This email has been going around, I don't know who Peter is or where he is from, but the information is very interesting. I advise people to check out the details. Seems someone doesn't like the image this controversy is giving to the solar industry.
-----Original Message-----
From: Peter Moriarty [mailto:pemoriarty@ymail.com]
Sent: Tuesday, January 25, 2011 5:05 PM
To: pemoriarty@ymail.com
Subject: Metrotek Solar Energy Proposal
I am writing to urge the Tamaqua School District to consider declining
MetrotekElectric's request to sign a letter of intent for a solar / wind
energy power purchase agreement. I am a strong proponent of solar energy, however Metrotek's business practices and abrasive community and public relations are ruining the solar industry for everyone in Pennsylvania. As you a likely aware, Metrotek has an agreement with the Northampton School District to install a 2.2MW solar energy system as part of a power purchase agreement.
Metrotek's cost figures for the Northampton project have not sat well with me since the beginning, and after interviewing several other solar providers about panel prices, installation costs, and power purchase agreements, it is clear that Metrotek is taking advantage of a legal loophole allowing these public projects to avoid going to bid and is convincing school districts to sign a so called letter of intent, solely designed to secure no-bid status in order to inflate the profit margins of their projects.
Using Northampton's project with Metrotek as an example, consider the costs just to install a system of this magnitude. In presentations and discussions with the press, Metrotek has repeatedly said the project will cost more than $14 million to complete. At one of Northampton's board meetings, a competing solar installer mentioned that he could install the 2.2MW (2,200,000 watt) system for $4.25 a watt. According to the Pennsylvania Department of Environmental Protection
(http://www.portal.state.pa.us/portal/server.pt/community/grants_loans_tax_credits/10395/pa_sunshine_solar_program/821790), the
current average installation price for a 44kw system, some 50 times smaller than the Northampton system, is $4.97 a watt, with some installers completing systems for as little as $2.67 a watt. Granted, a solar energy system of this size would require additional cost outlays in engineering and infrastructure upgrades, but neither of those would be enough to justify charging more than the reasonable $4.25 a watt installation costs. In discussing this project with
other installers in the area, they agreed that $4.25 a watt was a reasonable estimate and suggested that it could be completed for even less. This means that if the Northampton School District was purchasing this system outright, it would cost the school district no more than $9,350,000.
So where is Metrotek getting $14,000,000 from? After comprehensive research and again discussing the project with other installers, I was able to calculate the estimated profit Metrotek will be earning from the Northampton has a result of securing an exclusive letter of intent. Using the $9,350,000 figure as a starting point, I asked what other costs would be incurred as a result of the project being financed under a power purchase agreement. It was revealed that several factors would increase the cost of the project as the result of it being financed under a power purchase agreement, including interest that
accumulates during construction, legal costs from writing the power purchase agreement, and fees that are paid to the bankers who raise the capital for the project. However, these additional factors would only add approximately 10% to the project costs, so we can safely assume that Northampton solar project isn't costing Metrotek more than $11 million (including a reasonable profit margin for them). Other system costs such as insurance, maintenance expenses, and accounting costs are taken from the annual revenue earned through the power purchase agreement and come from the money the school district pays to Metrotek
for power, and revenue from the sale of renewable energy credits earned by operating the system.
So why does the project cost $14 million? Simply, Metrotek can borrow
whatever it wants as long as paying the initial costs back will be supported by the revenue from the project during operation. Take the 10% profit margins most solar providers operate on and apply it to the reasonable $9,350,000 cost, combined with the difference between $14 million and $11 million, and Metrotek will be making an astonishing $3.9 million for a 28% profit margin.
But wait, it gets better. Our terrific state government has the wherewithal to reward Metrotek's greed and gift them an $800,000 plus grant for the project, all of which you can see is pure profit, pushing the profit margin on the project to 33%, all of which will be enjoyed by the company as soon as the system is operational (revenue during operation would pay back the $14 million loan, Metrotek sees virtually all of the profit when the project is completed), while tens of thousands of taxpayers and the school district have to wait 20
years to POTENTIALLY save $2 million. Additionally, the above cost estimates use solar panel prices that are about $1.70 a watt, but the they're falling so rapidly (http://www.renewableenergyworld.com/rea/blog/post/2011/01/some-changes-ahead-in-2011) that Metrotek's profit margin could be in the 40 to 50% range by the time installation gets underway.
