Greg Irwin 0:18
Welcome to SETC, Sustainable Enterprise Technology Group, we are going to be spending our time here talking about our current topic of net-zero building construction. And that's going to spend, spend quite a bit of time here on solar. Before we get into the conversation with our, our anchor on the topic, Dan Javan. Just a little reminder on SETC, you can find it, the link is right here in the chat. It's sustainableetc.com, please make sure you click and you do go to sustainableetc.com. Click and join. To continue to get reminders for these sessions. We do monthly group calls. And we also do quarterly survey work, where we're basically promoting. We call it practical steps towards sustainable enterprise technology. We cover everything from energy credits, to, you know, better heating and cooling. And today we're going to be talking about net-zero construction. As always, we like using the chat. So what that'll enable us to do is as we're describing and discussing the topic, you all can guide us with your questions. You can have sidebars, and chat with others, and also set up follow on conversations. So I want to encourage people connect across this group and ask any questions that we might have. And if there's follow up to be done, we'd be thrilled to to help in any way. Everybody is has a busy full time job. So you may not be able to turn on your camera. But if you can, it's better. So if you're in a spot that accommodates it, turn it on, it'll help drive the engagement. And let's let's get you involved here and do us a favor. Give a little intro to the group. Tell us just a little bit about Suntuity, solar, and a little bit about some of the work you're doing around net-zero construction.

Dan Javan 2:29
Yeah, thanks for having me, Greg, in pleasure being on. I've actually been on other BWG Strategy calls around solar. Just as a background. I've been in the solar industry and renewable energy industry for 12 years now. Suntuity has been around for 13 years now consists of a different companies into the solar is in fact, probably one of the youngest of the century Group of Companies. We're in 26 US states, eight countries outside the US. And really our focus is around everything from utility down to residential solar. On the resi side, we are one of the top 15 residential solar providers in the country, on the commercial and utility side on the top 50. And everything from finance engineering to epcm services, is what the Suntuity Group really focuses on, we have a separate construction division called Suntuity at home that does net-zero home construction, we're beginning to get into more and more commercial net-zero construction. Now, a lot of that has to do with newer technologies using ICF sips. And and some of the other technologies that are out there, I'd really the entire focus on net-zero is to generate more power, or at least as much power as you consume in a self sustaining manner. So, you know, we do that with most of our installs on the solar side. Now, when you add that into storage, you can actually do that on the commercial side, too. So just as a background, you know, 1000s of customers each year 20 Plus states is where our footprint is right now. And that's expanding every year.

Greg Irwin 4:11
Excellent. Wow. Congratulations. It's a great time for solar. It's a great time for net-zero construction. So you're in, you're in a tremendous spot. I'm gonna dig in with some questions. But before I do I want to solicit questions from the group. So everybody do me a favor, without exception. Go into the chat window and put in one question that you'd like cover today. It can be about solar, it could be about net-zero construction. It could be about you know whether the Yankees are going to be able to hold on to Aaron judge, although I'd prefer I prefer they do. But we'll see. But give us a question because it'll help us focus our our discussion here I have some basics that I want to bring forward. The first is what What's the true cost associated with net-zero construction, I think cost and inflation are in in, in all types of construction are ever more important. So me in thinking about this and coming to this is putting some, some boundaries around that or put it putting it into a, you know, putting it into a ballpark. So, Dan, for me, my question is understanding some of the cost trends. But before I even do that, I'm going to start us off high level, what are the trends you're seeing, in terms of the actual adoption of net-zero construction? Yeah, so

Dan Javan 5:42
I think net-zero construction is beginning to take off. I think, really, obviously, slow adoption is beginning to take off across the country, for obvious reasons. I mean, solar today, and if you just look at solar as a part of net-zero, construction is already a good priority when you're looking at LC o u, which is levelized cost of energy, or say a 25, or 35 year lifespan. So it's actually cheaper to go solar today than it is to stay on your grid with your utility provider. Now talking a little bit about cost around net-zero. Construction. Again, if you look at the levelized, cost of construction and ownership. For net-zero homes and businesses, it's actually cheaper than traditional construction. Most people are concerned about the sticker shock, because they'll look at a higher price upfront. But what they don't realize is your true cost of ownership of a home or business unit is actually higher when you now put utilities into the space. So when you actually look at the full picture, and you levelized that anything in mortgage payment, by combining both utilities, and your costume construction, known, it's actually cheaper. In addition to that, you have some side effects to net-zero construction, alone no to construction today, can be done with materials like concrete, that can handle you know, cat four hurricanes, right. Now, when you start looking at ancillary benefits of long term ownership with net-zero construction, it's actually much, much cheaper. In addition to that, obviously, your operating costs are low, because the insurance costs are lower your risk profile on a on a construction, that's our net-zero construction is lower cost, again, long term, depending on how you see utilities rise. Not only is it a cost savings potential, I mean, 10 years down the road, this could become a matter of national security. I mean, look at what happened with Eastern Europe. If it wasn't for solar adoption, we did have a relevant today with what's going on out there. Right. So. So when you factor all these things into it long term, this is actually cheaper, better and last longer than traditional just

Greg Irwin 7:55
run into context. I want to see you know, there's a bit of the word mom, I think about the word momentum. And are we actually seeing momentum? Right? Yes. Can you explain how where you see it? So particularly, I think we're talking more commercial and industrial here in this group. So give an example of, of momentum and how you would define momentum.

