Great piece from Tom Friedman this past Sunday on why a natural gas embargo on Ukraine and by extension Europe by Russia would be good thing for renewable energy and energy efficiency growth. Some excerpts:
“Because such an oil & gas shock, though disruptive in the short run, could have the same long-term impact as the 1973 Arab oil embargo — only more so. That 1973 embargo led to the first auto mileage standards in America and propelled the solar, wind and energy efficiency industries. A Putin embargo today would be even more valuable because it would happen at a time when the solar, wind, natural gas and energy efficiency industries are all poised to take off and scale.”
” . . . . Solar cells, for example, have dropped in cost by more than 80 percent in the last five years. This trend is underway, if a bit less dramatically, for wind, batteries, solid state lighting, new window technologies, vehicle drive trains, grid management, and more. What this means is that clean energy is moving from boutique to mainstream, and that opens up a wealth of opportunities.”
A gas embargo by Putin would also reinforce the message of the United Nations’ latest climate report by the Intergovernmental Panel on Climate Change, which warned with greater confidence than ever that human-created carbon emissions are steadily melting more ice, creating more dangerous sea level rise, stressing ecosystems around the globe and creating more ocean acidification, from oceans absorbing more C02 . . .”
“We are closer to both irreversible dangers on climate and scale solutions on clean tech than people realize. Just a little leadership now by America — or a little scare by Putin — would make a big difference.”
Everything you need to know about attracting mainstream capital to clean energy solutions.
A great read by Jigar Shah, founder of SunEdison, innovator of the solar power purchase agreement model and former CEO of the Carbon War Room. With real world examples in many energy related industries, Jigar outlines how entrepreneurs and investors can unlock the enormous potential that climate change represents. And how this can be done utilizing existing, commercial off-the-shelf technologies combined with new and innovative business models.
According to the International Energy Agency, $10 trillion can be invested profitably—today—in the world’s existing technologies, making Jigar’s plan of 100,000 companies each generating $100 million in sales a reality in catalyzing a new economy in the process.
A quote from the book that sums a large issue facing the solar industry, ““The utilities are playing this wrong, saying you’re with us or against us. It’s not the solar industry that’s the problem — it’s their refusal to recognize the benefits of new technologies.” I remember Jigar telling me years ago that the utilities where in trouble as distributed generation plants like solar are going to put an enormous pressure on them in the very near future. I was skeptical that the utility monopoly would be in trouble anytime soon. Fast forward today and the writing is on the wall. With the exception of few forward thinking utilities, the majority are fighting back instead of embracing distributed generation and morphing their models to this new technological and business model. Utility business model innovation anyone?
A good update from Lazard’s annual look at Levelized Cost of the Energy (LCOE) for alternative and conventional energy sources illustrates two interesting developments: 1) the continued progress of solar photovoltaics (PV) reduction of cost and competitiveness with conventional brown fuel generation and 2) the cost reductions in the battery storage market.
A key metric for project finance entities, PV LCOE has been significantly reduced by ongoing year-over-year cost reductions of PV hardware, balance of systems (including installation methods) and financing. The result has been a robust PV market both in North America and globally at a time when government support has been steadily declining. (LCOE is defined as all the expense line items of a PV system’s installed cost + the total lifetime cost of the PV system divided by the total amount of energy output in kW hours that the system will put out over its lifetime. A simple LCOE calculator here). A signifcant recent example is SunEdison’s utility scale PV project for the City of Austin which is supplying energy in year 1 at just under $0.05/kWh as part of a 20 year supply contract. This contract will likely save the city’s electricity rate payers money compared to conventional brown fuel sources.
The most interesting data in the Lazard report is the all-important progress of energy storage cost and performance. Renewable energy has large value generally when the renewable fuel source is available–when the wind is blowing or the sun is shining. For example, in the early evening a solar array is winding down production at a time when the peak energy demand on the utility grid is still elevated. Solar battery storage significantly increases the value of solar during this time, as solar power stored in the batteries can service this demand at a competitive cost depending on the location.
