Archive for the ‘Solar Finance’ Category

Poll: 75 percent of Trump voters want to accelerate the growth of clean energy

by , a national Republican political and public affairs research firm with its roots in political campaigns, yet again not only illustrates how broad based support is for clean & renewable energy but also the issue by issue disconnects. A good piece on the survey and the survey itself found .


trump voters clean energy

Source: Public Opinion Strategies, LLC


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Fact Checking the Election Claims on Renewable Energy Economics

Of all the events I’ve attended in my 20 years in the solar industry, I will always remember the renewable energy finance conference I attended in 2012 where the major investment banks, pension funds, and project finance entities gave one presentation after another stating they treat wind and solar as any other energy generation asset class when looking at returns and risk. This was a major turning point for the renewables industry, as finance is the heartbeat of the rapidly expanding industry.

Consider the following facts: renewable energy industry reaching $30B in 2016, renewables are the largest



generator of and it’s by far the largest sector of . Since that conference, my phone has been ringing repeatedly, and weekly, with calls from the finance community looking for projects to purchase. Demand for projects far outstrips supply. The rate of return and the low risk profiles are that good.

So it amazes me that our new president and other elected officials can stand in front of the country and claim over and over that wind and solar power does not . Clearly Wall Street and other finance entities do not put capital work into a near USD $1 trillion global industry that are not producing solid, predictable long term returns. Of course when confronted with actual facts, the conversation go right to the specious argument that taxpayer funded subsidies makes renewable energy projects possible. Anyone that knows me knows topic: the

The renewable energy industry has done remarkable work in bringing solar and wind to compete with a highly subsidized fossil fuel industry to a point that it’s now less costly than coal and on par with natural gas derived energy. The investment opportunity has never been better.

An excellent fact book on the U.S. sustainable energy transformation can be found at the bi-partisan

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Deutsche Bank expects final ‘gold rush’ in the US solar market to begin in 2017

But that prediction is less than certain as a result of the negatives and positives of the 5 year ITC extension.

Article originally posted on  

Deutsche Bank said it estimated around 8GW of primarily utility-scale projects were under various stages of development in Texas alone, while nationwide that figure stood at around 31GW, which would translate into a relatively flat 2017 market with 2016 but generate strong growth over the next three years. Image: SunPower

Deutsche Bank said it estimated around 8GW of primarily utility-scale projects were under various stages of development in Texas alone, while nationwide that figure stood at around 31GW, which would translate into a relatively flat 2017 market with 2016 but generate strong growth over the next three years. Image: SunPower


Updated: According to the latest analysis by Deutsche Bank and in contrast to market research firms, Bloomberg New Energy Finance (BNEF) and GTM Research the US solar market is expected to grow in 2017, heralding in the last ‘gold rush’ period through 2020.

Deutsche Bank analyst, Vishal Shah said in a research note that PV module and inverter price declines would drive improved solar economics in 2017 and result in continued strong demand seen in the US market in 2016.

Shah noted: “This precipitous decline in module prices is also accompanied by a sharp decline in inverter prices, especially in the utility-scale and C&I [Commercial & Industrial] markets. As a result, we expect solar economics in several U.S. markets to improve significantly over the next 12-18 months. Our analysis suggests that project returns in the U.S. could likely exceed the returns solar developers achieved in other markets during prior cycle peaks and these returns are unlikely to improve as incentives gradually decline or net metering phases out. As such, we expect the final “gold rush” in the U.S. market to begin in 2017.

However, the US ITC extension as “hurting” solar growth in 2017, due to the urgency to complete projects ahead of future ITC cuts is several years away. According to BNEF, overall US solar demand in 2017 is set to experience its first major slowdown after years of strong growth. BNEF also expects the US residential solar market to stay steady at around 2.8GW in 2017, a 0.3% increase over 2016 forecasts.

GTM Research had been the first firm to warn of a slowdown in the US market in 2017, citing utility-scale project slowdowns after the ITC extension at the end of 2016. The market research firm expected the overall US solar market to decline to levels of around 7 to 8GW last seen in 2015.

Update: However, GTM Research has since told PV Tech that it latest forecast was closer to a flat year in 2017, compared to a dramatic drop. The research firm is guiding installs at 13.7GW in 2017, down slightly from 13.9GW in 2017.

A major decline in US installations is expected to occur in 2018, yet rebound to around 15GW in 2019 and over 17GW in 2020.

