Date: Jul 10, 2013
July 2013: 2013 Comp and HR Practices Survey
Uesugi Farms has installed an expansive solar power system.

Pete Aiello admits that he’s “kicking myself for not getting it done earlier.  We investigated it for five years,” he said, “before we pulled the trigger.  It’s been positive cash flow from day one so we should have done it sooner.”

Late last year, the company worked with Vista Solar, Santa Clara, CA, to install a five-acre solar energy project on its land that can generate as much as 791 kilowatts of power at any one time.  “It was designed to offset as much as 100 percent of our needs,” said Pete, who is co-owner of Uesugi Farms with his father, Joe.  He also serves as general manager, which puts him in charge of these types of projects.

The company entertained four or five presentations from different solar companies before settling on Vista Solar. “They were actually the last ones that came to the table, but they were very good at educating us and we felt comfortable with them.”

With its state-of-the-art packing shed that was completed in 2009, Aiello said the firm’s annual energy costs were running at about $200,000 per year.  In investigating the size of the solar installation to build, Uesugi Farms wanted to get as close as possible to 100 percent of that cost.

Greg Chandley, director of operations for Vista Solar, said that is typically the goal but at the end of the day, the actual utilization level is a bit less.  For Uesugi Farms he believes that, on an annual basis, the solar panels will provide between 90 and 95 percent of the company’s needs.

Aiello said you really don’t want to go over the amount you use because while the utility will buy back the excess power generated, it does so at a reduced rate.  Consequently, you want to build a facility close to 100 percent utilization without going over that number.  He said 90-95 percent is very good.

The facility has been generating power since January 1 and Aiello said it is operating as advertised.  “We decided to finance it on a 10 year lease to buy program,” he said.  “We expect that in this very first year we will have a positive cash flow of at least $15,000, and, in fact, that will be our minimum positive cash flow for each of the 10 years.  After that we will own the system and save at least $200,000 per year.”

Aiello said that to be fair to their power of reasoning and the decision making process, the delay in building the solar power installation was tied directly to the building of the packing plant.  “To be honest we already had a $2.5 million loan on the books (for the packing facility) and the bank wasn’t quite ready to finance the solar installation.”

Chandley of Vista Solar said if a company is cash rich and wants to finance the installation themselves, payback can be in as little as four years with five years being average.  “That’s a pretty good payback on your investment,” he quipped.

However, he added that most farmers would rather use their money to invest in their crops so utilizing bank financing for solar installations is commonplace.  Of course, that additional cost of money has to be factored in but it still creates a very reasonable pay-back schedule, he added.

Chandley called the Uesugi Farms installation a large one but not that unusual in commercial agriculture.  Vista Solar has worked more often in commercial installations in urban areas so he said space is often a consideration.  He said the two most important factors when designing a system is how much land is available and how much energy the client uses.  A typical residential installation using the roof of the home is about 5 kilowatts.  Commercial installations are often in the 500 kW range, but he said installations from 10 kW to one mega watt have been installed all over California.  “To give you a good example of size, the Uesugi Farms installation is the largest ever approved in the Santa Clara Valley.”

He said virtually any location in California or Arizona is suitable for a solar installation as long as the location has a clear path to the sun.  Agricultural installations are among the easiest because they are typically in open fields where there is no sun blockage.  And Chandley said overcast or even foggy days are not a huge impediment.  “We have installations in Watsonville and even San Luis Obispo where there is a lot of fog.  As long as you have ambient light, the panels are working.”

Kim Cardia, a customer service representative for Vista Solar, said the days of the rebate are pretty much over so installations have to pencil out on their own…and they do.  She said the payback on investment is the biggest incentive followed by tax incentives, with their still being a 30 percent tax credit on federal taxes.  Aiello said you can still get a tax break with regard to accelerated depreciation for a solar installation.

And Chandley reiterated that the panels themselves are designed to last much longer than whatever financing package is used.  He said Uesugi Farms should have use of their solar panels for at least 25 years, which is 15 years after they are totally paid for.  “Some of the electrical parts will have to be replaced so there will be some normal maintenance (during those 25 years) but the panels will last that long if not longer.  When we do our calculations, we figure in the maintenance costs as you go along, but that’s only a fraction of the total cost.”

Pete Aiello said the solar installation is only one example of the firm’s sustainability efforts.  He said most of the firm’s land utilizes water-saving drip irrigation and when they built their packing shed and cold storage facility, it was equipped with the latest in energy-saving devices.

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