Q&A: Jeremy Lipinski on using solar power on the farm March 13, 2020 | Lesley Weidenbener | Indianapolis Business Journal
Jeremy Lipinski and his son launched Emergent Solar Energy in 2016 in the Purdue Research Park with the goal of helping local governments, schools, manufacturers and other companies make the switch to renewable energy.
And Emergent Solar still serves all those types of customers. But it didn’t take long for agriculture to emerge as a key sector. Lipinski said that’s because solar is a good financial bet for farmers, but also because farmers are interested in the environment and sustainability.
Lipinski called farmers the “real stewards” of the land.
He pointed to a 155-kilowatt installation at a northern Indiana hog farm. Solar is now covering about 75% of the farm’s energy demand. That equates to a reduction of 3,500 tons of carbon emissions over 25 years.
The farmer, Kraig Resler, said the decision to install solar was an economic and environmental one.
“We are always discussing how to make our 7,000-pig operation more cost-efficient and environmentally friendly,” Resler said in a statement. “We are excited that our completed solar array will have a positive impact on the environment and save us money on electricity for years to come.”
IBJ talked with Lipinski about his company and why solar appeals to farmers.
Tell me how you got started.
For many years, I worked in commercial finance and I did financial modeling and placement of financing for commercial projects. Some of those were energy projects—and specifically solar. And in 2016, my son and I decided that there was an opportunity in Indiana because of Indiana’s energy policy.
I think at the time, there were 12 or 14 solar installers in the state of Indiana, and most of those focused on residential. And so, in looking at the commercial side, I realized there was an underserved niche. And when we got started, working in the AG sector kind of happened organically because they were the ones that always contacted us. If I received 10 phone calls from people interested in solar, eight of them were farmers. That sector has been far and away the sector that has showed us the highest interest in adoption of solar. It’s not even close.
Why do you think that is?
The project returns for the farmer are quite impressive, and they are so because the farmer is not subject to what other commercial entities are subject to, as far as their electric utility rate tariff. Generally speaking, a large manufacturing plant or a small factory with a large energy load are subject to demand charges on the bill. [Demand charges are based on the highest amount of power a customer uses in a specific time period.]
You have charges based on demand and you’ll have kilowatt-hour charges. Demand charges are more difficult to mitigate with solar.
A good candidate for solar is a customer with a meter that has only kilowatt-hour charges, and they are generally single-phase electric service. They are excellent candidates because you can offset all of their energy consumption with solar. And if they’re interconnected into the utility through a net-metering agreement, then they get credit for energy that they push to the grid during the day for periods when there is no solar power. So, the project economics for on-farm solar seem better than for larger consumers that have different rate billing tariffs with larger demand charges.
There is a project size that we really want to focus on, that’s kind of a standard for most grain-drying and CAFOs, which you would know as a hog barn. That size is about 100 to 300 kilowatts, in that range. Now 100 kilowatts, if you compare that to the average home solar, it would be 10-12 times larger than the average home system. But if you compare that to a large factory or a school, something like that, then it would be probably 10 times less. About 100 to 300 kilowatts is what most hog barns, decent-size grain-drying operations are in the ag sector.
How long does it take that 100- to 300-kilowatt customer to break even on the investment?
That’s a great question. We had a big project in Tipton County, it’s 124 kilowatts. … This farmer has a hog operation and a very large grain storage operation. So now he has 90% of his energy load offset with solar and his project economics are incredible.
His internal rate of return for the life of the project is 14.5%. His 30-year return on investment was 183%. His payback period is 5.4 years. We get there through different means. You have the investment tax credit, which is now 26% of your project in a dollar-per-dollar federal tax rate. It’s stepping down. It’s going to be down to 10% here in two years. Then you have MACRs depreciation, which, with the change in the tax law, you can take 100% bonus depreciation. … Then you have for farms specifically, the USDA [Rural Energy for America Program] grant, which is an awesome program for any entity, farm or otherwise, that’s in a qualifying rural area. … We’ve had great success with that program. Now, when you add all that together, you’re looking at an offset 60% to 70% of the total project installed cost. Those numbers make it really attractive.
For most farmers, is this a bottom-line decision? Or are some of them interested in the environmental benefits?
I focus mainly on the financial aspect or the project economics because that’s a universal interest. I think that appeals to everyone.
But I think the majority of farmers are definitely interested in what I would call the intrinsic benefits of solar. And one of those, besides the environmental benefits, would be independence. And I think that farmers definitely have an independent spirit; they’re entrepreneurs. Farmers want to be independent of any other entity and especially monopoly utility services.
You called it environmental benefits. I would classify it as stewardship. Farmers are the original stewards. And I’m not a climate scientist, but I can tell you that clean energy from solar is much better alternative regarding emission pollution. I believe the environmental impacts of burning fossil fuels are a concern to farmers and they want to reduce their footprint.
I think farms have gotten a bad rap, really, as far as being polluters. I feel like that’s absolutely untrue in regard to their approach to how they manage their farms.