Deutsche Bank said it estimated around 8GW of primarily utility-scale projects were under various stages of development in Texas alone, while nationwide that figure stood at around 31GW, which would translate into a relatively flat 2017 market with 2016 but generate strong growth over the next three years.

“For 2018-20, we expect strong growth in all segments, and raise demand estimates from 13.2GW, 15.2GW and 17.4GW to 16.5GW, 18GW and 19.7GW respectively,” noted Shah.

Deutsche Bank’s forecast would seem to be the more bullish, currently.

PV module price declines steeper than expected

, Deutsche Bank’s Shah noted that industry participants at the SPI 2016 exhibition in Las Vegas expected average PV module prices to approach US$0.35c/W within the next 6-9 month timeframe, down from US$0.60c/W at the end of Q2, 2016.

However, Shah said in the latest report that US module prices had already declined by nearly a third in the Q3 to US$0.40c/W and were set to decline further to US$0.35c/W in the fourth quarter of 2016.

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Diversification Into Renewable Energy Chronicles – How About Now?

solar energy, diversification, solar bankability

Source: U.S. DOE

First post in a series looking at the fossil fuel segment diversification into renewable energy.

Consider the current energy industry situation:

  • For the first time in the last 100 years of the electric utility industry, revenue from sales of electrons did not go up after the US economy emerged from the recent great recession. Energy efficiency, renewable energy and behind-the-meter generation schemes are part of the reason.
  • Oil and gas industry revenue and margins are suffering from very low prices as a result of overproduction, regulatory tightening on and other factors.

    Coal Industry Decline

    Coal Industry Decline

  • The coal industry is at a point that prompted the CEO of one the largest coal producers to   that coal as a dominant generation fuel is in significant decline. Natural gas at historically low prices is rapidly replacing coal for base load generation. Coal is also impacted by strict limits on emissions as a result of the EPA’s (MATS). International markets, long thought to be a lucrative export valve for US coal, are in decline.  China and other large coal burning nations have enacted new laws to wind down their coal generation, as the reality of climate change sets in and the cost-competitiveness of renewable energy continues to rise.
  • The future energy picture, broadly speaking, is generally viewed through an electric industry lens. “Electricity is the energy of the 21st century,” according to Patrick Pouyanné, CEO of the large French oil company Total, which has been making initial strategic investments in renewable energy and energy storage over the last six years.
  • The majority of the world’s countries (174) have come to agreement on slowing down climate change at the United Nations in December 2015, which attempts to limit warming to 2° C compared to pre-industrial levels. With energy generation contributing average of 35% of emissions, the implications for the energy sector is clear.

In this era of market turmoil and low prices across all fossil fuel energy sectors, renewables are highly cost-competitive AND gaining ground. The recent BNEF 2016 Outlook verifies what renewable energy cheerleaders have been saying for many years – renewables with energy storage and next-generation grid technology are ready to lead the imperative global transition away from carbon-intensive generation.

So why is the fossil fuel industry still sitting on the sidelines? Renewable energy companies and assets throughout the supply chain are relatively inexpensive now, due to the low cost of the gas and oil it competes against. The timing to present a diversification effort to shareholders has never been better.  The timeline for return on investment for renewable diversification is significantly shorter than building fossil fuel assets. This would appear to be a first-mover’s diversification market.

The renewable energy industry represents a natural, highly profitable diversification strategy given the fossil fuel industry’s large balance sheets, synergistic services and capabilities, very low cost of capital, leverage with regulatory agencies and built-in customers in many cases. Yet many fossil fuel companies continue to dig in deeper on their traditional extraction-and-burn model, even as a of oil and gas executives back in

Constellation Energy PV System at Denver Airport Source: Denver International Airport)

Constellation Energy PV system at Denver Airport     Source: Denver Int’l Airport

2009 uncovered major concerns about the sustainability of their industry.  The majority of these executives also expressed strong support for, and confidence in, the future of renewable energy.

There are signs that a tentative transition by some entities is underway. Major electric utilities such as Duke Energy, Georgia Power, NRG Energy and Exelon domestically have their toe in the renewable energy water, and the large European utilities have announced long term transitions to 100% renewable energy. Other smaller electric utilities are testing renewable generation, and decoupling their profitability from electron-only sales into energy efficiency and other services. The oil & gas sector is increasing their involvement in renewables with recent announcements from Shell, Total, and Statoil, as well as a number of smaller firms that service the large multinationals.

