Senate Switches Control, Goes 50/50. Early this morning and again this afternoon, news outlets confirmed the New York Times needle. Warnock and Ossoff have been elected as the next Senators from Georgia pushing the balance of power to 50/50 with the democrats controlling the floor with the Vice President breaking the tie. Solar stocks had one of the biggest days ever, some going up as much as 25% before an attempted insurrection at the Capitol brought the market down a bit.
What It Means. Functionally the biggest change with the gavel going to Senator Schumer is being in control of what legislation reaches the floor for a vote. It also makes every Senator the most powerful Senator because one vote swinging to the other side is meaningful. That one vote swing may mean that more Senators get what they want when legislation moves especially on the 20 Senators that are in the center of both sides of the aisle. More to come on policy punditry but not today. In the short term, as you saw with the Garland nomination as AG, Schumer is going to be much more powerful pushing Biden’s cabinet nominees through the Senate.
What It Doesn’t. Don’t expect giant climate bills to the tune of $2trillion to be made into law anytime soon. A 50/50 Senate is a balancing act including the effort to make sure Manchin doesn’t switch parties. I would expect Manchin to be heard loud and clear on energy issues and retain his chairmanship of the Senate Energy Committee.
The Platform Value. Carlyle’s infrastructure fund is investing $374million into Amp Energy’s platform for projects around the world. The investment highlights not only the strong desire to invest in renewable energy infrastructure but to do so in partnership with platforms like Amp. Just a few years ago, private equity was interested in projects but not the team and company that makes sure those projects are investable. I think this is a nod to all of you developers and analysts that have been arguing for more value to be put on the platforms.
Highlighting Permitting. I would appreciate your social media elevation of the op-ed on the need to remove permitting barriers for solar. You can find the article here and tag me on Linkedin/Twitter and I’ll make sure to return the favor.
Consolidate Your Power. As you walk back into your offices (remote or otherwise) you will realize that the conversation is about what isn’t available. Modules, inverters, wires, tax equity, labor and other core requirements are in high demand and short supply. On product supply look towards consolidating your purchasing with similar companies to maximize your access and keep your pricing competitive. We’d be happy to give you more information at the SolarWakeup Buyer’s Group.
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Yann
The Senate Hangs. Yesterday, Georgians went back to the polls in their dual Senate run-off election. At the time of my writing this at about 2am Eastern, it seems a distinct possibility that the Senate will end up in a 50/50 split with Vice-President Harris breaking the tie. IFF (sorry to the non-engineers) that were to happen, you ask yourself what the Biden policy impacts would be since we largely assumed McConnell retaining the gavel. First and foremost, it provides a more realistic path to Biden to confirm his cabinet including those that are focused on climate. It does not however, in my mind, change much on the policy initiatives on energy with Manchin in the middle. Senator Manchin was the ranking member for the Senate Energy Committee and Schumer is unlikely to do anything that helps McConnell’s effort to have Manchin switch parties which he has been telling donors is the plan in the case of a loss in Georgia. So we wait and see for these results as well as the final confirmation later tonight that Joe Biden will be President come January 20th.
Shoals Files IPO Papers. In week 1, one of my predictions is coming true from my year in review last week. Shoals Technologies, the Tennessee manufacturer of balance of system components (and solar expo exhibitor expert), has filed for their IPO. The S-1 filed is a placeholder in advance of their roadshow and final fundraising document. It does give us some of their financial results through Q3 2020. The profitable manufacturer is smaller than many expected at sub $200million in revenue with 30% margin but keeps their overhead low with a great net income number relative to the revenue. If Shoals IPO is successful, and there is no indication of it failing, it opens the doors to many more IPOs at this scale which is much lower than previously assumed by solar companies. In short, if a $25million earnings company can be valued north of $750million or more then hold on to your horses because there is quite a pipeline of solar companies that will want to follow suit. Here’s a word of caution though, $200mm of revenue with north of 10% margin is different for a company with a track record of success and market share growth with the professionalism gained by having a seasoned executive team and owned by someone like Oaktree versus a company that just reached that amount, is growing exponentially with a team that has little track record of previous exits and investors that aren’t on JP Morgan’s speed dial.
It’s All About the Home. Grid planners, investors and realtors are coming together to assess the next decade. In a strange combination of circumstances, the focus on the home has never been greater and the electrification of the homes has never been more apparent. Additionally, the use of the home’s electric system is rapidly increasing with work from home/virtual schooling/gaming/streaming and shifting the gas station to the driveway with electric vehicles. They say home is where the heart is, but soon we will find that home is where the market is too.