Dan Javan 8:20
Yeah, I mean, if you look at several states across the US, right, there's a mandate now, where if you're larger, if your footprints large Minnesota in 1000 square feet, you're required to incorporate some level of energy management, building management systems, and renewable energy into the mix. Look at New Jersey, for example, right? In New Jersey today, if you've got a warehouse larger than 10,000 square feet, it actually needs to be able to handle solar on the roof, regardless whether you sell it or not. If you look at states like California, or there's a whole bunch of mandates around renewables, if you look at most federal buildings today, federal buildings have a mandate around this. If you look at states like Colorado, so the momentum is increasing. The issue in the basketball is cost. Right? But if you look at the IRA, that Biden passed earlier this year, I mean, it just has a tremendous amount of tailwinds now, because, I mean, you're literally getting paid to incorporate a lot of these technologies into your home into your businesses where your payback in the ROI could be as little as four or five years. Right. And the challenge in the past was, you had an ITC, that was sunsetting, you're on your, you now 10 year runway with ITC. And then if you don't qualify YTC, you got PTC on top of that, right. In addition to that, if you've got domestic content, if you've got, you know, community projects, if you've got low income housing, for example, you can get almost a 60% ITC grant or tax credit for that. So between a 60% ITC and a 30% or 35 years depreciation of the assets. I mean, really, you're monetizing that in a couple of years, at best. Now, you levelized that on some kind of loan or, you know, 20 or 25 years, you're cashflow positive day one. And that's what's driving a lot of that momentum. Right. The

Greg Irwin 10:22
Have you seen following the the federal bill, the infrastructure bill that was passed? Have you seen that as a notable catalyst for project activity? Oh, absolutely.

Dan Javan 10:33
Right. So we've seen manufacturing actually kicking off into high gear in the US, right? Manufacturing usually leads to lower cost, it leads to more adoption, because it ultimately leads to more awareness. Now there's more awareness with communities off technologies. We've seen more deals struck in renewables in the last few months than we have in the last five years. And that is basically deal struck where companies are looking at investing companies looking at manufacturing companies, they're looking at adopting, and this is just a start. And as the adoption increases, the manufacturing increases. I mean, frankly, this, there's no way you're not going to incorporate this, especially when you've got a 10 year runway on these incentives, especially when you're literally getting paid to do a lot of this stuff. Right. I mean, if you look at electrification in general, when you're looking at intelligent load panel systems, I mean, between rebates and tax credits, I mean, it's almost 100% right off at that point, and the savings are 30 to 40%. There's absolutely no reason why you wouldn't do it. You know, this the same issue we ran into with solar 10 years ago, right. When solar first came out, states had incentives, federal incentives were put in place, and they were extremely high. Most people thought it was snake oil, and it came back and said, Well, that's too good to be true. We won't do it, we're gonna wait for the price to come down to the price came down, but the incentives also died out. Today, you're in the perfect storm, the prices are low, the incentives are high. There's a there's a trajectory that's on the upswing. You know, the millennials wanted Generation Z once said, you know, there's absolutely no reason why you shouldn't adopt it.

Greg Irwin 12:13
I'm sorry to ask such a cynical question. But we're weeks away from the midterms. And the presumption is, you know, what's going back to Congress is going back Republican, is there risk or fear of people to invest? Because these credits that they're counting on might get taken away?

Dan Javan 12:31
Right, so look at it this way, but even if Congress changes, we still have the president that has veto rights, right. So unless is the super majority, it's gonna be tough. Biden's gonna veto anything that changes. And in Congress, which means you're going to need more Congress, and you're going to need the White House, to be able to fix the change, and maybe you in the Senate at some level, but look at what happens in the next two years. But you got a two year runway for this for this government to actually make sure this gets out. Right, if you got billions and billions of dollars in manufacturing already established in the US before that happens, you got you know, hundreds of 1000s of jobs that are now affected by these billions of dollars in investments, no matter who comes into the White House and who's in Congress and, and in the Senate, you're not going to want to basically layoff hundreds of 1000s of people. So today, renewables is probably one of the fastest growing, hiring industries in in the energy space. Right. So now you start, you light the fire on these incentives and manufacturing and adoption, and you had another half a million jobs over the next two years. There's no way this is going away, because it's a huge world bank that you're basically going to turn away. So if you ask a question indirectly, I think I don't see that going away, because you have another two years to create momentum and continue the momentum to drive the industry. Alright, great, great start.

