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As I have wrote previously here, here and here, retail solar grid parity has been achieved in some markets with a large expansion coming the next 3 years around the globe.

A recent industry survey by Applied Materials confirms the acceleration of grid parity as the price of silicon and modules continues to drop. A great graphic set from their survey conclusions blog post can be found here.

Also, Shayle Kann at Greentech Media has a great piece about grid parity and the pitfalls in how the term is used and cloudy expectations about achieving parity at both retail and wholesale pricing levels.

Numerous solar industry analyst forecasts and media articles herald the U.S. as the next big market opportunity for global PV solar energy suppliers. Many offshore PV industry

State RPS Program Driven or ITC Driven?

companies have been setting up distribution and facilities across the country to position themselves for this growth opportunity.

At a recent Wall Street alternative energy conference, progressive utility CEO David Crane , a strong solar energy supporter, gave his view about government support for renewable energy. The federal government is too paralyzed to produce any meaningful support policy via either climate change or energy legislation, says Crane, but the renewables business will move forward strongly on the strength of state level legislation.

While the state-by-state paradigm has been credited with slow but steady solar energy growth in the U.S., the mid-term elections of 2010 resulted in new legislators in various states who have been reversing support mechanisms for clean energy and climate change mitigation.

The most recent example is New Jersey Governor Christie’s recent reduction in the state renewable portfolio standard (RPS) target (30% by 2021 now 22.5%) and language that may remove enforcement teeth for meeting the threshold by making it voluntary for utilities.  (An RPS is a requirement for utilities to produce or buy and sell a certain percentage of renewable energy to their customers.) He also withdrew New Jersey from the highly successful Regional Greenhouse Gas Initiative, an alliance of nine North East and mid-Atlantic states.

Seven other states have quietly reduced their RPS mandate and diminished or eliminated penalties for non-compliance by the utilities in the last few months.

Governor Christie and other detractors of RPS mandates routinely cite escalating costs to ratepayers (utility customers) for their lack of support. Christie believes the RPS is an “unreasonable transference of wealth from ratepayers at large to solar developers.” But an extensive Lawrence Berkeley National Laboratory RPS report in 2010 and more recent studies show that the “cost is a fraction of a percent.” Tiny by anyone’s standard.

The trade off, producing more clean energy which reduces health care costs and environmental damage costs (compared to burning fossil fuel) while creating a high number of quality jobs (17 jobs per $1M spent vs. 5 jobs per $1M spent in oil & gas sector)  in a new economic ecosystem, for that small cost, would seem like excellent bang for the dollar spent. Am I missing something here?

Source: Lawrence Berkeley National Laboratory

The chart above shows the projected amount of installed capacity (in yellow at top) if current RPS programs are kept in place. Approximately 6 million tons of C0₂ would be displaced annually if achieved, along with elimination of large amounts of ground level particulate pollution.

With the rapid reduction in the installed cost of PV systems, declining RPS programs may become less important in regions where high utility cost and other factors line up to make winning project proposals that are close to retail cost grid parity (including only the federal ITC incentive) in the very near future.

Recent, high frequency, global extreme weather events are affecting crop yields and increasing negative feedback loops, not to mention causing significant loss of human life. I am deeply concerned about the near term, current generation effects of climate change. With C0₂ levels now approaching 400 parts per million (350 ppm is the generally agreed tipping point) these decisions and others like it are reckless and irresponsible in my opinion.

In support of countries planning on participating in the United Nations Reducing Emissions from Deforestation and Degradation (REDD+) program, NASA’s JPL has produced the first accurate carbon inventory map for Earth’s tropical forests in 75 countries.

Source: NASA JPL

The map, devised from highly accurate terrestrial and space-based measurements (over 3 million data points) shows the amount, location and distribution of tropical forest carbon storage. Most of that carbon is stored in the extensive forests of Latin America (49%).

