Clean Energy Future by Arno Harris

A Sixth C for Arizona

I learned a great fact about Arizona recently when I was in Phoenix for the Arizona Solar Summit. The state’s economic priority list has historically revolved around what are known as the “Five C’s”: Copper, Cattle, Cotton, Citrus, and Climate.

Just about anyone who’s a native Arizonan can recite the list from memory because it’s taught to everyone in grade school. It’s a simple way to communicate the idea that the state’s interests are closely tied to a set of natural resources and products. Those resources have been key drivers in the creation of local jobs and economic development for the state.

One of my takeaways from the Summit was that it’s time to add a Sixth C to Arizona’s priority list: Clean Energy. Because if there’s one natural resource Arizona has more of than other state, it’s sunshine. Check out the insolation map of the U.S. from NREL below that really drives the point home.

Summit participants—policymakers, educators, regulators, and solar industry representatives from Arizona, California, New Mexico, Nevada, and Texas—repeatedly made the point that Arizona’s future has always been closely aligned with developing it’s natural resources. So it would seem to be a natural conclusion that Arizona would be doing everything possible to develop and export the buckets of sunshine it receives every day.

For a while, it seemed like Arizona’s leaders got it. The Arizona Corporate Commission (ACC) put in place a Renewable Energy Standard (RES) that required the states’ public utilities to reach 15% renewable energy levels by 2025. The RES stimulated developers and utilities to create a bunch of new projects in the state. My company, Recurrent Energy, developed a 100MW pipeline of projects in the state—23MW of which is now operating with an additional 20MW contracted to come online in 2013.

But in the last year or so the state seems to be reversing course and heading in the complete opposite direction. First there was the odd attempt at the legislature in 2010 to include nuclear in the RES, effectively enabling the utilities to meet renewable goals with existing nuclear power. The bill failed eventually. Next the ACC decided to eliminate the option for utilities to contract with independent power producers to develop solar projects. Instead, they limited them to work only with rooftop solar projects and utility-owned generation (which effectively killed 60MW of our pipeline and many MWs for other developers who were similarly committed to the state).

Finally in recent months the legislature has taken the oddest step yet, proposing a bill that would stop the RES in its tracks by capping renewable energy targets at their current levels. Despite the fact that Arizona’s Legislative Counsel believes the bill is unconstitutional, it has been advancing steadily through the legislature and seems destined for Governor Brewer’s desk. Hopefully cooler heads will prevail and the Governor will veto the bill and get the state back on track to developing its solar resources.

A Road Map for Developing Arizona’s Sixth C

Despite the confusion in the capitol, Summit participants showed a remarkable amount of agreement about what it would take to develop Arizona’s solar resource and make the state “a leader in the technology and business of generating energy from the sun.” What came out of the discussions were three key steps the state could focus on:

• Develop Arizona’s domestic market for solar power—this is mostly a question of getting the RES back on track and allowing utilities more flexibility in how they procure renewable energy.
  
  
• Grow Arizona into the nation’s leading exporter of solar power to other Western states—this will take some more time as it requires new interstate transmission lines to be built which is costly and time consuming; plus, states like California that are the biggest potential buyers are focused on developing their own domestic markets first.
  
  
• Create a leading solar technology and business cluster in Arizona—the seeds have already been planted via ASU’s LightWorks and SkySong programs, plus the support Greater Phoenix Economic Council (and let’s not forget that one of the world’s largest solar company’s, FirstSolar, is headquarted in Tempe, Arizona).

Hopefully the next event coming up in Arizona, Greentech Media’s SolarSummit 2012 (May 1-2) will shed some more light on how Arizona can take meaningful steps forward towards these goals.

 

Time for a Reset on our Clean Energy Future

This post originally ran on Todd Woody's Green Tech Blog at Forbes.

Judging by the numbers, you’d be half-right to conclude that 2011 was a boom year for U.S. renewables. Solar showed explosive results as installations more than doubled, delivering 1.86 new gigawatts in a market that previously was measured only in megawatts. Wind too had a successful year with 6.8 gigawatts of new turbines connected to the grid. Looking at the long list of projects readying for construction, 2012 looks likely to put even more impressive numbers on the board.

But behind the impressive installation numbers is a worrying trend for anyone who wants our country to stay on the path to a clean energy future. The reality is that utilities are not contracting nearly enough new renewable energy to sustain the pace of progress we’re seeing today – and developers are starting to mothball their development pipelines. Unless we make policy changes now, new wind and solar construction starts will slow to a trickle in the second half of this decade.

Because power plants take anywhere from two to five years to complete, the construction activity we see today is the result of long-term utility power purchase agreements (PPAs) signed several years ago. Thus most of the large renewable energy projects driving this year’s numbers flow from PPAs issued between 2007 and 2010.

Unfortunately the flow of PPAs has been reduced to a trickle. California’s utilities are slowing down as they reach contractual fulfillment of the targets set through the state’s Renewable Portfolio Standard (RPS). And RPSs have been much slower to spread to other states than was predicted. As a result, nowhere near the number of PPAs is being issued to maintain the pace of construction into the second half of this decade.

Why is this happening? A confluence of forces is undermining the policies that have been driving renewable procurement. Recession and election year politics are certainly big contributors. Demand for power is flat, ratepayers are sensitive about costs, and politicians prefer grandstanding to serious talk about energy. We can’t do much to about that right now, but there are encouraging signs an economic recovery is underway and thankfully the election will be over in November.

However, the real elephant in the room for renewable energy is historically low natural gas prices related to the boom in “fracking,” a process to release natural gas by fracturing the underground rock in which it is trapped. Today, spot prices for natural gas in the U.S. are around $2.25 per MMBtu. At that price, gas can theoretically be burned to make electricity at just $0.02-0.03 per kWh. (In reality you can’t get a long term contract for gas at that price, but even $6/MMBtu gas delivers electricity at $0.04-0.07/kWh). Despite the fact that wind and solar are more affordable than ever, low natural gas prices make the cost gap between fossil and renewable power appear much larger.

This is a problem because politicians and regulators get caught up in the false dilemma of fossil vs. renewable generation. It’s false because no one would really contemplate building a fleet of all-gas or all-renewable power plants. And yet, our policymakers still fret that choosing anything other than gas will expose them to ratepayer backlash.

Renewable advocates that get cornered by the gas-vs-renewables dilemma are left with two ineffective arguments. They can try to prove gas prices will inevitably rise again (which is likely true), but this doesn’t solve the policymaker’s issue and is little more than spitting into the wind. Or, they can argue the cost of natural gas should be higher because of fracking’s impact on the environment. While this is probably also true, it comes across like sour grapes or killing ratepayers’ golden goose.

