Original post by Carline Winter, Bloomberg Business, Patagonia Will Start Paying for Homeowners’ Solar Panels
Patagonia plans to use state and federal tax credits to invest $13 million in the construction of solar panels on 1,000 homes in Hawaii, turning the eco-conscious retailer into the financial backer of a green electrical utility.
With the announcement on Wednesday, Patagonia hopes companies across America will follow suit with similar efforts. “Any U.S. public or private company who pays their fair share of taxes can use this strategy to speed up the development of new energy infrastructure,” Rose Marcario, Patagonia’s chief executive, said in an interview. “And they can make money doing it and create jobs.”
Patagonia is joining forces with a tiny solar-financing company, Kina’ole Capital Partners, as well as a local Hawaiian bank to create a $27 million fund to pay for rooftop installation and upkeep. Starting in Hawaii makes sense because of its abundant sunshine and sky-high electrical rates; Hawaiians currently pay three times the U.S. average for electricity.
Patagonia’s team will take advantage of credits that reduce the tax liability for purchases of qualifying solar technologies. The goal is to make solar energy available to homeowners at no upfront cost. Customers will instead pay monthly fees for the electricity generated, at a rate about 40 percent lower than average in Hawaii, according to Kina’ole.
The fund will begin making a profit as soon as it recoups the installation and operational costs. “If the system doesn’t produce power, [customers] don’t pay,” says Andrew Yani, a co-founder of Kina’ole. “So we’re incentivized to make sure it works.”
The size of each solar panel system will be customized to each homeowner’s needs so as not to overproduce energy. In the event that too much is generated, the power will flow back into the grid and the homeowner will get a credit from her standard utility company, which will remain available on backup. “It’s kind of like rollover minutes on a cell phone,” says Kina’ole co-founder Blair Herbert.
Yani and Herbert founded Kina’ole in 2012. The two friends had met years earlier in Los Angeles, where Herbert worked in commercial real estate and Yani was head of television for Merv Griffin Entertainment. Then Griffin died in 2007, and one year later the economy and real estate market tanked, so Yani and Herbert moved on to launch the solar installation company Bonterra Solar.
Next the friends, both in their 30s, founded Kina’ole to make solar energy accessible to more homeowners and speed the development of renewable infrastructure. “The actual literal translation of kina’ole to English is ‘Doing the right thing in the right way at the right time in the right place with the right person with the right feeling the first time,’” says Yani.
Last year the startup approached Patagonia about investing tax equity in building a renewable energy infrastructure in Hawaii, where the retailer has a long history of helping grassroots social and environmental ventures. Marcario sealed the deal within a month, ensuring Yani and Herbert enough money to scale up operations. “Rose basically called us up from the minors and said, ‘Here’s your shot,’” recalls Yani. “Our goal is to keep driving down the cost of solar power, and investments like this help us scale to that level.”
The roughly 1,000 solar systems purchased by the fund will reduce greenhouse emissions by 153,000 tons of CO₂ over their two-decade lifetime, according to Patagonia’s announcement. That’s equivalent, the retailer says, to 323,000 barrels of oil or eliminating 29,000 passenger cars. Plus, installing the solar systems will create hundreds of jobs in Hawaii. The fund will be available to all qualified solar installation companies, including that of Patagonia surf ambassador Kohl Christensen.
This is Patagonia’s first investment in renewable energy. The deal came through the retailer’s $20 Million & Change fund, launched last year to help support startups focused on social and environmental causes. Besides providing affordable, clean energy to Hawaiian residents, Patagonia and Kina’ole expect the fund to be quite profitable. “Way above what I would say are more standard returns,” said Marcario. “I think renewable energy is good business.”
Patagonia and Kina’ole are eager to advise other companies on how to make use of state and federal tax credits and direct tax money to build clean energy infrastructure. “I think we could really start a renewable energy movement in the U.S.” said Marcario. “If businesses act, and we don’t wait for policy, or those in the current energy infrastructure who are really interested in protecting the status quo, it could make a big difference.”