November-December 2005

New Roof Shatters PV's Glass Ceiling

There's a new twist in the Million Solar Roofs Initiative concept specifically for industrial buildings -one that targets million-dollar solar roofs.

Traditional silicon and glass photovoltaic panels are just too heavy for large-scale deployment on most flat-roofed industrial buildings. Instead, an entire replacement roof with photovoltaics imbedded within a 10-foot by 40-foot roll of roofing material is what is called for. If the price were right, this concept of a roof plus PV could be quite a breakthrough for flat-roofed buildings. Actually, the price is a bargain---basically it’s free---if the customer opts for a long-term electricity purchase agreement.

It sounds unlikely, but thanks to a partnership among four companies---Solar Integrated Technologies (SIT), Sarnafil, Uni-Solar, and GE Commercial Finance Energy Financial Services---these new roofs are already producing electricity at a major metropolitan school district and numerous industrial buildings. So the concept works, but as Jon Slangerup, CEO of SIT recalls, just developing a new product wasn’t enough to succeed.

As a roofing company, Los Angeles--based SIT has been involved in the industry for 75 years, installing everything from the traditional tar and paper roofs to glass and silicon PV systems. But their breakthrough into large-scale PV roofs came with the introduction of two key technologies: thermoplastic roofing membrane materials from Sarnafil; and thin-film, vapor-deposited amorphous silicon alloy PV cells from Uni-Solar Corp.

By fusing strips of the thin-film solar cells to the roofing membrane, SIT came up with its SmartRoof product, a 10-foot by 40-foot module that ships in rolls, weighs only 12 ounces per square foot, and combines 12 flexible 128-W PV modules for the production of 1,536 W of DC power.

“We entered the solar business when the thin-film photovoltaic material came along,” explains Slangerup. “Although crystalline panels are good, they’re 5 to 8 pounds per square foot, and most of the flat-roofed buildings have very low weight-bearing characteristics.”

Not only are the thin-film materials lighter, they’re also more efficient. Uni-Solar’s amorphous materials are manufactured in a triple junction process that’s sensitive to three separate light frequencies. The process results in a higher energy output under imperfect light, and high shadow tolerance (see thin-film sidebar).

The new product was an ideal solution to the energy needs of the San Diego Unified School District. According to Bob Martin, electrical planner and estimator/inspector for San Diego Unified, the district spent a year getting snubbed by major electricity providers during its search to establish predictable energy costs.

“We had some big players in the industry say it wasn’t going to happen because we were asking for the moon for free,” recalls Martin. But then SIT and GE came along and now we have our photovoltaics.”

The project involves 14 school buildings, and started with a 100-kW system at the Jackson Elementary School. Jackson’s roof consisted of 64 SR2001 panels, plus a 100-kW Xantrex Inverter and SIT’s “Power Smart Management System.” It was completed in April 2004 and, since then, 10 more buildings have seen their roofs replaced and transformed into sources of solar energy.

“The system is net metered and it will turn the meter backwards,” notes Martin. “But most of our schools have activities even on the weekends, and our goal is to purchase all of the electricity produced.” The district estimates that it will ultimately save millions in both roofing costs and electricity.

“Everybody walks away winning,” adds Slangerup. “The district doesn’t have to spend any of their capital and, in exchange, they signed onto a 20-year energy services agreement, which fixes their cost of electricity at 16 cents per kW-hour with a small escalator.” The district had been paying blended rates from $0.075 to $0.22 per kilowatt-hour

The total package is valued as an investment of roughly $17 million for GE, and the terms make a persuasive argument for the growing popularity of third-party financing and power purchase agreements (see sidebar). To start, GE owns an asset that produces 2 MW of installed power for a 20-year revenue stream. Additionally, they can claim tax benefits that include an accelerated rate of depreciation, plus state- and utility-sponsored rebates.

“It’s groundbreaking because this type of structure [financially and otherwise] for rooftop photovoltaic had not been done before and you have challenges,” says Daniel Gross, GE Financial’s senior vice president of renewable energy. The first challenge was the fact that SIT was selling a new technology, which motivated GE to proceed with a high level of caution. On one of their many visits to SIT’s Los Angeles manufacturing facility, they asked SIT to demonstrate the viability of removing a roof, in the event of a deal going wrong.

“We brought a camera and a stopwatch,” Gross recalls, “and on two occasions they were able to remove a section of 10 by 40 feet in less than eight minutes. It was just two guys using an Exacto knife and a screwdriver.”

Not surprisingly, the legal paperwork proved to be slightly more challenging. Gross notes that project financing has very intensive documentation and extensive regulatory review, making it very costly to execute. “We didn’t want to invest all the man-hours and money to do it once or for a couple of small projects, and SIT didn’t want to go through this exercise with a lot of different [financial] parties,” says Gross. As such, GE favors large-scale projects for this type of financing, and that in turn requires even more caution. Nonetheless, GE found the arrangement so attractive that it asked for a guarantee of first right of refusal on the next $500 million in financing of SIT’s solar roof projects.

After looking at SIT’s roster of rooftop systems deployed since San Diego, it’s evident that first right of refusal was a wise option. Some of the latest projects include new photovoltaic roofs on large buildings owned by Frito-Lay and Coca-Cola.

In terms of commercial viability, SIT’s relationship with multi-national food seller Frito-Lay is a case in point. The first project was a 100-kW system consisting of 70 SR2001 panels at a 67,000-square-foot distribution center in Torrance, CA, completed in January 2004. Within weeks, Frito-Lay had the same system installed at their Sylmar, CA, distribution center. Three months later, the company ordered three more systems for other southern California locations. The company expects to generate more than one million kilowatt-hours annually from the five rooftops.

In May 2005, SIT received Frito-Lay North America’s 2004 Capital Supplier of the Year Award at an energy conference attended by members of PepsiCo companies that included Frito-Lay, Tropicana, Quaker Oats, Gatorade, and Walker Chips. The Frito-Lay Energy Group announced that it would be providing energy consultation and services to the entire PepsiCo family of companies. Slangerup expects the decision to result in the opening of doors for SIT’s roofing solution within the entire PepsiCo community of companies.

The company also has a foot in the door with Coca-Cola Bottling of Los Angeles. Though in this instance, Coke preferred to participate in the financing by spending some of their own capital up front. “It was a [financial] trade off, but the end game is the same,” Slangerup explains. “They get a discounted rate on the power for 20 years and give up all rights to the solar assets on the roof. But they get a brand new roof and they were able to finance an energy services agreement. At the end of the day, they see a reduction in the cost of their product.” The new roof has 236, SR2001 panels, generating a peak capacity of 325 kW.

Roughly 47% of SIT’s customers prefer to use their own financing to buy a system and take advantage of the financial incentives, green attributes, and energy security. So customers have two methods of financing, and even though these projects need to be large to make financial sense, Slangerup isn’t worried about finding a market for SIT’s products.

In fact, his problem at this point is in meeting current demand. When SIT wraps up its first year of sales of its SR2001 product line, it will have sold 10 MW–worth of systems, and future orders total up to $80 million more. “There are literally millions of square miles of flat roofs just in California,” notes Slangerup. “We will double our manufacturing capacity in September 2006 and that should get us through the next 18 months of commitments.”

As production volume grows, the company’s fixed costs drop, and Slangerup anticipates reaching a point within three to five years where rebates aren’t needed to make the projects financially viable. So, ultimately, a million dollar roof may cost much less, and the success of the Million Solar Roofs Initiative may come to pass much sooner than anyone could have predicted.