This is your SolarWakeup for April 27th, 2018
Eyes Wide Open. This is bigger than just Alabama. This is Michigan, Connecticut, and more. Solar net metering continues to be under attack and it’s threatening thousands of jobs and small businesses. Keep in mind that penetration is essentially negligible and provides more value to the grid than it costs. If we want major adoption of solar across the Country, solar needs to have a fair way to operate with market certainty.
Buildings Stay Open Longer Than Businesses. I agree that commercial solar will be majority 3rd party owned. It’s not because business owners don’t have access to tax equity, it has everything to do with the following. Ask a CEO if the business will be around 25 years from now, and they will be absolutely certain it will be. Ask that same CEO if they will still be in that building 25 years from now and a lot of hesitation comes across their face. Solar is a long term solution to power a building, not just the business within it and that is why the building itself is what should be underwritten in the transaction.
Pruitt Keeps Going. Here’s an unpopular opinion, I hope Pruitt sticks around. Yes, he is doing crazy stuff at the EPA and fighting science at every turn. But his non-political actions are keeping him on the front page and showing off his regulatory dismantling, to the dismay of the American people. If Pruitt goes, then so does the limelight. Who do you think will replace him? Do you think that person would do anything different on the policy front?
Press Releases Aren’t Under Oath. It may come as a shock to you but sometimes press releases aren’t everything they seem to be. I think it’s great that SunPower bought SolarWorld and First Solar is building another factory in Ohio. If you think that 201 is the reason that both of those events happened, then you need to stop trusting every press release. 201 is only a 4 year event and First Solar was exempt from it anyways. They could have built that factory anywhere in the world and doing so in Ohio had nothing to do with 201. On the other side, more complicated, is SunPower buying SolarWorld USA. For our view on why we think this happened, read here.
Enjoy Your Weekend. Will I see you in Minneapolis next week?
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Yann
This is your SolarWakeup for April 26th, 2018
The Official Schletter Update, Chapter 11. I get zero pleasure of writing these notes. I’ve been there myself, figuring out how to come up with a hail mary, worried about what to say to the team. You want them to stay focused on the task, not worry about their jobs, in the back of your mind worried that you may have to let them go. Solar is a cruel business, margins are tight but the gold mine remains unbelievably full and that is what keeps us going. Schletter has filed for chapter 11 protection in the US as it seeks a buyer for the global business. A spokesperson for Schletter says that they have interest from industry and financial investors alike. The cause for the protection is a bet into securing a pipeline which seems to imply that Schletter was doing project development to secure the sale without getting their margins crushed. We’ll Monday morning quarterback that decision and execution another day. In the meantime, let’s find these good folks new jobs so they can make a living in solar.
Fixing The Utility Monopoly. If there is ever a utility policy that reads as good as it sounds it is the legislation in Hawaii. Instead of getting paid to build stuff, regardless of how much value it creates, Hawaii will align utility revenues to consumer metrics including metrics in solar and storage. Utilities in the traditional rate base make money when things break, like after a hurricane in Florida. Replacing wood poles is a great business for those ‘investors’ when the consumer is the insurance and fuel hedge. Maybe we should consider Hawaii’s success as we craft new ways forward for Puerto Rico. On the other hand, what a difference compared to a year ago when NextEra looked like they were going to be the Hawaii electric company owner.
A Case Study For Buildings. RMI and energy consultants are posting about a project that brought a Colorado building closer to net zero. The interesting twist on this is that not only was the project feasible from a technical standpoint, it was also financed using commercial PACE assessments. As I wrote yesterday and we covered earlier, financing is not only a function of the interest rate, it is also a function of term length. Click above to see what rates and terms are available for project capital on solar projects.
Je Suis Désolé, Monsieur Trump. Macron got the last word in his visit to DC with his message to the joint session of Congress. Maybe it was the dandruff brushoff or something else that got Macron to provide a solid rebuke to Trump and Congress about climate change and transforming our economies to meet the challenge. Macron is not an ideologue on the environmental issue, he’s a financier that understands that productivity means creating and growing the sectors of the economy that mean a better future. It doesn’t hurt that the bipartisan support on this issue looks a whole lot better than coal and nuclear. This message was brought to you by the most nuclear powered nation on earth, France.
Midwest Solar Expo. Are you joining me in Minneapolis next week? I’ll be moderating a session on 201 tariffs with some great solar leaders, including longtime SolarWakeup friend, Tony Clifford, as well as hosting SolarWakeup Live! at MWSE with the CEO of Connexus Energy to talk about how a rural cooperative implements solar and storage in the Midwest. Not to late to jump on a plane and join us.
