Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=109001
Story Retrieval Date: 5/20/2013 11:54:36 AM CST
Audio slideshow-Fui Tsikata/ Medill
Audio slideshow-Fui Tsikata/ MedillPictures from Solar Services Inc.
In 1977, 24-year-old Brandon Leavitt left Florida and moved back to Illinois to start a solar installations business. Leavitt says he was “young, idealistic and foolish.”
After all, who leaves the sunshine state to search for the sun’s rays in dreary, cold Illinois? His friends thought he was crazy.
Today, Leavitt is the president of Solar Services Inc., a Niles, Ill.-based company specializing in solar installations and wholesale distributing of solar systems.
Three years after returning to the state, he ran out of an initial investment of $200,000 that he used to develop systems for heating homes and water. At the time, he worked with a partner, a secretary and an installer. Idealism can only power a boat for so long and Leavitt said he only became a businessman when his money run out and he needed extra capital.
He promptly found out that banks were as skeptical as his friends. While pursuing a Small Business Administration loan, he made sales of about $200,000 to a condo developer, obviating the need for a loan.
During the oil crisis of the '70s, when prices rose to record highs, many people turned to alternative energies. It lasted into the mid-'80s, when Solar Services made sales of over $1 million in one year and had 21 employees.
But when support for alternative energies waned as the price of oil fell, in 1987 Solar Services closed its offices and scaled back its operations after paying off its investors. Leavitt worked from home and began consulting and worked the speaking tour. This lasted 10 years.
Now in his 50s, Leavitt displays strands of grey hair as relics of his endeavor and persistence. His measured demeanor indicates he knows that when it comes to alternative energy, pendulum shifts can occur at the stroke of a pen.
His now revived and flourishing business is a testament to his perseverance. Leavitt says of his journey, “I describe myself as a 30-year overnight success.” While he still consults and speaks, his core business is installing solar thermal and solar electric systems and wholesale distribution of systems to other states. “It’s our wholesale business that really pays our bills,” Leavitt said. Even though wholesaling constitutes only 20 percent of his revenues, the gross margins are higher, said Leavitt.
“I’m what you call a pragmatic optimist,” Leavitt said. “Even when things happen, they happen for good reasons.”
Leavitt relied on that optimism upon hearing the Illinois legislature had frozen the 30 percent tax credit for residences and businesses that install a thermal or photovoltaic solar system for a year. The freeze has been in effect since the close of business Sept. 30. In better news for Solar Services, Congress recently passed an $18 billion tax credit for alternative energies as part of the $700 billion financial bailout.
Steve Simko of Morningstar Inc. said the bill “should open up the U.S. markets a lot.”
Last year, Solar Services made sales of $3 million. As of mid-November, the company was on pace for a similar performance this year. The company spent $1 million in 2007 to expand its premises to include more warehouse space.
While revenues remain positive, Solar Services has to work extremely hard to turn a significant profit. Leavitt estimates that for every $200 in revenues, the company makes a penny profit. His $80 gross profit is wiped out by $79.99 in rent, taxes and utilities.
Leavitt said the company spends each year $47,000 for workman’s compensation, $100,000 for health insurance, $120,000 in property taxes and rent, and $40,000 in liability for the company’s trucks.
Simko said of companies in the solar industry, “In the next few years, they have to drastically reduce their costs.” While Morningstar typically follows bigger solar companies, he said all alternative energy companies have similar challenges. For solar, it is the threat of new technologies and also the potential dominance of other alternative energy forms like wind.
Leavitt said that he recently had to order $100,000 worth of panels in anticipation of a price hike. “We have lots of money tied up in inventory,” Leavitt said.
Also, the current economic crisis has affected investments into solar energy as the “credit markets are frozen,” according to Simko.
The frozen markets don’t seem to have affected Solar Services though. Leavitt said the company’s performance has allowed him to have a line of credit backed up by his revenues and accounts receivable. He said all bills are paid regularly and that has bought some goodwill from the banks if the company needs to access its credit line.
Solar Services was about to hire an installer when news of the state legislature’s freeze came. The job terms were changed from a permanent position to a temporary one. The candidate who was offered the position declined.
Nevertheless, Solar Services has enough business to keep it busy until June of 2009, according to Leavitt. The company has also seen only a handful of cancelled orders because of the state’s freeze.
“The last two years have been really, really good for solar,” said Simko.
If the future for renewable energy is as bright as Simko and Leavitt believe, then consumers like Melody Meyer of Chicago will be key. Meyer installed a one kilowatt photovoltaic system on her home, but, she said, not for economic reasons. “It’s more about who we are and our desire to be socially conscious users of the environment,” Meyer said.
Nevertheless, she received an added bonus. “The electricity bill has gone down 40 percent”, said Meyer, with some of the savings coming in the form of a credit from her electricity supplier. She said she would like to install a solar thermal system in the future.
Currently, Solar Services has 20 employees. About half are full-time installers. A two-person sales team, general manager, an office manager, and a Web business developer complete the team.
Leavitt said keeping employees in the state is challenging. He explains that in the last two years he has lost three employees to states like California that are more aggressive and consistent in their renewable energies programs than Illinois. While sad to see his employees leave, Leavitt said, the only thing he can do is “throw a nice office party” and hope that one day they will return.
In spite of the challenges, Leavitt sees a bright future for his company and the solar industry as a whole.
Steve Simko is equally optimistic. “Within a few years there’s no question the price of silicon is going to go down a lot, Simko said. “Their input costs and material costs are going to go down.” When that happens, and with continued assistance from state and federal government, solar will become cheaper and more widely used.