By NEIL HARTNELL
Tribune Business Editor
A Bahamian renewable energy provider believes it has achieved an industry first through its financing tie-up with Commonwealth Bank, a move designed to overcome “the biggest hurdle” to the industry’s expansion.
Acknowledging that renewable energy penetration in the Bahamas was “probably still less than 1 per cent”, Guilden Gilbert, vice-president of Alternative Power Solutions (APS), told Tribune Business that the bank’s agreement to provide its clients with loan financing would tackle the biggest impediment - the upfront costs associated with system purchases and installation.
Mr Gilbert said Commonwealth Bank’s decision to provide dedicated renewable energy system/installation financing would boost accessibility to “big ticket items”, such as solar water heaters and solar PhotoVoltaic (PV) systems.
And he explained that this initiative linked to another sector ‘first’, namely APS’s decision to establish its own dedicated store at Sandy Port.
The renewable energy distributor/installer has invested $60,000 into building up its inventory over the past three-four months, something Mr Gilbert described as showing its belief in the industry’s “bright future”.
“What we’ve established is a financing arrangement where Commonwealth Bank is prepared to finance the support, purchase and installation of renewable systems through APS,” Mr Gilbert told Tribune Business. “We would complete the arrangement with the client and submit it to Commonwealth Bank.
“The market has been waiting for the ability to finance renewable systems. I think that’s probably been the biggest hurdle. The up front cost has been the biggest factor. The financing will help move the client forward to installation. It is going to be a tremendous help.”
While equipment pricing has “bottomed” compared to several years ago, Mr Gilbert conceded that renewable energy systems were “still a sizeable expense, not a $50-$60 expense” for Bahamian homeowners.
APS’s solar water heaters start at $2,200, with solar pool pumps at $4,000 and solar PV systems also costing in the thousands. It is this cost, combined with a desire to be sure that renewable energy technologies are a sure thing, that the company believes has held the industry’s growth back until now.
“The Bahamian mentality likes to see something working before they commit to it. That’s what’s been holding the industry back until now,” Ivanhoe Sands, APS’s president, told Tribune Business.
Mr Gilbert added that APS clients had previously inquired whether the company itself provided financing. He added: “Commonwealth Bank, I believe, are the first bank to step up to the plate and specifically finance renewable energy installation costs.
“It speaks volumes to what Commonwealth Bank is thinking as well. It’s not just a revenue issue with them; they also see the benefit to the country, moving to clean energy technology.
“This is very important, because it now puts us in a situation, and the client in a situation, where the client has to come up with very little of their own money to have the system installed,” Mr Gilbert said.
“For any client, they’d find that the amount they pay on the loan will be less than the savings on their BEC bill. It would be a net saving or, at worst, it would be the same as their BEC bill, so in effect they would be paying themselves.
“By having this facility, it will allow clients who would otherwise not do it to be 100 per cent off the [BEC] grid.”
Mr Gilbert told Tribune Business that, depending on the size of electric water heater it was replacing, the ‘payback period’ was between 12-15 months on an APS solar water heater.
Noting that several clients had reported saving $200 per month on their electricity bill through one of APS’s 53-gallon solar water heaters, Mr Gilbert estimated that the product could slash Bahamian household electricity bills by 20-25 per cent.
As for solar PV, Mr Gilbert said this technology would pay for itself within five years. APS clients, he added, had estimated the monthly savings at between $300-$400 per month - a figure that could increase/decrease depending on system size and usage.
“With renewables, once you handle the upfront cost it’s basically free after that,” the APS vice-president added. “Once you cover the installation costs, from day one you’re starting to cut into that return. The return on investment starts from day one. While there’s always the cost of money, once you get over that hurdle, whatever the system produces is free for you.”
APS’s decision to establish physical premises is further evidence of its belief in the Bahamian renewable energy market’s potential, and that it may be poised for significant growth.
“I believe that we may be the only dedicated renewable energy storefront,” Mr Gilbert told Tribune Business. “We’ve done it in anticipation of the growth of the market. We decided not to do a storefront initially, as the market was not quite there, but we’re starting to see more and more interest in renewables.”
Noting that the products it distributed, and/or installed, were sourced directly from their manufacturers, Mr Gilbert added of APS’s Sandy Port store: “It shows a commitment to capital. As a company, we’ve committed the capital to the investment. Now it comes to how quickly we can turn the inventory over.”
He told this newspaper that APS had invested $60,000 in building up its product inventory over the past three-four months, with its investors committing at least $80,000-$90,000 to the business since it was founded in 2008.
“We’re looking forward to where the market goes,” Mr Gilbert said. “The key was that we had to get to the point where we could make a commitment to inventory. It’s going to pay-off long-term.
“I would think that saturation wise we’re probably still less than 1 per cent [in market penetration]. We think there’s a bright future in the industry. It may not happen today or tomorrow; it’ll happen slowly, but the interest will be fairly strong going forward.
“We prefer to grow at a steady rate, as it allows us to manage that growth. At this point we don’t want to be in a position where we will not be able to meet demand as a business, as not being able to meet demand is the same as not being able to handle installation.”
Mr Gilbert said APS was about to ship seven solar water heaters to a Bahamas-based developer, whom he declined to identify. Two have already been installed at the project site, and another four have been requested - making a total of 13.
Mr Gilbert added that consumer interest in solar pool pumps was also increasing, with APS having recently installed a solar well pump. Demand for LED (Light Emitting Diode) lighting was also rising, the company having built up a 400-strong inventory, with another 300 in transit.
“I think the demand is increasing because we are not seeing the price of traditional electricity go down, and I don’t think it will,” Mr Gilbert told Tribune Business. “Depending on how this summer goes for BEC, the demand may increase.
“The more outages we have, the more people start to think about alternative ways to produce power. And as long as we see oil prices continue to climb, we will see more interest in renewables.”