< Previous Written by Mark Golombek“We are at a crossroads and are redefining the company as we move forward into the new realm. There will be no more Feed-in Tariff program. Solar has been pushed into the market by the market drivers, as opposed to a policy with respect to a standardized offer program, so it’s going to be very interesting as solar needs to stand more and more on its own,” says Azeem.The microFIT program for installations of fewer than forty solar panels was put in place by the Ontario provincial govern-ment to promote the generation of electricity from renewable sources. Many people are in favour of adopting clean energy like solar but are unable to afford to invest in a system. Ontario’s program helped with that.“Every year, there is a digression in the feed-in tariff rates; the rate the government offers has lowered each year. When that happens, people have no incentive financially to participate in the program as it is not as lucrative. We will keep the numbers at the same rate as last year through some creative processes,” says Azeem.Now that the government program is ending, Grasshop-per has developed its own: the Grasshopper Guaranteed Funding Program.The Guaranteed Funding Program offers up to $30,000 toward installing a solar power system to homeowners with a qualified roof. Grasshopper Solar pays for installing the system as well as its maintenance. It will hopefully enable more people to qualify for solar power and is a noteworthy change for the company this year. The educational campaign taken on by Grasshopper has been difficult. People are still uninformed about solar power options, and some still believe that solar may decrease property values. “We have to continue our efforts by tirelessly educating cus-tomers through different channels. Yvonne (Yvonne Villeneuve, marketing), has been championing that with various videos, and reaching out to a host of realtors, helping them to under-stand the value of solar,” says Azeem.Ontario’s not-for-profit Municipal Property Assessment Corpo-ration (MPAC) is an independent corporation that assesses the value of all properties in the province for tax purposes. MPAC will be examining all property transfers that have a Grasshopper 20solar energy system to see if the system affects property values. So far, about two hundred such properties have been sold.“We rarely had a situation where the sale is incomplete or something happened as a result of solar. In fact, that never happened,” says Azeem.MPAC’s current stance is that rooftop solar panels do not affect the assessed value of a property or its taxes. In the future, Grass-hopper hopes that MPAC will see that solar adds a specific value to the property. It will take time to implement this as enough data and analysis must be performed. “The short-term goal is with MPAC validating the fact that solar has a value. The impact of this is long-term because we are in twenty-year contracts,” says Azeem.When we last spoke, the company was planning a solar program to be made available to commercial and industrial properties in which Grasshopper would own, install and maintain the infrastructure. Properties that sign up would see the benefits of solar power without any of the risks of investing in it. The project is now operational, and Grasshopper has been install-ing quite a few commercial projects. By the second quarter of 2018, there should be an estimated $250 million in operating “The Guaranteed Funding Program offers up to $30,000 toward installing a solar power system to homeowners with a qualified roof.”21RESOURCE IN FOCUS “We want to have real conversations and talk to people about their concerns.”assets, making this the largest project of its kind in Canada.Throughout the summer, Grasshop-per is preparing to go on the road with barbecues and parties to attract whole neighbourhoods and educate residents on the merits of solar power. The hope is to get mayors and city representatives invested in face to face conversations.“It’s a very real thing we are doing. We are the largest residential company in Canada. We want to have real conver-sations and talk to people about their concerns. We want people to build a better life by helping them save money on their hydro bills. We are currently planning that road show,” says Azeem.Grasshopper is actively looking to expand into the Northeastern U.S. as well as California, and Azeem believes that Grasshopper can bring a lot of value to these areas. The solar energy sales model is certainly going to change because now it will be financed via consumer credit rather than govern-ment incentives. There are no standard programs, but rather power purchase agreements (PPAs) and lease contracts between electricity sellers and buyers. “The value of operating it from the engi-neering procurement construction (EPC), with asset management on the back end, will remain fairly consistent. But, the way we originate and develop projects will be different and somewhat of a logistical nightmare,” says Azeem.The challenges may vary, but they have not increased. The main thing to note is that the market in the U.S. is significantly larger and energy prices are also higher than in Ontario. This translates into more motivation in particular areas to explore alternative energy options, with the expectation that the U.S. will move quickly on solar.In the past year, there has been a sub-stantial price drop in the cost of solar panels. “When we spoke last year, panels were going for seventy cents per watt. Today we are able to get a similar panel for forty-five cents per watt, which is about a thirty-five percent to forty percent decrease in pricing of the solar panels. It’s tremendous to see this happen,” says Azeem.22New policy is currently being discussed, especially in Ontario and the U.S., that should make solar more accessible. In fact, Azeem is in talks with the Ministry of Energy about what is known as community solar or virtual net metering. This involves generating electricity on commercial rooftops, near a community of people who can sign up for shares of solar power without the panels being mounted on their homes. Subscribers receive credits on their energy bills of the amount generated by their share of the installation.“There is a lot of work going into crafting that policy, as it essen-tially allows anybody to participate and brings in economies of scale. This will further reduce the cost of solar with that policy construct,” says Azeem.For the future of the industry, the community solar idea shows tremendous promise because many energy consumers who will be hardest hit by rising energy costs live in condominiums, smaller homes or townhomes, where solar power installation on the rooftops is not possible.“By creating this construct with the community solar, that dis-crimination in the way that happens goes away. It’s a very important measure that the government needs to be looking at, and we need to be talking about as an industry. We want to try and bring this to fruition for everyone in Ontario,” says Azeem.23RESOURCE IN FOCUS This is a truly exciting and ground-breaking time to be involved in the ethanol industry due to the continued support from the federal government’s Renewable Fuel Standard (RFS), the low carbon profile of ethanol, the relative cost of ethanol to gasoline, and the high octane rating of the fuel. Companies such as Pacific Ethanol are on the cusp of a new era. Environmental standards are taken into consideration more and more these days, and ethanol is at the forefront of these efforts. Written by Mark GolombekThe industry still battles with the oil industry for recognition, and it has been a tough slog, but that is all about to change. We spoke with Pacific Ethanol’s Chief Executive Officer, Founder, and Director Neil Koehler, hot on the heels of his interview with FOX News in October, about the latest developments in ethanol, its advantages, uses, and outlook for the industry going forward.Neil is very passionate about this business and has been involved for his entire career in the industry, having started two other ethanol companies before Pacific Ethanol. One of them, Kinergy Marketing, even became a part of the current entity. He graduated from college in 1981, with a major in government and an emphasis on energy policy.“That was after the oil shocks, and I travelled to the Middle East knowing that we needed to move quickly to displace oil. I started working for the Department of Agriculture in Sacramento, helping farmers use renewable fuels,” says Neil.A combination of geothermal, hydroelectric power, wind power, methane digesters, and small amounts of ethanol were being used to help the farmers, and this process gave Neil an idea. He realized that ethanol production was just getting started and could eventually replace oil and gas in the U.S.“I have committed my entire professional career to making this happen,” says Neil. Pacific Ethanol is part of an industry that now has more than two hundred ethanol plants throughout the country. But Neil’s foray into the industry began much earlier.“It’s about the value generated in the lower carbon score and the ability to charge a premium price because of that.”25RESOURCE IN FOCUS Siemens congratulates Pacific Ethanol on their 15th anniversary and looks forward to continuing our successful partnership.We also congratulate them on their work to be the most environmentally friendly ethanol producer in the U.S. And we're excited about the recent successful startup of our KG2 gas turbine with power oxidizer technology at Pacific Ethanol’s refinery in Stockton, California.93275_Siemens_15thAnny_Ad_BIFM (Businesss in Focus Magazine) 3.45" x 5.12" No Bleed Parallel Products was the first ethanol production company in California and was co-founded by Neil in 1984. It converted waste products from the food and beverage industries into ethanol. It was a real niche business, working with trucks of waste that would come in from companies like Anheuser-Busch. Eventually that morphed into taking packaged goods that were unsellable due to bad marketing or being damaged in transit. “We were de-casing one million cases a month that would otherwise be considered consumable beverages, recycled all the containers and converted all of the liquid into fuel-grade ethanol,” says Neil.Parallel Products was sold in 1998, and in 2000, Neil founded Kinergy Marketing to distribute ethanol in the western United States. Oxygenates are fuel additives that raise the oxygen content of gasoline and are required to be added to gasoline to reduce tailpipe emissions. For years the oil industry’s oxygenate of choice was methyl tertiary-butyl ether (MTBE).The oil industry found, when added to fuel, MTBE would also meet federal air quality requirements. However, when MTBE was found to be contaminating drinking water, it was banned “All we are asking for is equal and fair access to the market.”26 in California in 2002 and eventually was banned throughout the U.S. Ethanol is another oxygenate as well as a clean burning fuel that met the earlier federal air quality requirements. “This was a huge growth boost for ethanol, as it was now the only product that could be used to meet air quality require-ments. I founded Kinergy Marketing right when MTBE was being phased out of gasoline,” says Neil.This spurred growth in the ethanol market. With Neil’s well established relationships with suppliers in the Midwest, Kinergy brought ethanol from the Midwest to California and the other states in the Western United States, where it then distributed the ethanol to oil companies, making for a smooth transition from MTBE to ethanol.Other than Parallel Products, there was no other entity in the state of California that was producing ethanol at this time of growth. In 2003, Neil, along with former California Secretary of State Bill Jones, founded Pacific Ethanol.