Tag Archives: Daily Rundown

This is your SolarWakeup for June 7th, 2021

The Drought And Effect. The west is dry and while we all hope for the best, there are already worrisome signs of wildfires and lack of water for agriculture. The energy effect will be more power shutoffs than before and a grid that consumers will consider unreliable. Grid planners have not adjusted any major items to ensure new infrastructure is built out but if I were still living in California, I’d be making sure my solar and battery were ready for primetime.

Low Capacity Bailouts. Expect to see more bailout legislation coming out after the low capacity clearing price in PJM. Nuclear operators will be legislating towards ZREC policies that provide a kicker for their plants but always opens up opportunities to get a broader energy package passed.

SolarAPP+ Thanks. It has been a village to get SolarAPP+ to where it is today and there are many people that are integral to this process and without ignoring everyone’s efforts I want to call out one particular person. Andrew Birch, a co-founder of Sungevity and current co-founder of OpenSolar, first pitched me the idea of instant/uniform permit policy over 3 years ago on his patio in Alameda. He’s been tenaciously cheerleading the effort and getting the biggest names and companies in the solar business to spend time, money and sweat on the effort. I told him then that it would be an uphill climb, and some of you emailed me when I first brought you the idea agreed that it was crazy to think this was possible. So for having the willpower to bring an idea to fruition against all odds without ever asking for credit, here’s a token of appreciation from me.

Will Manchin Deliver? Joe Manchin remains unpopular but very powerful and in some ways is taking the infrastructure bill on his shoulders to bring a bipartisan support of the bill to reality. We’re getting very close to seeing whether he can deliver the votes and give Biden the bipartisan win his 47 years of government would assume he could get.

The Solar Market Update. Tomorrow, I join Phil Shen of Roth Capital (subscribe to his newsletter), for our monthly resi solar market update. We’ll be talking about supply chain, financing, policy and of course, storage. You can register at this link. 

 Opinion

Best, Yann

 

This is your SolarWakeup for June 4th, 2021

New Spending, No Tax Increase. Biden and Senate republicans are going back and forth on the infrastructure bill which will be massively popular with voters. Biden looks to give in on tax hikes as long as republicans agree with $1trillion of new spending. Senate dems are putting up a 10-day shot clock before making their case for doing it by reconciliation. Solar advocates say that ITC extension looks solid but issues around labor and domestic content remain, though outcomes appear workable.

Climate Warning Signs. Two independent transactions with high-profile names are getting into climate event prediction and analytics. I guess knowing that your house will flood before it floods can be considered a valuable data point. This also marks TPG’s Rise Fund’s first major investment announced since former Treasury secretary Hank Paulson joined the fund as executive chairman.

AB 1139 Defeated. This was a bad bill doing bad things that are completely counter to the market and climate goals in California. Moreover, legislation that undermines existing market rules would create a new risk analysis in solar that would have impacted all parts of the ecosystem. Led by CALSSA and it’s 600+ members plus allies, advocates came out and maneuvered the opposition to victory.

Talk About Capital. I’ll ask this on a high level with a promise to talk more about it with you in the near future. Solar and wind investors look for stable returns on contracted cash flow with conservative assumptions for tail revenue post contact term. Energy storage can play a role for solar+ contracts but what capital pool will be an investor in the merchant storage assets and how will a stand alone storage ITC get a tax equity deal done? Same pool of capital but higher hurdle rates or different capital all together?

Enjoy your weekend!

 Opinion

Best, Yann

 

This is your SolarWakeup for June 3rd, 2021

Behind The Scenes. In this newsletter and my interactions with reporters in my professional capacity, I try to give a real account of what I am thinking and how I view the market opportunity. Part of joining FlexGen was being part of a team with Kelcy Pegler and joining a team at FlexGen that has been leading the energy storage market with expertise for over a decade. On the other hand, I was concerned about the timing of energy storage in the overall energy transition. I knew that storage was a crucial element of the transition but joining FlexGen was a decision made before the Texas freeze event which cemented the variables that influenced my decision and confirmed that the decision was a good one. My conversation with Andy Colthorpe from Energy Storage News gives you a view of how we view the market and the opportunities for everyone reading this to start adding storage to their pipeline right now too.