However, with the exception of Total and few others in the electric utility industry, diversification capital investment budgets are small, generally under 0.6% of the total. And there is always the lingering suspicion, based on past pronouncements, that these latest diversification efforts are merely green-washing to counter urgent climate change action calls.

To be sure, diversification from a core competency is not simple for any company who has shareholders to satisfy on a quarterly basis.  Patience for executing a diversification strategy is not something the investment community is good at, as witnessed by the from the electric utility NRG last year. And E.ON in Germany is an example of the while crossing the diversification chasm.

But with the continual and rapid lowering of the installed cost and levelized cost of energy, as well as plunging cost reductions in the energy storage sector, diversification into solar and wind and other renewables can be achieved with a well timed diversification plan and lower risk. There’s money to be made, jobs to be created and the urgent health of our planet to consider.  How about now?

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Solar PV Module Bankability – a Maturing Lack of Clarity

solar energy finance - bankability secure?

As I have written previously, the concept of bankable solar products and services is complex and contradictory and has many interpretations depending on where you sit in the industry. When looking at the bankability of modules (aka panels) the situation is quite confusing.

In the PV industry, there is continual chatter about which module providers are tier one or tier two, and who is on various analysts’ bankable lists and who isn’t. The general metrics involve the business health of the manufacturer, the technology they employ, the manufacturing process, vertical integration and being in business for more than 5 years. Many of the tier 1 companies are relatively new, stand alone companies with weak balance sheets, so they don’t have the financial health to meet bankability standards and yet they are considered bankable. This contradiction was illustrated in spectacular fashion over the last 2 years with the bankruptcy of the largest PV module manufacturer in the world, , and another large Asian company, LDK, among others. Both were publicly traded with high visibility on the NASDAQ and had been considered highly bankable.

With this history, it’s hard to understand how module providers with weak business fundamentals continue to show up on various analyst and industry tier one vendor lists. Many times the answer to this contradiction is that the module company has supplied a couple of large projects with the project financed non-recourse by well-known capital providers. The analysts are relying on the finance entity and the finance entity is relying on the analyst, and then it would seem that herd mentality takes over.

From a technology standpoint, a crystalline PV module is a mature (40 year old), proven technology that desperately needs the kind of

Any standards & verificatin in place

Any standards & materials verification in place?

manufacturing standards that are found in many other commodity product industries. Manufacturing and materials standards tied tightly to verification protocols would go a long way toward lowering the risk for long-term owners of PV systems. With adherence to standards and robust verification, business-side bankability becomes less of a pain point. Standards are paramount if the PV industry is going to continue its steep growth curve.

The crystalline PV manufacturing industry is maturing with the reentry and/or scale-up of diversified, large multi-national corporations’ PV programs. As a result, the secure bankable route has developing clarity with companies such as BYD, Hanwha, Hyundai, LG Electronics and other similar companies who can bring confidence to finance entities via large balance sheets, continual technology improvement and strong manufacturing heritage. Additionally, a few of the original large stand-alone crystalline module companies are becoming more stable again as growth has returned to the market, and their balance sheet burden due to manufacturing capacity over expansion in the past few years is diminishing.

In my next post I will discuss PV thin-film version 3.0 bankability. Thin-film CIS and CdTe is rapidly achieving performance parity or better when compared with crystalline poly modules, and there is potential for disruption to the crystalline vendors in particular application segments.


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A New Year Greeting

solar bankability

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Quietly, A Major PV Industry Milestone Achieved

REFF Wall Street 2012With the PV industry, nothing is as it seems. The industry is influenced by a myriad of technological, business, economic and competitive forces both inside and outside the industry. Current media rhetoric holds that the industry is crashing (more on this erroneous assertion in my next post) and the finance community is fleeing the industry. The latter claim couldn’t be further from the truth.

While working on various PV project developments over the years, I often heard from finance entities that they viewed solar PV energy as highly risky, which created a higher cost of capital and demands of higher IRR’s, among other negative effects. As one partner from a large national bank said, “We know how to finance a combined cycle natural gas plant – the entire product comes from GE or other well-known sources and the technology risk is well understood. With PV projects, there are a number of different component brands which make up the generation asset along with a number new variables that we don’t know or understand. It has our risk antennae up significantly.”

