How Does Solomon Energy Make Money?

The Solomon Energy team advises large energy consumers on ways to reduce their utility bills through renewable energy and energy efficiency technologies including:

  • Solar,
  • Cogeneration (also known as Combined Heating and Power or CHP),
  • LED lighting, and
  • Batteries.

Solomon Energy is compensated for its services in three ways:

1. Success Fees.

In most cases, Solomon Energy does not charge for its services unless and until a project is completed and commissioned.

In what it called its Phase 1 process, Solomon Energy will work with its clients to perform a free assessment of a number of potential energy savings strategies. Only if it concludes that a client can reduce its operating costs immediately will it recommend the client proceed to Phase 2.

In Phase 2, the client will agree to have Solomon Energy do a more detailed engineering study. At this stage the client will agree that in exchange for Solomon’s investment of time and money the client promises that if any energy contracting is done within the next three years the client will insist that its contractor pay Solomon a fee.

Solomon’s fee – which will be paid by the contractor and not by the client – generally equals approximately 5-10% of the gross value of the project. In the case of solar the fee may be calculated as an amount – e.g., $.15 – per kilowatt hour of solar energy nameplate Direct Current capacity before conversion into Alternating Current.

In addition to conducting preliminary engineering studies Solomon Energy will help its client conduct an RFP process to seek competitive proposals for the project. If, after making a recommendation, the client agrees to proceed with a contractor or vendor, Solomon Energy will help its client negotiate contracts including construction contracts, Power Purchase Agreement, real property lease agreements, client lease amendments, shared savings agreements, or other documents.

Solomon will also help its client secure whatever state, local and utility subsidies are available or tax benefits that are due.

Does Solomon Energy’s fee increase the cost of the project? Surprisingly no. To date contractors have considered Solomon’s fee as comparable to the amount they pay their own salesman to source deals. In the case of RFPs conducted by Solomon, contractors are pleased to submit bids for projects that have been vetted already. Unlike many projects they pitch in the ordinary course, projects brought by Solomon have a high likelihood of success. Accordingly, the contractors know that if they inflate their bids to include Solomon’s fee they risk losing the competitive bid process.

Finally, Solomon’s fee is only paid if and when a project is successfully completed. Solomon Energy invests in its client’s success. Its interests are aligned with its clients. If its clients do not succeed in completing a project, Solomon Energy does not get paid.

2. Consulting

Over the course of its four year history Solomon has been asked by some clients to review bids or contracts submitted by contractors in response to solicitations conducted by the client itself or by other consultants the client has hired. Many clients find that they and their consultants are inexperienced when it comes to evaluating the proposals they receive. They have difficult evaluating them and making an apples-to-apples comparison. Or they are uncertain about how to obtain better contract terms.

Solomon has thus far conducted six consulting projects. In these cases it has been paid an hourly fee – anywhere from $250 to 500/hour – depending on the scope of its work.

Solomon Energy consulting engagements have ranged from $3,000 to $20,000.

3. Energy Supply Brokerage

Many of its solar and energy efficiency clients have asked Solomon Energy to help secure competitive bids for the balance of their energy supply needs, that is, those volumes that are not offset by their solar or other investments.

In these cases, Solomon Energy’s subsidiary, Solomon Energy Advisors LLC, charges a fee per unit of electricity or natural gas purchased on behalf of its clients. See How Much Do Commercial Energy Brokers Get Paid.

Solomon Energy Advisors’ fees are among the lowest in the brokerage industry, running between 2 and 5 mils per kWh and $.02-.05 per ccf.