Podcast: How to sell solar in the Midwest with Inovateus Solar President TJ Kanczuzewski

Inovateus solar buzz

Outside of the solar hotbeds on the coasts, a solar company might need to be even more passionate to succeed. Inovateus Solar, for example, has carved out a sizable solar development market in the Midwest – a journey that has required a ton of customer education and a deep corporate belief in the mission of advancing renewable energy. We stopped by the company’s South Bend, Ind., offices to chat with President TJ Kanczuzewski about how they’ve done it, the book he wrote about it, the role of solar + storage going forward and the company’s new energy fund.

Listen (or subscribe!) at the bottom of this post. Here are some highlights:

First important note: I successfully pronounce TJ’s last name.

We start with TJ’s book, Building a Brilliant Tomorrow, and dive into the history of the company, which I find fascinating for how nimble Inovateus has been — never settling on one business model – but always staying true to its core purpose of pursuing solar business, wherever that leads them. This mission started with TJ, after he left a large company to pitch his dad on a wacky idea he had for expanding his company into solar.

“I didn’t get a sense of purpose working for the second largest mall owner-operator in the country,” he says. “I wanted to do something meaningful … and renewables is something our country needed and was something I was passionate about.”

This is the passion that was needed to jump start a dormant solar market in the middle of the country.

“We are solar evangelists,” he says of the company’s approach. “Sometimes we are just meeting with someone, establishing a relationship and teaching them about solar, and it might take 3, 4, 5 years before they do something, but when they are ready and looking for information, they’re going to call us up.”

This brings us into meta topic of “the psychology of renewables” which undergirds this entire business strategy.

TJ’s hot take: Not enough people working in solar practice what they preach. “I wanted to drive an electric car so that I could think like someone who drives an electric car.”

Our second favorite term after solar evangelist: Professional opportunist.

“We have to be professional opportunists because of where we are located. If a job pops up, we have to go after it whether it’s small or large.”

Finally, as usual on the Solar Builder Buzz, drinking a beer leads to an actual segue to solar business discussion, including why solar + storage, in more and more cases, is creating a better investment opportunity than just solar on its own. This leads me to get excited and fumble my way through a retelling of why our Project of the Year for 2017 was so awesome. Do yourselves a favor and just read what I wrote on it here instead of listening to me babble.

We end with some news on a new energy fund the company is launching. TJ also references a Michigan State carport project, which we covered here, and in this feature we did on the carport opportunity in the market.

— Solar Builder magazine

Huge Michigan State University solar carport project now complete

inovateus solar

Alterra Power Corp. and Inovateus Solar LLC are pleased to announce that the 11 MW Spartan solar project commenced full commercial operations on December 21, 2017. The Spartan project is located above 45 acres of carports at the Michigan State University campus in East Lansing, Michigan, covering over 4,500 parking spaces.

Separately, the project’s $19.8 million construction loan was retired on December 22 via a $10.2 million 10-year term loan and a $9.7 million tax equity investment, both provided by 1st Source Bank, a subsidiary of 1st Source Corporation (NASDAQ: SRCE). Under an agreement with Inovateus, Alterra now holds a 100% sponsor equity interest in the project.

Alterra will manage the project, which sells 100% of its power under a 25-year agreement with the Board of Trustees of Michigan State University. Inovateus managed the construction of the project and will also provide operation and maintenance services under a long-term contract.

Jon Schintler, VP of Project Finance & Development at Alterra, said, “We’re pleased to complete this project within 2017 – with tremendous thanks to our partners at Michigan State University, 1st Source and Inovateus. We’re looking forward to further growth of our US solar business and many successful years delivering clean power to MSU.”

“We’re excited to reach commercial operations at this project, a culmination of hard work by our entire team and each of our partners,” said TJ Kanczuzewski, President of Inovateus.

The ‘Carportunity’: How our electric vehicle future means big things for solar carports

— Solar Builder magazine

Financial details on Michigan State University solar project revealed

inovateus solar

Alterra Power Corp. and Inovateus Solar LLC closed $19.9 million construction loan facility for the Spartan solar project, an 11 MW solar project located on the Michigan State University campus in East Lansing, Michigan.

The loan facility is supplied by 1st Source Bank, a subsidiary of 1st Source Corporation  and consists of a $19.8 million construction loan plus a $500,000 letter of credit. Concurrently with the construction loan, 1st Source will provide a $9.7 million tax equity investment commitment and a $10.2 million term loan commitment, both of which will be used to retire the construction loan facility upon achievement of commercial operations (each subject to typical conditions precedent). The term loan will have a balloon payment based on a 6-year maturity and 20-year amortization.

Separately, Alterra completed a partnership agreement with Inovateus, under which Alterra will manage the project and hold a majority interest of at least 85% (final partnership allocations are subject to final project economics and other factors).

Alterra expects the Spartan project (currently under construction) to achieve commercial operations in December 2017. Spartan is contracted under a 25-year power purchase agreement with the Board of Trustees of Michigan State University for 100% of plant output. Construction is being managed by Inovateus, who will also provide operations and maintenance services.

