Prospecting For Renewable Energy Economics

Commercial renewable energy investments in the US have grown to more than $2.4 billion, according to industry watcher Clean Edge, Inc (CEI). A refreshing new level of commitment by U.S. politicians at the regional, state, and federal levels and significant corporate investments, acquisitions and expansion initiatives are stimulating unprecedented industry growth in renewable energy.

Projected economic benefits have not nearly begun to be realized by developers, operators and utilities, although the stakes are high. Minimizing true costs and driving towards potential real value can encourage investments, mergers and acquisitions and insure competitive advantage. Therefore, a strategic mindset at this time is warranted. Renewable energy costs can be managed and new opportunities can result by the utilizing the right software application.

Substantial gains for investors, developers and operators are also available by utilizing smarter approaches in program management and process implementation. "The wind development business has matured to a point that developers need to look for innovative ways to maintain profitability in their projects and companies. Those that create structured, technology-enabled systems without sacrificing agility can create significant advantage," says industry expert Jacob Susman, founder of OwnEnergy, a consumer-generated renewable power company and former member of Goldman Sachs' Alternative Energy Investing group.

Range Of Trends

Dozens of varying commercial, renewable energy applications are being pushed forward. New energy ideas and technological breakthroughs are being developed incessantly, from wind to biomass. It almost doesn’t matter what it is; if it’s new, people are finding investors to develop alternatives to fossil fuels.

Wind and solar photovoltaics are two of the five most prevalent renewable energy sources in the US according to the US government’s Energy Information Association (EIA). Wind energy is taking this country by storm. The American Wind Energy Association (AWEA) states that BY 2020, 25 million homes in the US will be served by wind power. The Earth Policy Institute predicts that wind and wind-generated hydrogen will shape not only the energy sector of the global economy, but the global economy itself.

Wild West

As you read these words, dozens of commercial renewable energy transactions are coming on line. It’s the Wild West in the US once again, only instead of gold, speculators are prospecting for renewable energy.

These wildcatters’ objectives are to initiate projects and get them online using whatever means possible. Everyone seems to be in the US renewable energy race from farm machinery manufacturer John Deere’s development of projects, equipment and financing, to US acquisitions by foreign utilities such as Dutch Shell, British BP, Spanish energy titan Iberdorola, Italy’s largest power company Enel and EDF, one of the largest energy companies in the UK. Denmark's Vestas Wind Systems, the world's largest wind turbine maker, announced plans to build a $60 million wind turbine blade factory in Colorado recently.

At this early stage, it’s about the race for footprint, partnerships and creating perceived value. The mindset of “details be damned” is pervasive. Attitudes have resorted to “grab the land and get online to provide returns to investors or be acquired by a utility as quickly as possible.” Utilities benefit from these initiatives, as they do not have the bandwidth and resources for project development.

Not So OK Corral

However, it’s not that simple. Quick profitability is fraught with issues. Tax credits are on again/off again and their future is uncertain. Only a few developers are able to take advantage of them directly by offsetting their US pre-tax profits. Others such as Iberdola need to sell these credits at a discount. Approvals from utilities to support implementations can take years, caused by the need to conduct their own analysis of a developed project as developers lack complete, accurate records in their attempts to get online fast. Developers often operate in silos with no checks and balances or historical records for utilities to examine. They are either running projects in their heads, or cobbling them together with rudimentary means. Most are working with disparate systems, simplistic spreadsheets or boxes of paper.

There is a shortage of wind turbines and their costs have skyrocketed, putting pressures on profitability. This shortage has been further compounded by the weakness of the dollar and rising materials costs, resulting in higher prices for wind energy seen in 2007.

Installing transmission lines to the closest utilities involves risks. Continuous improvement and modernization of the interconnect grid and building of new lines must accommodate new energy applications. In fact, investments in grid infrastructure grew 42% from 2005 to 2006, according to CEI. More than 50 percent of the projected demand for renewables in 2007 is for grid-connected electricity generation, according to the US Department of Energy, though this number could actually be higher.

