Saving green
Startup offers companies low-cost options in solar energy

Tuesday, July 29, 2008
BY TOM JOHNSON
Star-Ledger Staff

Appliance Dealers Cooperative, like most other businesses, is coping with sharply rising electric bills that show no sign of leveling off.

But the company does not use enough power each month to justify the huge expense of switching to an alternative technology to reduce its energy bills, according to Yanai Siegel, corporate counsel for the not-for-profit price club for appliance retailers.

It recently found a way to stabilize its energy costs with the help of Soltage, a Jersey City startup founded by two Yale University graduate students. The renewable energy company helps businesses go green and save money by tackling one of the biggest obstacles to installing solar power systems -- the up-front capital costs.

Soltage finances and installs solar panels on the roofs of its customers, maintains and operates the systems, then sells the power back to the clients at a discount. The customer saves money on electricity and is shielded from the big spikes in energy bills other businesses face -- without having to invest in expensive solar equipment or installation.

ADC expects the solar system Soltage will install on its warehouse roof in Monroe Township will save it in excess of $1 million over the next several years, Siegel said.

"What Soltage has done is make this kind of technology attractive," Siegel said. "At the end of the day, it will allow us to save on our energy costs and allow us to hedge electric costs going forward."

Privately held Soltage was co-founded three years ago by Jesse Grossman, chief executive, and Vanessa Stewart, chief operating officer, who came up with the business model along with three other classmates at Yale University's School of Management as part of a class project.

The 29-year-old co-founders concluded solar energy capital costs -- which can run from $2 million to $14 million for the commercial and institutional customers Soltage is targeting -- were both a challenge and an opportunity. Their model allows customers to reap energy savings without diverting needed investment capital.

"The reality is, this is a very large market -- the opportunities are quite massive," said Grossman, who says they decided to locate the business in Jersey City, about a block away from the Hudson River, because of the state's commitment to promote renewable energy.

New Jersey has set a goal of having 20 percent of its electricity generated from renewable energy sources such as solar and wind power by the year 2020. The state is second behind only California in the number of solar installations.

Last year, Trenton revamped its solar program from one relying largely on rebates to fund new projects to a market-based system, which requires the private sector to pick up most of the cost. To make the systems more affordable, the state has created incentives in the form of solar renewable energy certificates, which can be sold to big energy suppliers that face mandates to increase the amount of renewable energy they produce.

With the certificates, as well as federal tax incentives, energy sales and depreciation on the equipment, Soltage can make money on the solar systems it installs, Grossman said. He declined to say how much the company generates in revenue or profit, but did say the company was "revenue positive." It currently operates in 10 states, but about half of its business -- mostly involving commercial clients with large expanses of roof space -- is in New Jersey.

The opportunity is huge. The $16 billion solar industry will expand to a $50 billion market in the next five years, according to some projections. New Jersey, which wants to be a leader in the solar field, hopes to have at least 2 percent of its electricity generated from solar panels by 2020.

"What New Jersey has done is very encouraging," Grossman said. "This is a market we can grow in scale. From an economic point of view, it could be a real boon for the state, creating many new green collar jobs."

Others in the sector also predict solar is ready to take off.

"One of the biggest problems facing American families and businesses is rising energy costs. Managing those energy costs is the key to profitability," said Neal Lurie, a spokesman for the American Solar Energy Society. "The biggest hurdle for solar energy is the up-front costs. What we're seeing is an increasing trend toward new financing mechanisms to help invest in solar technology."

Michael Albert, owner of Pilgrim Furniture in Milford, Conn., had a solar system installed by Soltage on his 80,000-square-foot store and expects to cut his energy bill 10 percent each month.

"It was a combination of favorable power rates and the opportunity to reduce greenhouse gases," he said. "We're looking to be as environmentally friendly as we can be."

Tom Johnson may be reached at tjohnson@starledger.com or (973) 392-5972.