I think there’s a much more compelling vision to get behind. Instead of fighting low-cost gas, renewable advocates need to embrace it. The truth is we have never been in a better place to deliver a clean energy future – because wind, solar, and natural gas have never been as affordable as they are today. In a portfolio that combines all three, we get the best features each has to offer. Wind and solar are 100% clean, carbon free, and in almost infinite supply; natural gas is dispatchable – though still polluting it’s cleaner than coal, and its low cost will help to offset any increase associated with renewables.

What does that deliver? A clean, reliable, secure, independent power system at a blended price that won’t break ratepayers’ wallets. Now that’s something to get fired (or solared) up about!

 

SMUD Unveiling with Governor Brown & Secretary Salazar

I had a fun morning today introducing one of our SMUD solar projects to the media with a little help from Governor Brown and Secretary of the Interior Ken Salazar!

Recurrent Energy hosted the event at our 19MW Bruceville project in Elk Grove, one of 88MW we have under 20 year power purchase agreements with SMUD. These are the same projects that we announced Google and KKR invested in in December.

The project provided a great backdrop for remarks by the governor and secretary about the importance of renewable energy and the coordination of state and federal policy. The event featured the signing of an MOU between the Department of Interior and the State of California to continue coordination of permitting for transmission lines on government land.

In my brief remarks before introducing our guests, I focused on the significance of the project in terms of where solar and renewable energy are today.

It struck me that looking back, today's large solar projects rest on the shoulders of those who had the vision and leadership to imagine solar could work at large scale. Our energy infrastructure is a direct reflection of the policies that create markets for renewable energy, support permitting and interconnection, and facilitate the flow of private capital to make them a reality.

Today, the solar industry stands on the cusp of playing a significant role in conventional energy markets. We have harnessed industry to demonstrate how scale drives out costs. Yesterday's expensive niche technologies can become tomorrow's baseload energy supplies. Solar and renewables are no longer 'alternative', they will play an increasingly central role in our energy and grid.

Looking ahead, we have opened a door to the exciting possibility of a clean energy future. To make that possibility a reality we will need just as much vision and leadership as in past decades.

Google & KKR Invest in 88MW Solar Portfolio

Recurrent Energy announced that Google and Kohlberg Kravis Roberts & Co (KKR) have invested in an 88MW portfolio of solar projects. The projects provide clean solar electricity to Sacramento Municipal Utility District (SMUD) under 20-year power purchase agreements. Three of the projects will be operational by the early in 2012 with the remaining project to come online later in the year.

The investment includes a significant equity investment from Google in addition to equity from SunTap, a new venture formed by KKR to invest in solar projects in the U.S. Recurrent Energy will retain a minority position in the projects and continue to operate them.

Working with Google and KKR on these projects has been a gratifying experience. Both companies are committed to investment in renewables and they worked hard to get the deal done before the end of the year.

Their investment is a clear demonstration of solar’s ability to attract private capital from well-­established investors. That's a good indication of where the solar industry is headed as an increasingly mainstream energy source.

For me personally, there's a nice symmetry to Google's involvement in this financing. Back in 2005, I led the team that developed Google's 1.8MW solar power system for their headquarters. It's great to see that the passion that led them to be an early adopter of solar back then has grown into a large and very visible part of their corporate investing activity today.

Ready to Roll on 200MW in Ontario

Today Recurrent Energy announced a $250M construction debt revolver from Mizuho Corporate Bank for our Ontario solar PV portfolio. The four-year revolving facility will provide support to build roughly 200MW of new solar generation over 20 project sites.

The size and nature of the financing is pretty remarkable. It's one of the largest non-recourse solar construction facilities in North America. The revolving feature enables us a great deal of efficiency and flexibility as we build the portfolio in stages.

The timing of the announcement reflects the fact we're getting ready to start construction on the first of the projects as soon as the ground thaws in 2012.

It's exciting to finally be at this stage in Ontario. Since the projects were awarded back in April of 2010, we've been working diligently to secure permits and get our supply chain in place to meet Ontario's domestic content requirements.

The timing is also good news for Recurrent Energy's business. US renewables appear headed for a rough patch with the failure of the Congress to pass critical extensions of the PTC and 1603 Treasury Grant programs before the end of the year. With several years worth of projects to build in Canada, Recurrent Energy has a solid line of work that is insulated from US policy uncertainties and should help us to ride through the political gridlock here at home.

Duke Energy & Recurrent Energy Deliver 'Good Solar' for APS

Today Duke Energy announced the purchase of two Arizona solar projects from Recurrent Energy totaling 20MW. The projects provide solar electricity to Arizona Public Service Co. (APS) under the terms of two 25-year power purchase agreements.

We reached an agreement with Duke back in August to sell the projects. However, we decided to wait until after the projects were completed and operating to make the announcement. I think one of the most exciting things about it is that Duke Energy's involvement is yet more evidence of solar's growing role in the mainstream energy industry.

The projects themselves are pretty interesting. The Ajo Solar Project in Pima County (5MW) and the Bagdad solar project in Yavapai County (15MW) are both great examples of what we call 'distributed wholesale' power plants. They're less than 20MW each and located near load centers, but the power they generate is delivered to the utility under a wholesale contract, which allows them to be financed more like a conventional power plant. 

The projects are also great examples of how solar can be sited in a way that makes use of lands with low environmental value. Both projects are located adjacent to large mine tailings. That means that this is a story about using solar to transform an otherwise useless location rather than using pristine wilderness.

In a very real sense, these projects represent the best of what 'good solar' can be: adaptive to local environments, delivering clean power where it's needed most, reliable enough to work with utilities like APS, and bankable enough to attract the investment of mainstream energy companies like Duke. We've come a long way, baby!

Weathering the Challenges Ahead for Renewable Energy

This post also ran on The Hill's Congress Blog in advance of comments I'll be making at this week's ACORE's National Policy Forum.

There’s a chill in the air that hints at the stormy weather ahead for renewable energy. After several years of success, the political winds have shifted and the water has grown choppy. We’re entering an election year when Americans are sincerely worried that our nation has lost its way in a world that looks increasingly unstable. In the resulting atmosphere of uncertainty, America’s rudderless energy policy stokes suspicion and fear.

What’s worse, our leaders seem incapable of pointing us in an inspiring direction. Despite polls that show widespread public support for renewable energy from both Democrats and Republicans, the industry has fallen victim to political gamesmanship and bi-partisan gridlock.

In some ways, the current environment feels a little bewildering because of the success we’ve had over the last few years. Whether through luck or design, the intersection of a few state RPSs and federal tax credits delivered a potent formula for demand that also facilitated large flows of capital across the value chain. A whiff of progressive optimism didn’t hurt either.

