As Sunshine Week Approaches, Cloud Hangs over Solar Financing in Georgia

Solyndra was a visible black eye for the Obama administration in 2011, when the solar panel manufacturer went bankrupt after taking in more than $500 million from taxpayers and private investors. Closer to home, the silence is deafening: Few even know of the failure of Mage, a solar company that set up shop in Middle Georgia with great fanfare in 2011.

What started out as a Georgia Public Policy Foundation commentary to mark Sunshine Week (March 15-21) and the two-year anniversary of Dublin High School’s award-winning solar array led to a trail of lofty projections, broken promises, unpaid bills, questionable math and taxpayers left on the hook.

It was March 11, 2013, that Dublin City Schools in Laurens County broke ground on a 4,000-panel, 1.1 megawatt solar energy array to power the high school.

“This is the first day of tomorrow,” said Public Service Commissioner Lauren McDonald, who attended the groundbreaking ceremony. “This day represents entities coming together to work toward a common goal and to break the ice for solar in Georgia.”

The panels were provided by Mage Solar USA. Just over four years ago, the German-based company chose to establish its North American headquarters in Dublin. According to reports, Georgia beat out Mississippi and Arkansas.

Mage was persuaded with a $1.25 million OneGeorgia EDGE grant in December 2010, and “committed to create 350 jobs and to spur the investment of capital in the amount of $25 million within 60 months.” The total potential value of state incentives (including job tax credits, port tax credits, sales and use tax exemptions, QuickStart training and the EDGE grant) was estimated at $12,444,500, according to the Department of Economic Development.

Solar panels downtown, at several other Dublin businesses and outside the police department, reflect community commitment to solar and Mage.

Mage's solar panels, installed in 2013, have pride of place in front of Dublin High School in Laurens County.
Mage’s solar panels, installed in 2013, have pride of place in front of Dublin High School in Laurens County.

Mage’s panels were installed by June 2013 at the high school, which pays $300,000 a year to lease the array. The array would cut electricity bills by 40 percent, school officials said.­ A school spokeswoman reported the May 2013 power bill was $18,000 and the May 2014 bill was $3,600.

No numbers have been published yet for the total 2014 energy bill, but the superintendent of Dublin City Schools, Dr. Chuck Ledbetter, told the Georgia Public Policy Foundation the high school saved $87,000 on its 2014 energy bill.

“We’re pleased with what it’s doing,” Ledbetter said. “It’s right about where we thought it would be.”

A ‘first’ in financing model

The bonds for the school project, issued by the city and development authority, were financed by a local option sales tax. That led to a Standard & Poor’s BBB credit rating “with negative implications.”

The solar array at the school, which won an award last year from the Solar Foundation, was pronounced, “the largest system in the Middle Georgia area and the very first one in the state that utilizes a third party lease model for schools.”

In a third-party lease model, according to the Solar Energy Industry Association, the customer – in this case, the Laurens County Public Facility Authority, with Dublin City Schools as the sub-lessee – signs a contract with an installer/developer and pays for the solar energy system over time.

Greenavations Power LLC (a solar consulting group) and Renewable Energy Equipment Leasing (REEL), a Georgia-based finance company, worked with Mage to create the financing structure,” according to Mage.

The CEO of Greenavations, Robert Green, is also co-founder of Georgia Solar Utilities, which was supported by Commissioner McDonald when it petitioned the PSC in October 2012 to become a monopoly solar utility. It was unsuccessful; Green was called the “brainchild” of the ensuing 2013 legislation to that effect. It also failed.

Green has a bachelor’s in theology; according to PSC testimony, his business card listed Solyndra, President Obama’s albatross. He has been described as “one of the most ardent supporters” of expanding solar energy in Georgia.

According to an Atlanta Journal-Constitution report,

Green was responsible for developing the [school] project’s financial plan. In its rating of bonds for the solar project, Moody’s noted the ‘complex deal structure.’ In fact, it took 15 months and six law firms to figure out a way around a state law granting Georgia Power, and electric membership [co-ops], exclusive territories in which they alone can sell electricity.

“Solar has achieved such a point of technical maturity and reliability that it is time for financing methodologies, such as bonds, to become standard practice,” Green was quoted as saying in a Mage release.

“If you compare the financial model that we’ve put together to all other mechanisms of funding solar in the world today, this one is a far more economical and a higher performing model than any of the others. It moves us to the forefront. As goes Georgia will go the rest of the South,” he was quoted as saying.