Greg Irwin 13:56
And a thanks to everybody here in the chat, because I can't multitask well enough, and read all of these questions to get them in. So I'm now asking for more help. Do me a favor, please reply to others. This is this is a well informed group. I believe that you all have an opinion about some of these questions that are out there. So let's start chipping away. And, and let's start let's start with a couple of years. All right, I'm going okay. ROI, I see it from gave and I see it from Parsa. What are the average expected ROI is related to solar energy from Farsan. And what do we think about solar and what is an acceptable ROI? I know many projects have not happened because it's such a long payback meaning five or five years or more that what's what's happening here in terms of ROI is and how are the ROI is perceived.

Dan Javan 14:57
Yeah, so ROI is a pretty subjective right If people come back and say, Well, what color do you like? Right? Some people come back and say I like blue. Some people say green. So if you go to certain businesses and say your ROI is five years one invest on this, they'll say yes, some, some folks will come back and say, No, we want a three and a half year ROI. But I look at any expense that you put in, right. And again, if you're looking at the actual levelized cost of energy, and the system or the life of the system, then you finance that system, because finance is readily available today. For renewables, your ROI is infinity, right? I mean, basically, as long as you're cashflow positive, or your IRR is infinity, as long as you're cashflow positive from day one, and the system actually is paying down the loan, and saving you money from day one isn't really an expense. Right? In fact, it's a profit center instead of a cost center. If you look at states like New Jersey, for example, again, I'm bringing it up. But same thing in Massachusetts, Maryland, Pennsylvania, where you've got energy generation credits, right, you get a net metering kilowatt hour for kilowatt hour credit, plus you got Asterix, right, you got green tags given to you from the state for 15 years, New Jersey green tax $92 A megawatt hour 9.2 cents, you know, equivalent per kilowatt hour, guaranteed for 15 years. Plus now if your cost of energy use aren't on 14 cents, 14 cents, and that's rising three 4%. I mean, start doing the math, your ROI with a maybe a domestic content product 40%, ITC 35% appreciation, you know, the delta you finance it your way always like four years, right? To me, that's a pretty good deal. And then you look at your cost of energy after that. It's, it's next to nothing. Right? And in fact, I saw someone out here asked me a question, but Evie is right. People talk about, you know, what is my mile per gallon equivalent of an Eevee. Right. And again, that's using regular power, right? If you have 19 cents per kilowatt hour power, which is PSE and G and you, you know, Jersey, 28 cents in California, your MPG equivalent might be 80 miles, 90 miles a gallon. equivalent, right? I'll give an example I have an Eevee have a BMW IX 50 360 mile range, it cost me $2 To charge it. What is my miles per gallon equivalent 750 miles per gallon equivalent? Right, you start now moving that into your you start in fact, in fact, you can use evey charging as a profit center. Right, depending on where you're located today, you have folks that are trying to set up Evie charging networks that are charging customer 43 cents a kilowatt hour that they will buy the power for you at a for profit, right. And you know, generally the power, say with solar. But typically, with solar most states, your LCD of the solar is maybe seven, eight cents, you now sell the power to these charging stations that are co located on site at 26 27 cents. And they're flipping that at 43. And the consumer still saving, you just took the cost center, which is your parking lot, and you made a profit center. The same thing with the roof, the rear roof is a call center for you. Right, you roll that into a PPA or lease, you get a brand new roof installed as part of that, right, and you now are paying maybe eight cents, nine cents, compared to now having to maintain your roof having to actually pay for electricity at 19 cents. So you just took a cost center, you made a profit center. So if you position yourself, right, I mean, you're profitable out of the gate and somebody else would finance it for you. You don't have to even put the cash out of pocket is extremely lucrative. You just have to understand how to do it.

Greg Irwin 18:34
How much so you're you're talking about New Jersey, and some of the state credits. For particularly for businesses that are deploying, and this is an IT group, we've got a lot of datacenter professionals here who are deploying data centers in multiple states. Yep. And some of those states, you know, it's it's Las Vegas, Nevada. It's, it's Virginia, as some of the hotspots California as well. So there are some there's some good overlap here. But when you look across the country, and you know, how there was the question I saw in the chat in terms of lack of uniformity of state level regulations and credits for for Stoller, right. Take take a broader look. And I guess, are you seeing programs still, the program and the efficiency that you're seeing in one state like New Jersey, is that applying to nationwide programs where a retailer is rolling out dozens of locations or, or for an IT group and a company is rolling out, you know, four or five data centers across the country? Are you still able to get the same economics when it's not always necessarily in a tax favorable

Dan Javan 19:55
state? Yeah, no. So that's a good question, right. So there's a reason why So we're licensed in 28 states, we operate in 26. Right now, between 22 and 26, depending on what products you're looking at, I'd say almost 30 to 35. of the 50. States today have good incentives and good options. Sorry,

Greg Irwin 20:14
how many out of 35? States?