The growth and advances that resulted during this period have cemented solid gains. Wind and solar energy, once at the fringe, are increasingly accepted as part of the mainstream energy industry. And while it is still early days for smart grid, efficiency and demand management, they have earned a consistent priority in our national dialogue.

Unfortunately, the happy accident of American renewable policy now appears to be falling apart. State RPSs have not spread meaningfully to new states. Lacking any kind of coherent federal clean or renewable policy (not to mention carbon policy) to grow markets, demand for renewable energy will taper off.

Production tax credits are set to expire at the end of this year. And though the 30 percent Investment Tax Credit is on the books through 2016, the expiration of the 1603 Treasury Grant Program next month will starve the industry with an austerity diet of scarce tax equity.

We’ve gotten used to fixing these kinds of challenges with a ‘patch kit’ approach to public policy, pushing for the extension of a tax credit here or the expansion of a state RPS there. Given that the mood in Washington isn’t likely to get better anytime soon, I’m not sure that approach is going to work this year. The situation this leaves us in is not pretty. Without an extension of the 1603 Treasury Grant Program and PTC, developers will put their new wind and solar projects on hold and simply focus on completing construction of late-stage projects. Even if we were able to extend those programs, the tapering off of RPS-driven demand would soon slow investment in new projects as well.

Perhaps once we get through the election in November, the national discourse on energy will become less shrill. In a more constructive environment, we might create a vision of our energy future that finds broader support. And perhaps we could put something together that is a little more harmonized across states and disentangled from the tax code. But until we get there, I think the reality is that we’re looking at a slow period for renewables development and deployment.

Despite the approaching storm, I remain hopeful about the future of renewables in this country. I’m actually quite confident we will weather this storm as we have previous setbacks. That confidence stems from three things. First, I know the strength of the people in this industry, whose staying power is rooted in hope and optimism about building a better future.

Second, despite a near constant attack in the media, almost 70 percent of Americans still believe renewables deserve government support because they realize it is important and necessary. Finally, the transformation of our energy economy is an inevitable outcome, shaped by the economic reality of the declining cost of renewables and the finite nature of fossil resources.

On December 7, the American Council On Renewable Energy is holding their annual policy forum on Capitol Hill where I will be speaking about the importance of renewable energy to our economy and our environment. Congressional leaders from both sides of the isle will be speaking and bi-partisanship will be an important theme.

Perhaps this is a small ray of sunshine on our stormy landscape, a step towards putting the interest of the American people above politics. For everyone’s sake, let’s hope it is the first of many.

The Biggest Thing the NYTimes 'Gold Rush' Story Got Wrong

The New York Times posted yet another error-riddled article last Friday on clean energy. This one, titled "A Gold Rush of Subsidies in Clean Energy Search," purports to describe the "banquet" of "lucrative" subsidies that result in "windfalls" to renewable energy project investors.

Rather than catalog all the errors made by the Times, I will just point readers on to some very thorough rebuttals already online from NRG and others. What's amazing is that almost nothing in the article stands up to scrutiny. It reveals an astounding failure of the paper's editors and gives the impression the story was rushed to press to make a splash.

But the biggest thing the article got wrong is the presumption that there is something wrong or shameful going on when an energy company realizes a profit investing in a solar project. Forgive me, but isn't the whole point of current solar incentives to get the industry over the final hurdles to scale and credibility so that it can play a role in mainstream energy markets?

The whole point of subsidies for promising new technologies is to make them economically competitive with entrenched incumbents--like coal, natural gas, and nuclear. Those incumbants receive billions in subsidies today despite the fact they enrich some of the world's most profitable companies. On this unequal playing field, transitioning to clean, solar energy surely deserves government support.

Why does solar make sense to subsidize? Because it's a rapidly maturing technology and we have a virtually endless supply of both silicon and sunlight. Today, solar costs 70% less than it did just 2-3 years ago and those costs will only continue to decline as the industry grows and innovates. As a society, we frequently make choices about how we want our country and its infrastructure to look in the future. In the case of solar, it's a clear and easy choice to make.

The very facts the authors cite as evidence of solar policy failure are actually the evidence of a compelling policy success. The combination of state renewable mandates and federal subsidies finally add up to a formula that provides companies like NRG with enough profit incentive to invest in a big way. In other words, we finally seem to be getting the policy formula right! Was someone over at the New YorkTimes under the impression that NRG, Duke, FPL, and others were investing in solar without expecting a return?

The New York Times' editors underestimate the intelligence of the American people who have repeatedly affirmed their support for renewable incentives (Pew Study & UT Austin Study)because they are important and necessary. They further insult Californians by insinuating the state's Renewable Portfolio Standard (RPS) is a handout when Californians have repeatedly demonstrated they understand and support greenhouse gas goals. They even ignore America's small business owners--the ones supposedly hurt by 'over regulation'--who overwhelmingly support programs to reduce carbon emissions because it creates new market opportunities.

Here's what I'm excited about. Solar power, once viewed with extreme skepticism by utilities, is now embraced my mainstream companies like NRG to the tune of hundreds of millions of dollars. We would do well to hope other government initiatives could meet with such success!

A China Trade War Will Decimate US Solar Jobs and Businesses

I've been getting up to speed on the trade proceeding initiated by SolarWorld that seeks to impose punitive duties on US companies that import Chinese solar modules. What I've learned is chilling. The nightmare that is likely to unfold will have severe and immediate consequences to the US solar industry. Unless the industry takes action now, the result will be massive loss of jobs, decimation of the US solar project pipeline, and the failure of numerous US solar businesses.

To see why the impact will be so severe, it's important to understand two things: how the trade proceeding works and how US utility scale solar projects get developed.

A Quick Summary of the Trade Process

The trade process will move forward via a series of hearings culminating in a final decision on whether to impose duties at the end of September 2012. However, the intermediate hearings present big risks because of how the process works and when liabilities for duties attach to importers.

The first hearing is next week to gather initial testimony. The first decision about whether there is sufficient evidence to move forward with an investigation will occur December 5. If they decide to move forward (which is very likely because the level of proof required at this stage is very low) the next decision comes in spring 2012. This is when a preliminary decision is due on the amount of duties to be imposed on US importers.

The preliminary decision date is critical because from this date forward importers must post cash or bond to cover the duty on all subsequent imports. What's worse, duties can be imposed retroactively going back 90 days to cover imports from December 2011 on. In other words, the risk of duties being imposed will impact decision making almost immediately even though the final decision isn't due until September of next year.

Another very important point to clarify, import duties are imposed on importers, not exporters. In other words, it is the US solar businesses that are importing modules from China that will be hit with the duties--not the exporters. Furthermore, if an exporter were to reimburse or compensate an importer in any way, the duty is automatically doubled to ensure punitive impact on those involved.