“This is a benchmark map that can be used as a basis for comparison in the future when the forest cover and its carbon stock change,” said Sassan Saatchi of NASA’s Jet Propulsion Laboratory in Pasadena, Calif., who led the research. “The map shows not only the amount of carbon stored in the forest, but also the accuracy of the estimate.”

Stunningly, 15 to 20 percent of global carbon emissions are as a result of deforestation and forest degradation. The majority comes from tropical forests because they store vast amounts of carbon in the above ground wood and in the roots. A large amount of carbon is released into the atmosphere when trees are removed, burned or left to decompose. The UN REDD program is designed to assist and reward countries for conservation and management of their tropical forests by placing a financial value on the stored carbon.

About 10 billion tons of carbon is released annually from both forest burning and land use changes in the 75 countries. In total these countries’ forests hold about 247 billion tons of carbon.

Continued weekly monitoring of various entities throughout the supply chain shows the average selling price (ASP) on the spot market continues to decline in all categories except the inverter.

Of particular note is the sharp drop in poly silicon ASP from the previous week. Its widely believed that the efficient silicon refiners cost basis is approximately $25 – $28/kg and we may well see further substantial reductions if the demand situation remains week.

While the data above is sampled broadly from Tier1, 2, and 3 providers, the weaker entities with little or no bankability status will be feeling the pressure, soon, to idle further production and in some instances find an acquirer. Over the last 5 years, there has been speculation about consolidation of the many industry manufacturers when demand has temporarily weakened. This current market demand bust may be the one that results in bankruptcies and acquisitions of the lower tier players. The large Tier 1 players with weak cost structures are looking for strategic partners or majority acquirers such as the deal we saw between Sunpower and Total last month. This may also be the opportunity for the mega sized electronic manufacturing services companies like Flextronics, Foxconn and others substantially grow their PV industry presence with acquisitions.

In response to questions about how a solar cell operates, how labor cost aren’t a big component of the module price and the technology differences, following are a few videos that provide some answers and detail.

1) Energy 101: Solar PV

A great video for the U.S. Department of Energy on the basics of photovoltaic’s. Good visual on how a solar cell converts photons to electricity toward the end.

http://www.youtube.com/watch?v=0elhIcPVtKE

2) Crystalline Module Manufacturing

Corporate video from Spire, a leading U.S. based module assembly company that provides automated module production machinery.

http://www.youtube.com/watch?v=HUO3MDH_4Qo

3) Crystalline Solar Cell Manufacturing

Somewhat outdated corporate video from Q-Cells (no longer 2^nd largest cell manufacturer) but gives a good view of the manufacturing facility.

Module Assembly - Stringer Tabbing

http://www.youtube.com/watch?v=9KECQS-W6xg

4) Amorphous Silicon Micromorph Thin-Film Manufacturing

Sungen corporate video (apologies for the background music!) with good visuals and narration on the process.

http://www.youtube.com/watch?v=fNwZrKR4gRI&NR=1

The weekly update shows average sales price on the spot market still declining in all categories with the exception of inverters.

With inventory likely backing up at manufacturers, distributors, integrators and installers, many PV manufacturing companies have announced idling of production capacity. An example is REC’s recent announcement here.

It’s likely that the price bottom is near. With the corresponding drop at the installed cost level, many projects on hold that had borderline financing attributes in Germany, Italy and the U.S. will now go ahead as retail grid parity will become the norm in high utility cost regions. In addition, the race is on in Germany, again, before the next ratchet down in subsidy program. Q4 and Q1 2012 may see a return to manufacturing capacity utilization growth and normal 3 month inventory work through.

Lowe’s Companies, Inc., the second largest do-it-yourself retailer (1,750 stores), is now offering a Sungevity solar system lease option at their stores in select

Solar PV Reaching the Masses

California locations. The company also announced that it had purchased a 20% ownership stake in Sungevity, Inc. with terms not disclosed. Lowe’s joins Home Depot in the segment that already works closely with residential solar lease companies Solar City, Inc. and SunRun, LLC. While both home improvement companies offer solar programs with a concentration on California, they also have plans for, or are operating in, Colorado, Delaware, Maryland, New Jersey, New York and Massachusetts.