So [farmers] like the publicity, the positive publicity, of going solar. When I put up solar for a hog barn, Purdue Research Foundation puts out a press release on my behalf for the farm. That’s shining a positive light on how beneficial solar can be and what is the potential for others. And that’s good news for the farms. I think that it’s easy to paint them with a broad brush and say, “Oh, it’s a factory farm and they don’t care about the environment. They don’t care about animals.” I found the opposite of that’s true. How they farm their ground and care for their livestock is of the utmost importance because it not only affects their reputation, it affects their bottom line.
What could Indiana be doing to encourage more companies or farmers or anybody to adopt renewable energy?
Indiana’s energy policy towards renewables is very low scoring, if you look at it from a national average. We do not offer any state incentives for solar. We don’t have a state renewable tax credit. We do not have a SREC market that trades in Indiana. Some states … have a market where you can exchange renewable energy credits. Indiana does not have that. We have no state incentives. But I think the biggest thing is that Indiana does not allow for third-party ownership. And what that means is, when you see a school or a municipal entity, university, college, or town; they must purchase and own the solar project per state law.
In other states, a third party can come in and essentially finance that project for the school and that entity gets all the tax benefits. And they sell the power to the off taker by what’s known as a PPA, or power purchase agreement, to non-taxed entity at a reduced price. The private entity owns and maintains the project and receives all the tax benefits.
That’s how Ohio does it. That’s how Illinois does it. Indiana doesn’t allow that kind of finance structure. So, every project that I build, whatever entity contracts with me, actually owns it. If it’s a non-taxed municipal, like a town or a school—they receive zero tax benefits. None. They can’t get the solar tax credits or the depreciation benefits. So that’s half the cost of the project that they have to pay that a taxed third party would not. Indiana becoming a PPA state would open the door to much more opportunity for many different types of solar projects.
Do you expect more farms and companies to adopt renewable energy?
I think so. I think that you have two things happening. You have the cost of electricity continuing to escalate—there’s no doubt about that. Duke Energy Indiana just requested an across the board 15% increase in electric charges for 2020. Then, you couple that with the cost of solar installation that continues to drop every year. There will be a tipping point. Once the solar project can cashflow commensurate to the utility bill, every business that can go solar, will go solar.
IBJ original link:
Solar Energy Adoption helps Indiana Farms Cut Electric Costs and Gain Independence with Clean Power
For many farms in Indiana, electricity is one of the largest fixed-costs and one of the most difficult expense to control. Annually, utility electric rates increase by an average of 3%, while on-farm electric consumption usually increases as well. Farm expansion, increased production, new facilities and machinery all work to increase farms electric costs. These factors leave Indiana farmers with few options to mitigate this cost, because electricity is a business necessity, and most Indiana utilities and rural electric CO-OPs operate as monopolies in their respective district without alternative competitive options.
On-farm solar power is an energy solution option that Indiana farmers may want to consider closely. Solar installation costs have dropped significantly in the past few years and now farm projects are producing some compelling economics. The average solar installation for a Midwestern farm payback period is now at 7 years. This economic metric alone is attractive, due to the fact that the power production lifespan of a typical solar array is 30 years. The second most important metric in the solar agriculture calculus is the levelized-cost-of-energy (LCOE). This metric is the cost of electricity, after the implementation of solar, calculated over the life of the solar array. This is a number that factors in the cost of the solar system, along with the avoided utility cost of power that a system owner would have otherwise paid, and demonstrates an energy rate over the life of the system. Many times the LCOE is less than half of the cost of doing nothing.
Another item for Indiana farmers to consider while weighing the benefits of switching to solar is the USDA's Rural Energy for America Program, also known as a REAP grant. This is a merit based grant which is scored by the USDA's system that considers many factors in the solar project, such as type of farm grant applicant, solar project feasibility, energy offset, financing and total solar project economics. If the REAP application is strong and the project numbers are favorable, it increases the chances of being awarded. The maximum REAP grant for a Indiana solar project is a 25% reimbursement of the project cost. If awarded, this makes the implementation of solar for the farm very compelling.
Lastly, the solar Investment Tax Credit (I.T.C.) is an important considerations for the farmer to consider before making the decision to implement solar. The ITC is the federal 30% business tax credit for adoption. This is the IRS solar incentive that credits back to a business up to 30% of the cost of the solar project in a dollar per dollar credit against a federal tax obligation the business would have paid otherwise. This means that in order to make use of this tax credit, the business would have to have a tax appetite. The credit can be retroactive for the previous tax year or spread out over future tax years in order for businesses to claim the full 30% credit. 2019 is the last tax year for the full ITC, and the credit amount drops incrementally over the next few years until it drops to 10%. at which time it will remain at that percentage indefinitely.
Emergent Solar Completes 155kW Indiana Farm Solar Project
Emergent Solar Energy just completed a solar project for a large hog operation in northern Indiana. The project was a 155kW system that offset near 80% of the farm's electric consumption. The project was award a USDA REAP grant and the farm utilized a term loan at a favorable interest rate from their AG lender, which helped the project cash flow and greatly improved the project economics. The CAFO farm had a very high monthly electric cost due to the hog barns exhaust fans which made the electric load steady and without spikes. Since the local utility allows for a net-metering agreement, not yet reaching the Indiana renewable energy cap, the farm was able to maximize the net-metering program at the retail rate. This means that the farm gets credit for the energy it pushes back over the meter at the same rate the utility charges it for power pulled off the grid.