Dan Javan 20:17
Yeah. So, you know, I actually own a company that used to build data centers, right. So I actually have first hand knowledge of data centers, and what goes into that. So we're using today solar, for actually setting up power generation for Bitcoin mining facilities, right. And those of you that actually have data centers, right, your cost of electricity is probably 50% of your bill. The other 50% Is your demand cost, right, your demand costs can be 678, dollars a kilowatt, compared to 1819 cents a kilowatt hour. So now you start adding storage, along with the solar storage is ITC eligible, just like the solar is storage is now at a point where it is cost effective, your demand costs almost disappears. Because your storage kicks in basically takes that demand curve offline, and gives you the demand peak from the storage system. And then obviously, your use levelized power. So just by adding storage, you're probably going to eliminate your demand cost about 80 75 to 80%. Now you add the solar component for the cost per kilowatt hour, and you take that down to about 40 to 50% of the cost. You're in about 30 to 35% of the cost you and bear today, paid for by incentives paid for by loans paid for by tax credits, right, but nothing having to go out of pocket. Right. I like a takeaway number. And I think you just gave us

Greg Irwin 21:39
one. Did you say that? Have you been able to see a real world situation where somebody's dealt, and the operating costs with solar and inverters and batteries resulted in a meaningfully lower cost than if they were run it would run it off of traditional, you know, tie into the utility and have a backup generator? Absolutely.

Dan Javan 22:05
Absolutely. And we've seen costs go down as little as 30 to 35%. As in like you're saving about 70%. Right

Greg Irwin 22:13
now, I believe this group on the line doesn't have a follow up question here for Dan

Dan Javan 22:17
well, I mean, we sit down and have follow up discussion with performers right away, we can actually show you where the actual numbers are this and what we do day in and day out. And we do this at scale. So there's actually no reason why you guys don't do it. And now if you're in Vegas, right, for example, most of the power that's coming from Vegas comes from Hoover Dam, right? Those lakes are running out of water, you know what's going to happen when they actually run out of water, you know, your bar is going to come in, it's going to get real from probably neighboring states, where the cost of bars almost twice as much. So if you're in Vegas, frankly, it's a do or die situation. Because once you start building today might take six months, or a year to build depending on the size. And it's not a question of if it's a question of when you run out of water in those lakes, you're going to have our curtailment, you're going to have a whole bunch of stuff hitting you pretty hard. You know, that's something to think about, you know, now, because otherwise it's going to be too late.

Greg Irwin 23:15
That's alright, so it's a great story. I'm going to keep going through some of the questions that we have here. Let's let's talk about inverters and batteries for a moment. I saw that question come in a little bit earlier. And maybe put it into context in terms of the cost declines that we're seeing. i I only know generically, cost of solar has come down. I presume that means the cells. How much recently like over the last two years, three years, as the cost of solar come down? And on the battery and inverters to use those batteries? How much of the cost of that equipment come down? Yeah, so we've

Dan Javan 23:52
seen about a 30 to 40% decrease in cost. In fact, costs right now are frankly, a little higher than they were probably about four months, five months ago because of supply constraints. But with all the manufacturing that's kicking in behind here in the US, we expect cost to actually come down. And again, maybe another five to 8%. But what we build today, for $2, we were building for about $3 to each one and five, we're walking, right about a year and a half ago. Alright, that includes the storage side of it. You know, there's utility scale projects right now being for adult being built for $1 A lot, right, five years ago that we've been built for 50 to $5 a watt. So the challenge that we are in right now is we're down to a point where, you know, we've almost pulled most of the fluff out of the equation. There used to be a lot of fluff that used to be a lot of margin. We're now down to a point where we actually brought that down to single digits. So yes, there will be improvements, you know, but I always use that same analogy that people will come back and say I'm gonna wait for the cost comes down, right? And I do a comparison of Well Do you want a computer Right. If you always waited for computers, reducing costs and get faster, what would you do till that happens? You're consuming power today. Right? So if you can save for the next three years, while the costs come down, you're still saving because you're doing an LCD calculation over 25 years. There's actually no reason why you don't mobilize now, because you haven't three or last few dollars. In fact, a lot of the incentives will start dying out right over time. So federal tax credits, we have a 10 year runway, but many states have, because of the federal tax credits kicking in, yes, sunsetting. A lot of the state incentives. Right. You know, when I got solar, right, back in 2009, on my house, I had a 30% tax credit. I had a 50% state tax. And it wasn't even a taxpayer. It was a state tax rebate, right between Feds and state. I was at 80% set off. The SRX said I need you dollars today was $640. Back then, I paid for my system in one year. Right? It was a residential system. It was $140,000. And when I actually got it, most people thought I was crazy, though, they said you could buy a house for $140,000. Right? How many houses would pay for itself in less than a year? Yeah. And since then, I've had free power. Right. So but that's what we need to start looking at. From an analogy, perspective.