It appears Metrotek has offered the school a starting power rate of 8 cents a kilowatt hour, increasing to 20 cents a kilowatt over the 20 year term, yet I haven't seen a single conclusive piece of analysis out of Metrotek that shows that power will cost more than 20 cents in 20 years. Its more than possible that the increasing flood of renewable and alternative power systems being connected to the grid in combination with energy efficiency advances will result in slower increases in the cost of power over the next 20 years, meaning... here's the
best part... the school district could potentially lose money on the deal. Realistically, Metrotek has reduced the savings the district will enjoy to next to nothing, allowing Metrotek to take all of the financial benefits from the project the day it is completed.
Isn't it Metrotek's responsibility to ensure that the school district
doesn't lose money on the agreement and ensure that the system continues to operate properly over the next 20 years? No, Metrotek has specifically avoided accountability on the project by creating a limited liability company. Metrotek formed what appears to be a wholly owned subsidiary, Energy Alliance Group LLC, which ultimately executed the agreements with the Northampton School District. This means that should the system suffer a catastrophic failure,stops making money and / or paying back the loans, or results in a significant insurance claim, Metrotek has no responsibility to keep the system running
or even have to remove it from the land at the end of the 20 year term if they so choose. If you got all of your money the day the project is completed how concerned would you be about maintaining it for the next 20 years?
I have seen power rates of 4.5 to 9 cents a kilowatt hour over the life of agreements offered by competing solar providers for other school districts in the state, and its clear from the financial analysis that Metrotek could have offered a similar, competitive rate to the school district had they not been selfishly obsessed with maximizing their profit margins.
Maybe even more surprising than the level of profit Metrotek will be
enjoying is the level of experience Metrotek has in renewable energy and power purchase agreements. Browsing records from Pennsylvania and New Jersey, In October 2010, Metrotek completed its first and only major solar energy project, a private 600kw solar array, and appears to have no other projects under construction. Not only that, that have ZERO experience working with power purchase agreements, essentially using the Northampton Area School District as their guinea pig for trying to break into the industry. Metrotek and their subsidiary Energy Alliance Group appear to be completely owned by Reiner Jaeckle and Eric Abeshaus, two individuals of questionable backgrounds. Abeshaus alone
has been under federal investigation several times for bribing various
school officials through his former company Circle Systems and is currently facing civil litigation as a result of the allegations. Metrotek also claims to have been in business since 1975, but state incorporation records show the company was formed in 2005. But my favorite part so far though is that I cannot find one
licensed electrical engineer that works for Metrotek or Energy Alliance,
including the owners, yet they want to design, build and maintain
multi-million dollar electrical systems that will surround our children. Records do show that Jaeckle is a licensed electrical contractor in New Jersey, but not in Pennsylvania.
Northampton's decision to use Metrotek is the result of failing to complete even minimal due diligence. The school district did not even evaluate one other solar provider and got locked into a letter of intent with Metrotek, and is now suffering the consequences. Even one other bid on this project would have forced Metrotek to improve the financials in order to compete and would have resulted in millions in additional savings for the residents of Lehigh and Moore Townships.
I have no problem with private enterprises profiting from the public sector, but this is not capitalism, this is corruption, fraud and profiteering. For an example of solar projects being done right, look no further than the Bethlehem Area School District, and I would recommend talking to them to learn about how they approached their successful solar power purchase agreement projects. Additionally, there are many far more experienced and less expensive solar providers that I am sure would be more than willing to provide an evaluation
without a letter of intent, for instance:
Vanguard Energy Partners - 908-534-1302
Kenyon Energy 904-777-0833
PennWind and PASolar - 570-286-4030
Reading Electric - 610-929-5777
I invite you to forward this message to other school districts that may be considering solar energy or reproduce this message as needed to spread the message about these unfortunate business practices.
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