United States: Electricity costs in the USA average 8.32 cents per KWH. With the capability of producing clean energy at under 2.5 cents per KWH, the solar "SKYLITE" opens its own mass market. Electric utilities are a primary market opportunity. Rates at the ten most expensive utilities in the U.S. average 12.79 cents per KWH costing families from $600 to over $900 per year in earnings to heat water.
ASN could achieve its five year projection by penetrating just 5% of the homes serviced by those 10 utilities alone. The solar "SKYLITE" water heater offers all electric utility companies one of the lowest cost sources of energy and pollution abatement. The "SKYLITE" system is the most cost-effective and cleanest way to heat water. It cuts water heating costs from 55 to over 80 percent.
International: Energy costs in most of the rest of the world are several times that of the United States thus making solar water heating immediately very cost effective. In many areas major problems exist with deforestation as millions of families seek wood for their fires to cook with and heat water. In China, the world's most populous nation with a population of more than 1 billion, or nearly onefourth of the world's total, and similar countries whose governments are making concerted efforts to raise their standard of living, multimillions of families require hot water. This need represents an unprecedented market in the multibillions of dollars. The same is true of other densely populated countries such as India. Pakistan. Indonesia and Nigeria, to name but à few.
Without an immediate emphasis on solar water heating, solar cooking and solar electricity (PV), these countries face catastrophic pollution problems with serious negative worldwide consequences. Only ASN's unique products offer immediate low cost solutions to vexing water heating problems. At the same time, ASN can also package products to solve cooking and electrical supply problems.
These problems are so great that major world and U.S. agencies are placing significant emphasis on funding solutions. These agencies include the World Bank, The International Finance Corporation (IFC), United States Trade and Development Program, Agency for International Development (AID), ExportImport Bank of the United States (EXIM), The Overseas Private Investment Corporation (OPIC), Department of Agriculture, Department of Commerce, Office of the U.S. Trade Representative, and the Small Business Administration (SBA). In addition, the United States Solar Energy Industries Association (SEIA), to which ASN is a long standing member, has a U.S. Export Council as party of its International Program.
Existing competition comes from relatively small firms. These companies products are based on designs that generally date back over twenty years. They have large capital investments in these designs and are unlikely to change to meet the various needs of different foreign and domestic regions. On the other hand, the ASN system is highly flexible by design and can be rapidly custom designed and adapted to specific regional needs at low cost. The ASN system enjoys another considerable cost advantage in that the ease of installation can cut installation time in half.
Significant barriers to entry by potential competitors have been created by the advantages allowed by the patent; proper use of durable, low cost, lightweight materials; six years of field experience and refinement; as well as having already completed the time consuming certification requirements. ASN will research, refine and develop new products that will create or greatly expand new markets to stay ahead of competition.
Solar products are primarily purchased on the basis of cost effectiveness. Research has shown that solar has increasing price resistance points at $700, $1,000, $1,500 and $2,000 and over. A massive national and international
market exists for PV powered open loop systems that can be installed in nonfreeze areas for under $700. No such product exists, moreover, a large market currently exists for doit yourself people in freeze areas for a solar water heater priced under $1,000, again, no such product exists. Solar dealers are crying for a quality, freezeproof product that they can purchase complete for under $1,000 and easily install for under $1,500. No such product exists. A major utility market exists for the larger freezeproof solar water heaters that can be installed for under $2,000. No such product exists.
In short, to date, no solar product has been priced at a point that is below the threshold amounts that are perceived to be cost effective in many parts of the world. In volume production, the ASN product has every potential of being that product. In order to get to the needed volume, ASN will need to sell its product temporarily at a low profit in order to build sales volume to the point where high volume profitability can be attained due to greatly reduced manufacturing costs. ASN will set up the marketing and manufacturing equipment to fulfill this mission over a three year period.
The U. S. residential market consists of over 60 million single family homes. The initial utility target market will be utility companies in the eleven states where utilities, state governments and regulators have given strong incentives for investing in energy conservation: California, Hawaii, Massachusetts, New Hampshire, New York, North Carolina, Oregon, Rhode Island, Virginia, Vermont and Wisconsin. Five of the top ten most expensive utilities in the nation are in either New York or Massachusetts. ASN is currently working with two public interest groups in Massachusetts (Conservation Law Foundation and Mass PIRG) in an effort to take part in the collaborative process surrounding DemandSide Management.
The California Energy Commission (CEC) recognizes solar domestic hot water as an "Opportunity Technology"; that is, a technology which has matured to the extent that it is a viable, economically sound alternative.
Utility sponsored studies have shown that solar can cut peak power demand thus reducing the need to build new electrical generating facilities. The "SKYLITE"" system passes the economic tests commonly used by utility companies when performing LeastCost Planning. Utility companies, through DemandSide Management Programs, can either buy and install or provide financing for the purchase and installation of hundreds of thousands of systems. Large "all-source bidding" power contracts can be won by ASN systems as they are often competitive with bids that rely on fluorescent light bulbs which are currently considered the lowest bidder. SMUD is creating a "Conservation Power Plant" using DSM, and many other utilities are preparing to follow SMUD's lead.
