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									                                                                                                Quick Facts
                                                                                                Company Name:
                                                                                                FLS Energy

                                                                                                Company Website:

FLS Energy:

                                                                                                Location: Asheville, NC

A Financing Solution for Solar Hot Water                                                        Year Founded: 2006

                                                                                                Technology / Sector:
Overview                                                                                        Solar hot water

    FLS Energy is a solar utility that engineers, builds, operates, and finances solar energy    2010 Employees: 80
    systems for customers that use large amounts of hot water or electricity.
                                                                                                2010 Revenue: $18 million
    FLS Energy has implemented an innovative financing model that eliminates the up-front
    cost to the consumer of a solar hot water system.                                           2011 Revenue: $36 million

    In September 2011, the company was named America’s 46th fastest growing private
    company by Inc. Magazine. 1
                                                                                               Advanced Energy Economy

                                                                     Feb 2012
FLS Energy: A Financing Solution for Solar Hot Water

      "We want to be the company that makes solar hot water mainstream."

                                                                                                                                Joanna Baker,
                                                                                                               FLS Energy Marketing Manager

         A Forward-Looking Company
         Founded in 2006 by three partners in Asheville, North Carolina, FLS Energy engineers, installs, operates, and finances solar hot
         water and solar electric systems for residential, commercial, and industrial buildings. Prior to founding FLS Energy, Michael Shore,
         the current CEO, specialized in energy policy issues. Dale Freudenberger, the current President of FLS Energy, was a general
         contractor, and J. Hardy LeGwin, currently the chair of the FLS board of directors, was a longtime designer who built his first solar
         energy system in 1983.

         FLS Energy was founded with the mission to grow the renewable energy sector and make solar mainstream. Since 2006, FLS
         Energy has grown from three employees to more than 80, earning the company a distinction as the 46th fastest growing private
         company in America as reported in the September 2011 issue of Inc. Magazine.3

         A Proven Technology
         Solar hot water technology is nothing new. The first recorded instance of using solar energy to heat water was in the 1760s and the
         first commercially available solar hot water heater was patented in 1891.4 Modern solar hot water systems combine the simplicity of
         traditional designs with state-of-the-art technology, heating water efficiently and reliably.

         The basic components of a solar hot water system are the solar collectors, a tank to store the hot water, and the piping to connect it
         all together. So-called "active" systems have a pump to circulate the water, whereas "passive" systems do not. Instead passive
         systems are designed to circulate water by taking advantage of temperature gradients — the hot water wants to rise naturally. In mild
         climates, the water can be heated directly by passing it through the solar collectors. In cold climates, an antifreeze solution (typically
         a 50:50 water-glycol mixture) is used instead, and a heat exchanger transfers the heat to the water in the storage tank. A solar hot
         water system is usually designed to provide about 80% of a customer’s annual demand for hot water.5

         Given the maturity of the technology and the fact that the fuel is free, one might expect solar hot water systems to be ubiquitous.
         However, only about 1.5 million homes and businesses nationally have solar hot water systems, for a market penetration of slightly
         less than 1%. In at least a couple of cases, the market share for solar hot water systems has actually diminished over time. In
         Pasadena, California, solar water heaters are much less common today than they were a century ago.7 In Florida, in the early 1940s,
         more than half the population heated their water with solar energy. 8 The overall decline can be attributed to the rise in the use of
         natural gas and electricity, and the drop in the costs of these fuels over time.

         Today, the challenge facing those who want to own solar hot water systems is upfront cost. Modern solar hot water systems can cost
         thousands of dollars more than their conventional counterparts that use natural gas, heating oil or electricity. As a result, many
         consumers have found solar hot water systems to be cost prohibitive, even though fuel cost savings can make the systems
         cost-effective on a lifecycle basis.

                                                                            Feb 2012
FLS Energy: A Financing Solution for Solar Hot Water

         Paying for Hot Water
         To attract customers for whom the initial investment is a barrier, FLS Energy has implemented a financing model similar to
         arrangements that have become common for solar photovoltaic (PV) electricity – a solar power purchase agreement. In the case of
         FLS Energy, they call it a Solar Energy Purchase Agreement (SEPA). A SEPA works like this: FLS designs a solar hot water system
         according to the needs of the customer and then installs the system for little initial cost to the customer. "Many times it requires
         nothing up front," said Joanna Baker, Marketing Manager for FLS Energy. FLS Energy finances and owns the system and then acts
         like a hot water utility, selling the energy output of the system (Btus of hot water) to the customer. Moreover, FLS Energy is able to
         charge their customers less than they would be paying using conventional hot water systems—typically using a predetermined rate
         schedule. This means that the SEPAs deliver direct, immediate savings to customers as well as greater predictability in energy costs.