In addition, solar battery and other storage media can also provide voltage, frequency regulation (Hz) and ramp rate control for PV systems, which enable grid operators to have more control and confidence in the interegrity of their grid with a large number of intermittent distributed resources on their systems.
Notably, energy storage is not required for renewables solely because of their inherent intermittent generation function. Some of the Independent System Operators who manage the transmision and distribution grids nationally need storage throughout their grid to manage their ongoing demand response and frequency regulation challenges. This is due mainly to localized issues such as in the PJM ISO where they have a dearth of energy generation and other grid architeture issues. PJM embraces and rewards energy storage operators whose storage, placed strategically throughout the grid, helps them smooth out demand spikes and control frequency swings.
In a future post I will review the various storage technologies including battery, compressed air, hydro and thermal.
Employment change and family transitions in the last 18 months limited my time for blogging on the industry. Thanks to everyone who sent inquiries regarding my publication schedule and your questions and suggestions for future posts.
For 2014, I plan to spend more time on the subject of sustainability and the interaction point with energy generally and solar energy specifically.
2013 was clearly a large indicator of things to come. Super Storm Sandy, the decline and near extinction of the Monarch butterfly, the North Atlantic cod fishery collapse, Typhon Haiyan, extensive Australian drought and on and on. As a species, we humans are overunning the earth’s ability to support the systems that support our way of life. We are in massive ecological overshoot to the point of needing another 50% of earth’s renewable and non-renweable resources to meet our rapcious needs. Overshoot meaning when a population exceeds the long term carrying capacity of its environment.
From a great piece by Haley Smith Kingsland of the Global Footprint Network in Huffpo: ”Most Americans might be surprised to discover that it would take the ecosystems of 1.9 United States to regenerate the ecological resources U.S. residents use annually. Were Italy’s residents to use ecological resources produced solely within their country’s borders at their current rate, they would need 4 Italys. Japan’s residents demand the ecological resources of 7.1 Japans. It would take 1.8 Indias to support India. Egypt uses the ecological resources of 2.4 Egypts, and China the resources of 2.5 Chinas.”
The pace at which this overshoot problem is accelerationg is alarming as it exceeds even the least conservative modeling projections by the acedemic and scientific communities. How do we reign this in with all the competing nationalistic, econonmic and even religious factions?
It’s no secret that solar PV module costs have plummeted in the last 24 months. The improvements in non-module balance of systems (BOS) and installation processes are now leading the total installed cost reduction assault with less publicized but equally significant developments in solar PV hardware, software, process and logistics.
One intriguing development has been Gehrlicher Solar’s development and use of ground mount installation robotics to reduce the cost of installation of solar PV modules in the field. (disclosure – this author works with Gehrlicher) A great video of this robotic system in use can be found here.
Over the last 15 year’s, Gehrlicher has lead this BOS cost reduction race on a number of fronts including quick install racking, cost reducing wiring harnesses and other BOS components under the Gehrtec® brand. The company recently installed 34MWp’s of ground mount hardware and solar PV modules in 10 months in Germany which is a stunning illustration of this BOS progress.
€1/Watt ($1.50/Watt in US) installed is just around the corner, stay tuned!
I had the opportunity to attend the US Department of Energy’s inaugural lecture series “Energy AllStars, What’s Our Energy Future” in Washington DC on January 19. Dr. Steven Chu, outgoing Secretary of DOE gave another one of his adroit and compelling presentations, which started with a comparison of how technology solved an environmental problem caused by transportation in the late 1800’s – namely that major American urban centers like New York and Detroit were being fouled with 3 – 4 million pounds of horse manure and 40,000 gallons of urine per day by horse drawn carriages. A technology transition—the rise of the automobile—solved this problem in less than 30 years.He went on to show how the dire issues facing us as a result of climate change and its cost to insurance companies and taxpayers presents another technological and economic solution transition opportunity: this time with clean energy and energy efficiency. Dr. Chu’s presentation is one that the President Obama should give to the nation.
