidies -- both direct and indirect -- from fossil fuel electricity generation, solar would be less expensive than fossil fuels. The reality is that it is impossible not to see the dire financial and environmental impact of fossil-based fuels when you consider:

  • A recent report from the National Association of Manufacturers, The Escalating Cost Crisis, noted that since 2003, natural gas prices have soared, most significantly, because federal policy sharply limits exploration and domestic production of both natural gas and oil. Natural gas does not have a global price, so by limiting domestic supply, government policies have led directly to higher prices, undercutting U.S. manufacturers' competitiveness and hurting job growth in manufacturing.
  • On Oct. 24, a study conducted by 15 scientists from 13 nations and commissioned by the governments of China and Brazil titled "Lighting the Way: Toward a Sustainable Energy Future" concluded that coal-burning power plants may pose "the single greatest challenge" to averting dangerous climate change. The panel urged governments and industry to cut back emissions of carbon dioxide and other gases blamed for global warming.
  • Crude oil pricing continued its steady recent climb, surpassing $94 per barrel. There's no telling where pricing will go once winter hits North America, one of the largest consumers of crude oil.

Solar Power: A Sunny Solution for Manufacturers

Conversely, commercial solar energy costs continue to decrease with more widespread adoption and increased competition among solar panel manufacturers. In fact, solar is increasingly affordable, particularly when compared to oil, gas or coal when you consider one common industry measure price per watt -- the solar industry equivalent of price per barrel -- which has dropped from $30 per watt about twenty five years ago to about $4 per watt today.

Solar energy systems have no fuel costs, so most of their cost comes from the original investment in the equipment. While these upfront costs are not trivial, independent research shows that solar power delivers significant cost savings during the life of the investment. With a 30-50 year design life, solar systems are among the best long-term infrastructure investments a company will ever make and many of our customers have told us they are surprised at just how quickly they've realized a payback.

Add in robust state incentives for solar initiatives and many customers are realizing a significant return on investment within the first few years of their implementation.

Solar Power 101

Solar energy can be subdivided into two categories: thermal and photovoltaic. Thermal includes the use of large arrays of concentrating collectors for power production in the desert southwest, as well as low-grade heat production of the variety used to heat homes and domestic hot water.

In the manufacturing realm, photovoltaic (PV) is more prevalent. PV panels are installed in arrays on building rooftops or directly integrated into the design of buildings to generate electricity.

As the only distributed renewable energy source, solar energy provides many advantages. It is seemingly inexhaustible and has zero emissions of pollutants and greenhouse gases. In addition, photovoltaics also operate silently and their maximum power output coincides with peak utility power consumption.

The Solar Agenda: From Contemplation to Action

With the myths debunked and the benefits clear, action is needed. As with any major corporate initiative, a successful solar system implementation will require balancing efforts across disciplines within your enterprise.

A basic blueprint to consider:

Get the big picture -- given the complexities of the solar industry, most companies cannot successfully go at this alone. Deep industry knowledge and expertise in specific areas such as finance and regulatory matters are fundamental in addressing these complex issues. Therefore, leveraging an expert source who knows all the facets of the changing industry through a great depth of experience, expertise and old fashioned trial and error is paramount.

Make a plan -- work with a partner to implement a solar system that meets your building application and locale based on its lifecycle cost. Start accumulating payback from the initial investment, move onto a larger array, then ultimately an entire building or corporate campus.

Consider your options -- currently the most popular financing options for financing a commercial power system include an outright purchase, a multi-year leasing agreement or a Power Purchase Agreement (PPA). here is no one size fits all. The optimal evaluation of solar power financing options is to perform a comprehensive analysis of all the lifecycle costs involved.

Careful execution -- benchmark the project management requirements and diligently execute the plan across the entire project.

Sustain facility performance for life -- carefully review the building operation parameters and energy consumption on a semi-annual or even quarterly basis. See where discrepancies arise. Make adjustments and implement remedies as necessary. This will allow you to sustain and extend the project over its complete lifecycle.

Tom Hunton is President and Co-Founder, American Capital Energy, N. Chelmsford, Mass. American Capital Energy is a full-service provider of enterprise-class, commercial solar power system integration and installation services for businesses. http://www.americancapitalenergy.com


Interested in information related to this topic? Subscribe to our weekly Value-chain eNewsletter.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish