This is your SolarWakeup for August 11th, 2017
Happy Friday. Don’t forget, if you need money for good deals, let me know!
ITC Staff Report. The process is playing out as we speak. The trade commission staff has put a report together, essentially a review of the filings ahead of the September 22nd hearing. The petitioners seemed happy about the report which did highlight that US manufacturers have struggled over the past decade. I’d like to add some caveats in the form of questions because I think Suniva/SolarWorld should answer them. How much market cap/valuation has been lost by US manufacturers versus Chinese manufacturers? How much value has been lost in the downstream/development side of solar while panels dropped in price? Are publicly traded Chinese solar manufacturers lying when they say that $0.35/watt modules generate a profit?
SEIA Chimes In. I’m a fan, SEIA should do this more often. I applauded it when Tom Kimbis was CEO and wrote public comments. Keep doing it please.
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Yann
This is your SolarWakeup for August 10th, 2017
It Was Marketing, Not the Market. Over the past decade, you can pick the moments when SolarWorld and Suniva went down a path that led to the less lucrative outcome. You can also pinpoint the moments when both companies were given above market income due to Buy American policies. At the end of the day, cheap Chinese product did not impact either company’s bottom line. I don’t hear LG and SunPower making that argument. At the same time, a big loss could be the fact that SolarCity decided to build a factory instead of going to the market. There are a lot of reasons why these companies failed, but they failed at the same time that multiple Chinese manufacturers also failed so the complaint fails the logic test.
If You’re Faking, At Least Fake Well. It’s no secret that people get paid to consult towards a specific result all the time. I’ve consulted to an IOU, so I get it. But when the 201 petitioners approached Mayer Brown to do an economic analysis that shows the positive results of their 201 request, it went into a new stratosphere. The request was to write 8 pages, single spaced on creating jobs that should be higher than 88,000 using data from companies that said the 201 petition is bad. 2 blank pages and lots of graphs gave us an analysis that is laughable at best and must be disappointing to academics and experts throughout the Country. Manufacturing barely creates any jobs, these are mostly robots both in the US and China.
New Capital Needs Old Capital. There has been more ‘patient capital’ coming into solar which is good for everyone. However, the process to get to this money remains the same. You need to put early stage development money to work. Find takeout capital that is tax efficient to buy the deal and then your project could find its way to long term, low cost money. I.e. you need to take all of the risk out of the project before this money gets excited, at scale.
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Yann
This is your SolarWakeup for August 9th, 2017
The second half of 2017 continues the trend of projects seeking capital. SolarWakeup is made possible by putting projects and capital together. If you are seeking capital, our clients may be interested. Note that our capital providers are cash in hand family offices. Email us by hitting reply to this email or forward it to your project finance colleagues.
2017 Tax Equity. Part of the difficulty of solar project finance is tax equity, especially mixed with expensive sponsor equity. We’ve been working hard on finding tax efficient money that does not require the complexity of a multiple member flip structure. When sponsor and tax equity is the same fund, everything gets done quicker and you make more money. It has taken a decade to drive appetite of this kind of investor to solar but here it is. There is still money available for about 20MW of projects that are built in 2017. I know you have projects that have investors bullshitting you, time to get something with certainty to the table.
Development Capital. Are you working on deals that need money for development? One of our partners added a development equity fund to help you with this. This is a capital partner I have personally used and want to introduce to the SolarWakeup family. As a developer you should focus on development without needing to use your children’s college fund to get the deal to NTP.
Delay With Certainty, Please. To continue the topic from yesterday, which many of you commented on. Moving the on peak from 11am to 4pm is troublesome because it doesn’t allow for sufficient transition time from the current times. Yes, solar knew the time would change but the CPUC has taken some time to get to this point. Customers have been standing back from doing deals given the uncertainty, especially in the C&I market. If customers don’t know the rules, they don’t know the risks and they are unlikely to sign up. The CPUC should set the new times but should delay the changeover date to allow industry to get ready with technology and financing to align with the new systems that will be needed.
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Yann
This is your SolarWakeup for August 8th, 2017
Net Metering Time Shift. In what appears to be a more substantial story, the SDG&E rate case is moving forward with an important data point that many in CA have been waiting for. The 11am-6pm on peak window will apparently shift to 4pm-9pm. That’s a duck curve phenomenon that will be taking out on distributed generation which doesn’t even get counted in the State’s RPS. I don’t know what the delta is between the 11am rate window and the 4pm rate window but I wonder if CPUC will give that delta to the utility scale projects? If I were to add storage to the large projects, will the PPAs be allowed to monetize that time shift in response to the new rate windows? I think not. On the other hand, the load shifting will be cheered by the storage companies because their value proposition is now quantifiable above and beyond the demand reduction.
The Berkshire Energy Headline. Tagging on to the next story, Berkshire made news with the increase in net income to the renewable energy unit. Interestingly, Berkshire owns PacifiCorp which owns Rocky Mountain Power, the same utility that was afraid of a few solar homes. After NV Energy’s stance on solar it seems that Berkshire may want their cake and eat it too just depending on which business unit is active in the State. I welcome Berkshire in utility scale but wish they and other IOUs would realize that solar homes mean more reliable grids for large solar and solar homes mean more homeowners that buy electric vehicles.
A Deal in Utah? A bit of a surprising turn in news regarding the Utah fight around net metering. I doubt the net metered solar market is large but solar is taking the fight anywhere that solar is under attack. This week there is a public hearing and solar was mobilizing, I received an email early yesterday. Part of the conversation with Rocky Mountain Power was apparently about reopening their ratecase to see if they were overcharging the consumers due to lower fuel costs. Executives would have quickly done the math to see what was larger, solar losses (which are probably nothing) or return of dollars for lower fuel costs.
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Yann
This is your SolarWakeup for August 7th, 2017
Sunny Side of Residential Storage. Residential storage has a certain allure to me. It merges marketing with the technical side of our industry, in many ways making tech companies turn into sales organizations. Unlike residential solar, the starting capex is already much less and dropping while one could make the case that the value is greater. Storage creates this comfort if built for backup and a certainty around knowing when it will be discharged. Sonnen is taking on the beast that is Tesla with Powerwall and others like LG Chem are certain to play as well. Keep your eyes on resi storage, this market could grow rather quickly in the near future.
Where Should Utilities Go? The General Manager of Wartsila is asking (rhetorically I presume) what is next for the American utility. Of course Wartsila has been a giant in generator and power plant construction but more importantly they recently bought Greensmith, the storage company. In many ways, IPPs are welcoming the IOUs to the party when it comes to the risk/reward that has and should be part of the energy system. In my opinion, IOUs with ratebase, should (and in some cases have) become transmission companies. Generators and retailers need to compete in the market to give customers the product and pricing they want. Owning all parts of the value stream fails to align the interests of the company and customer, never a good thing in a free market.
The Policy That Created The Nuclear Boondoggle. Ten years ago, I met a Florida State Senator that was on a mission to eliminate a policy appropriately named “Early Cost Recovery.” This policy allowed IOUs to charge ratepayers for costs associated with developing and building nuclear power plants before and during construction. Since utilities make a return on capital deployed, you could see how cost increases may actually work in their favor if regulators grant those increases along the way. What we have seen throughout Florida, Georgia and South Carolina is that the policy has resulted in a lack of risk and cost awareness. There are greater parts at play here but the consumer seems to be universally hurt by the policy. Senator Mike Fasano is now the tax collector in Pasco County but could be so much more.
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Yann
This is your SolarWakeup for August 4th, 2017
Have a great weekend. Make sure to start planning for SPI!
I Hardly Even Knew You. I doubt the paint is dry on the solar offices after the net metering legislation was passed. In ‘complying’ with the legislation, NV Energy is essentially trying to undo the intent of the language. Now the procedure sits in regulators’ hands instead of the politicians elected by the people.
Go West. Not that residential customers choose where to put solar since they tend to put it anywhere the sun shines but this Missouri utility is being proactive with this incentive.
Ten Years of Nostalgia. My university commencement speaker was Al Gore. After a quick store about stopping at Shoney’s, the Vice President and popular vote winner talked about climate change. It was important and it was coming. Fast forward over a decade and I have spent my career in solar and walked through flooded Miami streets last weekend. Don’t get me wrong, I believe in the business of solar to make money, but making money without creating a greater good seems pointless to me. Getting cities to be educated about becoming buyers is as important as anything we can do right now.
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Yann
This is your SolarWakeup for August 3rd, 2017
Power To The Roofs. As I am writing this, Tesla is up about 7.4% after a quarter that Wall Street approved of. The solar anticipated roof tiles are in pilot mode and have been installed on Elon and Straubel’s house. Full line production will come out of Buffalo by the end of the year. I still believe that this is a premium product given the complete system requirements. I would expect Tesla to find another path to distribution as well. In order to drive scale, roofers will have to be an outside sales channel in my opinion, let’s see how Tesla handles that end.
