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Renewable energy sector makes progress, eyes future growth

Rochester Business Journal
October 4, 2013

Renewable energy companies in the Rochester area are making headway on various fronts, from entering new markets to refining their business models. Government incentives have helped fuel growth, and new initiatives aim to spark private-sector financing for more projects.
 
Efforts across New York are making it easier to adopt green energy, says Nabil Nasr, associate provost and director of the Golisano Institute for Sustainability at Rochester Institute of Technology. Incentives from the New York State Energy Research and Development Authority, in particular, deserve praise.
 
"A lot of countries realize that there's a lot of potential from an economic perspective in energy-related fields," Nasr says. "Now, in the U.S., you see some states doing more than others."
 
Still, funding is tight, he adds.
 
"The challenge I think we have in the Upstate New York area, and in New York in general, is that while we have funding from venture capital to angel investors ..., we're far more conservative than many other parts of the country."
 
A local firm has harnessed rising interest in renewable energy. Since entering the solar market roughly a year ago, Sustainable Energy Developments Inc. has found Rochester and its surrounding counties to be a sweet spot for residential and commercial installations, says Kevin Schulte, CEO and co-founder of the Wayne County firm. An $800 million state incentive program for solar projects also has brought work to the firm. (See page 23 for article on solar energy.)
 
Launched last year, the NY-Sun Initiative supports large, commercial photovoltaic projects, as well as small to midsize residential and commercial systems. It is funded only through 2015, but Gov. Andrew Cuomo has proposed extending the program to 2023 to encourage more private investment in such systems and to bolster solar developers' confidence in the state's commitment to the technology.
 
A greatly improved return on investment has made solar more viable for residential and commercial purposes, Schulte says. Many projects now pay for themselves in five to eight years, and the internal rate of return "should be over 10 percent, in some cases over 15 percent," he says.
 
"So when we go to conferences ..., we always hear, 'Oh, but solar is so expensive.' And the truth of the matter is that the cost of solar has fallen about 75 percent over the last dozen years or so, and the incentives driven by both state and local government are in a position now to make solar really cost-effective," Schulte says.
 
One way for people to adopt solar is to own the solar panels themselves, he says. The company also offers the systems to customers in a way that requires no cash investment in the projects.
 
Sustainable Energy Developments also is busy in the distributed and community wind market. The company recently helped install a turbine at SUNY College of Technology at Alfred and has an installation of five turbines scheduled for the state Thruway Authority.
 
"We're marketing everywhere," Schulte says.
 
Those efforts range from setting up booths at the area's home shows to advertising in print publications.
 
"What's happened in the solar market is that it's become a retail business just like purchasing a car, or other commodity markets like that," Schulte says.
 
To spur private investment in clean energy, New York is not banking only on solar.
 
Last month, Cuomo set in motion the $1 billion New York Green Bank initiative with an infusion of roughly $165 million in uncommitted funds for its initial capitalization. The funding would permit the new entity to leverage private-sector financing for a broad range of projects that move the state toward a more self-sustaining energy system, according to a statement from Cuomo's office.
 
When it opens for business early next year, the Green Bank plans to partner with private lenders to offer financial products, including credit enhancement, loan loss reserves and loan bundling, to support securitization and build secondary markets. The approach aims to fill a void for renewable energy projects that cannot easily attract financing because of federal policy uncertainty, a lack of publicly traded capital markets for clean energy and other factors.
 
The state is projecting that the Green Bank could double the amount of private capital flowing into clean energy markets by 2019. Over 20 years, it could deliver nearly 10 times more private capital than is currently invested.
 
Incentives and subsidies have receded for some renewable energy companies, but they have continued to expand their market reach and increase efficiency.
 
Western New York Energy LLC produces nearly three gallons of ethanol from every bushel of corn, says Michael Sawyer, executive vice president of the firm in Shelby, Orleans County.
 
The operation's annual output is 57 million gallons of ethanol, in addition to 160,000 tons of dried distiller's grains, 100,000 tons of food-grade carbon dioxide and 1.5 million gallons of corn oil.
 
"We're also focused on reducing our production cost," Sawyer says. "Certainly, corn is our primary cost input, but we have control over other inputs such as energy. ... For every one unit of energy that goes into ethanol production from the farm all the way to our plant, we're producing over two units of energy."
 
Researching the potential of next-generation feedstock such as corn stover and switchgrass also is a high priority at the company.
 
"And we think plants like ours are really the natural starting point for cellulosic ethanol production," Sawyer says. "The idea is leverage the assets we have in place-our material handling, our distillation, our fermentation and our personnel-to start utilizing other feedstocks."
 
Some local green energy companies have changed operations to keep pace with market demands.
 
Once singularly focused on biodiesel fuel based on vegetable oil, Seneca BioEnergy LLC now produces food-grade grapeseed oil from local winemaking waste.
 
"We were going to make biodiesel out of the grapeseed oil, but it was far too expensive to extract the oil," says Michael Coia, CEO of the Geneva-based company, which manufactures its product line at the AgBio Facility in Romulus, Seneca County.
 
"Instead, we (thought) we'd be smart to figure out we're in the middle of an agriculture, support-local, savor-local kind of phenomenon that's growing in Upstate New York."
 
Though the company's focus has shifted to food, "that's just as sustainable as making a liquid biofuel is," Coia says. "And it folds nicely into the philosophy of the company, which was agriculture, green energy and sustainability. All three of those tenets ... are starting to be realized at the facility."

Sheila Livadas is a Rochester-area freelance writer.

10/4/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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