But in the past 12 months, and most recently at the in Manhattan, I am consistently hearing from marquee finance entities that they now view a PV generation asset no differently from other assets, as the risk and business models are now well understood. This is a major milestone for the PV industry, and when combined with the inflection point of declining solar PV energy cost at retail parity with brown fuel generation cost, bodes well for the continual growth of the solar energy in the next 5 years and beyond.


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All the Best in New Year

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Solar Industry M&A – Really?

With the collapse of publicly traded solar stocks in the last 4 months, the general business press has been buzzing with speculation about mergers and acquisitions. But these articles have missed some basic industry drivers and circumstances that may point to minimal M&A activity. A good example includes a recent Bloomberg about how is a take over target for GE and Siemens as FSLR’s share price has fallen from $156 in Q1 2011 to $36 today losing enormous value.

First Solar - M&A Target?

While I have tremendous respect for what FSLR has accomplished and believe that high performance thin-film will be a factor at some point in the longer term, rapidly changing market dynamics have caught up with the company.  Manufactured costs of crystalline silicon PV modules have dropped much more rapidly than thin-film as a category or FSLR could match.  Indeed, FSLR’s stated guidance was to decrease manufacturing cost by $0.05 per Watt during the last 18 months compared to a $0.20 – $0.35 per Watt decrease by a variety of crystalline providers.

Solar thin-film as a general category is lower in efficiency, which requires more land/space, balance of systems (inverters, racking, wiring, permitting, administration) and as such, requires a module sale price differential from a crystalline module of approximately 30% to remain competitive. Currently the delta between the 2 module technology types is only 6% – 10% in the spot and long-term contract markets respectively.

The thin-film business model as a general category in the current environment is broken. (exception may be S) While First Solar has their downstream project development and EPC capability glossing over the module manufacturing cost problem, this will continue to be a problem for the foreseeable future. And with behemoths like Samsung, LG, Hyundai and now F about to enter the market with aggressive low cost capabilities and significant resources, the pace of cost reductions will continue.

I would be more than surprised if GE (especially since GE has its own thin-film with an integrated BOS approach) or Siemens or similar entities would buy FSLR with the current market dynamics in play. If the price becomes low enough, they may have interest in FSLR’s substantial project pipeline but that would need to be significantly lower than the current $36 price.

Overall, acquisitions in the PV module manufacturing industry don’t make much sense even at the current low valuations unless there is valuable IP present or there is a substantial project pipeline as a result of downstream integration. This is because the barriers to market entry are quite low. Manufacturing equipment used throughout the supply chain is generally American and European made off-the-shelf production machines with willing and able companies such as Applied Materials ready to supply. Additionally, most Asian solar manufacturers have no brand value established worth purchasing. Foxcon’s entry in the PV industry is a good example where no existing company or capacity was purchased, opting instead for the latest, highest efficiency manufacturing platforms available while partnering with an existing Chinese poly silicon company for raw material supply.

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PV Supply Chain ASPs: Not At The Bottom Yet

Continued weekly monitoring of various entities throughout the supply chain shows the average selling price (ASP) on the spot market continues to decline in all categories except the inverter.

Of particular note is the sharp drop in poly silicon ASP from the previous week. Its widely believed that the efficient silicon refiners cost basis is approximately $25 – $28/kg and we may well see further substantial reductions if the demand situation remains week.

While the data above is sampled broadly from Tier1, 2, and 3 providers, the weaker entities with little or no bankability status will be feeling the pressure, soon, to idle further production and in some instances find an acquirer. Over the last 5 years, there has been speculation about consolidation of the many industry manufacturers when demand has temporarily weakened. This current market demand bust may be the one that results in bankruptcies and acquisitions of the lower tier players. The large Tier 1 players with weak cost structures are looking for strategic partners or majority acquirers such as the deal we saw between Sunpower and Total last month. This may also be the opportunity for the mega sized electronic manufacturing services companies like Flextronics, Foxconn and others substantially grow their PV industry presence with acquisitions.

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Residential PV System Lease Now available at Lowe’s

the second largest do-it-yourself retailer (1,750 stores), is now offering a Sungevity solar system lease option at their stores in select

Solar PV Reaching the Masses

California locations. The company also announced that it had purchased a 20% ownership stake in with terms not disclosed. Lowe’s joins Home Depot in the segment that already works closely with residential solar lease companies and While both home improvement companies offer solar programs with a concentration on California, they also have plans for, or are operating in, Colorado, Delaware, Maryland, New Jersey, New York and Massachusetts.