Institutional markets such as federal DOE, EPA, HUD and DOD agencies and many other state agencies are searching for ways to control rising operating costs of lowincome housing and either government properties. Department of Energy (DOE) officials have been briefed on the "SKYLITE" system and toured the prototype manufacturing facility. Interest in the "SKYLITE" system has been expressed for its' use in Housing and Urban Development (HUD) weatherization program.
The primary domestic market consists of 20 million single family detached houses with 3 or more inhabitants who currently rely upon electricity to heat their water (roughly 1/3 of all homes). Two complementary channels of distribution will be simultaneously developed and employed.
The first channel of distribution will be Demand-Side Management (DSM) and Load Side programs adopted by utility companies. Aside from SMUD and Oregon, ASN is currently part of major NY and New England Electric Pilot Programs. The second is a dealer network which will be responsible for marketing directly to the homeowner. In many cases the dealer network will also be responsible for doing installations under Utility programs. ASN's goal is to have over 1,000 dealers worldwide within five years.
Over time, as the cost of the system declines and other fuel costs rise, the "SKYLITE" system will prove to be cost-effective visavis fuel oil and gas, thus opening up the other two thirds of single family detached housing market. The reduction in price will also allow ASN to market to federal and state lowincome housing authorities. Finally, ASN anticipates opening up a vast Commercial, Export and Mail Order business after ongoing research and development lead to new products specially designed to meet those needs. ASN plans to have a gross manufacturing margin in excess of 25% in most product areas.
Five electric utilities presently have solar programs. In addition, eighteen other utilities are exploring the possibilities of starting solar programs through the new national solar utility consortium, USH20, whose purpose is to expand the use of solar water heating. ASN will be part of a measurement and evaluation program sponsored by the New York State Energy Research and Development Authority. The results will by used by members of USH20 in their solar evaluations. Utility economics will get even better if proposed energy taxes, which exempts producers of solar panels, are passed into law. The tax hits producers of coal, natural gas, oil and more important, utilities generating hydroelectricity. All of our targeted utilities in the western United States such as Sacramento Municipal Utility District and Pacificorp in Portland, Oregon rely heavily on hydro power.
Utility Solar H20 (US H20): US H20, a new collaborative effort among utilities, has been formed to enhance and expand solar water heating. This national utility initiative is being coordinated by the Edison Electric Institute and the American Public Power Association and is supported by the U.S. Department of Energy. ASN attended the first meeting between representatives of the utility industry and solar water heating manufacturers.
Under an ASN plan, candidates for a solar water heating system would check a box on their monthly bill which would cause an analyst to set up an appointment. After site inspection and if practical, a solar unit would be installed and leased to the homeowner at a rate that would net them a savings on their utility bill. The utility company would pay ASN a lump sum to buy the system and have one of ASN's contractors do the installation. In return the utility would receive:
Pollution Abatement "Utility regulators in at least nine states are now insisting that environmental factors be reflected in the projected cost of power generation, 'leveling the playing field' somewhat for alternative energy. The Wall Street Journal reported in July that two states, New York and Wisconsin, now insist that bids on new power generators include estimated environmental costs, like air pollution. The California Energy Commission is considering a similar rule and may also require utilities to devote a portion of newcapacity investments to renewable energy production", according to the magazine ECOSOURCE.
The purpose of the Clean Air Act of 1990 is to "encourage energy conservation, use of renewable and clean alternative technologies, and pollution prevention as a longrange strategy, for reducing air pollution and other adverse impacts of energy production and use".
The incentives for all utilities to use solar are the pollution abatement requirements under The Clean Air Act of 1990 which set maximum allowable levels of pollution and acid rain emissions. The act gives utilities valuable allowances for the avoidance of pollution. According to ASN calculations based upon a formula found in the Clean Air Act and an EPA preliminary study, a utility would receive one Allowance worth about $700 for every two hundred solar systems installed. In addition to the federal program, a survey of state actions to factor environmental costs in utility planning shows that 29 states have indeed adopted them.
Energy Service Companies Another method for attacking the utility market is through an energy service company that would provide the financing, installation, monitoring, and maintenance of energy conservation at no upfront cost to the customer. The companies are paid for their efforts by sharing customer savings and/or utility payments that result from their efforts. "The deal is a nice one for the utilities and other endusers of electricity, since the energy services company assumes all risks and handles all the details. and the client enjoys the savings." Various program scenarios are being considered.
A fulltime marketing professional will pursue the utility market with a goal of establishing 24 demonstration units in the U.S. alone in year one, the sale of 1,200 units in year two, 4,800 in year three, 12,000 in year four, and 24,000 in year five. Because of the volume nature of this market, the growth curve in the U. S . can be very sharp, and the U.S. growth curve doesn't even compare to the potential growth in the international marketplace.