IPS grows hotter in a cool economy this year

Impact Power Solutions is a pioneer of the Minnesota solar industry with a new majority owner that has fueled red-hot growth in a recession.

SmartPitch Ventures, a private-equity firm focused on renewable energy, spent several million dollars last year to acquire most of the stock in the former IPS Solar that was owned by Ralph Jacobson, who started the firm 29 years ago.

Eric Pasi, chief development officer at IPS, said revenue should grow 35% this year, to about $35 million. IPS has increased employment to about 40 since the acquisition and employs up to several hundred workers annually on installations that stretch from the Twin Cities up to Red Lake.

The firm also changed its name slightly from Innovative Power Systems, to reflect the growing impact of decentralized solar production on local communities, from church rooftops on the North Side to community-owned "solar farms" on acres of marginal land.

"Community solar has been the driver of our business," Pasi said. "The investment we got from SmartPitch has allowed us to expand to Illinois this summer and those projects will contribute a quarter of our revenue."

IPS, which has completed 140 megawatts, has an additional 85 megawatts under development.

The solar industry got another boost in June when Xcel Energy said it would accelerate $3 billion in spending, particularly on renewable energy, in response to calls from state regulators to jolt Minnesota's coronavirus-slowed economy.

Xcel plans to build a solar plant in Becker that would be four times larger than Minnesota's current largest solar array. Also, Xcel would speed up plans to "repower" four older wind farms with new turbines and other equipment. The projects will create 3,000 jobs.

Duluth's Minnesota Power has announced plans to triple its solar capacity with three new arrays around northern Minnesota, a $40 million investment, with most of the construction to take place next year. Minnesota Power CEO Bethany Owen said the projects will boost the tax base in several locales, help regional manufacturers and create construction jobs.

IPS this year is a standout in an industry that has been hit by the economic effects of coronavirus outbreak.

Clean Energy Economy Minnesota (CEEM), in its annual report on jobs last week, said the state's renewable-energy industry has lost 11,546 workers since March, or about 18%, based on unemployment claims. That wipes out three years of growth in the industry.

Most of the jobs came from the energy-efficiency sector, including "smart building" climate-control software, thanks to the downswing in building occupancy. That sector, including energy-construction services, saw a 19% drop in jobs from 47,114 last year. Renewable energy, such as solar and wind, are off 20% from 7,920 last fall, according to CEEM.

But the trade group's executive director, Gregg Mast, said renewable-energy employment will still grow from around 62,000 overall jobs last year to about 100,000 jobs by 2030.

David Shaffer, executive director of the Minnesota Solar Energy Industries Association, said the cost of solar systems is dropping dramatically as the industry scales. The industry plans to increase solar production from 2% today to 10% of Minnesota's electrical generation by 2030.

"By 2025, solar should be least-cost energy in Minnesota and utilities will start buying more and you will see really big growth," Shaffer said. "If Xcel does what it says … that gets you to the 10% goal in Xcel's service territory alone. What's planned around the state is already about half of the 2030 goal. Xcel is half the state, including Twin Cities and Rochester, then Minnesota Power, Great River Energy and Otter Tail. … The pricing dynamics should move some of them more toward solar by second half of the decade."

While there will be a recession-related slowing in solar installations this year, Shaffer said it's not hard to persuade commercial customers to continue with planned purchases. Solar equipment costs pay themselves off in about two to three years in commercial settings, while the payback in residences is closer to 10 years.

"Commercial customers can depreciate the asset, plus a federal tax credit of 26%; and there are state incentives," he said.

"Community solar gardens are very popular. We have about 1,200 megawatts of solar in Minnesota and about half is community gardens and a third is utility-scale projects and the rest is residential and commercial," Shaffer said. "The supply chain, if anything is improving, and solar panels continue to drop in price. Last year we were up about 250 megawatts. This year we'll be up about 200 megawatts.''

Community solar gardens are aimed at residents, businesses and governments that seek cooperative ownership, managed by an independent energy outfit from which utilities buy the power.

John Farrell, a renewable-energy expert at the Institute for Local Self Reliance, considers Minnesota's community solar program a national leader.

He estimated the state accounts for about one-third of the community solar projects in the U.S. More than 14,000 Minnesota customers are enrolled, including 2,000-plus businesses.

Renewable-power production, primarily wind, has grown from 14% to 26% since 2009. Coal, the most-polluting fuel, has fallen from 56% to 31% of the state's energy production, according to the Minnesota Department of Commerce.

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.