A utility service model pioneered by SunEdison, which lets cash-strapped municipalities and building owners purchasesolarpower with no upfront capital, is beginning to generate more than just kilowatts.
It's also producing copycats in energy efficiency, heating and cooling. Companies such as Mondial Energy and GeoXperts have adapted the utility approach to solar-thermal and geothermal heat-pump systems, allowing customers to dramatically offset their use of natural gas or electricity without weighing down their balance sheets.
And at least one company, H2O Applied Technologies, has even figured out a way to sell conservation as a service, by getting paid over a long-term contract out of monthly energy savings.
Some industry experts caution that the complexity of certain technologies increases the risk of such lengthy commitments, and say that becoming a utility is more than just selling energy – it's about supporting a service 24 hours a day. The concept, however, is attracting the attention of green-minded organizations that want to buy clean energy, not own the systems that produce it.
"The client really doesn't know what the cost is. They don't ask us what the cost is. They have absolutely no responsibility regarding the cost," said Al Scaramelli, president of Boston-based H2O Applied Technologies. "They can have their cake and eat it too."
The company goes into hospitals, colleges and universities and installs energy-efficient equipment at its own expense, in exchange for an 80-percent cut of savings, usually over a six-year contract period. After the contract expires, the customer can purchase the equipment from H2O at "fair market value" -- typically 6 to 8 cents on the dollar.
H2O's trick is to keep the entire agreement off the institution's balance sheet so it doesn't tie up scarce capital that's desperately needed in other areas. It does this by investing in new equipment, or modifications to equipment, rather than changes to a building, which are subject to different accounting rules.
"It can't be real-estate related," said Scaramelli. "We couldn't put insulation on a roof but we could do it on a boiler. There's no other company that offers this kind of accounting treatment."
At Boston's Brigham and Women's Hospital, for example, H2O purchased and installed new energy-efficient heating, cooling and mechanical equipment, cutting the hospital's energy bill by $750,000 a year. The privately held company, which Scaramelli said has "several hundred million dollars" to work with, has about 30 projects under its belt and is seeing demand for its service take off as organizations move to green up their images.
Meanwhile, the city of Toronto recently gave the go-ahead for a solar-thermal pilot project that will equip 20 municipal buildings with rooftop systems at no cost. The systems will be installed, owned and maintained by a third party, which will sell the solar-generated heat -- or British Thermal Units (BTUs) -- back to the city at a fixed rate over 10 or more years.
A request for proposals has been issued and the city expects to select its solar-thermal utility early next year. If successful, the project will likely be expanded throughout the rest of the city, the fifth-largest in North America.
"There's been a mind shift among municipalities in the last year alone," said Rob McMonagle, a senior energy consultant for the city of Toronto and former executive director of the Canadian Solar Industries Association. "Everybody is starting to look at these alternative models."
Alex Winch, president of Toronto-based Mondial Energy, said the city's RFP is an "open endorsement" of a business model he has been promoting for the past three years. He said the fact that Toronto chose solar-thermal instead of solar PV demonstrates that, as far as greenhouse-gas reduction strategies go, displacing fossil fuels with renewable thermal energy is as equally effective as embracing green electricity.
With a solar-thermal system, fluid-filled tubes behind a solar panel collect the sun's heat and carry it into a building, where it's used to pre-heat water and assist with space heating. This renewable heat directly offsets the need for natural gas or electricity, in some cases by more than 50 percent.
"We've done the proof of concept, we've built on people's rooftops, we're generating the energy and customers are happy," said Winch, who many credit as a pioneer of the solar-thermal utility model. "Increasingly, we're going into meetings with prospective investors and they already know us, whereas three years ago I was going into these meetings on more of an educational mission."
The challenge now, he said, it to move beyond one-off projects and start building scale. "The Toronto proposal is a key element to this. A portfolio of 20 buildings lets me go to scale. We're not aware of any other city taking this approach." He said he hopes it will tweak the interest of other North American cities.
Mondial, which already acts as solar utility to two seniors' residences and one hospital, plans to bid for the city project, likely in competition with newcomers such as RESCo Energy of Toronto and Montreal-based HLT Energies.
"I'm sure there are a lot of people looking over Alex's shoulder to see what he does and how he does it," said Derek Brown, in charge of the solar hot-water program at Santa Clara, Calif.-based Fat Spaniel Technologies. The company supplies software that allows Mondial to monitor the performance and verify output of its solar-thermal projects. "They are the first ones and they're pushing it along. We're cheering them on."
Brown said it would be difficult for a company like Mondial to develop a business plan without the assistance of software that allows for remote and detailed monitoring of hundreds, potentially thousands of different systems. "The PPA (power purchase agreement) model and the Fat Spaniel service model are closely intertwined."
Winch agreed, adding that the ability to present performance data in real time from a remote location makes it easier to show the economic advantages of solar-thermal versus solar PV systems. "I think we're gaining traction because people are seeing energy pricing that's competitive. … When we price our kilowatt-hours (BTU equivalent) and come in with a proposal to customers, the PV guys cringe."
Another renewable utility model that could gain traction is being tested by a Toronto-based company called GeoXperts, whose founders have had limited experience in Philadelphia and the Bahamas with a geothermal-services model that replaces natural gas and offsets electricity use in large buildings.
Geothermal heat-pump systems provide both heating and cooling by taking advantage of constant temperatures 6 feet or more below the Earth's surface. The systems require some electricity, but overall greenhouse-gas reductions can be dramatic.
GeoXperts starts by determining what a potential customer pays in energy costs annually. The company then offers to supply that energy for a slightly lower fixed annual rate over 10, 15 or 20 years using a geothermal system it will install, own and maintain. "For the client, the key is that their energy costs are capped going forward. That's the difference we bring to the equation," said Leslie Thomas, president of GeoXperts.
Every year under contract, a GeoXperts customer gets a predictable flat-rate energy bill that's slightly lower than it used to pay. On top of this, it gets the environmental bragging rights associated with geothermal installations.
Thomas Garcia, chief financial officer of GeoXperts, said the company is close to raising a major first-round financing. "We're getting ready to launch in a big way," he said. "There are so many retrofits to be done. The market is just huge."
But for SunEdison, which considers itself technology agnostic, solar PV is still the way to go. Vice President Mark Culpepper said there are more technical risks to consider with solar-thermal and geothermal technologies.
"Any time you roll out a new technology, particularly ones involving moving fluids, you come under a much higher degree of scrutiny," said Culpepper, adding that startups entering the field often forget about the need for on-call service and maintenance crews and liability coverage.
"We're not opposed to it by any stretch of the imagination," he added. "But all those aspects entail having a comprehensive approach, and very few companies are thinking about it that way."