         FLS Energy’s SEPA financing model is at work at the Acme-McCrary Hosiery Plant in Asheboro, NC. FLS Energy developed the
         200-panel, 9,600 gallon solar hot water system with no capital investment from Acme-McCrary. FLS Energy expects to save
         Acme-McCrary an estimated $20,000 a year in avoided fossil fuel purchases.

         FLS Energy’s SEPA portfolio has grown to more than 40 projects, including ones at the Marine Corps Base Camp Lejeune and
         Guilford College. Between 2010 and 2013, FLS Energy is installing systems on 1,300 homes at Camp Lejeune, which together will
         heat more than 100,000 gallons of water a day.9 At Guilford College, FLS Energy initially installed 12 hot water panels on a student
         dormitory. After seeing the benefits of the FLS Energy system, they installed 190 panels across seven buildings all over campus.10

         In addition to changing the economic equation of solar hot water, FLS Energy is also changing perceptions. In the case of the
         Proximity Hotel – North Carolina’s first LEED Platinum 11 hotel – the hotel’s owners initially wanted a design that left the solar panels
         on their roof virtually invisible – but then changed their minds. “The client did not want the system to be seen from the ground at first,”
         said Baker. “Once the word got out about our system, though, the hotel developer decided to make solar part of the branding of his
         hotel. We had to redesign the system to make it more visible,” Baker said with a laugh.

         In an interview with National Public Radio about the Camp Lejeune installation, CEO Michael Shore said, "We have this myth in this
         country that renewable energy’s expensive. And here, Camp Lejeune and the housing company are saving money through solar [hot
         water], so I think we are really in the midst of a shift in how our nation gets its energy."

         From North Carolina to the Nation
         Already noted for their growth, FLS Energy is transitioning from a regional business to a national one. "We’re figuring out ways to
         deploy teams across the country," said Baker. One of the challenges in taking their business national is making sure the numbers
         work outside of North Carolina. That state has policies that encourage the installation of solar hot water systems, which help the
         economics of the SEPA financing model. As such, FLS Energy is first looking to states with strong support for solar hot water, such
         as Arizona, Maryland, Massachusetts and California.

         As the company pursues these new opportunities, the contracts with its existing customers—which typically last between six and ten
         years—will begin to reach the end of their terms. (FLS Energy began offering the SEPA financing model in 2007.) At that point,
         customers will have the option of purchasing the solar equipment at fair market value (the systems will still have many years of useful
         life left) and operating it themselves, or renewing their contracts, so that FLS Energy continues to maintain the solar energy systems.

         FLS Energy executives are optimistic that their approach, with its no-money-down model and flexible buy-or-renew contract can take
         solar hot water to new markets, and new heights. Said Baker, "We want to be the company that makes solar hot water mainstream."

                                                                           Feb 2012

1. "Inc. 500|5000," Inc. Magazine, September 2011. Accessed November 11, 2011: www.inc.com/inc5000/list/2011

2. This case study focuses on FLS Energy’s solar hot water business.

3. Inc. Magazine’s annual list of the 500 fastest growing companies has featured entrepreneurs for the past 30 years and ranks them according
to percentage growth in revenue from 2007 to 2010.

4. John Perlin, “A History of Solar Energy-- Solar Thermal.” Accessed November 20, 2011:

5. FLS: Solar Technology – Solar Hot Water. Accessed January 30, 2012:

6. U.S. Department of Energy (US DOE), Energy Savers Tips: Water Heating. Accessed November 20, 2011:
www.energysavers.gov/tips/water_heating.cfm. Total number of homes and businesses nationwide is about 166 million (US Census Bureau:

7. In 1900, more than a third of Pasadena residences featured solar hot water systems. In March of 2011, less than 0.2% of the city had it.
Calculations based on Perlin’s "A History of Solar Energy-- Solar Thermal" and the 1900 Census data from US Census Bureau 1900 Decennial
Report. Accessed November 28, 2011: http://www.census.gov/prod/www/abs/decennial/1900.html. 2010 Census data from City of Pasadena,
Statistics. Accessed November 28, 2011: http://cityofpasadena.net/Pasadena_Statistics

8. http://www.californiasolarcenter.org/history_solarthermal.html

9. Catherine Welch, Green Marines: Camp Lejeune Buys Into Solar Power, June 21, 2010, NPR News. Accessed November 20, 2011:

10. Jonnelle Davis, "Guilford College thinking green," Greensboro News & Record, October 28, 2010. Accessed January 12, 2012:

11. LEED stands for Leadership in Energy and Environmental Design and is a rating system for sustainability in the built environment. The
United States Green Building Council (USGBC) has produced a number of guidelines for certification, including using solar hot water systems.
LEED Platinum is the highest certification level possible. For more information, visit: http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1988
(accessed January 28, 2012).

                                                                       Feb 2012

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