Special Report: How to Make Money in the Midwest

“We’re pleased to complete this second project with our solar partner Inovateus, and to complete another financing with 1st Source,” said Jon Schintler, VP of Project Finance & Development at Alterra. “We look forward to serving Michigan State University for many years and hopefully expanding our Midwest solar operations.

“We are very proud of our entire team on the development of the Spartan project. A special thank you to Michigan State University, along with our partners 1st Source Bank and Alterra for joining us in building a brilliant tomorrow,” said TJ Kanczuzewski, President of Inovateus.

— Solar Builder magazine

Universities adding solar: Update on PV projects at Notre Dame, University of Virginia

Notre Dame goes solar

notre dame inovateus solar

Inovateus Solar has completed a 144.72-kW solar photovoltaic installation for the University of Notre Dame. The ground-mounted system is located at the Kenmore Warehouse storage facility and is the largest solar array built by the university to date as well as the biggest PV installation in South Bend.

The Kenmore solar system is connected to the main electric power feed for the building and will generate approximately 194,000 kWh of electricity annually, offsetting nearly one-third of the total electricity used by the facility. A net-metering agreement signed between the university and Indiana Michigan Power calls for any power generated in excess of the building’s immediate demand to be fed into the local grid for use by the utility and credited to Notre Dame.

The system is estimated to reduce the university’s carbon dioxide emissions by some 296,000 pounds the first year, and nearly 2000 tons over its lifespan of some 20 years.

Inovateus is developing and building several other major projects in the Midwest and adjacent regions, including a multi-site solar parking canopy installation at Michigan State University, which will be completed later this year and become the largest solar carport in North America.

UVA partners with Dominion Energy on solar facility

dominion solar power

The University of Virginia continues to expand its portfolio of carbon-free generation and achieve key sustainability targets with another partnership announced today with Dominion Energy.

Under a 25-year agreement, the University will purchase the entire output of a proposed 120-acre solar facility in Middlesex County. The solar facility, developed by Coronal Energy, will be constructed and owned by Dominion Energy. It will produce an estimated 15 megawatts of alternating current, or about 9 percent of the University’s electric demand.

The UVA Puller Solar facility joins the previously announced UVA Hollyfield Solar facility. In total, the two sites will produce 32 megawatts of solar energy and will offset about 21 percent of the University’s electric demand.

The UVA Puller Solar Facility was acquired as a development asset from Coronal Energy, a solar development company with regional headquarters in Charlottesville, Va. The facility will feature approximately 58,800 solar panels, enough to power about 3,750 homes at peak output. Construction is slated to start in late 2017, with commercial operations occurring by the end of 2018.

Coronal Energy, powered by Panasonic, is a leading independent power producer and provider of turnkey solar energy solutions tailored for diverse enterprise customers across North America, including utilities, corporations, and the public sector.

— Solar Builder magazine

Winning the Midwest: We look at how a new solar market is forming in the Midwest

Solar in the Midwest Map

You’ve probably heard, but more solar is being installed than ever before. As the cost of solar dropped the last decade, the economic case in areas of the country with high electricity prices was simple. This isn’t the case in the Midwest, where energy costs are lower, which keeps everyone mellower about the fossil fuels being mined and fracked in their backyards (we say this lovingly as Ohioans).

So, sure, most of the action is on the coasts, but even the Midwest is now starting to emerge from its cave, rub the soot from its eyes and see (and harness) the light.

Here’s what solar industry onlookers are buzzing about in the Heartland.

This article appears in the May/June issue of Solar Builder magazine. Subscribe here for FREE.

Midwest Means MW-scale

Cheaper electricity and a less demanding public means the case for solar in the Midwest mostly starts with policy incentives, and with little public demand for action, the balance of political influence over the shape of those incentives is tipped a bit more to utilities and any other interested stake holders (legacy fossil fuel companies?).

Utility-scale projects represent a little over half of the installations to date in those Midwestern states and about three quarters of the 2016 installations, according to data sent our way by GTM Research. The distributed generation markets in each state are all quite small still — sub 10 MW per state in each of the residential and non-residential markets for all of 2016.

The latest legislative triumphs in the region all seem to support this trend too with renewable energy portfolio standards (RPS) being raised in Illinois and Michigan and unfrozen in Ohio (for now). The Illinois bill in particular was two years in the making and has solar developers excited.

“It creates an adjustable block schedule similar to the successful California Solar Initiative model,” says Owen Goldstrom from Alta Energy, an analytics and procurement company that identifies and executes opportunities for renewable energy. “It’s an opportunity that we are closely tracking, and communicating to our customers with property in Illinois.”

Emerging Opportunities

chicago illinois solar

RPS standards don’t necessarily directly translate to DG solar projects unless there is a way for a smaller scale distributed system to benefit from the renewable energy credits (RECs), Goldstrom says. So, it is worth noting that these RPS bills did come with DG benefits too. The legislation in Michigan helped preserve net metering rules going forward, and GTM Research’s Allison Mond says they are classifying Illinois as an “emerging residential market.”

“The Future Energy Jobs Bill passed in the state mandates that a quarter of the 675 MW of DG required for the new RPS standard consists of sub-10-kW systems,” she says. “Though the market is still quite small, we expect residential installations in the state to double in 2017 over 2016 capacity and then continue to grow by between 100 and 200 percent each year through 2021.”