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Yann
This is your SolarWakeup for April 25th, 2018
Michigan Bellweather Decision. I’ve spoken about the importance of going on the advocacy offense and I couldn’t be prouder of the work that Vote Solar is doing in Michigan. Just yesterday, FPL’s CEO went on an earnings call and essentially outed himself and said that solar plus storage is more cost effective than “inefficient” alternatives. If the Michigan PSC delays the approval or denies DTE’s request for the gas plant this would be the first time a PSC delays a gas plant ahead of a thriving solar market. Nonetheless that is the right think to do.
Community Solar Potential. NREL was out with a study outlining the potential of bringing solar to demand even if the building can’t actually host solar. The disaggregation of solar generation from the load is a favorite topic of mine, it creates the collaboration of the lowest capital cost of solar, removes credit risk and generates more clean energy. At the same time we need to be thinking about growing the C&I market where transaction costs and credit risk make it more difficult than the residential market where the FICO score exists. I remain convinced that C&I is a combination of cash sales with long term financing through PACE is the best way to do that. Businesses that own their building have tax appetite and with assessment terms up to 30 years, why wouldn’t you want that.
Acting Like The Leader. 1366 Technologies asked for a 201 tariff exemption for their manufacturing facility. Now it appears that the request landed them in hot water for not having that facility in the US. I am sure there is much more to the story but the quote from the DOE makes me wonder if the aggressive tone is mirrored from above.
If My Way Works, Let’s Not Do It Your Way. A group of utility execs are workshopping how Puerto Rico should rebuild their infrastructure. At the same time, Sunnova, Sunrun, Sonnen, Tesla, and others have installed hundreds of micrograms on the island. Last week, when the entire grid went down again, only the solar micrograms were running including the fire stations. So tell me this, why do we have traditional power execs running this process when we already know what is working.
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Yann
This is your SolarWakeup for April 24th, 2018
Trump Tariff Impacts. In Germany, a company must file for insolvency at a much earlier date than the comparable situation in the US. While the German division of Schletter has been in self-administration for a little over a month, it appears that Schletter US has closed its doors, at least temporarily. Several employees and sources close to the situation advised that they were told to stay away from work. Emails and phones have been disconnected or go unanswered. Schletter has been a racking provider for as long as I’ve been in solar but with a large staff, 201 and commodity tariffs, it may have been too much for the parent company to continue funding. We’ve reached out to Schletter representatives without success and will update you once we hear from them. Overall, this appears to represent a broader need for consolidation in the racking market. While selling widgets is a profitable venture, there may be too many to choose from and too many with a market share that is too small causing margin pressure for large companies like Schletter.
MA Wants Storage, Needs To Act. MA may have the best market setup for energy storage after California with the start of the SMART program. That being said, the regulators and interconnecting utilities still have a lot of work ahead for them if they actually want storage to be built. If they do this correctly, storage will be built on every single solar project and I’d be happy to finance every storage installation in MA and elsewhere. (If you need me call me) Especially when it comes to DC-coupled energy storage, the interconnection is already in place, requiring a new filing makes no technical sense and only serves to dissuade developers from adding storage. So if MA wants more storage, then align rules with goals.
$1.9Billion For Solar Infrastructure. (Just kidding) From here on out, when I see a request for infrastructure improvements like a $1.9billion gas plant, I am going to point out the interconnection improvements to the network, like building a new substation, solar has to take on. I understand that energy is central to our economy and it must be reliable but it must also be clean and cost effective in the long term. Investing into infrastructure for 50 years going forward at consumer expense is not the most effective way to use rate base capital.
Bloomberg Donates Yesterday’s Earnings. Hopkins alum and notable environmental leader, Michael Bloomberg, is making up the $4.5mm shortfall that is left behind after the US departure from the Paris agreement. The money goes to the UN Climate Change Secretariat.
Certain Companies’ Power Plants. Axios’s Amy Harder has the inside the White House look at how Trump views the energy markets. Sometimes what you expect to hear is exactly what Amy is reporting in this article. Certain power plants by certain companies. When solar is generated on my roof, at least you won’t expect the government to shine light on the modules to generate more electricity. Libertarians rejoice.
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Yann
This is your SolarWakeup for April 23rd, 2018
Two major thoughts for the day. If you have additional insight, please send us a note. Everyone should think about joining me at the Midwest Solar Expo next Tuesday and Wednesday in Minneapolis.