Greg Irwin 26:19
Content. First thing, the state incentives, what are some states where you're seeing them start to wind down are they

Dan Javan 26:27
so Massachusetts, Connecticut, New Jersey, Long Island, on New York state. We've seen Maryland's going down, we've seen that Carolina is going down we're seeing Illinois actually just ramped up because they're trying to get back into the solar game. But they had actually run out of money last year, so they just remind them are set up. And the western states the cost of power is so high, they really don't need to incentivize this. Right? If you're in California, today, you're paying time of use, you're paying 28 29 cents a kilowatt hour, you're paying peak demand charges, it's a no brainer. on the East Coast, we're sort of spoiled, because you're in Florida, you know, you might be in FBML territory at six cents, seven cents a kilowatt hour, you might be New Jersey and 19 cents, down to 13 cents in you know, JCP and l territory. But the high cost of electric is the less the states need to incentivize it. Because solar pays for itself. You know, we've had PPAs being sold in New Jersey in in single digits and pennies per kilowatt hour because financiers just monetize those state tax credits. Right. So to me, that's just a pure savings. But again, a lot of those things are dying down. Right. So when the next three to four years, we think most of those will disappear. Because you are at grid parity today, you won't regret it last year. With solar, we are now better than grid parity.

Greg Irwin 27:52
Great stuff, I'm going to stick with the questions that the group has shared here. Please share more. And I promise I'll do my best to get them in there. And Dan, if you can cover a wonderful if it's too far afield hunt, you're you're doing tremendously and I think we'll cover what we can. So it's Mike, Mike, thank you for your questions. Let's get a couple of them in here. First, the staffing to actually do the implementation. You know, what are you seeing in terms of staff? You know, skilled installer availability? And is that is that a pain point? Yeah, no, I

Dan Javan 28:30
mean, labor is very important in all industries today, most industries, right, so, but again, so you've got 5000, solar integrators across the US, you got about 114,000, roofing companies. So we are beginning to bring in more of the roofing community into solar to actually help staff up. So Suntuity has a separate company called Central University. It's a for profit Training Center. So we actually, and we did this in 2011. Right, so when we saw the writing on the wall, the limiting factor of growth, incentives aside, is bodies, right? You can't get enough skilled labor that know what they're doing. So we did that. So we have 1000s of folks today in our arsenal to actually deploy across the different states, because Central University trains, right. So from an ownership perspective, now, if you want a system, you know, there are no moving parts in the system. So minimum maintenance is minimal as an EPC. And when we typically deploy a system will sign an OEM agreement with you, five years, 10 years, 15 years, however, long the period is, and we obviously roll that cost into your LTV calculation. So when you when you're looking at a true cost of ownership, all that is out there visible baked in so you can actually make decisions. But yes, the industry in general, is limited and cruel today, by the number of people it has to help deploy the systems. And there was a time when we were trying to sell these systems, right sell the solutions and the products. Today we in our facility. Today there's a huge demand And the folks that are extremely smart and intelligent, the early adopters that actually benefit the most. On the incentives, it really comes down to how much product do I have available? How many people do I have available? And who do I want to service first? And that's where the strategic discussions come in. Right? Are we looking at a one shot installed? I'll be looking at a three year plan, we'll be looking at doing a rollout, you know, are we looking at financing? So those are just some of the questions that come up. But, you know, we've got a lot of work ahead of us, as an industry only because we've got some fairly strong tailwinds behind us from the incentives that are in front of us.

Greg Irwin 30:37
If I were to go and pursue a project, are there extended lead times on installation because of product availability or availability of skilled staff skills? Yeah,

Dan Javan 30:51
so the lead times are more on the product availability side, depending on what project you're looking for, for example, if you're looking for a large project, where you are looking at tying into medium voltage, for example, you got a one year wait time on transformers, right? So if you start today, the earliest I can put you on the grid is a year from now, you know, most solar and storage components, you're talking about at least a four month, five month lead time, if it's at any scale, if it's small, it's not a big deal, you know, that's available. But that's really where the industry is. And then now, of course, you're running into winter, especially in the northeast, or the Northwest, you're gonna see slowdowns due to construction due to snow and, and temperatures. So that's just seasonal. But spring is when things gear up across the country when it comes to these construction initiatives. Because you have new budgets, new approvals, you have weather availability, at that time, now is when you place the orders, so we deploy these in spring, because that's how long it takes for us to secure product get approvals and mobilize.

Greg Irwin 31:54
Let's go to another another question here from from Michael, have you seen evidence of actually achieving lower rates, lower financing rates, lower insurance rates? Because of solar? I thought you'd mentioned that earlier at the start?

Dan Javan 32:10
Yeah, so you know, more and more construction, once it goes through the the certification, you see a drop in mortgage rates? Because of LEED certification, you do see, I mean, solar today has, you have loans against solar today that are fairly robust. And then if you're doing something like a PPA, or lease, I mean, someone else is looking at a rate of return of about an 897 9%. So, you know, a lot of people get tied down with, well, you know, I'm gonna have to be an 8% interest rate on a solar system. And it's a lot of money, right. But when you look at the savings equivalent, and you actually factor that in, the 8% 9%, really doesn't matter as much. It's literally fractions of a penny per kilowatt hour, on a monthly payment over the life of the loan, and the life of the system. So when you actually run the mortgage calculations, it's really it doesn't really matter as much.