Supply Or Demand. California is leading this discussion but FERC isn’t far behind. Should electricity grid reliability be managed on the generation (supply) or building (demand) side of the meter. I.e. do we need peaker plants or the ability to manage the electricity in your battery or refrigerator? The answer is all of the above, negative electrons through demand response, virtual power plants through distributed resources in solar or storage and stored energy in a renewable generation portfolio. Best of all, the entire demand response market is built without the need for ratepayers to carry the burden because if the market creates a pricing signal the market will respond with many GW of flexible capacity.
Consolidate Your Power. As you walk back into your offices (remote or otherwise) you will realize that the conversation is about what isn’t available. Modules, inverters, wires, tax equity, labor and other core requirements are in high demand and short supply. On product supply look towards consolidating your purchasing with similar companies to maximize your access and keep your pricing competitive. We’d be happy to give you more information at the SolarWakeup Buyer’s Group.
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Yann
Losing Money Redefined. If you buy a house and you make that mortgage payment every month, your checking account balance goes down. Would you consider that losing money? The money that the bank invests in you by providing that mortgage, is that money lost by the bank? If you were to read the New York Times article below, you would get the sense that Sunrun and Sunnova are losing hundreds of millions. In reality, their income statements have always been misunderstood by reporters because every dollar that goes into a solar project results in another 20 year contract that generates cash flow. There will come a time when the cash flow from those assets will generate more cash than the companies are investing and there will be GAAP EBITDA but even then it’s a dumb argument and I’m annoyed that the New York Times can’t report this accurately. Solar shouldn’t be made to be a bad investment by the pre-eminent newspaper in the Country, editors need to do better.
Will Government Contract Fast Enough? Biden is set to take the reins and he’s spoken at length during the campaign about government contracting. It is true that the military and GSA are enormous energy users spending billions for electricity and I hope that they are part of the solution. We need a project warp speed at the GSA and DOD to enter into PPAs for on and offsite renewable power purchasing. This can’t drag out and bureaucracy can’t get in the way this time.
Oil, Gas And Coal. If you’re an oil executive, where do you focus in the next 4 years? You’re losing your market share to EVs, so how do you play that? The harder question is for the gas executives, who are looking at their coal colleagues and see the writing on the wall.
Expanding Portfolios. Gibraltar, which trades publicly as $ROCK, has acquired Terra Smart to add to its portfolio alongside RBI Solar. Making portfolios of solar manufacturing companies is going to build great investments. Congrats to the team.
Consolidate Your Power. As you walk back into your offices (remote or otherwise) you will realize that the conversation is about what isn’t available. Modules, inverters, wires, tax equity, labor and other core requirements are in high demand and short supply. On product supply look towards consolidating your purchasing with similar companies to maximize your access and keep your pricing competitive. We’d be happy to give you more information at the SolarWakeup Buyer’s Group.
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Yann
It’s A New Year. We’re headed into 2021 but in reality we’re going into a three part series. With some certainty on the federal policy front for the ITC, DC will refocus on trade issues which causes modules and inverters to cost more than any other market in the world. Solar is also going to have a conversation at the State level starting with the NEM 3.0 battle in California which affects half of all solar revenues. Every manufacturer in America should be on the phone with CALSSA this week to talk about how they can help ensure that solar in California keeps the industry moving forward.
All About Permitting. Today’s top story is an op-ed co-written by Mike Casey and myself on the topic of permitting, expanding some views on the issue that you’ve read here. Our hope is to broaden the conversation beyond solar so that legislators, county officials and city politicians participate in the dialogue as well. Reality is that most people don’t know it costs a fortune in time and money to get a permit for solar and it doesn’t actually help the homeowner get better solar. I see plenty of poor installations that paid thousands in permitting fees. What have you seen and what do you pay for permits?
Welcome To The S&P 500. Congratulations to the Enphase team for going into the S&P 500, officially joining the index later this month. From written off at under $1 per share, execution led the company to new heights with some exciting homeowner focused initiatives well under way including direct to installer sales in Europe.
Consolidate Your Power. As you walk back into your offices (remote or otherwise) you will realize that the conversation is about what isn’t available. Modules, inverters, wires, tax equity, labor and other core requirements are in high demand and short supply. On product supply look towards consolidating your purchasing with similar companies to maximize your access and keep your pricing competitive. We’d be happy to give you more information at the SolarWakeup Buyer’s Group.
Opinion
News
Opinions:
Have a great day!
Yann