Introduction: Equipped with an education and passion in mathematics and physics, coupled with a fortunate opportunity in an emerging solar energy industry, I have been fortunate to build a career been involving hundreds of unique and challenging commercial solar projects throughout Michigan and the Midwest. The bulk of these projects have been in the agribusiness space – small and large corn and soybean farms, large livestock facilities, cold storage facilities, food processing plants, small and large manufacturers, and many other (mostly) rural businesses. This goal of this blog is to offer education on solar energy technology and how it might apply to a food producer, a manufacturer, or any other facility in the food processing supply chain.
Technical Introduction: There are numerous forms of solar energy such as heating water, heating air, generating electricity, and infinite variations for transforming solar energy into other forms of useful energy. In the context of this blog, we are talking about generating electricity with photovoltaic (PV) solar panels and using that energy in a commercial application. There are sometimes cases of off-site solar farms, community solar gardens, and other similar projects or ideas. This conversation relates specifically to on-site solar at an existing facility. A Solar PV array turns solar energy from the Sun into electricity by harnessing free electrons as direct current (DC) power in a solar cell. This DC power is then inverted into AC power in a configuration that works for each unique facility. The image below shows how the sunlight results in the free electrons that are harnessed as electrical potential. This is where my passion kicks in as I could carry on for hours about the technical details of a solar cell or solar array, but I will focus this conversation on the actual functionality and application of the technology on a commercial scale.
Let’s now think about where these electrons are actually going...Are they charging batteries? Are they powering specific equipment or lights or loads? Are they going onto the grid in return for financial compensation? Are they powering an entire facility? Well, as you might guess, the answer is unique to each facility allowing any combination of these possibilities. In most scenarios, especially in commercial applications in Michigan, the most common situation is to be grid-tied “behind the meter” without storage (batteries). This means the solar energy is feeding into your facility to be consumed directly. By the time the solar energy gets to your facility, the electricity has been inverted, transformed, and modified to match the incoming grid power (including phase and frequency). Therefore, your distribution panels, machinery, lights, and other electrical loads will not recognize if they are running on solar power or grid power or a combination of both. However, from the perspective of the utility billing meter, you have purchased less energy from the power company because some portion of your usage was offset by the solar energy.
When you picture this flow of electricity, you might rightfully wonder what happens to the solar electricity when you are generating more than the facility is using even if just for an instant. In most cases, this energy pushes back onto the grid and the facility is credited by the power company. The rates and rules associated with this export of energy is a case-by- case situation depending on utility policy, State policy, project size, and other variables.
Preliminary Design and Due Diligence The physical representation of a commercial solar array can greatly vary. Possibilities include roof-mounted arrays, ground-mounted arrays, carport structures with or without EV chargers, and more. There are many variables in this decision and a solar professional should work closely with the facility to determine the ideal design. Solar generation efficiency, access to the equipment, longevity, aesthetics, soil type or roofing type, utility policy, township ordinances, and project cost are all important considerations when developing an optimal design. It is always and highly recommended that a commercial facility obtains opinions from multiple solar energy experts to compare recommendations.
Financial Implications Upon completion of initial feasibility due diligence, the economic impact should absolutely be considered. The most common scenario for a commercial business is to simply purchase and own a solar array that is designed and installed by one or more contractors allowing direct benefits from the available tax incentives, grant programs, rebates, and electric bill savings. Every situation is very different and the return on investment for a solar project will heavily be based on the need for tax incentives. Another significant factor is kWh rates and rate structures from the utility provider. We are regularly seeing payback periods between five and ten years, often even quicker. With a legitimate lifetime of over 30 years for a structure with zero moving parts, on-site commercial solar projects are often very financially attractive. This is critical to keep in mind, as there are sometimes assumptions that there is the need to trade cost-effectiveness for environmental friendliness. In MOST cases, financial and non-financial benefits coexist where the choice between the two is no longer applicable. This is beautifully outlined in Norman Christopher’s previous blog.
Current financial incentives for solar installations in Michigan include (among other incentives):
Federal Tax Credit of 26% of total project cost
Potential grant programs through USDA, MDARD, MEDC, EGLE, MSU, and more
Unique and creative financing mechanisms that are only available to solar projects
There is a creative financing structure that is becoming much more common and beneficial to the industry. It is called a Power Purchase Agreement (PPA). A PPA holds a third-party owner/investor that pays for the solar project for the
facility. The facility then agrees to purchase the solar generation at a certain rate per kWh, often with an annual escalator. This agreement is typically designed in a way that gives the investor a satisfactory ROI while resulting in overall savings to the end user with no capital investment.
Storage, Peak Shaving, and Other Solar Energy Uses Utility rate structures often include significant charges for monthly peak demand, as opposed to the actual amount of energy consumed. There are also time-of-day rates that charge more or less per kWh for different times of the day. Storm outages and rolling blackouts are also a concern to a commercial facility. These are all concerns that can be at least partially alleviated with storage (batteries); however, there are also downsides with storage such as longevity, cost, and rapidly improving technologies.
The current factors in Michigan deviate from storage to effectively make financial sense. With peak demand rates increasing and battery efficiency continues to improve, the solar industry and commercial facilities will start to see more implementation of storage alongside on-site solar. Storage possibilities are another aspect that should be discussed with your solar professional(s).
Food Processing and Manufacturing Applications The content thus far can be applied to a wide range of applications and facilities. Specifically, food processors and related businesses such as farms, cold storage, and manufacturing facilities have unique benefits that other businesses may not necessarily have available. Some examples are:
Physical Space: The nature of these types of businesses typically allows for more physical space for solar energy than – say for example – an office building in downtown Grand Rapids. These facilities are often in rural areas with some available ground space, and/or have large open roof space to be used.
Customer Base and Supply Chain Image: Now more than ever the public is looking to food producers that show strong sustainable practices. On-site solar can be a large step in the direction of a company’s clean energy initiatives.
Energy Consumption: Whether drying grain, raising livestock, running processing/manufacturing equipment, or keeping a large warehouse below a certain temperature, food processors use a large amount of energy relative to other commercial businesses. Therefore, cost-effective and clean energy is critical when implemented properly.
Food Processors and related businesses are often in rural areas that sometimes comes with additional financial incentives such as the USDA REAP Grant.
Food Processors have a long and complex supply chain. The farmers growing the food have needed years and decades to perfect their soil and their methods. This food then needs to be transported, stored, processed, stored again, transported again, etc. where this practice allows these types of businesses to have more deeply thought-out long-term plans for many future generations. This mindset of longevity holds an aligned match for solar due to the durability of a solar energy system paired with the increased value over time protecting against unpredictable factors such as increasing energy rates.
Take Action As this blog has pointed out, every situation and facility require a custom in-depth analysis from a solar professional to determine if a project is feasible, and what that project would physically and financially entail. In your initial due diligence, it is recommended to not only research solar installers and solar developers, but also obtain recommendations while seeking advice from local industry associations. Two examples of this in Michigan are the Great Lakes Renewable Energy Association (GLREA) and the Michigan Energy Innovative Business Council (EIBC), but there are many helpful organizations to assist.
The surface of the topic on solar energy has only been skimmed to provide a preliminary introduction to the journey to go solar. I pride myself on being an informative ally into the solar energy world welcoming all questions and inquiries this may spark. I cannot fit everything into this blog, so please do not hesitate to contact me!