Follow the twists and turns of the renewable energy industry in Idaho, and you quickly come upon Boise-based Exergy Development Group.
Exergy has become prominent in the Treasure Valley because of its high-profile sponsorship of the Exergy Tour, the ladies professional cycling race in Boise and three other Southwest Idaho communities in late May. But it also has made news in Idaho through its business, including the addition of wind energy to Idaho's power grid. It opened a southern Idaho wind project in 2010 and announced plans last winter to open more wind parks in southern Idaho by fall. Windmill parts on eastbound trucks have been a common sight lately on I-84 through the Treasure Valley.
Business Insider caught up with President and CEO James Carkulis at his Boise office.
Q: What led you to found this company?
A: We started this company in Montana, back in 2000-01. That led to expanding the business to some other opportunities in the Northwest. A decision was made in 2003-04 that recognized the difficulty in getting to and from Montana, so we looked for an ideal location to relocate the main offices. Boise rose to the top of the list with very little effort. Logistics, business atmosphere, a wonderful downtown, a good school for engineers at BSU. We planted the main offices here in Boise.
Q: Were you born and raised in Montana?
A: Im a Montanan, and actually I still am. I still live in Montana; my family still lives in Montana, outside of Helena. I commute back and forth.
Q: How much time do you spend in Boise?
A: That's an interesting question, because we have offices in Oregon, we have offices in Minnesota. We actually have projects in 17 states and a couple foreign countries. I try to be in Boise at least three days per week if possible. For a number of years it was easily five days per week.
Q: Is your company privately held?
A: We are privately held probably one of the last few independent renewable power producers that are independently held. We've stuck to that program and protocol very closely. We do have on almost every project that we design, develop, build and own we do have investors into those projects, and thats simply because independent power is not cheap. It is very expensive, and the upfront capitalization is very expensive in the renewable field. But the surety of the (renewable) commodity keeps the prices reasonable over the duration of the life of the equipment.
Q: Who are the primary investors in your company?
A: It is primarily myself.
Q: Were you the founder of the company?
A: Maybe the better term is that I was the visionary as to what the opportunity was and where we could move the business. Do we have a close-knit business? Absolutely. We have a number of independent consultants, employees and loyal people that have been onboard that are part and parcel (of this company). So when we talk about the vision versus the implementation part, I can say without a doubt that we have a number of partners involved in that (implementation) aspect.
Q: Is Exergy Development Group the umbrella company for all of your operations?
A: From the vantage point of having some sort of umbrella, I would say yes. From the viewpoint of what does Exergy Development Group do as opposed to our other divisions its primary focus is wind and solar as its motive forces.
You take our other divisions, which are Exergy Integrated Services, thats really our R&D division. We are on the cusp of designing some very unique new equipment for renewable energy. Take our Exergy New Energy, which is broken out to two divisions; we have an Exergy gas department and we have an Exergy biomass department.
Q: Tell us about the new equipment and technology you are developing.
A: When I first got into this business I was always fascinated with this concept of bigger, taller, heavier, three-bladed horizontal wind turbines. It seemed to me that there had to be some iterations on that theme.
Back in about 2003 we first began conceptualizing a different methodology for generating power from wind. Hopefully in the next year. well have in the ground a full-scale prototype of a wind turbine that will actually have a great degree of energy storage built into it a form of a battery. We think this is a very important development.
We think it also has an aesthetic value to it. In those areas where you find some concerns about the viewshed and the visual impact of the turbines, we will have the ability to mitigate that quite well. We'll be able to put them closer to communities and be able to really work in a distributed generation fashion because of the built-in energy storage and continuous power output from the turbine.
We are working on some tidal technology also which, surprisingly enough, has led to a penstock generating design for run-of-the-river hydro generation.
And we have a few other things that weve been working on that we think have some real tangible value down the road for renewable energy.
Q: Where is most of your R&D work done?
A: Our R&D work is done both in Montana and in Idaho, and a little in Oregon for the tidal units. The design work is done here in our Boise offices, and we work in conjunction with BSU and Montana State University in Bozeman. Both schools have helped us over time with materials development and research and some aspects of the modeling. We also have had a relationship with the Air Force labs in Ohio.
Q: Is each wind farm that you develop a separate business enterprise?
A: Yes, each one is what we call an SP, a special-purpose company. We have a whole host of special purpose entities, maybe 50 to 60, including potential projects down the road, including wind, solar, digesters and biomass.
Q: What is the typical business structure of these special-purpose companies where there are several investors?
A: Normally they are LLCs. Or maybe an LLP limited partnership.
Q: You must keep a team of lawyers very busy.
A: Unfortunately, I can say that we keep a whole team of lawyers. But it's the nature of the business anymore. The transaction end of energy has become very complicated, and we are finding ourselves in a process today so different than 10 years ago. The legal requirements, the credit requirements, the due diligence engineering requirements and the review process for investors and lenders is tense.
No one likes to take risk. And we perfectly understand that. So everybody needs to be assured and reassured and maybe assured again. And so the bevy of consultants and attorneys that is necessary to give that affirmation has increased multifold over the years.
Q: Are you finding that there is more resistance to locating new wind developments these days?
A: From an industry standpoint, I would say that it is more difficult to site a wind park today than it may have been earlier. But some of that (difficulty) has to be put on our own industry.
There have been a number of wind parks that should never have happened because of environmental issues, because of a lack of community input, and the list goes on. And there are some sites that just arent good wind sites in the sense of the output against all of the other factors involved. Its a shame, but it has happened and it has put a bit of a blight on our industry.
On the other hand, we've been very fortunate. Weve turned down sites after intense investigation (that would have had) great wind velocity potential for one reason or another, due to avian issues, for example. Back in 2002 we had a wonderful site not in Idaho and we had one of the best raptor experts in the country. I remember that he came back one day and said 'This is an eagle corridor.' And thats all I needed to hear.
We're not even going to go down that road. We've turned down sites for what we considered an environmental reason or viewshed reason that others have literally gone and built on. We try to be sensitive and pragmatic. Make no mistake, we like to make money. But you cant do business in a vacuum.
Q: There has been some discussion lately that our electricity rates are higher than they need to be to cover the added expense of buying wind power.
A: I can start this conversation. In the last month, natural gas prices have risen 43 percent. They're still low, but they have risen 43 percent. What are they going to do in five years? Whats it going to be in 10 or 15 years? We don't know.
But here's what we do know: The price of wind yesterday is the price of wind today. And its going to be the price of wind tomorrow.
An independent power producer and a utility have been at odds for a very long time. It is sort of a love/hate relationship. You cant avoid it. A utility wants to be vertically integrated. Their return happens on everything they do. When a small power producer utilizes federal law, as we do sometimes under PURPA (the Public Utility Regulatory Policies Act) implemented in 1978 to stop the vertical integration and monopolization of utilities, or at least give them a little competition when we utilize federal law, a utility can only make their return on certain aspects of what they do for us, not necessarily on their cap-ex or the power generation itself.
They want to maximize everything that they can get. But on the other hand, when the nature of the relationship becomes an attempt to quash the defender of independent power, I think we're getting into a very dark area. Im not quite sure if the public wants that. And certainly not quite sure that the argument that renewables are high-priced power really has a lot of merit at all.
We've worked with Idaho Power a long time, and I think we have a fairly good relationship. But when you look at the categories for the rate increase for Idaho Power this time around, the highest one is the cap-ex for their new gas plant at Langley Gulch. But we're the ones that are being somewhat cast over the side.
Lennon S. Reid: email@example.com