Alaska's First Solar Farm with Jenn Miller and Chris Colbert - TAS #4

The Alaska Show

This week on The Alaska Show we sit down with Jenn Miller and Chris Colbert, CEO and CFO, and husband and wife co-founders, of Renewable IPP. Renewable IPP recently expanded its Willow, AK solar pilot project into a full-blown 1.2 MW utility-scale solar farm and went live with delivering energy to Alaskans via Matanuska Electric Association in December of 2019. In this interview we discuss the economics of solar in Alaska, how they got started, getting project financing, and how four partners from the oil industry can move renewable energy forward in Alaska.

Alex and JJ discuss postponing The Homer Alaska Podcast Anniversary Part and the Coronavirus.

Intro/Postponing Event/Coronavirus (0:51)

Interview with Jenn Miller and Chris Colbert (15:38)

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Interview Notes

Jenn Miller is CEO, Chris Colbert is CFO of Renewable IPP - they are husband and wife. Sam and Grant are the other partners.

“Renewable IPP” is a general name they came up with so they can leave their options open for other types of renewables. IPP stands for Independent Power Producer meaning it sells its power to the grid.

The 1.2 MW solar farm in Willow, AK went live in December 2019 selling energy to MEA. It’s twice the size of any solar installation in the state. It was a $1.5M undertaking.

They went live in December so they could squeeze construction into 2019. They have to do the financing, feasability screen and construction all then. They rushed to get all the DC electric work and panel work one in November. The final interconnection took place early December. It’s a tight window that controlled when they came online. They wanted to move as fast as possible to show they could do it.

They completed the 140KW pilot project in Oct/Nov 2018. They wanted to do a full expansion in a year. Also, in 2019 there were federal tax incentives. The incentives step down in 2020.

They are confident that economic feasibility will continue to make solar viable as incentives step down.

There is no storage with the project - just grid-tie. They want to keep cost per watt low and keep costs to the utility low and keep power low to their members.

Alaska is an interesting solar market because in the summer as the state has the most activity there’s plenty of sunshine.

Chris says utility-scale renewable energy projects have explode across the US in the last couple of years. In Alaska there’s been a lot of residential solar, but no utility-scale. But if you look at a solar installation map of Alaska and compare it to a country like Germany, Alaska actually has a little more solar resource potential just distributed unevenly throughout the year.

Jenn thinks there’s a perception change to get through. Everyone at the beginning assumed they would go to Arizona or Colorado and that it wouldn’t work in Alaska. They had to come in and prove they could do it at a low cost.

The big driver of lower costs in the last few years is solar panel manufacturing has reached a scale where it’s very efficient and the panels are cheap. Wind and solar are the cheapest forms of renewable energy right now. In Alaska you have to be creative to keep costs down because shipping is expensive.

Even in the three years they’ve done the home project, pilot, and now this project, Jenn says they’ve seen a 5-10% reduction in solar panel cost already.

The federal tax incentive is one of the most successful programs. The Lower 48 created big demand and drove panel prices down and now the economics work in Alaska.

Oil investments might have a higher return, but they’re very high-risk, very expensive projects. Renewables are much more predictable, much more financially accessible, and still generate a healthy return.

100% of the power is sold to Matanuska Electric Association. Every electron that is generated off Renewable IPP’s panels go straight onto the grid through a meter. It has to be consumed instantaneously. There’s no valve to turn it on and off regularly, only emergencies. It just flows onto the grid as needed.

Matanuska Electric was extremely supportive of the project. They helped Renewable IPP team a lot and met with them frequently to work everything out. Jen says utilities a lot of time don’t have that reputation, but a lot of the utilities are member-owned and 72% of people in the Valley voted to get more renewable energy.

Took a lot of time to figure out how to do project financing and work the tax incentives into the cash flow models. That was a big challenge. It was a few months of working in excel, reading and talking to accountants. They had some basic cash flow modeling experience, but it took them a while to work through it.

Engineering vs finance. In engineering you have physics and structure to work towards a right answer. In finance you put the human into the equation. It’s not necessarily about the right or perfect answer, it’s about getting everyone to work together. To Chris it was a business/financial problem not a technical problem.

Jenn says they learned from the cashflow modeling that $1,000 models. They were 1.5% below budget on the Willow project. It’s so important to manage the upfront costs because overages will destroy the rate of return.

They might miss in some areas, but they’ll make it up in others. Going into the expansion they learned what they actually spent on the pilot and worked it into the expansion. They went into the projects knowing what they had to really execute on. They could be $10k off in one area, but if they’re over in another they knew they’d be over $200k off. All the partners are experienced in construction and designed the incentives so they knew if they overran they had no profit.

The pilot project was a straight-up out of pocket test. All of the technical and economic feasibility went into the pilot. The partners bought the land and designed the thing and built it themselves. They actually beat the cost model for materials and revenue came in on-target for the first year and the federal tax incentives worked as they thought it would, which gave them the real confidence to turn around and go to the expansion.

Now that they’ve delivered on the expansion project, are they seeing more doors open up? Jen says definitely. They became a licensed general contractor and hired people and had the full cost model and proved they could do it on-budget and on-schedule. That gave them a lot of credibility with investors.

Financing. Debt financing from Alaska Energy Authority Power Project Fund set up to fund Alaska energy projects. It’s a state organization. It was a good way to get validation for their project. It’s a very detailed application process - like one you would go through with a bank. They were excited to fund a solar project and new investment in Alaska. They ended up being a great partner.