An Industry at Risk: A $40B Pipeline and Tens of Thousands of Jobs

The US solar market has been growing leaps and bounds in recent years. In large part, that’s because utilities have been eager to sign large contracts with developers for new solar generating plants. Most of those plants are going into construction or about to go into construction. An import duty will render most of those projects worthless by doubling the cost of the equipment going into building them. The result will be a wave of delayed and terminated projects, which will spill over into tens of thousands of lost jobs and an equally bleak landscape of bankrupt developers.

To get a sense for the magnitude of this impact all you have to do is look at the volume of projects that are in the late stages of development. Using publicly available data, Greentech Media estimates the US utility solar pipeline at 21 gigawatts (worth roughly $80B when completed). About 9.7GW (roughly $40B) already have contracts in place with utilities and are either in construction or about to go into construction. This pipeline represents nothing less than the future of US solar growth, investment and jobs. 

Source: Greentech Media

I can't say exactly what portion of these projects are relying on Chinese made solar panels, but I think it's a safe assumption that it's easily more than half. That's because, like it or not, the vast majority of panel manufacturing capacity is now in China. What this means is that something on the order of $20B-$30B of contracted utilty solar projects and all they represent are at risk. 

For the US economy, this couldn't come at a worse time. The US solar industry is one of the few bright spots when it comes to jobs. The industry now employs over 100,000 Americans (mostly in engineering and building projects) and is forecast to add upwards of 10,000 new jobs next year. 

The shameful irony in all of this is that SolarWorld (a German company with a manufacturing facility in Oregon) has wrapped itself in the US flag while initiating a process that could bring the US industry to its knees. The couple of hundred US manufacturing jobs they claim to be "saving" are insignificant compared to the thousands of US companies and jobs their actions will destroy. 

The rest of the industry needs to wake up fast to this reality and do whatever it takes to stop the trade proceeding as soon as possible. As someone who's worked for the past 10 years to make US solar a reality, the consequence of failure is almost too terrible to contemplate.

 

The Blame China Game

This post also ran on National Geographic's The Great Energy Challenge Blog curated by Planet Forward.

Rumors are swirling about the next shoe to drop in the campaign against renewable energy. A handful of struggling solar manufacturers are expected to announce they are joining a petition to the International Trade Commission and the US Department of Commerce (DOC). The petition is expected to allege China unfairly subsidizes solar manufacturers and is ‘dumping’ solar modules on the global market below cost (a view exacerbated by a few high profile solar company bankruptcies I previously wrote about).

A successful petition would be the first step towards imposing tariffs on solar panels imported from China. The announcement is timed to coincide with the start of Solar Power International, the US’s largest solar trade fair taking place next week in Dallas.

Let’s state plainly what’s going on here. A group of manufacturers who can’t compete with today’s solar panel prices are seeking to erect trade barriers to make the US a ‘safe market’ for their own more expensive solar panels. They want to prevent Americans from getting access to low-cost solar panels and low-cost solar electricity so they can sell their own more costly product to them instead.

This is clearly a tactic in the narrow self- interest of the manufacturers joining the petition. It’s not in the interest of American consumers. It’s not in the interest of ratepayers. It’s not in the interest of our national security. And it’s certainly not in the interest of slowing global climate change.

I’ve said it many times, but it’s worth saying again. The best thing we can do is encourage the solar industry to ruthlessly drive down the cost of solar panels. And that’s exactly what the industry has been doing with manufacturing in the US, Europe, China, Malaysia, the Philippines, and beyond. As a result, since 2008 the cost of solar panels has come down by roughly 75% with most of that coming from reductions in silicon commodity costs and manufacturing improvements.

The less solar power costs, the more favorably it compares to conventional power, and the more attractive it becomes to utilities and energy users around the globe. Today’s low cost solar panels are overturning antiquated notions about the limits of solar power and driving a massive wave of new demand for clean solar-generated electricity.

As with other high tech fields, rapid innovation and cost reduction in solar poses a challenge for those who can’t keep up. While individual company failures may be painful, it’s in the best interest of consumers for the market to remain competitive. Propping up failing companies with trade barriers would create an unhealthy market environment and ultimately discourage innovation by rewarding the laggards.

Leaving all that aside, here’s where the ‘blame China’ argument really starts to lose credibility from my perspective. First, according to the US Solar Energy Industries Association (SEIA), the US solar industry in 2010 had positive trade flow of $1.9B and was a net exporter to China by more than $240M. In other words, last year US companies sold more solar equipment to China than Chinese companies sold in the US. Solar is a global industry with a global supply chain and if one piece of that chain is impacted, everyone will be ultimately be affected.

In addition, the domestic solar industry is thriving and initiating a trade war would only be shooting ourselves in the foot at a time when we’re already facing a recession. Currently the US solar industry employs 100,000 people in the US (more than coal mining industry) and that growth isn’t in manufacturing, which accounts for less than 25% of the industry’s jobs, but in the diverse ecosystem of solar suppliers and others who sell, install, engineer and construct solar arrays and power plants.

Second, you don’t have to be much of a stock analyst to recognize that Chinese manufacturers are struggling to keep up with today’s competitive market as much as US companies are. If the companies joining the potential trade petition allege that Chinese companies benefit from unfair advantage, you’d expect to see Chinese companies earning comfortable profits while everyone else suffered. That’s just not the case. In fact, I’d argue that the signs indicate we’re likely to see some big Chinese failures in the upcoming years as the competitive marketplace exacts its toll.

My hope is that this all adds up to nothing and US trade representatives recognize that starting a trade war over solar panels would be stupid. Trade barriers would only raise the cost of solar equipment and solar power–something that is only in the interest of a small group of manufacturers who can’t keep up in today’s market. Instead we should continue to focus on growing demand and facilitating the growth of a promising and exciting new era of low cost, ubiquitous solar power.

 

Solyndra - Let's Keep It Real Folks

Election year politics ensure that Solyndra is going to get at least a full news cycle's worth of attention. Here are some interesting facts to consider as the Solyndra kerfluffle builds steam:

• Solyndra was a very small piece of the policy picture - Solyndra's $535M loan is just 1.2% of the total $38.6B loan guarantees issued by DOE. (Source: DOE.)
• All energy is subsidized and loan guarantees are equal opportunity - Guess who the biggest loan guarantee went to? Some big wind or solar boondoggle? Guess again: an $8.3B loan guarantee for a nuclear plant down in Georgia. (Source: DOE.)
• Solyndra is not the 'solar industry' - Solyndra failed precisely because conventional silicon-based solar is doing so well--the solar industry has reduced the cost of solar by 70% since 2009. Solyndra had a $2/Watt technology trying to compete against $1/Watt silicon PV.
• Not all solar needs loan guarantees - Large scale silicon-based solar PV projects can be financed without loan guarantees. My company is currently financing almost $2B of solar projects, none of which will rely upon loan guarantees. That's because silicon-based solar is highly reliable and has decades of proven performance--making it very attractive to investors seeking low-risk returns.
• It's not China's fault - China's subsidized loans to PV manufacturers account for maybe a 10% price advantage relative to non-Chinese competitors offering similar silicon-based products. It can't possibly explain the 100% price gap between Solyndra and today's PV. The explanation? Silicon , which was trading at $300/kg+ when Solyndra started, is now at $45/kg and falling. It's that simple.

