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Renewable Energy Outlook

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When a homeowner requests an estimate for equipment replacement, Action Air Conditioning, Heating & Solar in San Marcos, California, doesn’t dash off a proposal based on the home’s square footage. Instead, a salesperson spends nearly three hours assessing the entire home and doing computer modeling before providing three options: good, better, and best. The “good” package typically includes a higher efficiency heating or cooling unit and new insulation, while the “better” one might add weatherization and upgraded ductwork. The “best” package goes a step further to include solar panels.

“Adding the solar component has really taken our company to the next level,” says Greg Gill, Action’s president, noting that it went from a $6 million to a $12 million company in the last five years. “Maybe 15 or 20 percent of customers go for the best package, with solar, but their average ticket is much higher. Very seldom do we just do a solar system by itself; it’s usually integrated with our home performance offerings.”

Interest in solar runs high in California. According to the Solar Energy Industries Association (SEIA) in Washington, D.C., California accounts for 44 percent of the solar capacity installed in the United States. The state has long taken a proactive stance on renewable energy and, by 2020, will require every new residence to be Zero Net Energy (ZNE). In other words, a home cannot use more energy on an annual basis than it produces—from sources such as solar panels. “Commercial construction is following suit, although it isn’t required there yet,” says Gill. “People in other parts of the country will probably see their states following California’s lead.”

SEIA projects much of the future growth in solar will take place in Massachusetts, Texas, and New York. As chief executive officer of Halco Energy, based in Phelps, New York, Hal Smith has seen consumer interest in solar grow as the market has matured and prices have come down. In addition, he says, “There’s no question that federal and state tax credits help, as do the campaigns that offer bulk pricing to local communities.” Halco, for instance, has participated in numerous Solarize meetings, where groups of homeowners collectively negotiate rates and select an installer for their solar systems.

Globally, renewable sources such as sunlight, wind, and geothermal provided 24 percent of energy use in 2015, a 20 percent increase from just three years earlier. Closer to home, says Smith, “We are definitely seeing a larger portion of business going in the renewables direction. As an HVAC contractor, we’ve done geothermal for 20 years—but very sporadically. Now we have a geothermal department and do it all day, every day.”

Halco also installs windmills, although the latter represent a small percentage of its business. In fact, the company converts about 98 percent of its calls related to wind power to solar installations. “We get a lot of phone calls about wind, but most people don’t realize how much wind is needed—or that a residential installation is very different from an industrial wind farm,” says Smith.

Like Action Air Conditioning, Halco typically presents renewable energy options as part of an overall home performance package rather than as stand-alone components. When called for an equipment estimate, for example, the company always offers a no-cost energy audit—a $250 service for which Halco is reimbursed by a state agency dedicated to improving energy efficiency. The three-hour audit uses a blower door and a thermal imaging camera to measure leakage and results in a detailed analysis of the home’s efficiency.

“Nine times out of 10, even if they just called about an air conditioner estimate, people will take advantage of the audit,” says Smith. “That allows us to talk about how much less expensive and better for the environment a geothermal system would be for cooling the home. And then we can talk about adding solar for heating hot water and electricity.”

Smith and Gill offer this advice for succeeding in the renewable energy market:

Show and tell. Even homeowners pre-disposed toward solar or geothermal may not fully understand how those alternatives work—or may balk at the higher price tags they carry. Consumers need to be walked through the benefits to themselves as well as to the environment. “People who haven’t bought an air conditioner in 10 or 20 years experience sticker shock,” notes Gill. “We have to educate them about the benefits of the new equipment, the importance of indoor air quality, and the best value for long-term ownership. The more educated the consumer, the easier it is to upgrade a job in regard to product.”

Action Air, for instance, does load calculations to show the difference between adding and not adding insulation to the home; consumers quickly see that better insulation can mean purchasing a smaller air conditioning unit, which in turn can translate into lower operating costs. The firm has done enough solar installations to show such systems usually generate a minimum return on investment of 8 to 10 percent, typically paying for themselves in eight years.

Share success stories. Halco Energy has taken homes dating to the 1800s and retrofitted them to meet Zero Net Energy requirements. Working off the results of an energy audit, the firm typically begins by doing spray foam and cellulose insulation to tighten up the home and changing lighting and appliances to be more efficient. Next comes the installation of a geothermal system, often followed by a solar system. “The solar completely powers the geothermal and the plug load, and the people end up with no utility bills,” says Smith. “We’ve even had a few customers add additional solar to power their electric cars—so they never have to buy gasoline again either.”  

Gill often uses his own home as a sales example. Since he installed solar modules several years ago, the home always produces more electricity than it uses, resulting in an annual rebate from the local utility.

Subcontract if necessary. Halco started as a plumbing, heating, and air conditioning company 32 years ago, adding electric two decades ago. Consequently, the company already had the expertise it needed to move into home performance and renewable energy offerings. In contrast, Action Air has found it cheaper to subcontract insulation work and hire an electrician to hook up new solar systems to the power supply. “We want to focus on what we do best,” says Gill, “so if an outside source can do certain aspects of our business easier and better, that’s the way we’re going.”

As more wind and solar installations come on line, Smith observes, the costs of natural gas and electricity generated by nuclear or coal-burning plants are likely to rise and prompt more homeowners to consider alternatives. Survey results compiled by Statistic Brain Research Institute in Ladera Ranch, California, already indicate a willingness on the part of U.S. consumers to favor renewable energy. Among those polled, 23 percent said they were willing to pay more for cleaner energy, and 43 percent agreed with the statement “I’m willing to change my behavior to reduce my carbon footprint.”

Smith, whose company’s service area encompasses many environmentally conscious communities, sees significant implications in such results. “Be aware that the market is changing,” he cautions. “If you want to keep your HVAC customers, either ramp up and do renewables yourself or work with trusted partners so you can at least make the offering.”

Sandra Sabo
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