For the private side they put together a pitch deck and went on a roadshow. This was new for Chris and Jen because they were pitching something the investors weren’t used to seeing. They were still nailing down the exact project and business structure. As they talked to one investor they would learn more details they needed to nail down. Jen said they realized it would be uncomfortable and they would have to push through.

During that time they discovered Silicon Valley the tv show and watched the characters on the show pitch stuff they could relate to.

In Alaska the investment community is still growing. It’s a good place to figure it out and grow. It’s not so threatening.

What does the investment community look like in Alaska? Some of it is people Jenn and Chris know in Oil and Gas. Some of it is presentation to random people. You can’t just go to the “investor store.” But if you have success people kind of come out of the woodwork. It’s been interesting for them to see the evolution.

Jenn says the investor community is grassroots. They spend a lot of time testing opportunities and doing presentations to connect to new groups and people. They learned about the PPF through a presentation.

What does it take to maintain a solar farm over time? From the maintenance side, it’s pretty minimal. You have to brush snow off the panels in the winter. That’s something you can manage because production is not super high in the winter. The snow will melt too, but there’s economic benefit to keeping up with the snow. They were able to test, with the pilot, how often they have to go clear snow based on the weather forecast. Maintenance-wise it’s just clearing snow and mowing the lawn in the summer. It’s low-maintenance compared to traditional forms of power generation. The panels have very long lives. They still have working panels from the 70s. They are assuming 30-year project life. You know what your equipment costs are so it’s easy to forecast.

The construction phase is the most significant lift. O&M is manageable.

How has the public received your project? The true public sentiment will drive renewables. That’s what utilities are looking to to see if they really need to invest in renewables. An MEA survey helped them get online. Chris thinks the true sentiment out there is positive.

Jenn and Chris will do community outreach as they look at doing a project. They want the neighbors to receive them well. The neighbors have been supportive. The farm is extremely quiet, and sometimes people are glad there won’t be a major store or anything being built there. They did a media release for the Willow expansion. The major thing they want people to know is they’re not increasing energy costs and they aren’t just taking state money. Solar installer is actually the fastest-growing job in the nation. They hired 13 people for their last project and are looking to bring 50-65 into the next one.

The AEA loan means the State of Alaska is getting good money from the loan and significant property taxes go to the local government.

Jenn is optimistic about oil and gas in Alaska. It’s created a lot of investment dollars here and the outlook is positive. For Hillcorp, Prudhoe Bay is going to be their star asset and they’ll be eager to invest in that field. Conoco is looking at new development. She thinks there’s rejuvenation and new interest in the North Slope. Jen is a BP employee currently, but switching to solar full-time. She thinks BP is setting a good example in being a leader in acquiring renewables assets. It’s all energy and one of the great things with the solar farm is they get carbon credits.

Three out of the four partners have had FT jobs. In February Jen Miller will move to full time solar. Chris became interested in solar energy reading articles in 2016 that said solar is now the cheapest form of new installation in the world. He thought it would be cool to produce power for his house. When he took another look in 2018 he saw how much costs came down. They did a DIY project on their house initially and saw how cheap it was. Then they started looking at a large-scale system with their partner Sam. It all looked like it was working.

This has come out of Chris’s entrepreneurial spirit. He did a lot of investing in his spare time and thought it was interesting and wanted to own a business and see if he could make the jump from employee to entrepreneur.

Jenn saw the economics were there. They initially looked at doing residential, but that was a ton of little projects. She thought they could achieve a huge social benefit. There was only 3 MW of installed solar before Summer of 2019 in Alaska. Renewable IPP alone increased that by 30%, which was excited. All of the partners are entrepreneurial and care about reducing the carbon footprint of the state. She liked the idea of doing a couple big projects well rather than a bunch of small ones.

When was the moment they decided to commit? They decided over beers. Had to move partner meetings to coffee shops from breweries when they started making big decisions. All the government incentives are designed for you to do this as a for-profit rather than a non-profit. In the non-profit space there are too many “if-thens” and they thought they could have a bigger impact as a business.

Have Chris and Jenn always worked together this closely as a married couple? Until recently they worked at BP together. They worked in Colorado together at a small company for a while. It wasn’t a big deal for them to work together. Chris and Jen have always been very appreciative of each others’ capabilities. They lift each other up. One of the drivers for Jen to do the business is she and Chris get to have their own life outside of work where they run the business together.

Jenn thinks it would be harder to do it without the other person, because it’s all nights and weekends. Chris has always been super supportive of Jenn running the show and wearing the CEO title. The positions in the company came from people’s logical interests. Jen was the obvious choice for the CEO - she’s the best with people and is the best project manager. The CFO position was good for Chris because that’s what he was interested in. Sam is kind of an inventor at heart so he manages operations and is inventing snow removal devices and making things more efficient. He’s intereste in the electrical side. Grand is a civil structural engineer whcih is important to lower the cost of sub-structures.

Initially the positions were more “outward-looking” for investors, but it’s allowed them to have autonomy in their role. They have snow clearers that work for them part-time, but are looking to bring on foremen and project managers for the next project. They want to build construction capability in-house.

Everyone this summer worked really hard and well in the summer.

Now they’re trying to put together a 7MW project for the next phase. They’re in technical screening with the utility. They’re figuring out how to fit the system without major grid upgrades.

Jenn thinks progress in solar is going to improve exponentially.