The ultimate uncertainty is if renewable energy will be in rapidly growing demand to complement or compete with fossil fuels. While the US Department of Energy measured a capacity increase of 27% in 2006, consumption from renewable energy sources could be problematic. It actually dropped 15% in 2005 according to the EIA and predicts high growth in fossil fuel energy consumption through 2030, including liquids, coal and gas. No matter how accelerated the growth is in renewables, it seems that it would still not by enough to meet demand increases, let alone start chipping away at the base.

Changes for demand may also occur if fuel costs decline, impacting not only consumer behavior but tax credit renewals, not quite offset by state renewable energy mandates. Proponents of fossil fuels are attempting to lower their costs with standardization assistance from the Bush administration. While some developers, operators and utilities are taking an aggressive position, others are more cautious.

The country's largest retailers, such as Wal-Mart, Macys, Kohls and Target to name a few, have detailed plans to go solar with large-scale deployments of their own. Incentives include their already available real estate in the way of flat rooftops, improvements in technology, lower costs, state incentives and federal tax credits. Most large retailers have systems between .5 and 1 megawatts and could generate savings of $2 million annually, according to the San Jose Business Journal. Retailers expect to start cutting their energy bills day one upon installation and reduce commercial consumption as high as 40%, thereby reducing demand and creating examples for others to follow.

From Quicksand To Quick Profits

Whether your market sector is wind, solar, biomass, hydroelectric, geothermal, or other energy, the key business drivers for developers, operators and utilities are similar.

1. Achieve speed to market
2. Minimize risk
3. Lower costs
4. Improve profitability

Managing these objectives in the Wild West is a tough balancing act. Developers, operators and utilities have an opportunity to do so in a much smarter, cost effective way without slowing down and impeding progress.

For any type of commercial renewable energy project, the key to creating real “value” of energy generation depends on the ability to manage numerous critical factors from start to finish, quickly generate revenue and achieve profitability as soon as possible. These critical factors involve:

• Analysis of site specifications, including seasonal weather patterns
• Accurate environmental assessments and records storage
• Receipt of necessary permits
• Project development management
• Land acquisition and lease/lease option administration
• Equipment costs, accessibility and maintenance
• Grid interconnect accessibility
• Ability to scale more output of kWh’s as needed
• Low overhead of operations and management
• Contract management

Having one efficient system to manage these necessary tasks can help you accomplish both operational and strategic objectives.

New Sheriff In Town: Siterra On Demand

Easy • Efficient • Cost Effective • Low Risk
Siterra is a comprehensive on demand software application that is optimized for commercial renewable energy developers, operators and utilities. Everything from site prospecting to permitting, leasing, construction, asset tracking, equipment maintenance and ongoing operations are managed in one cost-effective system that is available to your employees and contractors securely from any location via the web.

Siterra eliminates the need for ftp transfers to review engineering drawings, does away with high costs of overnight document deliveries, eradicates wasted time for your organization to be more productive, connects people in the field and management to the latest data, drawings and photographs, generates automated workflow directives that are relevant to this industry.

You can efficiently store, retrieve and analyze third party studies, permitting documents, environmental data, rights of way, power purchase agreements, leases and much more.

With Siterra, you can manage your entire renewable program and process implementation:

• Bring your operations online quickly and easily
• Manage and streamline your projects, processes and business activities
• Execute effectively by connecting every employee, group and contractor globally
• Gain operational control of data, documents, photos, videos, maps and drawings
• Manage your land leases and assets more effectively
• Validate maintenance services performed, backed by documented evidence
• Make more informed decisions with analysis and powerful reporting levels ad hoc query and custom reporting tools
• Plug into any information network to seamlessly integrate with financial systems and other applications
• Meet regulatory compliance and record site inspections

Strategic Objectives

Most of all, Siterra will help you accomplish your strategic business objectives to:

1. Secure financing and investment capital for projects.
   Siterra’s rich document management system accelerates the path to financing. Investors need to review details of financials, site records, compliance and environmental due diligence.
2. Get to profitability faster. Shorten utility reviews and audits with accurate, historical and complete records. Siterra provides an easy to use, centralized and organized place to easily store and access valuable documents electronically, instead of having to rummage through boxes.
3. Lower risk and improve productivity. With Siterra’s on demand software, focus on your business at hand, without installing hardware or worrying about backing up your data. Siterra’s integrated software components are modular, making it easy to use the ones you need immediately to bring order and efficiency. You can add others if or as you need them later.
4. Execute on driving new business initiatives and save costs. Understand and exercise your lease options in advance of deadlines. Siterra proactively provides alerts for important dates and contract terms to your screen or any mobile device of your choice.
5. Safeguard tribal knowledge. Much of the knowledge of your operations walks out the door with people. You can utilize automated, customizable workflow templates, document methodologies and maintain a central repository of project data and all types of documents and historical records within a secure, roles-based system.
6. Avoid potential community relations and audit issues. Reconcile what was delivered to the community and what was promised. Siterra keeps you on track to avoid costly oversights that may take years to recover from.

The fully integrated, web-based Siterra solution is designed by people who know how industry works. It is optimized for real world requirements, processes, methodologies and workflows and consists of the following modules:

• Data|Documents|Photos
• Projects
• Leases
• Assets

Siterra assists commercial businesses of any size business to plan, build, manage and grow their operations in the ways and timeframes that work best for them. Frenzied developers and operators who spend their lives running around their company will see Siterra as a time saver, not a time sink. Here’s why and a simple approach to take:

Grow At Your Own Pace

Data|Documents|Photos
To begin reaping Siterra’s benefits quickly, we recommend starting off with the Data|Documents|Photos module to accommodate your extensive requirements for permitting, documentation and compliance. You will be able to efficiently negotiate and order equipment and manage power-purchasing agreements with embedded best practices to achieve enormous efficiencies. It will ensure that no one drops the ball. Handoffs will be quick, critical deadlines will not be missed, and important documents and information won’t be lost. Better documentation helps to make your assets more valuable. Larger companies will be better able to manage their increasingly complex portfolios.

Leases
With the Siterra Leases module, you will be able to efficiently manage all land leases/lease options and rights of way contracts, including complete administration and integrated views of payment processes, lease data and financial aspects of contracts and responsibilities at your fingertips. Among its many features, project incident tracking and equipment maintenance will be easy to report on and manage.

Projects
Siterra’s Projects module provides an easy way to manage the complexity across the lifespan of a project build-out. You can manage processes efficiently and consistently with automated process workflows that have built-in notifications to review, approve or take other actions. You can work collaboratively with partners on critical paths to communicate, track and oversee the activities of third party contractors and subcontractors to insure tasks and dates are met, maintain accountability and avoid cost overruns.

Assets
You can gain better cash flow by managing equipment, materials and depreciation with precision. Siterra will help you manage the history of your assets and maintenance records. Large companies will acquire developed projects because they don’t have the manpower and resources to get the tax credits. If you are one of these companies, you’ll need to understand the history of your assets and maintenance records to insure safety compliance, proper operations standards and to conduct audits.

Business Benefit Roundup
In this wildcat climate of boom and uncertainty, significant economies of scale and business benefits can be realized by commercial, renewable energy projects in all stages of development and operations. Using Siterra’s energy industry-optimized software, speed to market, minimizing risk, lowering costs and improving profitability are but a click away with Siterra’s on demand solution.

With Siterra’s global site and program management platform, you have a higher likelihood of winning RFPs and competing for business. You can achieve competitive advantage with better efficiency of human capital, not to mention the ability to grow and manage more megawatts, whatever your pace.

Call Siterra at 415 875-7100 or go to www.siterra.com to learn how we can help your business.

Siterra Corporation
150 Spear Street, Suite 750
San Francisco, CA 94105
415-875-7100
sales@siterra.com
www.siterra.com