March 27, 2012

Scuttled solar deal leaves churches, charities in lurch

With power bills averaging $5,000 a month, Glenforest School was interested in an ambitious solar energy project that could save the small academy big money.

A New England company told Glenforest that adding a solar component could cut the West Columbia school’s electric bill by thousands of dollars. What’s more, the company was offering free solar panels through a federally supported program that encouraged renewable energy projects.

“This was critical,” principal Chris Winkler said. “It would have saved us $1,000 a month I could put toward the kids. And plus, I could have had the kids learn about solar energy.”

But the deal fell apart after a legal fight between central South Carolina’s largest power company, SCE&G, and the business marketing the solar program, DCS Energy Inc. Upset with the solar company’s entry into South Carolina, SCE&G filed a complaint that prompted DCS to leave the state last fall.

The dispute left Glenforest and dozens of other nonprofit organizations in a lurch. And today, the disagreement is being seen as a lost opportunity to reduce electric bills for charities, churches, private schools and local governments in many areas of South Carolina.

All told, about 80 contracts to provide free solar panels fell through when DCS Energy left the state, company officials say.

In the Midlands, those affected included Saxe Gotha Presbyterian Church of Lexington, the United Pentecostal Church of Cayce and Lexington’s Red Bank United Methodist Church. All had contracts with DCS but never got solar panels, according to company records and church officials.

Others, such as West Columbia’s Brookland Baptist Church and the Harvest Hope Food Bank of Columbia, were negotiating to acquire the free solar panels when the deal fell apart, DCS records show. The town of Lexington also never received panels.

None of the organizations is known to have lost money – because the solar panels were free – but it hurt plans to cut their power bills by adding solar. Projected savings ranged from several hundred dollars per month to thousands of dollars.

“We were just like any other church – we were on a budget and trying to save energy,” said Gene Bishop, the property chairman for Pisgah Lutheran Church in Lexington. “The price was right. It was kind of a no-brainer.”

Outside of Columbia, organizations in Greenville, Anderson and Charleston counties were among those failing to get solar panels, according to DCS records. Organizations in Connecticut and Florida also did not receive free solar through DCS, the company said, after key investors heard about the problem in South Carolina and withdrew their support.

“We already had the equipment in the warehouse and it was ready to go,” said Will Whitaker, a former DCS field representative from Columbia who said some 80 contracts in South Carolina were pending.

“This is incredibly depressing.”

What happened?

Solar panels, among the growing alternate ways of producing energy, are positioned on rooftops or on the ground near a building to absorb the sun’s rays.

They can be bought from a variety of companies to help reduce dependence on a power company’s electricity, which can lower bills in the long run. But the upfront costs of buying solar panels can be steep. So the DCS offer, made possible through federal stimulus dollars, was an unusual opportunity to get solar panels at no cost.

The DCS solar energy program began in early 2011, and by summer, had gained momentum in South Carolina. But by late fall, the program had disintegrated.

Records show the program collapsed after SCE&G filed a complaint with the state Public Service Commission. SCE&G’s legal filing said DCS Energy had illegally moved into its territory without state approval. The Sept. 23, 2011, complaint said DCS was a utility – just like SCE&G – and subject to regulation.

DCS is a six-year-old solar installation company from Connecticut with seven full-time employees, records show. SCE&G serves 600,000 electrical customers and is a subsidiary of SCANA, a Fortune 500 company with headquarters in Cayce.

While disputing that it was a utility, DCS decided that fighting a big corporation wasn’t worth it and agreed to stop marketing the solar program in South Carolina. DCS says SCE&G’s complaint prompted its investors to withdraw funds, leaving only federal money for the program – which was not enough to continue.

“This killed our program in South Carolina,” company president Craig Bradway said in a recent interview with The State newspaper. “We had (dozens of) systems planned. Some were for towns and counties, and some were for nonprofits and churches – the very people who could use some help.”

SCE&G points out that, under South Carolina law, it’s illegal to make and sell power without Public Service Commission approval. DCS needed state authorization before it began providing solar power, SCE&G contends.

“They were effectively trying to operate as a regulated utility without following the proper protocol to do that,” SCE&G spokesman Eric Boomhower said.

SCE&G’s complaint that DCS was a utility is part of a larger emerging question in Southern states, where power companies are keenly aware of competition from solar and other renewable energy sources. Utilities often have exclusive rights to serve certain territories, but the entry of solar power is a potentially new challenge for revenues.

In South Carolina, state law says any company that owns and operates equipment to make electricity – and money – needs approval from the state Public Service Commission. How solar and other alternate energy companies play into that definition is an issue that may need addressing by either the PSC or the Legislature, said Randy Watts, an official with the state Office of Regulatory Staff, the agency that investigates utility issues.