These factors made going solar an easy choice for this farm and most farms in Indiana with high electric costs, can utilize solar in the same manner to save money, gain independence from their utility or CO-OP, and power their farm with clean energy for decades to come. Confined Animal Feeding Operations (CAFOs) such as hog, poultry, dairy farmers, are great candidates for solar energy. Other farms such as growers of corn and soy beans, can utilize solar to power their grain storage bins, shops and out-buildings. Agribusinesses such as feed mills, seed processors and cold storage can enjoy the financial benefits and independence of producing their own clean power with solar energy in a similar manner as farm producers.
You can lean more about our latest Indiana agricultural solar project by clicking on the links below:
Emergent Solar Energy is proud to announce that our work has been featured in several nationally respected news sources, including PV Magazine, Solar Professional Magazine, PHYS.ORG, National Hog Farmer Magazine, and Purdue University Research Foundation news press. Read about our recent Resler Feeder Hog solar project in Mishawaka, Indiana in the linked articles below:
Learn more about our largest Indiana agricultural solar project to date.
Technology from Emergent Solar Energy, based in the Purdue Research Park, is helping to reduce energy costs on a northern Indiana hog farm
WEST LAFAYETTE, Ind. – A Purdue University alumnus is using clean, solar energy to drastically reduce the electric bill for his northern Indiana hog farm with the help of a company based in the Purdue Research Park. (Image provided) Download image
Kraig Resler, an alumnus of Purdue’s College of Agriculture, partnered with Emergent Solar Energy to find ways to reduce energy costs, protect the environment, gain energy independence and invest in the long-term benefits of on-farm solar.
“We are always discussing how to make our 7,000-pig operation more cost-efficient and environmentally friendly,” Resler said. “We are excited that our completed solar array will have a positive impact on the environment and save us money on electricity for years to come.”
The project is one of the state’s largest confined animal feeding operation solar arrays. The solar array is rated at 155 kilowatts DC and will produce more than 200,000 kilowatt-hours of energy per year. This will cover approximately 75 percent of the farm's energy demand and reduce energy costs by the same amount. This equates to a reduction of 3,500 tons of carbon emissions over 25 years.
“This was a challenging site,” said Chris Rohaly, engineering and operations manager of Green Alternatives Inc., an Emergent Solar subcontractor involved with this project. “Space was limited for the desired system size, and the tie-in to the utility feed required a long trench. But we iterated design until we reached the optimum between the farm's goals and site constraints. This system will produce strong results."
This project was awarded a Rural Energy for America Program grant by the U.S. Department of Agriculture, which helped reimburse some of the farm’s initial investment. The USDA grant and federal tax incentives, along with net-metering, will produce savings that will defray the costs of the project by more than 65 percent overall.
"This is our largest farm solar project to date, and I couldn’t be more pleased with the result,” said Jeremy Lipinski, managing partner of Emergent. “The project economics and production numbers are quite remarkable, and this will be a great investment for our farm client."
The Reslers are a Boilermaker family. Kraig’s son, Tyler, is also an alumnus of Purdue’s College of Agriculture and works on the family farm, which is in Mishawaka, Indiana, just east of South Bend. Kraig’s two daughters are undergraduate students at Purdue.
Resler worked with Emergent Solar Energy, headquartered at Purdue Research Foundation’s Purdue Research Park of West Lafayette.
The work aligns with Purdue's Giant Leaps celebration, celebrating the university’s global advancements in sustainability as part of Purdue’s 150th anniversary. Sustainability, including through energy conservation, is one of the four themes of the yearlong celebration’s Ideas Festival, designed to showcase Purdue as an intellectual center solving real-world issues.
About Purdue Research Foundation
The Purdue Research Foundation is a private, nonprofit foundation created to advance the mission of Purdue University. Established in 1930, the foundation accepts gifts; administers trusts; funds scholarships and grants; acquires property; protects Purdue's intellectual property; and promotes entrepreneurial activities on behalf of Purdue. The foundation manages the Purdue Foundry, Purdue Office of Technology Commercialization, Purdue Research Park and Purdue Technology Centers. The foundation received the 2016 Innovation and Economic Prosperity Universities Award for Innovation from the Association of Public and Land-grant Universities. For more information about funding and investment opportunities in startups based on a Purdue innovation, contact the Purdue Foundry at email@example.com.
About Emergent Solar Energy
Emergent Solar Energy is one of the leading commercial solar construction firms in the state of Indiana. Headquartered at Purdue Research Park, in West Lafayette, Indiana, the company provides solar solutions to the commercial and industrial, municipal and agricultural sectors across the state of Indiana. Emergent Solar seeks to bring renewable energy to the communities it serves and to help organizations gain energy independence while achieving their sustainability and stewardship goals.
Source: Jeremy Lipinski, 765-753-9155, firstname.lastname@example.org