Florida Reaffirms The Law. On Friday morning, the Florida PSC voted unanimously to approve the declaratory statement requested by Sunrun. The request, which included a solar lease template, was to ensure that Sunrun wouldn’t be considered a utility if they marketed and contracted in Florida using this structure. More importantly, this was a preemptive defense before entering the market. What Sunrun and others couldn’t do is come into Florida, sell a lot of leases and invest millions just to face a complaint by one of the investor-owned utilities. Just the process of defending the structure without this declaratory statement is a corporate risk that nobody could take.
The Market Potential in Florida. It’s been 10 years since the PSC in Florida asked for a report to be issued on the technical potential for solar in Florida. Navigant reports showed that rooftop solar had a 52GW technical potential at 2008 solar module efficiencies. With barely any capacity installs since the report, Florida’s technical potential is still intact, maybe greater than it was a decade ago. A sidenote, Florida will have higher than every other State adoption. Every Floridian wants solar on their home and showing off to our neighbors is everything for the Floridian mentality. Even though our energy rates are low, don’t be surprised how quickly the market grows in Florida. This market could give California a run for its money.
Consumer Scare Tactic. An interesting quote from the Office of Public Counsel, OPC, the entity that represents the consumer at PSC proceedings. They say that the consumer will not be represented by OPC since Sunrun (and others) will not be considered a utility. What they fail to mention is that the DBPR (licensing agency) represents consumers for all licensed contracting work which this falls under.
SunPower’s New Power. It’s been several days since SunPower announced the acquisition of SolarWorld. Most of the coverage is about 201 tariffs and we first wrote about the potential this has on their business lines. Now that the CEO has given interviews, there is another topic that hasn’t been discussed. SolarWorld USA is the sole petitioner of the AD/CVD cases and the co-petitioner of the 201 case. SolarWorld USA is now SunPower which means that any global settlement talks are now represented by SunPower folks. Trump mentioned global settlements when he signed 201 tariffs and those could be ongoing with a new team in the room. A sidenote, Tom Starrs (of SunPower) is the Chairman of SEIA and director at SEPA and is based in Oregon according to his Linkedin profile. Has SEIA started to lobby its board chair to settle the tariffs?
Tom Werner’s Focus. With all of the moving parts, it is important to remember that Tom Werner’s fiduciary duty is to his shareholders, not the solar industry. I am optimistic, however, that pendulum of success swings farthest when the market thrives. Removing barriers to silicon trade could make SunPower’s supply chain more efficient since Hemlock is seeking access to the China market once again. Definitely, a lot more to come on this story.
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Yann
This is your SolarWakeup for April 20th, 2018
What a week for the solar industry! As we begin the cycle once again in the storage industry, descending to the storage conference, I hope you enjoy your weekend.
Watch The Florida PSC. Starting at 9:15am, the Florida PSC will be hearing the request by Sunrun to have their lease ‘approved’ for use in Florida without being considered a regulated utility. Stay tuned for the result and a refresher on the issue here.
Solar’s Dilemma. I feel that most in solar have a set of values that many struggle with when solar argues against environmentalists on regulations. This is the case in the BLM land siting issue where solar is left with little available space to develop projects in due to environmental concerns. We’re going to need more solar going forward and we have to find where to put it but we want to do so responsibly, hence the dilemma.
The Little Story. This isn’t a big story but it’s the local victory that keeps us going. With the help of DOE SETO, the artist formerly known as SunShot, the municipality was able to move solar forward its own rules to promote solar. SETO is out with another solicitation for $105million.
Interest Rate Pressures. Over the past year interest rates have been creeping up, the 10-year yield is up to 2.91% as of yesterday. That’s over 1% higher than just a few years ago and that kind of debt cost increase hurts solar, where many projects are back levered. The positive side of this is the risk, the spread, has decreased to less than 2% more than the treasury rates. We’re still a long way from mortgage rates however.
SolarWakeup Live! Chicago. The event will occur at the end of June, dates to be announced soon. This will be a day long SolarWakeup Live and continue the SolarWakeup Live tradition of great content that helps drive the market. If you have a good idea for content that you’d like to hear, reach out. We will also have some special sponsorship opportunities if you are interested.
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Yann
This is your SolarWakeup for April 19th, 2018
For the trade lawyers, as you read this. What does SunPower buying SolarWorld and Suniva asset sale mean for a global tariff/duty settlement? Does SunPower get to speak for SolarWorld on this issue now?
Not All Bad Deeds Go Punished. SunPower has entered into an agreement to acquire the shares of SolarWorld Americas, Inc. This took most of the solar industry by surprise, myself included, when the news broke before the market opened yesterday. The market has reacted positively with a 11% bump in stock price based on the notion that SunPower has a way to get around 201 tariffs. A few hours before those news broke, the comments about the 201 exclusions came out in which SolarWorld supported SunPower’s request for exclusion which seemed odd given the market segment, residential, that both companies operate in.