Exxon Loses Another Seat. Exxon vote tallies show that Engine No.1 has another director joining the board. Andy Karsner should be well known to some of you, at one point during the Bush years, Karsner was the highest-ranked Moroccan American in the US government, interesting mostly to me since my family stems from Morocco as well. Karsner most recently spent time at Emerson Collective and comes with a technology view on solving for climate change. As a former wind developer, Karsner was early in building his renewable credentials which will hopefully enable Exxon to see the energy transition as an opportunity not a threat to their business model.

The Big Freeze Inflection. It is becoming clear that winter storm Uri that hit Texas in February of this year is going to be an inflection point for the energy market. The value of winterization, threat of losing frequency on the grid, and realistic event of having to black start generation are all entering analysis in a way that was always viewed as too nuanced before the storm.

PJM Results. The results came in and capacity pricing came in light, some pointing to the lower reserve margins as the leading cause. Coal cleared 8GW less than the last auction and some plants are threatening to shut down due to the low pricing. 

 Opinion

Best, Yann

 

This is your SolarWakeup for June 2nd, 2021

PJM Auction Results. With the PJM capacity auction results coming this week, expect headlines countering a renewables trend. Under the MOPR developed by the Trump administration, gas and some coal plants are expected to clear the auction and gain another round of survival. This is a policy driven result that does not mean anything for the future of renewables both from a cost or regulatory perspective. As you read the headlines, make sure you counter the argument that baseload is a real thing. In reality, we are transitioning to a power market that will value all parts of energy generation, transmission and regulation at a much more granular level which provides real value to energy storage assets in a power market (PJM) where storage has yet to really gain traction. Stay tuned…

Bus and Fleet Market. BYD and Proterra are the EV buses that you all know and more are coming. There will be no shortage of manufacturers that either OEM their own or use 3rd party technology, commercial fleets and buses will electrify. The opportunity is going to be segmented in two additional follow ons besides selling and servicing the hardware. First and more interestingly is the 3rd party ownership of those fleets, especially as it comes to transit groups and schools districts. If I weren’t fully involved at FlexGen with energy storage already, I’d be looking to finance electric school bus fleets. Taking the capital cost away from cash strapped school districts and financing them like we did with solar is a great capital deployment opportunity. Second is the contract to provide the electricity that the buses need, a fuel contract that is likely driven to actually be a renewable electricity contract as districts look to reach their environmental goals.

Distributed Congestion. There is another aspect to fleet electrification. Whether it’s a fleet of buses or delivery vans, they tend to drive a predictable route during the day and sit dormant at night. This means that fleets will have to charge in a small window of time, at the same time. By creating a new local peak for energy and capacity, the cost curve of the local market could react, actually creating an inconvenient supply and demand situation. Depending on the node, a large enough peak, charging a high power rates (like buses do) could create congestion pricing that is also not currently happening. In every problem lies an opportunity especially for the financier of the fleets, to control the energy contract and add a grid damper in the form of energy storage at the fleet charging location. By being a market maker and not a price taker (my coined phrase highlighting the value of storage), the fleet location could become a dynamic source of congestion or relief depending on how the asset is utilized, potentially creating additional arbitrage revenue opportunity for the finance company/asset owner. All of this backed by the school district cash flow on the bus financing, neatly packaged in an investment grade contract.

Buying Pipelines. Oil majors versus utilities, basically corporate giants that have 50 years corporate bond capital at sub 2% cost, are coming for the generation. That generation is being acquired earlier from developers, like BP acquiring 9GW pipeline from 7X Energy and putting it through their Lightsource platform. Pipelines are the valuation of opportunities that have real estate (or options), interconnections (or application/queue positions) and revenue streams (or power market pricing). The majors, as we outlined a few weeks ago, are well positioned to, potentially better than most utilities, to maximize the revenue streams from these pipelines. They are already managing the book of contracts for many retail energy providers plus getting into retail energy themselves (like BP did a few weeks ago). And if you remember what I wrote at that time, I highlighted the need to be offering retail energy contracts to fleets that are electrifying so they don’t lose the revenue stream when those fleets go from fuel to energy. This entire day of news is connected, and interconnects serviced by energy storage are the glue that hold the thesis together. 

 Opinion

Best, Yann