Greg Irwin 33:12
I'm confused, why is that? I would have thought 8%. If you're financing the equipment, assuming you're financing a reasonable part of it, that's 8%. But

Dan Javan 33:24
yeah, but look at it this way, Greg. So today, if your IRR on a project is 28%. Right? Who cares about being an 8%? APR. Right you your net, if you know the following is still 20%. Right? So and that's really what I'm getting at. So your delta is negligible in the bigger picture. So yes, it is a little bit more money. But of course, I'm not taking action far exceeds the cost of taking action at a slightly higher price.

Greg Irwin 33:52
I got you're saying the IRR is they've expanded to the point now, where they can absorb, you're paying an extra point on your on your financing. It's not a even going from 4% to 8%. Right? 4% more, it's not a big deal against double digit IRR.

Dan Javan 34:10
That's right. In fact, what happened in the residential side is beginning to happen. The commercial side people are buying down the APR with the dealer fee, right in their building the dealer fee into the cost of system because all of that is ITC legible. So you're artificially now reducing the cost even if that buy down by 50 60%. Right. That's another way of actually doing it. So there's a lot of ways to skin this. You know, we just have to sit down and go through the motions of that.

Greg Irwin 34:37
Natasha asks a great question to kind of again, put this in some context, particularly around commercial who are the early who are the actual early adopters of net-zero construction? And where do you think the potential the biggest potential is, and that by industry the most? Like I think we know, well, let me I'm not going to call it who where is it? I mean, if you look at some of the big boys, right, Amazon, Walmart, right Target,

Dan Javan 35:05
I mean, these guys adopted solar on the rooftops, five years ago, seven years ago. And they were smart, they actually did that, you know, with PPAs. And we put a single dime out of pocket, right? If you look at Walmart, Walmart, took that several steps further, where they actually looked at. And this is a project that I worked on about four and a half, five years ago, where we worked with fuel cells. And we converted all the forklifts from battery to fuel cell, and basically use fuel cells. And we give them a PPA on the fuel cell side of it, right and use hydrogen and the only export out of that is water. Which means now you need half the number of forklifts because you don't need to charge batteries for 12 hours, you reduce the electric consumption, and it's given to you as a BBN it's clean, you can put that on your sustainability reports, right. And that was done like four years ago. So the guys that are actually adopting this, that have, you know, teams around sustainability, that look at these different opportunities. They've been doing it for a long time. And they've been benefiting out of it. It's now where I call it mainstream America, which is in a strip mall owners are looking at it. Right? The single building owners are looking at it right. But again, is a big boy, is that what you know, hundreds of billions of dollars I've been doing it for all this time. Is this it's about time I think mainstream America needs to jump right into it.

Greg Irwin 36:27
So people have been doing it. Why? Because they know how to structure and take advantage of the credits.

Dan Javan 36:34
Well, no, because they're just doing PPAs and leases. They didn't even put the money out. And investor basically took all the the tax credits, right. I mean, most of the big boys don't actually pay taxes paid, they get all these tax holidays, right? So so they may have no tax basis, which is really, you know, so if you're a business owner, or if you want to build and you come back and say, Listen, I don't have a tax basis to get these benefits. How do I make this happen, you get into a lease or PPA, let an investor that has it invest in your building, and your IR I mean, at that point, if you're paying 20 cents a kilowatt hour and you sign up PPA, you know, at 16 cents, or 15 cents or 12 cents. It's at 40% savings, with no money out of occupants on ensuring and maintaining this on your rooftop guaranteeing your price. What do you have to lose, someone else is putting millions of dollars on your rooftop, and they'll guarantee the roof in the process and might even give you a new roof in the process. So there's no reason why you wouldn't buy if you want to do it. So today, more and more concrete, you know, manufacturing facilities, mining facilities, they are beginning to leverage solar, right. So of course they're not there where they need to be. But as they are leveraged more and more solar, their construction and the actual manufacturing process gets cleaner and greener. Of course, there's emissions that come out of concrete. But concrete is one of the forms of net-zero construction, right you can use. You can use lumber with, you know, foam insulation built into it, sips panels, you know that at the end of the day, whatever construction method methodology you use, the goal is when it comes to net-zero construction, you want to reduce energy footprint, to a point where you're actually producing more than you're consuming, or at least producing as much as you're consuming. Part of that is the building envelope. So whether it's concrete, whether it's sips, whether it's lumber, with you know, an AR 15 insulation in there are all these other forms of technologies that are coming in, more and more manufacturing is moving into the renewable sector. Right, perfect example, when you look at the Tesla giga factory, right? They've got all these batteries that they're making, but they also consuming all this power. Right? So a lot of people can come back and say, How's this green, when you consuming so much power to actually build these batteries so that you can actually save the power? Right, which is why they're looking at incorporating more and more solar to actually power these factories where they're building more solar panels where they're building more batteries. So as you see more adoption, using renewables in the manufacturing side, you're gonna actually see manufacturing becoming greener. And then as manufacturing becomes greener, all the downstream effects take place. So in fact, today, if you go to like Walmart, and you're a contractor for Walmart, you actually have requirements to be a contractor for Walmart on meeting certain parts of the sustainability reporting, which means you're using you get extra points if you are using renewables for manufacturing the subcomponents that go into, you know, things that Walmart uses. Right. And that's really what I think you're going to see happening.