None of this is meant to minimize the significance of the loss--$535M is a lot of money and if there was any misbehavior in how the loan was awarded it should be dealt with to the full extent of the law--but perspective is important.

Crystal Clear Lessons from Solyndra

The solar world woke up this morning to news that Solyndra, a startup company pioneering a new kind of solar module, was preparing to file for bankruptcy. Many were surprised by the news because Solyndra was a recipient of a $535M DOE loan guarantee in 2009 and their facility was used by President Obama as a setting for a 2010 press event.

It would be a mistake to generalize from Solyndra's failure to indict the solar industry and solar policy as a whole. This is about one company failing in a market that has exceeded all expectations on cost reduction. There are two important lessons to be gained that are worth stating very clearly.

First, Solyndra failed because conventional PV technology succeeded in dramatic cost reduction. Conventional solar panels cost 1/3 of what they cost 2 years ago. Solyndra's technology just couldn't get down the price curve fast enough to remain competitive in that kind of environment. We should be celebrating PV's wild success rather than lamenting the failure of one company.

(As an aside, the announcement from Solyndra blamed an oversupply of cheap Chinese solar panels for the company's demise. Yes, it's clear that China has chosen to take a leading global position in manufacturing renewable energy technology. I don't think that's a bad thing. As I've argued elsewhere, lower cost solar equipment means lower cost solar electricity. Declining solar electricity prices mean expanding markets for all that help our planet get ever closer to cost-competitive clean energy.)

Second, not all solar policy faces the same kinds of risks as the DOE loan guarantee program (LGP). So let's not paint all government policy with the same brush. The LGP was at the riskier end of the policy spectrum. It bet taxpayer money on individual technologies and companies. This kind of attempt to 'pick winners and losers' is typically the domain of venture capital and private equity--the type of investors who know that several companies in every portfolio will fail.

Other government policies like the Investment Tax Credit, 1603 treasury grant program, and state-level renewable standards are much less risky policies. They are 'company agnostic' and create competitive markets in which the best technologies win. Rather than betting on the success of one player, they align taxpayer interest with the success of the market overall. Those policies have resulted in resounding success and we need to recognize and reinforce their support.

Bottom line, I'm sad to see Solyndra fail and feel immense sympathy for the 1,100 employees who are now out of work. But in the bigger picture, Solyndra's failure underscores just how successful the PV industry has been at cost reduction--and highlights the risks when governments try to pick winners and losers in highly competitive markets.

A Silver Lining in Declining Solar Prices

This post also ran on National Geographic's The Great Energy Challenge Blog curated by Planet Forward.

Quarterly earnings numbers are out for many publicly-traded solar manufacturing companies and you'd be forgiven for thinking the solar industry is in trouble. Why? Because the global price of solar panels is falling, putting pressure on profit margins, and that spells bad news for manufacturers' earnings.

This is a reminder that what is good for a market isn't necessarily good for all market participants. Declining prices mean only those with the lowest manufacturing costs (and business models that work on much thinner margins) will earn the profits necessary to survive. Those that can't will fall by the wayside.

The recent news about Solyndra is a case in point. Solyndra had a compelling technology when solar modules cost $3.25/Watt. But the technology didn’t prove out in a world where costs are rapidly approaching $1/Watt. This is the Darwinian process by which markets reward innovation and starve stagnation. And it is this process that will ultimately deliver cost-effective solutions to climate change.

A 70% decline in solar panel prices over the last 24 months has many in the industry forecasting a brutal shakeout ahead. I'd argue that this picture misses an important point. It's myopic to focus solely on earnings of one segment of the industry. There's a silver lining for the world in declining solar prices: cheaper solar power.

The less solar power costs, the more favorably it compares to conventional power, and the more attractive it becomes to utilities and energy users around the globe. Utility-scale solar power can now be delivered in California at prices well below $100/MWh ($0.10/kWh) less than most other peak generators, even those running on low-cost natural gas. Lower solar module costs also stimulate demand from consumer markets where the cost of solar compares very favorably to retail electric rates.

Bottom line: declining prices mean ever growing demand for solar power. That means an ever bigger role for solar in our generating mix and an increasing impact addressing climate change.

Many may see today's handwringing about solar stocks as an indication we need to go back to past policies of rich direct subsidies for solar. The reality is "the way things used to be" isn't a viable option. Government appetite for direct solar subsidies is waning and the industry must make the transition to electricity market demand.

That's not necessarily a bad thing. Just as there's a silver lining to declining module prices, there's also an important upside to the broader changes happening in our industry: the companies that emerge successfully from our shifting subsidy landscape will be the very companies that help usher us into an era of grid parity, where solar competes on equal footing with gas, coal, and other traditional power sources.

But that's only if we play our cards right, both as an industry and as a nation. As I've written before, changes to key policies -- specifically, those that impact how projects are financed -- are critical to developing a strong and competitive solar PV market. Ultimately, the leaders that overcome today's crisis will be those that can tap the full potential of competitive demand, capturing massive scale as solar becomes a part of the mainstream energy supply.

Labor Day Dreams: President Obama on Energy and Jobs

This article also ran on Fortune's Brainstorm Green site under the title The Answer to Obama's Jobs Problem.

The White House announced that President Obama will address the nation on jobs after Labor Day. I have a suggestion for where the President could find part of the answer: by setting loose the 30-gigawatt (GW) buildup of U.S. solar projects bogged down in late stage development. Here's the amazing part: he could do it without committing to spend a single additional federal dollar and the result would be net savings to the government through massive job creation and a wave of private investment in our nation's infrastructure.

Let me first describe the situation on the ground. Over the past few years, rapidly declining solar costs and state Renewable Portfolio Standards (RPS) programs, which require utilities to generate a percentage of power from renewable energy sources, have combined to create 30GW of solar projects in the later stages of development. That's enough solar to power about 6 million homes. To put that in perspective relative to other sources of electricity, solar has more megawatts in development than wind, coal, gas, or nuclear according to analysis by the American Public Power Association.

All those solar projects represent many tens of thousands of new construction jobs, plus a whole lot of engineering, finance, and service jobs as well. The only reason those projects and jobs aren't happening now is because they're held up by a gauntlet of permitting, interconnection and financing challenges. To set those jobs free, we need to do just three things:

1. Streamline environmental permitting,
2. Align interconnection policies with utility procurement plans, and
3. Expand the pool of eligible investors in solar projects

Environmental permitting is inefficient, rife with redundancy, agency overlap, and jurisdictional issues. Don't get me wrong. We absolutely need strong rules to protect our environment and critical species. However, we can still have strong protection for our environment while streamlining rules and guidelines to make permitting more efficient. Net impact of reducing regulation: less government waste, less industry waste, more jobs.

Interconnection is a pretty technical issue but what's needed is straightforward to understand. Interconnection refers to the process of connecting a generator to the electrical grid. Under the current system, interconnection is overseen by "independent system operators" who coordinate grid planning and decide who gets connected and when. Procurement – how utilities buy power – is overseen by utility commissions who determine whether the purchase complies with regulatory requirements. We need our political leaders to make it clear that interconnection should 'follow' utility procurement. Right now they're treated as two separate processes, which is kind of silly when you think about it. This results in ridiculous situations where interconnection is granted to a generating resource utilities don't want or interconnection is denied to a resource that the market deems important. Net impact of fixing interconnection: less government waste, less industry waste, more jobs.

The easiest thing President Obama can do is expand the pool of eligible investors in solar projects. None of the 30GW solar pipeline will be built if investment capital isn't allowed to flow into projects. To be clear, I'm talking about good projects with proven technology, strong credit, and attractive returns. These kinds of projects should be easy to finance, but they're not.

Let me try to explain the very complicated topic of tax oriented financing. Solar projects in the U.S. qualify for the Investment Tax Credit (ITC). But, neither the projects nor developers typically have big enough tax bills to make use of the credits on their returns. So, developers enter into a financial arrangement with an investor who does have a large tax bill. The investor puts money into the project and receives a combination of project cash flow and tax credits in return. The problem is that we have a shortage of investors eligible to participate in tax-oriented financings because the rules are overly restrictive. This problem was temporarily fixed by the 1603 Treasury Grant Program (TGP), which provides developers with the option to receive a cash grant in lieu of the tax credits. The TGP is scheduled to expire at the end of this year, leaving solar projects high and dry.

The fix is an adjustment to the rules that allow more private investors to participate in solar projects. There are three options for the President to accomplish this goal: 1) extend the Treasury Grant Program, 2) make the Investment Tax Credit refundable, or 3) allow Master Limited Partnerships (MLPs) structures (commonly used to finance real estate and oil/gas projects) for Investment Tax Credit Projects. Net Impact: no additional cost because the Investment Tax Credit is already on the books through 2016 and none of the above fixes would amount to a government spending increase.

Here's what's even more compelling. There's strong logic that says the changes above would result in a net savings to government. A study from EuPD Research found that any cost of extending the 1603 TGP is more than offset by the avoided unemployment costs and additional income tax revenue generated by new jobs resulting from the extension. Read that again: the revenue and savings for the government from creating all those solar jobs would exceed the costs of the grant extension.

What are we waiting for, Mr. President?

Solar Industry Momentum at Risk

This article also ran on National Geographic's The Great Energy Challenge blog curated by Planet Forward.

I spoke this week on a panel at REFF Wall Street about the U.S. utility solar market. REFF is one of my favorite conferences in the renewable industry. It’s well attended and presents a mid-year opportunity to catch up on the year’s progress and compare notes on the challenges ahead.

This year my message was mixed. On the one hand, there’s much to be excited about. According to a study from the American Public Power Association (APPA), solar is now has 30GW of pending applications in the pipeline, more than any other generating technology or fuel.

What this reflects is a swell in the industry pipeline of solar projects making its way to the grid. It’s a direct response to declining solar costs and the alignment of state and federal solar policy. As someone who’s been working in solar for 10 years, it’s tremendously exciting to see these kinds of volumes in development. It means that solar is on the verge of becoming a mainstream energy source.

However, when you look downstream, solar accounts for only 6.2GW of permitted plants (#4 by capacity) and only 1.6GW of plants under construction (#5 by capacity). What stands between those 30GW of projects pending application and real, in-the-ground operating projects is a gauntlet of permitting, interconnection, and financing uncertainties. All of that potential solar hangs in the balance as we sort through some challenging policy issues.

The biggest potential risk facing the industry now is the looming expiration of the deadline to qualify for the 1603 Treasury Grant Program at the end of this year. The 1603 Treasury Grant Program allows developers to receive a grant in lieu of the 30% Investment Tax Credit eligible for solar projects. Without the grant program, solar projects will be stuck with tax credits that are almost impossible to finance in the market today. Without access to financing, a developer can’t build out its pipeline and all of that progress comes to a halt.

What’s important to note is that there is not a shortage of investors interested in solar projects. There’s a shortage of investors who are eligible to invest in tax oriented projects due to strict limitations on who can participate. To solve this problem and ensure those 30GW of projects can ultimately generate power, we need to do one of three things: (1) extend the 1603 grant program deadline, (2) make the Investment Tax Credit refundable, or (3) open solar project investment to a wider range of investors by allowing use of Master Limited Partnerships (MLPs) that are commonly used to finance real estate and oil and gas projects.

With the climate in Washington hostile to ‘stimulus’ and tax incentives, it’s going to be hard to deliver any of these solutions. My hope is that we can make the case and deliver a smooth transition. My worry is that lawmakers will once again let key policies lapse and precipitate a crisis before acting—while the industry will inevitably survive as it always has, it seems a waste to follow a path that will needlessly destroy industry progress, jobs, and investment.

The Gas Is Definitely NOT Greener

This article also ran on AOL Energy.

Robert Bryce penned another one of his usual contrarian energy pieces earlier this week. In an Op Ed for the New York Times, titled ‘The Gas Is Greener’, he made some poorly formulated arguments in favor of natural gas and nuclear while throwing mud at wind and solar power. It must be desperate times indeed in the conventional power business when wind and solar earn such spleen.

Mr. Bryce’s first argument is that the land use associated with wind and solar power is ‘profligate’ and untenably wasteful. He works through some simple math in an attempt to horrify readers with the possibility that such power sources might need 129 square miles of area to supply California’s renewable energy needs. Let’s do some simple math of our own to put his numbers in perspective. California has an area of 163,707 square miles. Mr. Bryce’s ‘big number’ amounts to just 0.08% (eight one-hundredths of a percent) of California’s total area. I think most Californians would agree that seems like a reasonable use of land for the payoff of clean, sustainable power in perpetuity.