The $3.7 million system is projected to reduce power bills by $3.5 million over the 25-year lease agreement. Unfortunately, as PSC Commissioner Stan Wise pointed out, “By the end of the agreement, Dublin taxpayers will actually pay $7.5 million in SPLOST sales taxes for debt service, and this does not include other costs such as operations and maintenance and insurance.”

“Using simple math, the inconvenient truth is that $7.5 million in costs minus $3.5 million in savings (generously using their numbers), still leaves the Dublin-Laurens County taxpayers with a $4 million dollar loss,” Wise noted.

Unkept promises

Laurens County and Dublin have been spectacularly successful in attracting international industry in recent years, thanks to a savvy and enthusiastic development authority and its ideal location on I-16 between the port of Savannah and Atlanta’s airport.

Welcoming Mage to Dublin in May 2010, Governor Sonny Perdue said, “Mage gives us the opportunity to expand our leadership position and industry competitiveness in the renewable energy sector. The growth of renewable energy is important to our state and nation, so I believe Mage Solar will be successful for years to come in Dublin.”

A solar-powered charging station looks lonely in in the deserted parking lot outside Mage Solar in Dublin.
A solar-powered charging station looks lonely in in the deserted parking lot outside Mage Solar in Dublin.

Today – less than five years later – Mage’s Dublin facility is shuttered. Its parking lot is deserted, a promised solar academy shut down, too. The EDGE grant expires in December and there is zero chance of Mage fulfilling its obligations. It came nowhere near 350 jobs; an Open Records Act request of the required progress reports for the grant recipient revealed that 54 was the highest number of jobs created, in 2013. It generated less than $2.5 million in investment.

Laurens County officials say Mage is, “in transition,” still paying rent on the facility. They say it fell victim to China’s cheaper panel production and family in-fighting in the parent company in Germany, from which it has separated.

At the same time, Greenavations, which was paid by the county, has yet to pay Mage for the panels installed at the school. Mage is suing Greenavations and Robert Green in Laurens Superior Court for nearly $1.4 million. That litigation, too, is hurting acquisition chances for Mage, some say. Who wants to acquire a company that may be in litigation for years?

Being “first” can be pioneering, but it’s often “first” to fail. This could have happened in any of a number of Georgia communities. Solyndra was first to receive a federal loan under the stimulus program in 2009. The school project was, “the very first one in the state that utilizes a third party lease model for schools.”

The financial fallout is likely to grow, but a cloud of hush surrounds the failed deal in the close-knit community of 48,000 in Laurens County. As Sunshine Week approaches, it may be that this commentary encourages more investigation, research and revelation.

Lessons for Laurens

Dublin High School officials say Greenavations continues to maintain the solar array. The county is hopeful a new group of investors will intervene in Mage. If the development authority has learned anything from this, Vice Chairman Roger Folsom says, it’s that, “Future contracts should include a clause that ensures that vendors are paid before a deal is finalized.”

Laurens County officials hope to find new investors for the vacant Mage solar manufacturing facility and the attached solar academy where it briefly trained workers in the industry.
Laurens County officials hope to find new investors for the vacant Mage solar manufacturing facility and the attached solar academy where it briefly trained workers in the industry.

The state’s grants, credits, subsidies or abatements are meticulously monitored by the Department of Community Affairs (DCA), which willingly provides access to interested citizens. The Foundation has long promoted transparency and online record-keeping to facilitate accountability and access. Trips to Middle Georgia and to access to DCA records are not within the reach of the vast majority of citizens; there should be an easier way to check up on governments and taxpayer dollars. Attempts to access Laurens County court records, however, reveal no public updates since 2007.

The failure of Mage and the financing approach are not an indictment of solar energy or Laurens County. They are a warning that if something seems too good to be true, it probably is, and that transparency encourages honesty.

As Sunshine Week approaches, highlighting the importance of public access to government information, it bears reinforcing that the Foundation’s search for information began precisely because of an unusual silence following the initial explosion of publicity.

As PSC Commissioner Stan Wise noted in an e-mail to The Atlanta Journal-Constitution: “It is not my intention here to question local government decisions …This is an example of what will play out all over the state if the guy who put this deal together, and others like him, [are] given free rein by the Legislature to prey on unsuspecting customers with unscrupulous financials.”

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