As compelling as Secretary Chu’s presentation was, the one that followed, by the energic and former Governor Jennifer Granholm of Michigan, really got my attention. She outlined her experience of being powerless, despite valiant efforts, to stop manufacturing flight from Michigan and the resulting collapse of the middle class. But the Governor then outlined her Clean Energy Jobs Race to the Top proposition that is modeled on the highly successful Department of Education’s Race to the Top program. This program leveraged $4.5B in American Reconstruction & Reinvestment Act (aka stimulus package) funding by making competitive grants to state governments that instituted education reform and showed progress in many categories of improved education statistics. It’s a successful program that has received bipartisan accolades.
As Governor Granholm outlined, the beauty of this program is that it becomes non-partisan – who would say no to funds that are being offered on a structured basis that provides real value to each state? It respects the states and federalism while it builds on the leadership already demonstrated by many states on climate change, clean energy, and energy efficiency.
Her Clean Energy Jobs Race to the Top program would be on an opt-in basis working with a funding level similar to the Department of Education program. The price for entry would be to establish both demand side and supply side strategies. These include enacting a state level clean energy standard of something like 80% by 2035, establishing innovation centers via industry and education partnerships, and producing technology and clean energy that is indigenous to each region. Each state would do an analysis of its strengths and weaknesses and hone in on a strategy that would leverage their region’s unique capabilities. The overall goal is to show how many jobs can be created.
With the government stimulus program over, the question is how to fund a program like this given the current sad state of Capitol Hill. Governor Granholm posited 2 ideas that would be difficult but could be achieved. One is to leverage philanthropic foundations such at the Bill & Melinda Gates Foundation, Google and others, where they provide capital that can then be matched by other private and government sources. The second, and I think the most interesting, is to repatriate some of the large amount of corporate money now offshored in tax havens with a program that would have low tax basis for investing in the program, resulting in enormous business opportunities that would benefit all of US industry.
Clearly there are many questions and challenges to this proposition but the basic framework she provided is clever, could have legs and create massive change with little money spent. To paraphrase the Governor, “Truly, we have an obligation as a nation to fix the problem of the hollowing out the middle class and to achieve energy independence by creating clean energy jobs.”
Gem of a video here showing the progress of PV solar energy proliferation in Germany. (runs fast, so freeze frame to digest statistics) Now 21% of the energy mix, renewable energy in Germany has provided 380,000 jobs and a road map for other countries to follow. Over the last 12 years of successful policy implementation, PV solar energy (near 10% of German energy) has eliminated the energy peak in Germany which is reducing costs and environmental degradation considerably while increasing energy security.
Germany is demonstrating that a large number of distributed renewable inputs from solar and wind can be integrated successfully into the grid infrastructure without stability or reliability issues. This is a common misconception about intermittent generation sources that, after 12 years of operation, the German market has proved otherwise.
Germany is also demonstrating that the distributed generation model works and is real threat to established utilities working in the standard centralized model used the world over. While its easy to be in the solar energy and say that we may
have the utilities on the run in the near future as distributed generation makes in roads, that one side “we win” mentality is a no win proposition. It would be prudent for utilities and the renewable industry and government to work together on policy and a road map that takes into account the enormous past and current investment of the utilities in existing infrastructure while following an economic and technological road map that leads to a smooth and profitable transition to a distributed generation model for all stakeholders.
Some interesting snippets from Energy Rebellion, the producer of the video:
. . . . . . . solar gold rush that lead to investments around the globe was mainly driven by demand in Germany up until recently. The first effects of this rush is prices for PV-solar systems have fallen by up to 70% and continue to decline.
. . . . . . . today industry experts claim that photovoltaic & multi-kWh energy storage will become the cheapest source of electricity even in OECD countries within the next 10 years. This will lead to a very fast structural change of the entire world economy.