In what can only be characterized as an odd canard, Mr. Bryce then attempts to shoot down wind power on the basis of its overuse of steel. Using some simple math again as a smokescreen, he makes the point that, on a per-megawatt basis, wind turbines use 4 times the amount of steel of a natural gas turbine. I’m not sure exactly what his point is. Yes, steel is somewhat energy- and transportation-intensive and thus contributes to wind's embedded carbon footprint. However, his analysis ignores the obvious and critical point that natural gas is a fossil fuel. Burning natural gas to create electricity is ultimately far more carbon-intensive than the footprint associated with wind’s steel usage.

Innuendo is the favorite rhetorical tool of mudslingers and Mr. Bryce is clearly a champion. Suggesting the green community is ‘deeply divided’ around these issues is reminiscent of the claim that ‘scientists disagree’ about the causes of climate change. By casting the disagreement as a profound philosophical quandary, Mr. Bryce hopes to cast doubt on the thesis of green power itself. (“See,” he says. “Even they can’t agree on the answer so it must all be untrue!”)

There are two fallacies here. First, the green community is not ‘deeply divided.’ Rather I would say that the green community is working through the issue of how to balance the global threat of climate change with the preservation of local land resources. This is a classic public goods issue that requires some careful thought but will ultimately be resolved (remember after all we’re talking about less than 1/10^th of one percent of our land). Second, even if we were to imagine the green community ‘deeply divided’ on this issue, it is doubtful any of them would rush to embrace Mr. Bryce’s thesis that the only answer is natural gas and nuclear!

This insight by itself reveals this argument as nothing more than rhetorical flourish, empty of any real meaning or insight that might lead us to an answer. The answer on this issue will come from the current debate happening in the green community and through the permitting process by which we are deciding how to balance the use of land and our need for cleaner sources of energy.

How natural gas and nuclear energy provide a preferable answer for Mr. Bryce is beyond me. While I support an ‘all of the above’ energy policy, I would never put all our eggs in those two baskets. We have a tremendous new discovery of shale gas in this country that may last us anywhere from 40 to 100 years at current consumption. Supporting our future energy needs exclusively on this resource would only hasten its depletion, leaving us dependent once again on foreign imports. Talk about kicking the can down the road and forcing our children to deal with problems we can deal with today.

The truth is that all energy sources have costs and risks. Population growth and society’s advancement along an ever increasing technological path requires a response. We need more sources of energy and we need to be ever more efficient in our use of energy. We need to choose a path that balances our need for power, our desire to reduce carbon pollution, our need for energy independence, and to minimize the impact on our local air, land, and water supplies.

We’re at an incredibly important turning point in the history of renewables. Solar and wind are on the cusp of true competitive parity with conventional energy (within 3-5 years). They are clearly a BIG part of the answer to our future energy needs. Perhaps the reason we’re seeing more and more allergic reactions like Mr. Bryce’s from the conventional power side of the industry to renewables is that they’re finally posing a long-term threat to the dominance of the status quo. In that sense, articles like Mr. Bryce’s are a welcome and very good sign.

Why Policy Changes in Germany and Italy Are Good for the Future of Renewable Energy

This article also ran on National Geographic's The Great Energy Challenge blog curated by Planet Forward.

For the past two months, solar industry analysts have been glued to an Italian soap opera as the government repeatedly flip-flopped on its Feed-In Tariff (FiT) policy, a controversial tool that European governments have used to promote the rapid adoption of renewable energy through direct incentives. Conflicting reports made it very difficult to determine what was happening in Italy. The details are still not entirely clear, but the outcome will involve new limits and has significantly disrupted the solar market and prices. The response to such extreme uncertainty has been that Italian solar module orders and project construction have ground to a complete halt. The only solace for manufacturers watching this unfold was the comfort that came from knowing Germany, the country that pioneered the use of the FiT and in the process became the world’s leading solar market, was on solid ground.

Late last month, however, German Chancellor Angela Merkel provided the next plot twist in the unfolding drama. After a week that involved discussions with the chiefs of Germany’s four major electricity companies, on May 13 she made some surprising remarks that may mean Germany’s FiT is up for adjustment next. This is how Bloomberg reported it:

‘Germany’s subsidies for solar power may be too high, Chancellor Angela Merkel said. While solar receives half of the German government’s aid for alternative energy, it accounts for only 2 percent of the 17 percent of electricity generated from renewable sources, Merkel told a conference of her Christian Democratic Union party in Berlin today. “We do have to think about whether we can keep this up,” she said.’’

A major change to German and Italian FiTs could radically reshape global demand for solar modules and hasten the transition to competitive markets. Despite the challenges this presents for manufacturers, I would argue this is exactly what the renewable energy market needs if it wants to truly become mainstream.

There’s a good reason this news is getting so much attention. Germany and Italy together made up 64% of global solar demand last year.

There’s a direct connection between the price Europe sets for its incentives and the price of solar modules worldwide. Over the past couple of years, reductions in European FiTs have resulted in a steep reduction in the price of solar modules. An interesting result is that as module prices have dropped, demand has begun to emerge in non-European parts of the world (e.g. the US). Demand is emerging because module prices have reached a point where electricity generated by a solar PV plant is become very competitive with other mainstream renewables (e.g. wind), the first step in the path to price parity.

This dynamic represents the first step in the evolution of the global market towards competitively driven demand for renewables versus fossil fuels – in other words, a more sustainable world. Utilities who need to procure renewables for regulatory compliance are snapping up solar at a rapid pace. The next evolutionary milestone will come several years from now as solar becomes competitive in ALL markets with conventional electricity generation.

While analysts may wring their hands about near term disruptions in European solar markets and the impact on individual solar stocks, I think hidden in this crisis are the seeds of a promising future. The solar industry, and the renewable energy industry as a whole, need to make the transition from dependence on FiTs to a new future that relies more on competitive markets. FiT disruptions may be painful in the short run, but the best thing for emergence of a mature renewable energy industry is continued rapid price declines and the transition to truly competitive power markets.

Oil & Gas Go to Washington

This article was also posted on National Geographic's The Great Energy Challenge blog curated by Planet Forward.

 

This was a funny week to be in Washington DC. I happened to be in town on Tuesday when the Senate was debating whether to repeal the numerous tax subsidies given to the oil and gas industry. To give you a sense of scale, the subsidies on the block add up to $21 billion over the next 10 years for the top five oil companies alone.

Of course this was Washington theater and the repeal was turned down by a majority made up of Democrats and Republicans. No big surprise there. I frankly didn’t expect the Senate to make a move that would effectively raise gasoline prices in the current environment. But it wasn’t a complete waste of time either. The debate provided several opportunities to compare how we talk about subsidies offered to the fossil industry vs how we talk about renewable incentives.

