Down But Not Out
With last year’s loss of the state solar tax credit, Louisiana’s alternative energy companies took a big hit, but industry leaders say there’s still hope.
A decade ago, as the Gulf Coast rebuilt following hurricanes Katrina and Rita, South Louisiana found itself a laboratory for the latest energy-efficient technology. Highlighted by programs like actor Brad Pitt’s Make It Right organization, neighborhoods across the region were reconstructed with homes that featured solar panels, foam insulation in walls and attics, Energy Star appliances, insulated windows and other efforts to make the homes as energy efficient, and thus cost effective, as possible.
Today, the energy efficiency industry in Southeast Louisiana isn’t nearly as robust as it was even two years ago, just before the cessation of the state’s solar tax credit caused serious damage to the marketplace.
The American Council for an Energy-Efficient Economy (ACEEE) recently ranked New Orleans and Louisiana among the least energy-efficient cities and states in the country. But remaining leaders in the sector are hopeful that by diversifying their businesses they can meet the needs of local commercial and residential customers looking to improve their bottom lines through energy savings.
Last year New Orleans and Louisiana ranked among the five worst cities and states in the country for energy efficiency, according to the ACEEE’s 2016 energy efficiency scorecards. The council included all 50 states and the District of Columbia in its state rankings and 51 of the largest American cities. Both the city and state ranked 47 out of 51.
ACEEE, a nonprofit, 501(c)(3) organization, acts as a catalyst to advance energy efficiency policies, programs, technologies, investments and behaviors. It developed the rankings by studying various energy efficiency policies and procedures in six categories, including utility programs, transportation, building energy codes, combined heat and power, state initiatives, and appliance standards.
Out of a possible 100-point total, New Orleans scored a 20, while Louisiana earned a 6.5 out of a possible 50-point total. The state was cited for lack of financial incentives and inefficient transportation. The council said New Orleans does not have an overarching plan for improving energy efficiency, but that they will be undertaking a planning process that may entail the development of a strategy as part of the Rockefeller Foundation’s 100 Resilient Cities Initiative.
LED Lighting the Way
85% — the drop in energy usage from the latest high-quality LED light bulbs, which illuminate just as well as traditional incandescent and fluorescent bulbs and last 10 to 25 times longer.
“By converting traditional lighting to LED lights, companies cannot only drastically cut electricity costs, but will also eliminate routine maintenance costs because of a much longer lifespan than traditional bulbs, and reduce HVAC costs because of the low heat emitted by LED’s,” said Jerry Hymel, owner of New Orleans-based LED lighting company Lumenergy. “Depending on the lighting application, companies can usually see paybacks between 3 months to 3 years and up to an 80 percent savings in energy costs.”
“Louisiana uses more electricity per customer than any other state in the country. An enormous percentage of our citizens’ income goes to energy bills.”
Logan Burke, executive director of the Alliance for Affordable Energy, a New Orleans-based consumer watchdog and environmental advocacy organization, wasn’t surprised by the scorecards’ rankings.
“Louisiana has long been at the very bottom of the list for energy efficient programs, and as a result, has really high energy burdens,” said Burke, whose organization partners with other advocacy groups, including the AARP and Sierra Club, to help promote energy efficiency matters within their member groups. “Louisiana uses more electricity per customer than any other state in the country. An enormous percentage of our citizens’ income goes to energy bills.”
Burke said there is an unusual regulatory setup within our borders as it relates to energy policy.
“Most states have a single body that is a state-level agency that regulates the monopoly utility,” she said. “Louisiana has two — the state Public Service Commission and the New Orleans City Council that regulates Entergy New Orleans.”
Robert Schmidt, co-founder and president of Joule Energy, a Mid-City New Orleans-based alternative energy equipment supplier, said local rate structures affect the city’s and state’s efficiency rankings.
“The Northeast and West Coast have rate structures that penalize more consumption, especially during peak demand,” Schmidt said. “If it costs more to produce at peak times, those end users should be charged more. Here in Louisiana, it’s the opposite. As you consume more, it’s less expensive. So, we’re almost disincentivizing being more efficient, because the more you use, the cheaper it is per unit.
“We have some of the cheapest electricity in the country (to produce), but if you look at how much each customer is spending on electricity it’s on the opposite end of that spectrum because we’re so inefficient here.”
As part of the nationwide economic stimulus early in President Obama’s term, investments in solar electricity triggered a 30 percent tax rebate. The state set up a generous 50 percent credit to match, and the sight of solar panels on roofs became common. But when Louisiana went into financial crisis in 2015 every cut was considered, and the solar tax credit, which was supposed to run through 2018, was eliminated January 1, 2016.
“At the end of 2015 the solar market in Louisiana was, for all intents and purposes, done,” Schmidt said.
“When we had great tax credits everybody was looking to add solar. We were adding energy efficient items all across town because there was a market for it. Now that has diminished since the state credit went away.”
Jeff Haag, owner of Diversified Energy — a company with locations in New Orleans and Baton Rouge that evaluates homes to help owners increase efficiency — said government incentive programs usually drive movement in energy efficiency.
