Solar Energy Firm Converts Ideals Into Profits

By Tom Redburn, Los Angeles Times,  March 9, 1981

SAN FRANCISCO—To the handful of political activists who had just gone down in defeat with the quixotic 1976 presidential campaign of populist Fred Harris, it seemed that starting a solar energy company was the best way to keep their ideals alive.

“We didn’t know much about bsiness, but we knew solar was the wave of the future,” says Peter Barnes, president of the Solar Center, one of about 150 solar installation firms in the San Francisco Bay area.  “In the early days, we were like a family.  Now, well, things are different.”

The Solar Center may not have sustained all of its founders’ dream, but after a stormy beginning in 1977, it has grown into a thriving small business.  Employee-owned and cooperatively managed, the firm has tripled its staff (now 19 people) since its inception and has doubled its sales every year, making it this city’s largest solar company.

In the process, the company’s transformation has provided a telling example of how solar energy is changing from a romantic cause into a hard-headed industry.

“We we started, we weren’t expecting to make a fast buck — and we certainly haven’t,” muses Barnes.  “But now we have more business than we can handle and our biggest problem is how to control growth.”

Once limited to utopian thinkers and Whole Earth Catalog devotees, solar energy has developed into a $250 million industry nationwide.  In California, where the state government has aggressively promoted solar development, the industry has grown rapidly.

The Solar Center was an outgrowth of a research project done in 1976 by Barnes and John Geesman, who is now executive director of the California Energy Commission.

“When I was hired, no one here had ever done a solar installation,” says Diana Fett, the first employee to join the core of six founders and now operations manager.  She herself has just attended a state-sponsored solar technician program and was therefore “supposed to be the expert.  I didn’t think we would last more than a few weeks.”

In the first year, the company did only about $90,000 worth of business, experimenting with different kinds of solar systems and taking any orders it could get.  Eventually, the firm began to specialize in solar hot water systems for medium to large-sized apartment buildings, which are more economical than individual solar units for single-family homes.

The solar systems typically save about two-thirds of the energy costs for heating water, supplementing an existing gas or electric unit.

“We went at the thing ass-backwards,” admits Barnes.  “Instead of figur­ing out the logical market, we all wanted to stay in San Francisco, so we just sort of stumbled into the right business.”

Although the Solar Center has barely scratched the surface of its potential market of more than 40,000 apartment buildings, it has now installed about 100 separate systems and generated nearly $1 million in revenues last year.

As it has grown, the company has had to modify many of its original ideals.  “Everybody was going to be able to do any job,” says Fett.  “Well, Peter did participate in one installation but after that he realized he was much more important arranging a loan.  We’ve become much more realistic about organizing the business.”

Although the firm is more managerial and structured now, it has maintained employee ownership and continues to make all major policy decisions as a group.

“People know it’s their business,” says Barnes, “and that their profit-sharing is a function of how productive they are and how well the company is doing.”

The company no longer pays every employuee the same salary, as it did in the first coupple of years, nor does it sill hold weekly staff meetings.  Hiring and firing is not the responsibility of senior employees in each division rather than a collective decision.

Productivity has soared, partly as a result of growth and learning how to do the job better, and partly because the employee participation encour­ages individual innovation.  Each installer now accounts for more than $13,000 a month in company revenues, compared to just $2,500 a month in the first year.

“Neither I nor anyone else in the Solar Center could have pulled it off as a traditional owner-boss operation,” Barnes says.

Although the company remains relatively unconventional in its organiza­tion, in many ways its young, politically liberal people have begun to take on the attitudes of typical small business owners.

“I’ve become a lot more skeptical of bureaucracy and regulation,” Barnes says.  “Most of our problems have come from our ‘friends’ in government, who genuinely think they are helping us.”

Barnes says he believes, for example, that if the state Public Utilities Com­mission had adopted its original proposal calling for utility loans for resi­den­tial solar water heaters, “it would have totally reorganized the solar industry at great cost and without any substantial benefits.”

As a result of the PUC initiative, Barnes became active in the California Solar Energy Industries Association’s effort to modify the utility finan­cing scheme.  The eventual changes, approved late last year, allow solar companies to arrange their own loans for buyers, with the customer’s energy suppliers providing a rebate.  They also eliminate many of the roadblocks that would have slowed the program by requiring utility-sponsored energy audits before financing a new solar water heater.

With California’s solar tax credits at 55% of the system’s cost, the Solar Center has demonstrated that most landlords will have an after-tax finan­cial gain from the first year they put in a solar unit.  Instead of promoting solar energy as an altruistic effort to save energy and improve the environ­ment, the company sells its products as a winning dollars-and-cents propo­sition.