First, this week’s debate makes plain that we’re subsidizing oil and gas in a pretty big way. How can we expect new technologies or renewables to ‘compete’ in the market when we’re handing out big subsidies to the incumbents? The answer is obvious: we can’t. (I blogged about this issue back in July). If we’re going to continue subsidizing fossil fuels, then we need to recognize that new technologies and renewables need subsidies just to maintain a level playing field. That’s an idea even my second graders can understand. 

Second, opponents of the repeal kept referring it to a ‘tax increase’ rather than a repeal of tax subsidies to some of the most profitable companies on earth. It’s identical to the way last year that those who voted against extending ‘temporary’ Bush era tax breaks were characterized as ‘raising taxes.’ I think the renewables industry could learn a thing or two from this example. From now on I think we should characterize any proposal to decrease or drop the renewable tax credits/grants as ‘raising taxes’ on renewable electricity. 

Finally, the main argument of the opponents rested on the notion that Americans are already suffering from high prices at the pump. They argued that eliminating tax subsidies now would simply increase gas prices and further hurt consumers. Again, I see an important lesson for renewables here. We should make it clear that raising taxes on renewable electricity will raise overall electricity prices and make it hard for Americans to afford the clean, reliable electricity they need to light and heat their homes. Let’s not hurt consumers by taking action that would increase the price of electricity!Oil 

I’m being a little tongue-in-cheek here to make a point. For the record, I don’t support any approach that singles out one or two tax incentives for elimination is missing the big picture. It’s clearly disingenuous to argue for one set of tax breaks on consumer grounds while arguing against another on the principle that government shouldn’t interfere in markets. If we’re against tax breaks, lets eliminate them all. Absent that course of action, the only fair answer is to provide similar breaks to new technologies and renewables to level the playing field.

 

SunPower Gets a Bigger Balance Sheet

This article was also posted on Fast Company's FC Expert Blog under the title "Why Big Oil's Purchase of Solar is a Good Thing."

Last month saw the surprise announcement that Total SA--one of Europe’s largest oil companies--agreed to buy 60% of U.S. solar company SunPower for $1.38 billion. Many pundits saw the goal of the deal as helping SunPower take on low-cost Chinese solar module manufacturers. But I actually don’t think that was the main focus of this deal. In my view, the hook up reflects the continuing evolution of the solar industry from a niche to a significant part of the mainstream energy industry.

A lot of the commentary on the deal, frankly, had me scratching my head. Most analysts seemed unable to get beyond the SunPower-vs-low-cost-Chinese-solar-modules framework. While the announcement noted some incremental investment in R&D and new technology, it clearly wasn’t the centerpiece.

If SunPower was looking for a technology partner to improve its cost-structure, an oil company would be an odd place to find it. And if Total was looking to make an investment in a solar technology business, there are lots of other ways to do that besides buying the majority share of a company like SunPower.

This deal was about access to capital and credit. Lots of it. What SunPower got in this transaction was Total’s massive balance sheet, as highlighted by the announcement of $1 billion in credit support from Total. Why do they need the credit support? Because one of SunPower’s biggest unrealized assets is its large utility-scale solar project pipeline (the lines that get the power from the solar plant to the grid). The key is that it will take a ton of capital to deliver the pipeline to full operating status--and raising more equity was not the answer.

There are two ways to extract maximum value from the pipeline for SunPower’s shareholders: One is to reduce the cost of building the solar plants themselves. The other is to cut the cost of financing the projects. The transaction with Total takes a tremendous amount of risk off the table for SunPower. What Total got was a way to put its balance sheet to work while sharing in the uptick in value it created for SunPower. It’s a smart deal and I think it makes a ton of sense for both companies.

There are strong parallels to Sharp’s acquisition last year of Recurrent Energy (where I’m CEO). Like SunPower, Recurrent Energy has one of North America’s top three pipelines of utility solar projects. The key execution challenge for us was finding a way to maximize the company’s value. The sale to Sharp provided both a balance sheet and access to the supply-chain expertise to reduce the cost of building our plants--the two levers for realizing maximum pipeline value.

As the utility scale solar market grows, pipelines will become ever more important. And because building those pipelines requires large amounts of low-cost capital, a key competitive feature of tomorrow’s solar leaders will be access to a balance sheet that maximizes pipeline profit for shareholders.

While that’s good news for shareholders, perhaps it’s more important to recognize that it’s also tremendously good news for the world. Energy generated from solar PV is 100% clean and carbon-free. Solar PV’s rapidly declining price over the last couple of years has made it one of the best cost renewables. As a result, it’s now the fastest growing source of new generation in the utility power industry. The fact that financiers and conventional energy businesses are embracing PV means it’s ready for primetime. And what the world needs pretty badly right now is prime time-ready renewables that can deliver energy cost-effectively at large scale.

 

Making Good on California's New 33% RPS

With the signing last week of California's 33% RPS, Governor Brown ensured California will continue to lead the country as a market for renewable electricity. The bill does a lot to fix the issues that might have slowed demand in the state for renewables. Now it's up to the industry to make it work.

The new law raises the RPS target to 33% by 2020 from the previous goal of 20%. And not a moment too soon. California's utilities have proven skeptics wrong by demonstrating the 20% target is now well within reach. In recent reports filed with the CPUC, PG&E revealed it has reached 17.7 percent while SCE Edison reached 19.4 percent. Both are expected to hit the 20% mark soon.

The law also improves on the old RPS by requiring all utilities to meet the new 33% standard. In addition to the ‘big 3’ investor owned utilities PG&E, SDG&E, and SCE, the bill is binding on the publicly owned utilities such as LADWP and SMUD (though SMUD has proactively worked towards RPS compliance already), and the electric service providers (ESPs) such as the Department of Water Resources.

The 33% RPS signing follows the overwhelming rejection by voters last year of Prop 23, which would have overturned California's defining climate legislation. The proposition received a record 61% no vote, firmly establishing voter's support for the direction the state has taken with climate and clean energy policy. And Governer Brown won easily in the same election on a platform that included building 12,000 megawatts of new renewable generating capacity in the state.

I think it would be a mistake however to take that support for granted. A recent NY Times article noted falling demand for green household products, providing a warning about the fickle, cost-sensitive nature of consumer demand for green goods. In the current economic landscape, support for clean energy could wane if costs don't maintain a downward trend. The key to maintaining strong support for the RPS will be to continue to drive the cost out of wind, solar, and other renewables.

To do that, we'll need some additional help from the government with some of the really hard permitting red tape that tends to drive up project costs unnecessarily. But make no mistake, the pressure is now squarely on us in the industry to 'make good' on the updated RPS. We have to show California and the rest of the states that we can fill that new demand with ever more cost-competitive clean energy. I think this industry is up to the challenge.