“If you take utility program funding away, unfortunately, sadly, it dies. That’s what happened here with solar,” Haag said. “When we had great tax credits everybody was looking to add solar. We were adding energy efficient items all across town because there was a market for it. That has diminished since the state credit went away.”
Solar in Louisiana essentially disappeared overnight, said Jerry Hymel, who left the solar industry as a result to start Lumenergy, a New Orleans-based LED lighting retrofit solutions company serving the commercial, industrial, government and educational markets across the Gulf Coast.
“When the tax credit went away a lot of consistent business dried up,” Hymel said. “[Solar] companies realigned their business model and either diversified, packed up and left the state to chase incentive programs in other states, or folded.”
The solar tax credit cancellation caused massive shifts for companies like Joule Energy that previously focused almost entirely on solar power.
“We had been building up a commercial LED division to be more diversified, but we didn’t expect that we would have to rely on that division in 2016,” Schmidt said. “We went from 10 percent of our revenue coming from the LED side and 90 percent of that from solar to, in 2016, 90 percent LED lighting and 10 percent solar.”
In an effort to move forward, Joule changed its focus and started looking for business opportunities outside of Louisiana.
With a limited solar market in the Pelican State, Joule had to diversify to survive. In August 2016, the company expanded into utility-scale solar, in which thousands of solar panels are added to acreage to collect, transform, store, and transmit power. Joule won contracts with Georgia Power, an Atlanta-based electric utility that is currently a utility-scale solar pioneer in the South, to supply solar panels to the company’s solar farms.
Joule has 14 utility-scale solar projects lined up with Georgia Power for the beginning of 2017. Schmidt says the scale and costs of utility-scale solar are becoming more and more competitive with traditional forms of power.
“We can deliver pricing that is competitive today with natural gas,” he says. “Twelve months ago we couldn’t say that, but the cost of the materials continues to drop, as does our installation.”
Between 2009 and 2015, Joule installed solar power systems totaling 10 megawatts and Schmidt expects to eclipse 75 megawatts in 2017. As a result, the company’s revenue is once again expected to return to 90 percent from solar projects and 10 percent from LED business.
Schmidt says he’s also expecting continued growth from the company’s LED division, which he says has been increasing at 50 percent each year thanks to commercial and industrial business. Joule has a satellite LED office in St. Louis, and Schmidt expects to open two new lighting offices in the fourth quarter of this year.
“We’re going to do about two and a half times the business that we did in the last six years in the next six months,” he added.
As the company continues to grow out of state, Schmidt says he wishes his home state would follow suit.
“The states around us have interest in utility scale solar, but there hasn’t been any action taken in Louisiana that is similar to what we’re seeing in the states surrounding us,” he says.
Still, there is hope that the solar industry will soon return to Louisiana.
“There’s a lot of funding in other states that we’re not seeing,” Diversified Energy’s Haag said. “Some of our leaders’ eyes are being opened to the possibilities of the economic benefits of energy efficiency. We’re behind right now, but eventually we’ll catch up.”
The Good News on Solar
While the state’s generous 50 percent solar tax credit was discontinued at the beginning of last year, the federal government still offers a 30 percent tax credit. Plus, costs for solar systems continues to drop.
In nine years in business, Jeff Cantin of Solar Alternatives, a New Orleans-based solar and energy management firm, has installed more than 800 solar power systems in Louisiana, Mississippi and Texas. He said costs for solar power systems have dropped for four straight years. It’s now cheaper to build a unit than an individual solar panel cost in 2012.
“Energy efficiency has numerous benefits,” Cantin said, “including lowering expenses — which helps the bottom line — potential tax incentives, long-term investment in your business or home at a relatively lower cost, the elimination of price changes when commodities fluctuate, and, as a bonus, it’s PR positive.”
Energy efficiency has become big business and dollars spent are expected to increase as energy-saving products become more efficient and set higher quality standards.
Spent by U.S. utilities on efficiency programs nationwide in 2015, up from approximately $7.3 billion in 2014.
Total business utility bill savings from standards reached in 2015.
Amount the average American family saved in 2015 thanks to energy-saving standards for appliances, lighting and plumbing products.
Most and Least Efficient
4 Rhode Island
5 New York
49 South Dakota
51 North Dakota
2 New York City
3 Washington, D.C.
4 San Francisco
47 New Orleans
51 Oklahoma City,
Do What You Can
While the idea of wrangling energy output can seem daunting, experts say there are easy and relatively inexpensive ways to improve energy efficiency.
With the number of old homes and land settling issues in this region, many structures have cracks and openings where cool or warm air can escape. Some really beneficial and low cost efficiency changes can be made via basic weatherization, which includes making sure windows, doors and HVAC systems are properly sealed.
“So much of our air conditioning systems, if they’re not properly maintained — just like a car — they become less and less efficient,” said Logan Burke, executive director of the Alliance for Affordable Energy, a New Orleans-based consumer watchdog and environmental advocacy organization. “We don’t want people to be air conditioning their attics and spending lots of money cooling their front yards in the summer.
“These [suggestions] apply commercially, as well. Business retrofits often go much further than home conversions in terms of an energy audit of usage, energy management and benchmarking usage over the course of a year to see where you can tighten the belt, add insulation, new systems, etc.”