Boomhower said the fear that DCS would take revenue from SCE&G was “not what was driving us.”

He emphasized that his company is committed to solar power. SCE&G has connected 112 solar generating facilities to its electrical distribution system and has helped the Boeing aircraft plant near Charleston install solar panels on its roof, the largest project in the region of its kind, the utility says.

But SCE&G’s complaint has left some churches saying they are disappointed with the power company.”The panels were denied by South Carolina Electric and Gas,” said Sid Hawkins, chairman of trustees at Red Bank United Methodist. “I felt like they were overstepping their boundaries.”

Other factors, however, may have contributed to the collapse of the DCS deal. In addition to legal questions, SCE&G’s Boomhower said Bradway “rebuffed our efforts” to discuss power company concerns. Whitaker denied the charge, but others say DCS could have done more to ease SCE&G’s concerns.

“If DCS had explained more to SCE&G, and said, ‘Hey, what we will be doing is this and we’d like for you to be on board,’ it would have helped,” said solar panel installer Stewart Belton, who worked with DCS in South Carolina.

In addition to those questions, some local officials said they could not understand how DCS could offer free solar and still make money. And the 2011 bankruptcy of Solyndra, the solar company providing some of the panels, made it difficult to get panels to some organizations, say some local officials.

Federal money fuels DCS

DCS Energy was able to offer the free solar program with the promise of federal stimulus money, as well as an unknown amount of cash from private investors.

Known as the 1603 stimulus program, it allowed companies like DCS to be reimbursed for solar and other renewable energy installations, such as wind turbines. Payments, typically up to 30 percent of the cost, were only supposed to be made after companies installed the equipment and put it into service, according to the U.S. Department of Treasury. The 1603 program ended in December 2011.

Bradway declined to provide a breakdown of his company’s projects, but U.S. Treasury Department records show that DataComm Services, doing business as DCS Energy, received about $11.7 million for work in five states: Connecticut, Pennsylvania, Massachusetts, Florida and South Carolina.

Bradway said the DCS business venture also was supposed to make money by selling renewable energy credits. These credits were to be generated through the free solar projects. By agreement with charities, churches and local governments, the DCS venture could keep the credits and sell them on the open market.

In South Carolina, DCS did install solar panels on about a dozen buildings, including Christ Central Ministry’s downtown Columbia office and a veterans’ shelter in Lexington. But most projects went by the wayside, former DCS representative Whitaker said.

Students lose

For teenagers at the private Glenforest School, the collapse of the program is frustrating.

Science students have spent part of the school year studying solar energy and other non-traditional forms of power. Having solar panels on their school’s roof would have been a valuable learning lesson, students told The State.

Some of them, including Savannah Calvert and Marcy Ballard, aren’t sure who to blame, but said they’re sorry SCE&G and DCS Energy could not smooth out differences so their school could receive solar panels.

“What I would like to see is the companies stop arguing over money and start compromising,” Ballard said.

The private school, which serves children with special learning challenges, has 70 students who meet in a former trucking company building off Interstate 26. The school’s annual budget is $1.6 million.

“If a small school takes on solar panels and shows how we benefit from them, people will be more likely to start using them in other businesses,” Calvert said.

Skeptics of solar power note that, even in sunny South Carolina, solar will never replace traditional sources of energy, primarily coal and nuclear. But boosters say it’s a way to supplement the supply of power and take pressure off traditional power plants during certain times of the day.

Because the DCS solar program collapsed in South Carolina, many organizations now say it will be hard to pay for solar panels to cut their energy costs. Some of the largest systems planned by DCS Energy were valued at $117,000.

“To come up with those funds is tough,” said the Rev. Phillip Sears, an Anderson minister whose church was to receive free solar panels through DCS.

These days, stacks of solar panels scheduled for installation in South Carolina are gathering dust in a crumbling warehouse in downtown Columbia. Without DCS, no one seems to know if they will ever be installed – here or somewhere else.

The program’s failure bothers Lemeul Stephens, who is vice chairman of a community center affiliated with Brookland Baptist Church in West Columbia.

“I’m really disappointed, that with all the emphasis being put nationally and regionally on alternative power, we come down to a situation where SCE&G is obviously thinking, at some point, they may lose revenue,” Stephens said. “So they block solar from coming into the state.”

Winkler, the Glenforest principal, said his school can only wonder today what might have happened.

“This was honestly a gift from heaven where the carpet got yanked out from underneath,” Winkler said.


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