Role Of The Utilities. Utilities play a large role in the solar market for a variety of reasons but most of all because they are the incumbent market participants. Having the monopoly gives utilities access to debt that are backed by having the ratebase and guaranteed returns. Other than being a bankable offtaker, the largest of the utility roles in this, utilities played a big part of owning assets in their deregulated business units. Long term cash flows, leveraged with cheap capital, make for great portfolios for utilities. At the end of the day that’s what utilities are, banks.
Perry May Move On. Now the General Kelly has left Homeland Security to be the White House Chief of Staff, there is an opening at DHS. Rick Perry is rumored to be in the running for that job, maybe because his State had a border or he has no nuclear energy knowledge. Would create another opportunity for DOE to be shaped by a new Secretary.
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Yann
This is your SolarWakeup for August 2nd, 2017
SolarWorld Enters Insolvency. In Germany, the process for insolvency is rather tough for management. Your responsibilities and exposure can be rather onerous and the departure of the management team can be telling. Last week, rumor had it that investors were close to a deal to save SolarWorld. This could still happen but it appears less likely now that the company has entered insolvency proceedings and the team has resigned.
An Arizona Reminder. I know it’s hard to keep up with everything going on but there is still an open investigation in Arizona regarding the corporation commission election a few years ago. Since the investigation started, the investigators have charged a former commissioner and his wife as part of a broader review. Documents will be seen and dealmaking will surely happen now that there is leverage and the aim seems still to be on APS, part of Pinnacle West.
Retrospective Perspectives. Andrew Beebe has been around solar for a lifetime, which means starting between the years 2005 and 2007. I remember the days of ‘alternative’ energy and agree that the energy piece of the conversation is largely gone, now focused on renewable instead. That being said development of renewable energy still seeks capital from special situations groups instead of private equity firms built around this entire premise. Money looks for deals more than deal development. That is the natural next step in my opinion to make solar gain market share into double digits of total supply.
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Yann
This is your SolarWakeup for August 1st, 2017
Will Storage Mirror Solar? I often ask myself how the chemistry projects in storage will play out in the storage sector. 10 years ago, solar was also going through a science project with companies in thin film and organic cells trying to drive up the efficiency to lower the cost. When it all played out, costs in crystalline came down and bankability caused the science projects to struggle gain the scale required to get actionable market share. Storage could be different. The science could drive exponential advantages as opposed to just lower costs. Lithium Ion may very well be the crystalline that keeps market share because of costs, access and bankability but maybe something else will overtake that. Google seems to think so…
This Will Be Different, Shell 2.0. Shell has been hiring some big solar names, names most solar folks know. The CEO has said his next car will be an EV and capital will get deployed into renewable energy. BP had a solar factory, Chevron used to do tax equity and Total basically owns SunPower. Oil companies have been trying to see an entry into new energy for years, as long as any corporate money. This time will be different I think except that the total dollars deployed will be restricted by the drastic reduction in costs.
For You To Read. Leaving this story here without comment.
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Yann
This is your SolarWakeup for July 31st, 2017
A Corporate Deal That Makes A Difference. It seems to me that JP Morgan going corporate including a goal to deploy capital is different that the Amazon/Facebook/GM/Ikea/WalMart announcements before it. JP Morgan has quite a track record in solar, big equity and tax equity alike. Hitting $200bb isn’t just good for our industry but it’s a good thing for investors in JPM as well. Being a customer only makes sense given that investors need as many deals as possible with great offtakers.
Series 6 Paying Off. Wall Street had some doubts about First Solar’s double down on manufacturing. The company has made much of its cash on development, betting early and often on interconnections. It’s been mentioned that FSLR is a winner in the 201 petition but I wouldn’t get too conspiracy theory on that given the leap in technology that FSLR was banking on before the petition was ever filed.
Going Local For Customers. Last month, at the PAC 12 Sustainability Summit, I had a simple message to the leaders in the room. You are the perfect customer and there is no deal that shouldn’t get done. Too many meetings have happened over the years where the discussion about solar ends with “it doesn’t pencil right now.” Really the question should be posed, what does it take to get a deal done at XX cents per kWh? Do we need to go bigger? Do we need to do a virtual net metering deal? Mayors can do the same. By talking to the market, doing solar deals can be done almost anywhere in the Country.
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Yann