Read a perspective on South Africa-based solar startup PTiP’s CIGS pilot line announcement at http://www.spvmarketresearch.com/notes-from-the-solar-underground.html
Read Notes from the Solar Underground at http://www.spvmarketresearch.com
In January, SunPower announced a $220-million loan from Bank of America Merrill Lynch to support expansion of its solar lease program. In December, Bank of America Merrill Lynch was the lead, and one of six lenders, involved in increasing SolarCity’s credit facility to $200-million.
Residential solar leases are increasingly looking like a trend and not a fad. Why? This model enables homeowners to install PV systems without the high upfront cost of installation thus emulating the traditional utility model of renting electricity. For solar businesses committed to this particular model the initial hardware investment should be more than offset by the eventual high margins. For investors, there are those eventual high margins to look forward to ensuring (maybe) either a profitable exit or repayment at a profit.
Though this model looks as if it is a winner for both parties (lessor and lessee) it is too early to make a judgment in this regard. In the future, lessees may not appreciate the escalation charge that is a part of all the lease structure. Also, in the future the difference between financing a PV system and leasing a PV system may make cost of leasing (as time goes on) seem less and less like a good deal.
For businesses engaged in the solar lease model, it is too early to assess the costs of unimaginable outcomes such as another US housing crash – foreclosures and abandoned homes and solar leases, or, continued strong growth in the housing market that encourages homeowners to trade up (an owned PV system may be an asset, a leased one may not be an asset). Legislated and thus enforced standardization of escalation charges (among other things) could take a hunk out of margins. New connection charges from utilities could annoy lessees. Direct competition from utilities with their own lease models could well make this model less attractive (hint, partner with local utilities now before they figure out how to capitalize on this potential revenue stream).
Finally, remember that everything changes – everything – and sometimes the changes are swift. The example in this regard is the feed in tariff model in Europe – back in the day (and this day is relatively recent) practically everyone thought that this was the incentive model of the future and investors believed FiT systems provided a safe and reliable investment. Now every investment in a FiT installation is one retroactive change away from going bust.
About six/seven years ago crystalline was dead. As low pricing (below cost) forced manufacturers into failure, thin films were dead. Both announcements were too early and too dramatic.
A few years ago the market in Europe was >80% of global demand — in 2013, amid continuing changes to FiTs (some retroactive) the market in Europe was ~20% of global demand. Lesson: Diversify your market strategy.
Read commentary and stay up to date with SPV Market Research commercial announcements at http://www.spvmarketresearch.com/announcements-and-industry-news.html
Read more about Paula Mints and SPV Market Research at www.spvmarketresearch.com
Are utilities missing an opportunity? No doubt, the landscape of how electricity is sourced is shifting – and it’s about time. For decades electricity customers in industrialized nations have focused on renting electricity from the local utility. With stronger growth in residential and commercial PV deployment – than was previously envisioned – and with PV systems sized to serve a customer’s complete electricity needs, as well as the (still remote) possibility that storage will allow energy consumers to truly be independent of the grid, utilities are concerned about losing a reliable monthly revenue stream. Though there has certainly been decades of time to plan for a paradigm shift in utility business models, it is not too late for utilities to get ahead of the curve and build the distributed generation model of the future. Instead of installing PV in remote areas miles away from the customer base and requiring expensive transmission builds and upgrades, why not lease customer rooftops? Put another way, why not partner with local neighborhoods and install the energy generating asset where it will do the most good. It’s not that farfetched to envision a future where utilities partner with their residential and commercial customers to harness customer owned PV and sell the true commodity – electricity. This model, which is essentially a version of the community solar idea, is common in the developing world where connection to the grid is not an option. In off grid communities values such as cooperation and conservation are part of daily life and not considered sacrifices.
Utilities should be encouraged to get ahead of the curve in this regard and test the viability of this model by choosing test neighborhoods, installing PV systems on cooperating customer roofs, arriving at a reasonable lease rate for the customer and then taking advantage of the fact that the PV generated electricity once fed into the grid is available to everyone in the utility’s territory. Result: utility ownership of a long term, DG, low maintenance energy generating asset, a closer relationship with electricity customers as well as participation in change – much better than playing catch up as change rushes by.
Ideally, this would take the solar lease model one step further, that is, involving utilities in changes that may happen with or without their involvement. As long as the agreement between the utility concerning the monthly lease/rent is fair to both parties, and the costs relate directly to the true costs of managing a photovoltaic installation and do not have an arbitrary escalation cost built into the contract this is, as the business cliché goes, a win-win. In Japan, Panasonic and energy management firm EPCO are launching a business at the end of January to sell aggregated (PV generated) electricity from residential roofs in advance of the potential liberalization of that country’s retail electricity market in 2016. It is too early to announce a successful result to this announcement, but it points to a forward direction for utilities, their customers and stakeholders everywhere – after all, these often disparate groups are partners whether they like it or not.