. . . . . . . . large scale market development has just started, but with 24.5 GW of PV-Solar capacity installed on more than 1 million roofs in Germany, the first signs of this new industrial revolution can already be observed. For example even during the dark & windy winter month of January, PV-solar produced up to 7 GW or 10% of peak-load demand in Germany. When a deadly cold wave brought the fossil & nuclear dominated energy system of France close to collapse, German PV-solar kept many gas & oil fired power plants offline, which significantly lowered the spot-prices at the European Energy Exchange.
With the PV industry, nothing is as it seems. The industry is influenced by a myriad of technological, business, economic and competitive forces both inside and outside the industry. Current media rhetoric holds that the industry is crashing (more on this erroneous assertion in my next post) and the finance community is fleeing the industry. The latter claim couldn’t be further from the truth.
While working on various PV project developments over the years, I often heard from finance entities that they viewed solar PV energy as highly risky, which created a higher cost of capital and demands of higher IRR’s, among other negative effects. As one partner from a large national bank said, “We know how to finance a combined cycle natural gas plant – the entire product comes from GE or other well-known sources and the technology risk is well understood. With PV projects, there are a number of different component brands which make up the generation asset along with a number new variables that we don’t know or understand. It has our risk antennae up significantly.”
But in the past 12 months, and most recently at the REFF 2012 in Manhattan, I am consistently hearing from marquee finance entities that they now view a PV generation asset no differently from other assets, as the risk and business models are now well understood. This is a major milestone for the PV industry, and when combined with the inflection point of declining solar PV energy cost at retail parity with brown fuel generation cost, bodes well for the continual growth of the solar energy in the next 5 years and beyond.
The standard PV panel design is essentially a 30+ year old packaging scheme, whether you are talking about crystalline technology or thin-film (glass on glass). It is a form factor that has served the industry well up to this point, but as my readers know, I believe it is keeping the pace of PV adoption from increasing further. I have long been a proponent of new, lightweight, aesthetically pleasing, and easier-to-install PV modules. While flexible thin-film has enabled some interesting products from a limited number of vendors, desirable economics and durability for these products is a long way off.
Enter Armageddon Energy with their unique, well thought-out product, the SolarClover. Clover is a completely new form factor which packages high performance mono-crystalline PV cells on a hexagonal , extruded plastic-aluminum sandwich backing, with a unique polyamid front sheet. Heavy, costly glass and metal framing is eliminated and the resulting product is unbelievably light. The hexagonal modules are then placed on a simple metal tripod racking system which utilizes 3 quick bolts for assembly. Each tripod has a micro inverter and holds about 450kW of rated output, takes less than 10 minutes to assemble and less than $100/kW to install. Industry average for residential solar installation is $300+/kW to install. Plug and play solar deployment has arrived.
SolarClover shipment packaging is IKEA style flat cardboard boxes – an entire 1kW AC system fits into a standard contractor van, in one truck roll. And while it’s tempting to look at this product for the DIY market in an outlet like Home Depot, Armageddon is targeting professional tradesmen like roofers, plumbers and electricians to handle installations. The company provides a clever and patented low cost tool for determining siting applicability – shading, roof orientation, etc. – called the Clover Analysis Tool (or CAT) which substantially lowers the challenges for experienced contractors already servicing the general residential market place but with limited solar energy experience.
SolarClover is centered on providing visually pleasing PV systems to the smaller size residential market where a standard 1kW to
2KW Clover system can add enormous cost reduction to electricity consumers with high utility rates, especially in places where peak demand charges are present. Pricing is currently just under $6/Wac with the expectation that scale-up of manufacturing and operations will reduce cost substantially.
Mark Goldman is the high energy founder of Armageddon who clearly has a strong product development and marketing capability and understanding of this market niche. “We’re focused on the utility consumer who only needs a small PV system, and we wanted to provide those consumers with a system that can be easily installed by their current contractors and is a really elegant addition to the architecture of their home. We look at the electric grid as a system we’re optimizing for the small residential consumer who will experience significantly lower electricity bills and a quick return on their solar investment.”