Reading Between The Lines. I don’t actually think this is about 201 tariffs. If SunPower were to acquire SolarWorld for 201, why not wait until the exclusion was rejected? I think that SolarWorld was in a bad place and needed a buyer which means that the price was right. At the same time, SunPower needed to add a product that could both be labeled as Made in the USA and cheaper. SunPower installers love the premium product but all of them carry a second product so they don’t lose deals purely based on price. Now, SunPower could offer a two tiered offering into its dealer network, which is as good as it gets. To summarize, SunPower buying SolarWorld is more of a play for residential market share than 201 tariffs.
Future Of Suniva. In the ongoing bankruptcy proceedings for Suniva, SQN has let the court know that they are selling some (or all) of the companies manufacturing equipment. This means that most of the value of the company aside from any intellectual property is leaving the company, if a buyer comes around. The 201 trade case is ending much quicker than it started, we haven’t even gotten to the point where prices can prop up local manufacturing.
The Business Of Solar. The annual solar means business report is out and Target is the big leader, adding 40MW in 2017 and the first to reach 200MW. Congrats to the Target team, many of whom are readers, for showing great corporate leadership. The other takeaway is Walmart putting the brakes on its program or at least taking a hiatus. Would be interesting to hear what caused the slowdown of deployment.
The Charging Infrastructure. Now VW is getting into the race to deploy more charging infrastructure. I question the OEM specific nature of this and why the utilities aren’t out front leading the development. When I go to my local Whole Foods, there is a charging station there that is free for me to use, a benefit for Whole Foods since I stay in the store longer than I otherwise would.
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Yann
This is your SolarWakeup for April 18th, 2018
The (Not So) Dark Side Of Solar. If you follow energy conversations on Twitter, there is a set of a half dozen energy Phd’s that educate (troll) solar conversations quite a bit. Yesterday, when I saw the article from Varun Sivaram, I rolled my eyes but then you made it the most clicked link. The oped is non-sense, Frank does the breakdown, and I’d be happy to defend my calling it non-sense. The danger is the real estate Varun is getting his message into, namely Brookings blog and Washington Post. Solar folks will read the article and know that it wasn’t factions of the solar industry fighting for tariffs, just two bankrupt companies. Solar may be able to get itself into political conversations but definitely doesn’t have political clout. Look at South Carolina, what did Varun want solar to argue for in addition to the NEM cap increase that solar didn’t get? Varun is anti distributed generation and against the ITC, in short, his message is to co-opt the public opinion support solar enjoys for more of the same 20th century message.
Storage At The State Level. State level energy storage targets are close to topping 10GW in the first real year that these legislative and executive order targets are proposed. So what’s next with these targets? Should I raise my hand and say that I have projects ready for construction with project finance capital and need a revenue stream? Aside from the SMART program in MA, we are still in a likely regulator process that will require pricing signals to happen. The money is still lacking on the energy storage side, a problem I am working to solve for you, but project pipelines are also nonexistent with any real scale. More announcements on the storage investment capital coming soon.
Sunny Insurance. Farmers spend as much of their time and resources hedging and forward selling their output as they do actually farming. As the weather becomes the unknown, the agricultural market has created insurance products to minimize the risk of weather. Solar is now being served by similar products, like kWh Analytics’ revenue put, that limits the risk to debt and ideally lowers the cost of capital. Look for credit default products to be created as well, another way that C&I could be fixed.
Private Equity Buys Into Solar. Conti Solar, part of Conti Group, is selling a majority stake of the business to ARES EIF, the private equity group’s energy infrastructure fund. Management will stay in place and financial terms were not released by the companies. Conti Solar installed 175MW in 2017 and if I were to guess, this is as much as a focus on growing the EPC business as it is creating a pipeline for projects to invest in. This is what the board room would call a ‘platform play’.
Completing The Turnaround. Enphase is getting positive reviews from Wall Street analysts. The company has struggled a bit in past years but now sees light at the end of the tunnel. 2017 was a tough year for residential and large customers limited their growth so the distribution channel had to come back to life, and it has. The democratization of capital available to local installers is also helping residential solar bounce back in a big way. So as costs decline, Enphase is at the center of the installation that adds value to the homeowner, maybe even with some nifty consumer focused data, creating real value to the market. Turnarounds are hard and turnarounds in solar are more so, hats off to the Enphase team to execute.
