THE DEAL: Castle Rock Vineyards Harvests the Sun

Solar photovoltaic energy systems benefit by having few if any moving parts. They are about as plug and play as you can get. But when it comes to financing, they can seem as complex as a nuclear power plant.

Take the 1.134 MW DC solar energy system at Castle Rock Vineyards, in the heart of California’s Central Valley. Opened in October, the system sits on 4 acres next to a cold storage building that is part of the table grape producer’s business. Castle Rock is a major supplier of table grapes to a number of European grocery retailers. These retailers, in turn, have goals when it comes to greening their own supply chains. Castle Rock had already completed lighting retrofits and saw a renewable energy system as the logical next step in enhancing its sustainable profile.

But while the goals and the technology were simple enough, the vineyard’s financial expert and system integrator REC Solar had to make the numbers work.

There were rebate incentives available from local utility Southern California Edison, time-of-use rate schedules and a new renewable energy tariff to consider. Then there were land use and property tax implications that had to be weighed under the Williamson Act, part of the California Land Conservation Act of 1965. Had a property tax waiver not been obtained for the system, project economics could have been adversely affected, said Ryan Park, director of business director for REC.

When it was all said and done, Castle Rock made out pretty well. It received a 22-cent rebate incentive from SoCalEd, had a favorable rate schedule as a cold storage facility and qualified for a special energy tariff, since at least 16 percent of its energy demand was set to be met by renewable energy. Castle Rock’s demand charge was lowered from $17 a kW to $6. And although the vineyard faced a higher kilowatt-hour charge, those numbers penciled out since almost 70 percent of the vineyard’s energy needs would be met by the solar system. In fact, the vineyard is likely to be a net power exporter, thanks to net metering.

Stress tests and financial analysis showed the vineyard could save from $250,000 to $340,000 a year once all the incentives and rebates were figured in, said Park.

Next in line was financing, which was arranged by Rabobank, N.A. The bank is part of the Rabobank Group, a 112-year-old cooperative bank that has its roots in agriculture and in the sort of relationship banking common in farming communities. The bank also has a strong commitment to sustainability, said Gianluca Signorelli, vice president of renewable energy finance. He said solar PV can help a business or commercial user hedge against rising utility rates to reduce its risk. That’s because the asset essentially converts electricity bills from being a variable cost to a fixed cost. That fixed cost then can be calculated for years into the future. Bottom line is the asset’s long-term certainty reduces the vineyard’s overall risk profile.

The Castle Rock financing consists of a 10-year fully amortizing term loan on the equipment, Signorelli said. And rather than a flat amortization schedule, the loan is structured to meet the seasonality of the energy resource.

Signorelli joined the bank earlier this year to expand its renewable energy finance department. A graduate of Stanford University and Johns Hopkins University, he previously worked in the Treasury Department’s International Affairs division. Two previous deals were relatively small projects. While similar in structure to the Castle Rock loan, they did not include an interest rate swap feature. That feature allows the loan to operate on a fixed basis.

The Castle Rock solar electric generating system, designed and installed by REC Solar, consists of 5,400 Kyocera KD210GX-LPU 210 W modules. The installation is expected to have a yearly production output of 1.77 million kilowatt hours, offsetting Castle Rock Vineyards’ energy usage by 69 percent. Castle Rock’s cold storage facility has a capacity of 1 million cartons of table grapes. During daylight hours-from about 9:00 a.m. to 5:00 p.m.- from late spring to autumn, the solar system is expected to provide 100 percent of the vineyard’s energy needs.

The solar array is close enough to the cold storage building to allow a direct 480 V connection without the need for a stepup or stepdown. The solar panels are angled at 20 degrees and do not include a tracking system, which would have required more ground area and more maintenance. The array is surrounded by a wind screen to reduce soil accumulation on the panels. Hub caps and rail locks for the panels are also included. And the site is contained inside a barbed-wire enclosure, which itself is inside the vineyard’s main gates.

The vineyard installation is the latest among an increasing number of projects between solar module manufacturer Kyocera Solar and integrator REC Solar.

REC Solar specializes in grid-tied residential and commercial installations. Kyocera Solar supplies solar electric energy solutions and has operating headquarters in Scottsdale, Ariz. The company is a wholly-owned unit of Kyocera International Inc. of San Diego, the North American headquarters and holding company for Kyoto, Japan-based Kyocera Corp.

Castle Rock hopes to install a second phase, but faces a hurdle since California’s Solar Initiative currently doesn’t allow for rebates on more than 1 MW of installed capacity. If developed, the second system would allow the vineyard to offset 100 percent of its electricity use.

Similar solar energy systems could be installed at agricultural sites elsewhere in California. For example, project developers installed a 1 MW system at the adjacent VBZ vineyard, which produces table grapes for Wal-Mart stores, among other customers. Outside of California, proper net metering rules need to be in place for similar initiatives to make economic sense in other parts of the country.

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