Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=161470
Story Retrieval Date: 5/18/2013 4:07:07 PM CST
U.S. Department of Energy/Ben Humphrey/MEDILL
Even in a fragile economy, risk-taking is alive and well in American business, and it’s resulting in some curious bedfellows.
Like fire alarms and solar panels.
In 2008, Lamarco Systems Inc., a security solutions company based in Northbrook, Ill., began installing and distributing solar energy technology through a wholly owned subsidiary called Chicago Solar Technologies. While green innovation and renewable energy are certainly of-the-moment, how does a decade-old security company get involved in the solar photovoltaic cell market?
CST Managing Partner Roman Grossman says the idea gained traction from conversations with the company’s customers.“Everyone is looking for growth,” Grossman said.
“Everyone is looking to extend their business, to leverage their customer base, and a whole mix of our clients in the security arena were saying, ‘you’re doing all of this electrical stuff, would you ever do solar?’”
Lamarco Systems’ clients had noticed a surprising synergy between the two industries. The steps required to design and implement a security system are very similar to those necessary to install solar paneling. So are the permitting and approval hurdles, which Grossman likens to “hoops and red tape.”
As solar energy usage grows and becomes more affordable, Grossman believes that the contractors, architects and electrical engineers in Lamarco’s network will increasingly be confronted with the same solar question posed to him. And he says that’s where Chicago Solar Technologies will step in.
“In three years, our goal is to become a one-stop shop for electrical contractors and engineers who want to install and service solar technology,” Grossman said. “We want to be a source of expertise and products to the army of people who get the solar question but don’t know how do to it.”
Knowing how to install and service solar is only part of the equation. Marketing it, and making it profitable, present entirely different challenges.
Solar power is expensive.
According to Grossman, total installation costs range between $20,000 and $40,000 for the average residential home, depending on square footage. In most cases, the federal government will cover 30 percent of production and installation costs, according to the Department of Energy. But the remaining balance is still a significant financial consideration.
“It’s kind of the wild west out there,” said Alicia Lauhon, director of sales for PVPower.com, a Chicago-based solar distributor. “Right now, it makes way more sense in the commercial space, but so much depends on what state you’re in…and it’s a big investment.”
Recovering the cost of a solar power system can take up to 15 years for a residence, and between six and 10 years for a commercial property, according to Lauhon. Consequently, attaching tangible value to solar energy, beyond its environmental benefits, is a difficult prospect, and rather different from selling the benefits of a security system.
“Most people are less inclined to pay for something that isn’t immediately economical,” Grossman explained. “Capital allocation is different between the two. Security, in many cases, is mandated, an assumed economic consideration. But solar is different – the economic justification is just not obvious to some customers.”
Success in the solar energy market might start with understanding who can afford solar, or who can take advantage of it.
For many businesses, switching to solar is not just about the environment. It can be a branding tool, a form of image enhancement. In a global market where sustainable energy is growing in popularity, claiming green is becoming its own form of currency.
“Eight out of 10 times it has nothing to do with the environment at this point,” Lauhon said.
CST sees the most immediate opportunity in the commercial sector. Corporations and developers normally have more capital, and can take advantage of renewable energy grants and various green-driven programs like LEED certification.
LEED certification is the recognized standard for measuring building sustainability, and is managed by a Washington D.C.-based non-profit called the U.S. Green Building Council. An increasing number of city and state governments are incorporating green caveats into building permits, so achieving LEED certification through solar panels is attractive to commercial developers.
Government incentives vary by state, and Illinois offers considerably fewer financial breaks than progressively green states like California and New Jersey, according to Lauhon. In California, return on investment almost always occurs in less than ten years.
Illinois does exempt solar energy systems from state property tax valuations, classifying solar equipment as a conventional energy system, which can provide a substantial reduction. The Illinois Clean Energy Community Foundation also facilitates a grant program for solar system installation, with preference given to buildings with a “LEED Silver” certification or higher whose system will provide at least 25 percent of that building’s peak load.
CST has a potential advantage over other young companies striving for market share in the solar field: the backing of its parent company.
Lamarco Systems, which had net sales of $5 million in 2009, provides CST with brand recognition and infrastructure, measures of stability that many green entrepreneurs do not have. Grossman and his team also have access to a proven customer base of thousands, many of which are confident that the company’s new venture will be a success.
“Absolutely,” said an employee at Lamarco customer Prestige Auto Gallery. “They are responsive and have always been there to fix even the smallest problems that we have. We are very satisfied customers.”
Solar panels are covered in a photovoltaic material comprised of cells that convert solar radiation into electricity. They are made of semiconductors like crystalline silicon and other thin-film materials, and represent a clean and reliable source of renewable energy, according to the Department of Energy Web site.
The solar field is still gaining momentum in the Midwest. And while Illinois does not boast the same green incentives as states like California, its market is less saturated. Solar distributors and installers like CST hope to capitalize on fewer competitors, while fighting to educate a skeptical customer base.
“We are believers in sustainable energy,” Grossman said. “But we are trying to be business savvy, not just full of naked enthusiasm…and that’s important… But it’s a good cause, it’s on the rise, it has to happen.”