Greg Irwin 39:42
Then I'm going to support David on this one just for a moment because I think there's just in terms of the manufacturing of of concrete, that alone is a very carbon expensive process. And I know there are lots of startups that have talked about it. Have you seen any indications In the construction projects you've seen, where people have actually deployed green concrete to different chemistry, a different material. And you know, when you're when you're laying concrete for an airport, or for an oil rig, you're pouring so much concrete, that the volumes and, and cost in terms of carbon is, is tremendous. It's an opportunity, anything you've seen in terms of innovation. So we've seen concrete

Dan Javan 40:25
getting recycled, right, a lot more now than it did before. But the problem is, it's more expensive, right? Because but, you know, until you actually get to a point where it's become second nature, you know, it's like plastic bottles, right? When plastic bottles are frozen recycle is extremely expensive. He was spending more money recycling than then what do you got out of it, you're beginning to see that now with concrete. But as the adoption increases, I think it's going to increase. But now when you look at what that means, from a lumber industry perspective, right, of course, concrete is extremely carbon footprint heavy, because of the amount of energy that goes into concrete manufacturing components, this idea says, There's byproducts and there's, you know, emissions that come out of it. But the energy consumption on a concrete plant is probably on a 15 to 20 times energy consumption on a lumber mill, right. But now, if you can offset that energy consumption with clean energy, and the energy doesn't have to be co located, it could be remote, you could be feeling the power by not only their savings, that goes into it, but it actually is now good for the environment. And you've seen that with mining facilities, they're beginning to incorporate more and more solar, many of them on site because they have the land that's already wasted. So that's where you're seeing the initial effects of, you know, emission reduction through reduction in energy consumption. You know, we see it both ways, we see the grid being in a position where it can't supply unit power, right. And that's because they just don't have it. You also have situations where the grid is outdated, where you actually cannot produce enough power and backfeed anything because the Greek god take the relays can't handle it, the Transformers can't handle it. So when you look at renewables, renewables have the opportunity with storage to be become micro grids, right. And what that means is that in California is a perfect example, you don't just have to produce power to consume in a building, you can produce power notice, apply the grid, right there look at California today, well, you can get revenue generation from your solar power plant on your rooftop by actually supplying power to the grid when the grid needs it. Right. So let's assume you're in California at 28 cents a kilowatt hour is what your cost of power is, you're producing power, you're storing that in your batteries. If the grid needs a power, they can pay as much as $3, a kilowatt hour equivalent to actually get that power in check and check to the grid. And the way we are building technologies and more and more inverters and batteries. By getting this built in, you're connected to the grid where you can now give give the grid access to your maps, and you can give them access to you in waters. And they can pull the power as needed. And they will actually give you credits, and actually pay you over and above your credits if you have it to actually allow them to do that. So what that does is you've now stabilized the credit by doing that, right, which is why you'll see more and more jurisdictions will come back and say, if you're coming with storage, you know, we won't restrict your ability to actually build solar, even as a grid contact the back feet. Because in the future where we need the power, you know, we can probably negotiate with you and allow you to inject the power into the grid. So your profit your cost center became a profit center, not just for internal self consumption. But now for export. And the cost said you actually get out of the export, or the benefit you get out of export sometimes can be four or 5x, when you would have actually saved on internal consumption. So this is gentleman, this is a cash cow. Right? It just depends on where you are situated how you connect to the grid, what the incentives are. And you can play it both ways. And yet people are doing it today. California is already ramping with it, mostly New York and the East Coast has begun to come online with that. And of course, what happens in the west coast on the East Coast eventually ends up in the Midwest. And you're going to see net metering and utility rates reflect that and mimic the use in the West Coast. states and utilities will allow you to export more than 100% of consumption at the time of use, but they look at your 12 month electric bill. And they'll come back and say okay, well you consume X amount of kilowatt hours, we'll let you go 200% of that, because they don't want you to end up becoming a utility. Because if you do, you're technically competing against them. Now, there are some exceptions. North Carolina, North Carolina, they will let you actually you can set up as large a solar plant as you want to in your house. And they'll pay you 14 cents a kilowatt hour for export. Anything above that, right. But now that your usage patterns have changed, so your consumption has increased. You can always go back and just add Andreas system, if you have more roof space, you can add on to your system. If you don't have more roof space, you can change your panels and get a higher wattage module that will give you higher output. Because if you were five years ago, you were probably somewhere at a 20 watt module to 85 to 91. That's likely, you can now go to 425 in the same footprint, right? And most people come back and say, Well, Dan, I hear you say that, that means, you know, efficiency or the module increased by almost, you know, I don't know, 5060 70% over the last five years, maybe we should wait for Module efficiencies to increase again. And the answer to that is, most modules should they use silicone, silicone is inert. People have tried cadmium telluride to use other components in there that are not inert. And we already had about 24 to 25% cell efficiency. In modules today, back in the day, we were at 17 18%, the theoretical efficiency of silicone in a lab is around 28%. So we are almost at 85%, of where we can go with what we've got. But again, to answer your question, Mike, you can either upgrade your modules to a higher wattage class, or if you've got roofspace, just add more. And as long as the consumption high, they won't restrict you on that. And on businesses, the difference is on a home, you got to claim depreciation on a business, you can claim depreciation, too, and you got a five year makers depreciation schedule, you can leverage with solar, which means you depreciate the asset in five years.