Illinois also allows for third-party ownership (leases or PPAs) of systems.

Implementation of Illinois’ RPS bill is the top issue of SEIA’s Midwest Committee, which has been working with the Illinois Power Authority to “get the regulatory language that allows the intent of the bill to move forward,” says Sean Gallagher, VP of state affairs for SEIA.

Perhaps the biggest exception to all of our Midwest generalizing so far is in Minnesota, where community solar has grown to become the third largest community solar market in the country after California and Massachusetts.

“It went from a cute idea to big business in two years, and now community solar is really picking up,” says Jake Rozmaryn, CEO of Eco Branding, the agency that represents the Midwest Solar Expo, now in its fifth year. “Large-scale development in Minnesota was over 300 MW in 2016 and is expected to be over a 1 GW in five years. Traction is there.”


Lingering Problems

We start in Indiana, which is ground zero for problematic energy legislation right now. The much-discussed SB 309 would phase out net metering in tiers: Early adopters would be able to keep net metering for 30 years; those who install between July 1 and 2022 can keep it for 15 years. Anyone installing after that date would be under the new rules.

What are the proposed new rules? Essentially it would be a “buy all, sell all” arrangement where solar customers sell their power back to grid for the wholesale rate (~3 cents per kWh), and then buy it back at the retail rate (11 cents per kWh).

The carrot in the bill for the solar industry is that power purchase agreements (PPAs) would be made legal.

UPDATE: That bill is no longer proposed — the Governor signed it into law.

Gallagher also pointed to Iowa, which doesn’t have a huge rooftop market yet, but has an important DG proceeding happening that will set rate terms and compensation structure going forward “and perhaps set some precedent in the Midwest.”

“We’re also paying attention to a bill in Missouri that would be harmful to rooftop solar,” he says. “We’re just trying to keep those markets open. It’s not a giant market, but we don’t want to see bills that just squash it.”

Arguably worse than the specific inhibitory policies is the general uncertainty lingering over much of the region. For example, we chatted with a developer based in New York who has been eyeing Ohio as a next great opportunity. Well, with the state passing a bill to freeze its RPS, which the governor vetoed, only to have a new, even more limiting bill be passed — how can anyone get a feel for how to proceed over the long term?

Political Will of the Midwest

Getting to this point was definitely not easy, and maturing the market from here will require even more work. Relaxed Trump-era carbon regulations might defibrillate the fossil fuel industries. Longer-term environmental and social arguments in general seem to carry far less weight than short-term costs, politically. Plus, Midwestern utilities have had the benefit of seeing net metered residential systems deployed on a large scale on the coasts, and some are trying to nip it on the bud. For example, ComEd tried to get a demand charge put into that aforementioned bill in Illinois, even though the net meter market in the state at the time was around 800 total customers. The Public Utilities Commission in Ohio is also considering proposals by several utilities in the state to double fixed rates for all customers.

But despite it all, the momentum is real. SEIA and the Environmental Law and Policy Center (ELPC) formed a Midwest coalition about two years ago thinking there were opportunities on the horizon for new markets to develop. It was a baby step. SEIA took a larger step this year and formed a Midwest Solar Committee.

“We recognized that there’s been some activity toward the end of last year that’s starting to bring those potential new markets forward, which provides justification for SEIA and its members to devote more attention to those states,” Gallagher says.

“Utilities in the Midwest have a lot of political clout,” Goldstrom says. “However, solar companies and industry organization have demonstrated a significant capacity to drive change and work with legislators on policy relating to both utility scale and distributed scale generation. I have been pleasantly surprised by the success of a lot of these lobbying efforts.”

By the way, ComEd’s demand charge request didn’t make it into the final version of the bill.

“I think the biggest success solar has had in the Midwest is becoming a competitive form of generation, and as solar prices continue to come down, the cost for electricity in general continues to go up, even in the Midwest,” says TJ Kanczuzewski, president of Inovateus Solar, based in South Bend, Ind. “Even in places that have some cheaper electricity from coal or hydro or even nuclear, electricity prices continue to rise by an average of 5 percent annually while solar continues to become more cost competitive.”

Residential Solar IllustrationROOM FOR Residential

As we wrote about the lagging prospects of residential rooftop solar in the Midwest, Sunrun became the first large national residential rooftop solar company to expand into the Midwest, setting up shop in Wisconsin.

Customers in Wisconsin can either own their system outright with Sunrun BrightBuy or own and finance it with Sunrun BrightAdvantage, using a loan arranged by Sunrun.

“We see a demand for solar that has been underserved in the state and look forward to giving residents a choice to reduce their electric bills with solar, while providing value to the grid,” said Lynn Jurich, CEO of Sunrun.

This highlights Sunrun’s ability to enter new markets in a low fixed-cost way through collaborating with local partners in the state. Sunrun’s economic investment is adding job opportunities in Wisconsin, and it is currently hiring for several positions for its solar team in Southeast Wisconsin.

Chris Crowell is managing editor of Solar Builder.

— Solar Builder magazine