Stay informed, read about mining in Panama — potential for remote and grid connected solar for reliable power as well as discussions to change EU climate change mandates to goals at http://www.spvmarketresearch.com/announcements-and-industry-news.html
Pod Cast with SPV Market Research
Listen to Paula Mints discuss solar in general and the practice of market research — why I love solar AND market research
Blast from the Past: The Global Solar Industry in 1994
Look how far we’ve come …
1994 global shipments: 61-MWp
Shipment leaders:
Siemens Solar, 21% share 12.6-MWp in shipments
Solarex, 13% share, 8.1-MWp in shipments
BP Solar, 10% share, 6-MWp in shipments
Kyocera, 7% share, 5.3-MWp in shipments
Sanyo, 6% share, 3.8-MWp in shipments
Manufacturer Revenues in 1994: $445-million
US: 40% share of global shipments
ROW (Rest of the World): 15% share of global shipments
Europe: 24% share of global shipments
Japan: 21% share of global shipments
Crystalline: 86% share of global shipments
Thin Films: 14% share of global shipments
Cumulative shipments all years including 1994: 444.9-MWp
Cell (including thin film) capacity in 1994: 99-MWp, capacity utilization 62%
Total demand in Latin America: 4-MWp
Total demand in the US: 14-MWp
Total Demand in Canada: 600-kWp
Total Demand in Europe: 15.6-MWp
Total Demand in the Middle East/North Africa: 3.2-MWp
Total Demand in Central and Southern Africa: 3.4-MWp
Total Demand in India: 7.9-MWp
Total Demand in other West Asia Countries (aside from India): 600-kWp
Total Demand in Japan: 5.6-MWp
Total Demand in China: 1-MWp
Total demand in South Korea/Taiwan: 300-kWp
Total demand in Southeast Asia: 1.8-MWp
Total demand in Oceania: 3-MWp
Most morning talk shows have daily segments on what is trending — meaning what is popular currently. A better word for these rapid changes in taste would be fad — for market research, a trend is established over time and will encourage a change in behavior.
1) Trends are established via the use of statistical tests to establish a change in behavior — a lot of evidence that establishes a pattern over time.
2) A trend is established using consistent methodology
3) The analyst must be able to draw a statistical line using unbiased data gathered through consistent methodology (history is important)
4) Rigorous statistical tests must be used
5) Most important, a change in behavior must become apparent through statistical means not anecdotal evidence — for market research, circumstantial evidence is not enough!
Utility scale (multi-megawatt) solar: An established trend
Residential Solar Leases: Trending, not yet a trend
Community (group buy) Solar: Beginning to trend
Power Purchase Agreements for solar: An established trend
Tender bidding for Solar: Trending, not yet a trend
Crowd funding for solar installations: Not even trending yet
Crowd funding for solar manufacturing: Not even trending yet (would also be very dangerous)
Whether 2013 was a good or bad year for the solar industry and all of its technologies and participants is a factor of personal perspective as well as the vagaries of memory. For manufacturers enjoying a return to positive gross margins low cost raw materials (polysilicon) are to be celebrated but for producers of raw materials low prices are hardly celebratory. While many manufacturers are enjoying recovery of a sort, past leading manufacturers, such as Q-Cells and Suntech fell from great heights ending in soft, to not so soft, to very hard landings. Feed in tariffs rules changed (sometimes retroactively) or ended and tender bidding forced margin constraints on large developers. The lease model and its potential for high profits (once the hardware is paid off) drove solar deployment in the US residential sector, at least for now. Vertically integrated PV cell/module manufacturers committed more module product to the system sides of their businesses (as good a way as any to avoid selling technology below cost).
As 2013 ends and top ten lists, including predictions for 2014 continue popping up, a short look back is in order. In order of publication in the Solar Flare bi-monthly report, some moments of note from the Solar Flare, (feel free to write in to SPV Market Research with some of your own):
Solar Flare February 2013 Issue:
- US flexible CIGS manufacturer, SoloPower (Oregon) announced a restructuring.
- China-based crystalline cell and module manufacturer Hareon announced an initial $50-million investment in a 600-MWp manufacturing facility in Mexico. Doing the math, at $0.08/Wp this is either one good investment or, the facility is unlikely to be built or, there is more money for this project somewhere.
- News leaked that the PPA for First Solar’s Macho Springs installation was $0.06. No comment.
- Mexico based module assembler Solartec announced that it had acquired Belgium based crystalline manufacturer Photovoltech and planned to dismantle and move Photovoltech’s manufacturing facilities to Mexico, leading to the question: did I hear that correctly? Nonetheless, if countries in the Latin America region are serious about deployment it will be far less costly to be serious about manufacturing at the same time.
- California’s CSI program reached its limit ahead of its 2016 deadline.
Solar Flare April 2013 Issue:
- The US DoE announced funding of $7-million for projects on Indian lands. (Comment: Though some US Indian tribes have casino generated wealth, many are poor and could benefit from the construction jobs that come along with deploying solar as well as well as the potential revenue stream from system ownership and finally from the availability of reliable and clean electricity.)