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Yann
This is your SolarWakeup for April 17th, 2018
Solar Is Big Money. In 2018, the global solar market is going to top 100GW. That means more than $100 billion in total capital was committed to the market for 20 years of solar cashflows. In the US we likely stayed north of $20billion last year which is impressive on its own but we are getting to the point that global investors see the safety of the solar investment. There is still plenty of risk allocated to the market and room to lower the cost of capital. The margins remain on the pipeline side of the ledger, if someone can put land, interconnection and revenue together, they have created the value that will get them paid.
The Big Lyft. Lyft is targeting 1billion self driving electric vehicle rides by 2025, annually. Maybe that explains why Google’s energy director, Sam Arons, recently joined Lyft as the Director of Sustainability. Sam was often on the solar circuit talking about Google’s energy strategy and how the company would get to 100% renewable energy. I can only surmise that Lyft is thinking that the billion electric rides need to be powered with renewable energy. A corporate deal for a fleet of EVs?
Time For Retail Choice. Rocky Mountain Institute is out with a consumerism report using Green Mountain Power as the case study. The broader story here is the intermediate step before monopoly markets are deregulated and that is retail choice. This would be the allowance of third parties to serve as retail providers to consumers that wanted to enter into short term contracts for energy for the product and price they are willing to pay. Like picking a cable provider but for energy. Some legislation has been floating for this and gets pushed back quite a bit but it would be a great step forward if there is more traction on this issue.
Tuesday’s Mailbag. Thank you to the tremendous feedback about my comments from yesterday, which Frank covered in more detail. This reminds me of the arguments I was having with SEIA back in 2014 when SEIA wasn’t sure that it would support an ITC extension (yes, that happened) because some members weren’t supportive. It took the Solar Pledge and some marketing to get SEIA on board with the ITC extension and in this case it will take your voices to stop utilities from being members at SEIA, even as non-voting members. As I’ve urged those that have emailed me, make sure you let SEIA know how you feel.
Forest Through The Trees. This appears to be a bit of a scrivener’s error or at worst a silly way to stop distributed generation in California. EDF does a good job in shining the light on this.
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This is your SolarWakeup for April 16th, 2018
SPI Host Says, Forget Net Metering. Rate design is a false flag meant to lure solar advocates into a discussion of how we move into a large solar integration conversation. By changing the conversation from simple net metering to a complicated discussion about fixed charges, SEPA is saying to you, forget net metering. Last year ~3GW was distributed versus almost 10GW in utility scale. Gutting net metering is a fight to take energy choice away from the largest source of energy demand, the buildings across America so that more rate base can be invested. The larger point is that almost $4million from the trade shows we all attend goes to fund this rhetoric and I’m a bit tired of the status quo. Fighting for net metering means that all solar has a chance and grows across all of the value chains and we can’t have half of our trade show money going to values that don’t align with 90%+ of the solar industry because what does it say about our values if we don’t spend it on likeminded ventures.
A Runaway American Dream. The era of Chris Christie is over, Governor Phil Murphy is in the house now! NJ is going big with an enhanced RPS, SREC fixes and a community solar program. All of that on top of the PJM market will likely create some new development opportunities in Jersey. I look forward to seeing how this plays out over the next few years.
Exhibit A. For the past week, you (the readers) have been clicking on the South Carolina story of the day which caused Frank to have to cover the daily play by play. That’s the interesting part of the second story, we don’t control the topic, you do! But look at what happened in South Carolina where solar advocates, including Sunrun which has been reaching across the proverbial aisle as much as anyone, asked for a cap increase while utilities were busy losing billions on unbuilt power plants. After losing the vote, utilities pushed for a crazy rule that required the NEM cap increase to be approved by 2/3 of the House. What picture am I missing?
Exhibit B. Germany had a renewable energy auction and solar won all of the contracts with an average rate of 4.67 euro cents per kWh. In dollars that’s about 6 cents per kWh and Germany doesn’t have an ITC and has higher income taxes. Germany also has a similar irradiance level as Washington State or Southern Alaska. That’s the problem with ratebased solar power, the private sector can do the exact same thing but better and cheaper without a double digit return. If I were a regulator, I would require any rate based renewable energy or energy storage to have to compete with an open RFP. Get the picture?
Exhibit C. Here’s the bigger picture. (TL;DR) The monopoly system doesn’t work anymore. The market is moving on to consumer and retail choice. Produce your own, procure responsibly; cheaply or do nothing and go with the wires provider. Nuclear is a good example, the utility sector is pushing to build new and consumers through legislators supported this. Then it required money so they approved advanced cost recovery. Then the delays happened, bankrupt suppliers and whistleblowers. Now solar with storage is less than 5 cents per kWh in sunny areas. Time to move on and let the market handle the 21st century. Picture that.
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Yann