“Bill is a long-time farmer and rancher in the Fresno area. I had the ethanol expertise and a name in that world. He had good name recognition statewide and understood the local agri-culture and political landscapes. Together, we formed Pacific Ethanol to take advantage of this market opportunity,” says Neil.At that point, all the ethanol had been produced in the Midwest and consumed there. With the change from using MTBE, suddenly ethanol was being distributed throughout the entire country. Pacific Ethanol was the first company to move manufacturing to the markets where the end product would be used, rather than producing ethanol in the Midwest where the corn was growing.There is now a huge ethanol market in California, and what many people do not know is that when corn is made into ethanol, the by-product is a high-quality product called distill-ers grain that is fed to beef and dairy cows. “The corn is turned not only into ethanol but high-protein feed. In addition, pro-ducing our own ethanol and combining it with the oil that we produce in the U.S. to become self-sufficient is a lot better than supporting oil imports from the Middle East,” says Neil.California has the largest dairy industry in the U.S.; it also has the largest concentration of dairy cows in the world, so corn was already coming to California as feed.“We just decided to come into that market and got the oppor-tunity to take the corn, remove the energy for conversion into ethanol, and concentrate the balance of the corn into high protein feed. The model is wherever there are lots of cows and cars, that’s where we built the ethanol plant,” says Neil.One plant was built in Idaho, one in Oregon, and two in California. These four plants have a combined capacity of over 200 million gallons. Kinergy Marketing was purchased by the new company that Neil founded and was integrated into the production side. It was unique to incorporate a significant marketing and distribution company with a pro-duction company, and it was also rare to find an ethanol producing facility outside of the Midwest. Pacific Ethanol went public in 2005.The industry was supported for its agricultural economic devel-opment, energy, security, and environmental protection. These and other reasons drove additional policies that in 2005 and again in 2007 resulted in the federal Renewable Fuels Standard. These went beyond simple air quality regulations. “RFS requires oil companies to be increasing amounts of renewable fuels (ethanol, biodiesel and others) into the mix nationally. That’s been a huge policy driver, and the corn farmers have stepped up by producing incremental corn. Producers have done the same by expanding ethanol pro-duction,” says Neil.A relevant strength of the California market is the carbon pricing built into the gasoline markets in that state. In 2007, Governor Arnold Schwarzenegger directed the California Air Resources Board (CARB) to create California’s Low-Carbon Fuel Standard (LCFS). This program was created to encourage the production and use of cleaner, low-carbon fuels to address climate change, lower greenhouse gas emissions and reduce the state’s depen-dence on fossil fuels. The initiative aims to decrease the carbon intensity of California’s transportation fuels. These reductions include vehicle emis-sions as well as all related emissions from production, distribu-tion, and fuel used for transport. Pacific Ethanol has invested in many low carbon technologies to reduce the carbon intensity of the ethanol it produces. For instance, Pacific Ethanol took what was arguably already a clean grid in California and built a five-megawatt solar powered system which has zero CO2 emis-sions for production of electricity, making it the first ethanol company in the world to incorporate a commercial solar system in a plant. “If you look at the cost of producing ethanol, the number one expense is the price of corn, followed by the cost of energy, and finally, labor. Energy is a big deal. Natural gas and electricity can affect the bottom line,” says Neil. “That program is giving us the incentive to do it. It’s a policy that is resulting in significant innovation and technological change.”28 In California, the sun shines, generating electricity, so Pacific Ethanol’s electricity requirements are being taken care of while it saves $1 million per year in its electricity costs and gives itself a lower carbon score after installing 5 MW of solar electric pro-duction at its Madera, CA facility. “It’s about the value generated in the lower carbon score and the ability to charge a premium price because of that. The solar system just went online and it is operating at its full capacity, though of course at lower total production during the winter months,” says Neil. When the sun is shining during the summer, it will displace forty to fifty percent of the electricity used. Initially, the plan was that by 2020, California refineries must reduce the carbon intensity of their fuel by ten percent. CARB recently extended goals to 2030; by that date, it wants to lower the carbon intensity by twenty percent. If you look at what it takes to reduce carbon intensity, these are significant numbers and will shift the way fuels are made and distributed in California.Adding ethanol is what refineries have been using to meet these requirements. “We are thirty percent to forty percent lower carbon than gasoline, and the refineries buy our ethanol, blend it at ten percent with their gasoline, and that generates the credit. The same is happening on the diesel side, with bio-diesels, renewable diesel, and cars that are becoming electri-fied with plug-in hybrids,” says Neil.Biogas from dairies is going into compressed natural gas vehicles, resulting in world-leading policy for carbon reduc-tion in transportation. Ethanol plays a very significant role. Pacific Ethanol saw this early on, especially when standing next to Arnold Schwarzenegger as he directed the California Air Resources Board through an executive order to establish the world’s first low-carbon fuel standard.“This has been a part of our vision. We saw this policy was critical and wanted to develop new policies to supplement policies developing at the national level. The policies had to be more appropriate for our business model,” says Neil. Oregon, British Columbia, and states in the Midwest have adopted or are con-sidering low-carbon fuel standards. Another example of low-carbon initiatives at Pacific Ethanol was incorporating some membrane technology that reduced its natural gas use by five percent, and it is looking at mechanical vapor recompression (MVR) that could cut natural gas use in half. Natural gas has been relatively cheap, but it has been used more in the ethanol plants than elec-tricity, so reducing its use would make sense. All these initia-tives require significant capital.Next >