- US based CPV manufacturer Amonix announced a record CPV module of 34.9%
- China based crystalline manufacturer JA Solar announced commercial production of its monocrystalline (19.6% conversion efficiency) and multicrystalline (18.1% conversion efficiency) MWT cells.
- US-business based SunPower (manufacturing in the Philippines and Malaysia) announced US availability of its X Series modules using its Maxeon Generation 3 cells (~24% conversion efficiency).
- CPV Manufacturer Soitec finalized a ~$100-million bond to finance its 44-MWp installation in South Africa. Doing the math, this is $2.27/Wp.
- Among a host of almost monthly bad news for former top ten crystalline manufacturer China based Suntech, the company closed its US (Arizona) module assembly facility, founder Dr. Shi was replaced as CEO and South Korea based OCI (polysilicon) cancelled its long term supply contract. Unfortunate news for Suntech plodded on through 2013.
- US based flexible CIGS manufacturer Solopower shuttered its Oregon manufacturing facility leading to a flurry of reporting about the similarities between Solopower and Solyndra as well as many references to CIGS technology being both promising and new. There are no similarities between Solopower and Solyndra. Yes, CIGS/CIS remains promising. Though commercial shipments of CIGS/CIS began in the late 1990s, early 2000s, the technology is ~20 years young.
- US based (with manufacturing in Malaysia) CdTe manufacturer First Solar announced it had acquired US based crystalline manufacturer TetraSun also noting that it would begin commercial shipments in 2014.
- Jinko and Yingli announced loans, (likely under favorable terms), with China’s Development Bank
Solar Flare June 2013 Issue:
- K Road Power LLC cancelled its 294-MWp Calico project that was to be located near Barstow California, had switched from CSP to PV and was acquired from Tessera Solar. (Comment: Hopefully this proves that announcements about deployments, among other things, are not sure things until construction (not just a fence) has begun and just possibly not even then.
- Utility Hokkaido Electric Power in Japan rejected 1.2-GWp worth of applications for FiT solar installations.
- With amazing efficiency, Italy’s FiT reached its cap and the government announced the ending of its program in July 2013.
- The Government of Ontario, Canada replaced its large FiT program with a bidding system, proclaiming the move as the way to get even more solar installed.
- Romania made changes to its FiT program to control growth.
- Spain reduced subsidies for renewable technologies – again – by an additional 20% thus ensuring that no one will likely make any money from the country’s brief, briefly profitable but long term painful FiT.
- The EU imposed tariffs on Chinese imports
- The WTO ruled in favor of the few remaining EU based manufacturers over Ontario’s domestic content requirement in its not-exactly wildly popular FiT.
- Hopefully surprising no one, Greece announced retroactive reductions to its FiT.
- Taiwan based TSMC (licensed Stion’s CIGS technology) announced a champion module efficiency (this means not in production) of 15.7% for its CIGS technology.
- Japan based Solar Frontier announced 14.6% conversion efficiency for a champion cell developed on production equipment.
- Taiwan based cell manufacturers DelSolar and NeoSolar finalized their merger and will hopefully live happily ever after.
- Canadian Solar announced its commitment (~50% of its future revenues) to its system business, a perfect example of an announcement that is essentially meaningless but does get people talking.
- Hemlock filed a $96-million lawsuit against Isofoton. Ouch.
Solar Flare October 2013 Issue:
- The EU and China agreed on a 0.56 Euro/Wp price for modules imported from China as well as a limit on imports. Immediately following the heralding of the announcement countless (meaning too many to count) ways around the set in stone requirements were found and implemented.
- The Netherlands announced it would close five coal plants – now this is an announcement worth making.
- SolarCity, continuing its acquisitive ways, acquired mounting company Zep Solar.
- IKEA announced that it would include China-based Hanergy’s CIGS module kits in its UK stores, by which they, of course, mean they will do so when these kits are commercially available.
- In California Governor Brown signed SP43 requiring investor owned utilities (IOUs) to install 600-MWp of solar above the state’s 33% RPS on environmentally disadvantaged or economically disadvantaged areas with system sizes limited to <20-MWp. Also in California, AB327 required the CPUC to develop a new standard for commercial and residential net metering as well as monthly fees and new electricity rates. (Comment: Even given potential pushback from ratepayers, two giant steps forward towards the way solar will be valued in the future given that in the future the current paradigm will be restructured to favor self-consumption, wider use of renewables and the use of the utility grid as backup storage. Utilities should get on board now with ownership of solar assets and the renewable community should help them. )
2013 was another year of triumph over the significant obstacles and constraints that remain in the path of the solar industry and all of its participants – yes triumph, despite everything progress in the face of significant obstacles is a triumph worth celebrating.
Recognition of climate change and the various government announced commitments to ameliorating it are simply not moving fast enough to retard the damage already done and ensure against future damage. Real progress in this regard will require a herculean effort to change the minds and hearts of energy consumers everywhere that conservation is not sacrifice, that renewable technologies provide real independence and that though the switch will be costly, it is far less costly than the alternative of climate disaster.
paulamspv 