No Upfront Cost - Source: SolarCity

The has quickly gained traction (in select states with adequate government support) as it removes the upfront cost of the PV system installation, and even though there is a monthly lease payment, the overall benefit is a lowering of the monthly residential utility bill of up to 25%. The lease company and provides maintenance.

On the Sungevity website, the company advertises “Pay $0 down,” “Save 15% on your electricity bill from day one,” and “we’ll guarantee in writing how much energy your system will produce each year and, if we fall short, we’ll pay you for the difference.” It is fairly compelling marketing.

For the Lowe’s relationship, Sungevity will provide in-store quotation kiosks in 30 California stores. The Sungevity kiosk runs their web based application, which provides users a quote for their home location within 24 hours.  After the customer inputs location and estimated energy use, iQuote accesses satellite imaging of the roof and surrounding vegetation and then ties that information in with historical solar radiation, government incentives and other variables including the cost of utility-provided power. The final quote provides a customized projection of how much money will be saved on the utility bill along with an artistic rendering of the how the installation will look. Local, certified installers who work with Sungevity, install the system.

The best investment return for a residential solar system is for the homeowner to own and operate it themselves, the excess energy to the utility and secure the . But with the average residential system costing $16,000, the solar lease is a great option to having the benefits of solar without the upfront cost. As the Sungevity CEO Danny Kennedy said, ““Our goal is to take this solar offering to the masses across the country.” The big box home improvement retailers should be a great conduit for solar leasing companies to reach those masses.

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A Netscape Moment for Solar Energy?

was an early Internet browser company that went public with startling success in 1995 and kicked off an IPO binge for companies

Netscape Moment for the Solar Energy Industry?

The Infamous IPO

associated with the World Wide Web. With the historic IPO and subsequent Netscape stock performance as a result of their 90% marketshare, bankers where screaming for any fast growing Internet companies that could have the same IPO performance and returns.  The resulting number of IPO’s was nothing short of spectacular.

Over the last 8 years, there has been much discussion about when the would arrive for the renewable energy industries. Many thought it would be triggered by putting a price on C02, some thought it would be a new disruptive technology company, and some thought it would be an enlargement of government subsidies.

Solar Energy Photovoltaics - Steady Growth

Building It Again and Again

It’s difficult to see how the renewable and solar energy industries will have a Netscape moment. As many Venture Capitalists and other investment organizations who did well by investing in IT are experiencing, renewable energy is a one by one, infrastructure-intensive industry requiring large up front capital with longer return on investment timelines. The classic software model – make it once and sell it millions of the times – is not applicable to renewable energy. While the ROI on renewable energy, particularly photovoltaics, is on par with IT industry returns, more patience is required.

The energy industry is also highly regulated by governments in most locales globally which creates distorted market signals and tends to holds back “irrational exuberance” in the market.

In reality, I don’t believe there is going to be a renewable energy moment with one company setting off an IPO binge. It has been, and will continue to be, a longer, smoother growth curve with a number of significant events along the way that demonstrate value and scale. I believe we are entering that time frame now, as evidenced by recent global events:

  • The market expanded during the global economic slowdown of the past 3 years. In the solar industry growth exceeded 40% YOY during this time.
  • , ’s third-biggest oil producer, agreed to buy as much as 60 percent of for $1.38 billion.
  • U.S. Department of Energy (DOE) has conditionally committed to provide US $1.37 billion in loan guarantees to support the financing of 400MW Solar Electric Generating System, one of the largest solar thermal systems in the world.
  • After 10 years of development, 140MW received final permitting and is expected to reach 707GW by 2015, meeting 20% of global demand.
  • in the levelized cost of photovoltaic solar energy systems is enabling $3.00/W installed cost for larger systems with $2.50/W in sight for 2012.
  • A rapid increase in (coal, oil and gas), and the recent Japanese nuclear disaster, are allowing renewable energy to achieve grid parity sooner than industry forecasts predicted.

The solar energy Netscape moment has been happening slowly but relentlessly. The business model differences between IT and Renewable Energy combined with government regulation of energy markets suggest that the Netscape “moment” will be more like the early days of large commercial agriculture. Highly profitable companies where slowly but consistently building revenue under government regulation and the finance industry began to consistently invest in companies across the agriculture supply chain.

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