Interestingly, Solar Clover has real applicability in the military market in operational and forward deployed environments where simplicity, light weight, quick set up and break down, and high performance are key attributes. More on this later.
Solar Clover is not without its technology and market challenges. They include things like solar cell packing density, snow loading durability and a small installation cost (difficult for installers who are used to commanding larger invoices). These are engineering and marketing issues common in new technology commercialization and Mark has a solid roadmap to mitigate and overcome these challenges as volume increases and his technology partners innovate along with him.
This is exactly the kind of form factor innovation that the industry needs to significantly broaden the appeal of PV through lower cost, ease of installation and aesthetics. Early adopters, this is your product and who knows, maybe this is what I will put on my own roof during a planned renovation.
The US PV industry as a whole is grappling with the solar import tariff petition by Solarworld which presents an interesting set of American made, American protectionist, and
wider global trade issues. A great recap with citations of this complex situation which may result in substantial tariffs on solar PV modules that contain crystalline solar cells made in China can be found here.
Within the US federal agency PV market there is another set of complex American content regulations called the Buy American Act (BAA). (Not to be confused with the now expired and poorly written ARRA Buy American clause which governed rapid release of stimulus funds) The BAA requires that products purchased by the federal government must contain 50% or more US content, with finally assembly done in the US. It sounds simple, but is highly complex to execute, with numerous contradictory requirements and a number “if this, but not this, then this” situations.
Solar PV modules that are sold to federal agencies fall under the BAA. Fortunately, when it comes to crystalline PV modules, determining which modules are BAA compliant is slightly less complex. The following is meant to clarify the basic situation but does not dive down into the many permutations and “what if” scenarios.
To gauge whether a solar PV module is a fully BAA compliant product, the bill of materials (BOM) needs to be examined. As the example industry average BOM to the left demonstrates, if the solar cell is not made in the US with final assembly in the US, the module cannot be BAA compliant. This is because the solar cell makes up at least 65+% of the completed module, depending on module design and provider.
While it’s fairly clear from this example which solar PV modules should be BAA compliant, the situation is confused by wording sometimes found in solicitations from US government agencies, such as: “ Products and materials employed to fulfill this project must be Buy American Act compliant but applied in a manner consistent with United States obligations under international trade agreements.” These trade agreements include World Trade Organization Government Procurement Agreement (WTOGPA), General Agreement on Tariffs and Trade (GATT) and other international trade agreements all of whose products are treated equally with American made goods provided certain requirements are met. A good overview of the laws can found here which includes a list of countries with whom the US has signed agreements. Notably for the PV industry, China is not included.
As there is currently no guidance for which modules comply in which circumstances, it may be helpful to think of the situation in tiers, which prioritize the intent of the BAA act:
Tier 1 BAA Compliant PV Modules: Solar cells are made in the US with US final assembly
Tier 2 Trade Treaty Compliant PV Modules: Solar cells made in treaty country with final assembly in US
Tier 3 Trade Treaty Compliant PV Modules: Solar cells made in treaty country with final assembly in treaty country
This is admittedly a simplified explanation but puts the majority of module companies in easy to understand buckets.
Unfortunately there is no official BAA module list vetted independently under direction from a qualified agency. The US Department of Energy has provided a vetted list of lighting products which meet BAA and performance claims, so that government procurement and industry have a clear guideline on which lighting products are acceptable for a given procurement. An agency such as DOE or DoD energy should create a similar vetted list for PV modules, given the expansive planned use of PV in the next 10 years.
This topic is becoming increasingly important as PV systems are deployed in public private partnerships such as PPA, ESPC, UESC and other models where the government buys the energy from the system but not the system itself. This type of procurement puts the onus on the project awardees to self-certify BAA compliant modules with no guidance, oversight or penalties from the procuring agency.
And with many non- trade compliant PV module companies boldly claiming BAA compliance with modules made completely outside the US but with simple junction box installation in the US, now would be the time to put a vetted BAA qualified list in place before the problem escalates both programmatically and publicly.