Greg Irwin 46:24
Very good. Let's keep shifting here. I want to try and stay to the the mode of commercial although I'm I think we're all personally interested in, in some of the residential trends. And I'm sure everybody is here thinking, Maybe I should take that, that call from that person who keeps calling me about installing clothes on duty? Or I think we know where we can we can find somebody. There was a question about minimum utility bills. And I was curious about that. Dan, is there are the utilities, you know, backtracking such that the returns can be limited now, again, from a kind of commercial basis, not not necessarily residential?

Dan Javan 47:10
Yeah, so the only thing that you will have. So again, it's state specific, but majority of the states in the US today that have solar adoption, don't have a minimum kilowatt hour utility rate other than a need or rental rate, right, you got to pay the minimum wage or rental rate. But where they get you is your minimum demand rate, right, especially on businesses. And if you're any kind of manufacturing, your demand rate is set, based on 15 minute interval anytime in the month of use, which is why if you now put storage along with solar, if you put solar by itself, you're not going to be able to cope with the demand side of it. But if you put storage with solar, that demand rate that's minimal. And maybe that demand may be 600 kilowatts will go down to like 50 kilowatts or 60 kilowatts, because the storage will take care of the other fellow 505 50. And then you take your minimum cost now, which was normally, you know, for 600 kilowatts, down to 50 kilowatts, which is an extra, nothing really interesting. Yep.

Greg Irwin 48:12
So you save there, I never realized that's a way to kind of get around one of the requirements. Yep, good storage. I trust him, and he's made a business on it. And a lot of people are thinking about their bottom line. And you've got Michael right here, who's done it and has made the money. But also the other one that I took home was Walmart. And it's true, it's absolutely true. The folks that are deploying this, are, you know, what, when you think of Walmart, they care. They're a very thin margin business. And I'm thinking he's right, it's on top of every single location, because they've probably done the math that Dan's laying out, and probably came up with the same bottom line answer. And I realized, I think that for me in the conversation, was one of the strongest points I heard. Dan, I don't know if there's anything you you do that reaffirm, reaffirm the trust and in the trends.

Dan Javan 49:17
Yeah, I mean, you know, I said in the beginning of the call, right, so you can either own it, or you can let an investor on it, right. So if you're a skeptic to sign up for sign of RPPR lease, we'll put it on your roof, we'll own it will just give you a guaranteed cost per kilowatt hour rate. We take the risk, right, so we put our money where our mouth is, in the next era. Again, they're doing 150 to one megawatt projects at a clip, and again, their utility, but think about it this way. Why are they doing solar? Because their cost of energy today, production with solar is less than the cost for energy production with a lot of the other sources that they've got, and of course, they're selling to all you consumers in the state of Florida for higher price, right? LC OE for utility scale solar is Someone that to send a kilowatt hour ah, that is a cost of energy. Right? So they wouldn't want you to go solar if you're a business owner, because you're now basically going to take yourself off the grid. I mean, you'll see on the grid, but really, you know, consuming power from them. So all these billions of dollars you're putting into large utility scale solar farms.

Greg Irwin 50:18
Well, look, I think this was a great overview. Dan, thank you so much for the time going into the details and taking all the questions. Obviously, if people want to do some follow up, I'd be happy to connect you here with Dan and his team. That's saying, please remember, this is SETC, Sustainable Enterprise Tech Group, go to the website, sign up in the links that John John shared. And third, recommend a friend. We're continuing to build the community. So let's keep it going. If you have a calling you think we'd be interested in these forums and this information, please send them the link and have them sign up for the forums. With that, we're going to wrap it up. Dan, great stuff. Thank you so much.

Dan Javan 51:04
Thank you, guys. Thanks for having me. Take care. Thank you.