Indianapolis Business Journal Q&A: Jermey Lipinski On Using Solar Power

Mar 20, 2020 | Emergent Solar Energy, Jeremy Lipinski

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.

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