No Upfront Cost - Source: SolarCity

The residential solar lease has quickly gained traction (in select states with adequate government support) as it removes the upfront cost of the PV system installation, and even though there is a monthly lease payment, the overall benefit is a lowering of the monthly residential utility bill of up to 25%. The lease company monitors the system and provides maintenance.

On the Sungevity website, the company advertises “Pay $0 down,” “Save 15% on your electricity bill from day one,” and “we’ll guarantee in writing how much energy your system will produce each year and, if we fall short, we’ll pay you for the difference.” It is fairly compelling marketing.

For the Lowe’s relationship, Sungevity will provide in-store quotation kiosks in 30 California stores. The Sungevity kiosk runs their proprietary iQuote web based application, which provides users a quote for their home location within 24 hours.  After the customer inputs location and estimated energy use, iQuote accesses satellite imaging of the roof and surrounding vegetation and then ties that information in with historical solar radiation, government incentives and other variables including the cost of utility-provided power. The final quote provides a customized projection of how much money will be saved on the utility bill along with an artistic rendering of the how the installation will look. Local, certified installers who work with Sungevity, install the system.

The best investment return for a residential solar system is for the homeowner to own and operate it themselves, net meter the excess energy to the utility and secure the government solar energy incentives. But with the average residential system costing $16,000, the solar lease is a great option to having the benefits of solar without the upfront cost. As the Sungevity CEO Danny Kennedy said, ““Our goal is to take this solar offering to the masses across the country.” The big box home improvement retailers should be a great conduit for solar leasing companies to reach those masses.

Following up on my 4/22 and 4/29 solar energy supply chain posts, the average selling price (ASP) of the main PV system components is still in decline across all categories as demand weakens further and manufacturing capacity continues to build.

Many industry observers believe that pricing will stabilize in 2H 2011 as inventory is worked through now that the Italian subsidy program has finally been announced giving markets some certainty. In addition, other markets (U.S., China & India) should continue to ramp up. Whether these markets can ramp quickly is the main question.  With global 2011 demand figures ranging from 16GW to 22GW (Tier 1 Asian manufactures can supply 15GW) and manufacturing capacity heading toward 30GW, the picture is not good for module manufactures with high operating leverage and weak balance sheets. Overall, this is difficult market to forecast demand and supply chain pricing will continue to slide with this lack of demand clarity.

Courtesy of the U.S. Department of Energy’s Solar America Cities program, the PV Cost Calculator is a system modeling tool, which computes and then provides various visualizations of solar PV’s trend toward retail grid parity in the next few years. The calculator is designed for residential (4kW size) and small commercial (20kW) installations. Retail grid parity is when the levelized cost of energy is same as retail priced energy from the utilities in a given region.

Modeling grid parity, whether in front of (retail) or behind (wholesale) the utility meter, is a notoriously difficult endeavor due to the large number of variables. The PV Cost Convergence Calculator models a complex set of variables that are highly dependent on local issues.  It takes into account long term federal and state incentives and provides a 20 year analysis period.

The screen shot below is for a 20kW commercial system using a moderate scenario – 4% increase in conventional utility energy cost and moderate decrease of the PV system price. With this scenario, the majority of Solar America Cities are at or below retail grid parity in 2012.

Dotted line - utility cost with 4% annual inflation

The PV Cost Calculator makes a number of assumptions to simplify the calculation set and is meant as an illustration for Solar America program cities.  Another DOE agency, The National Renewable Energy Laboratory provides a sophisticated, detailed PV system modeling tool called the Solar Advisor Model (SAM). SAM makes performance predictions and economic estimates for grid-connected solar systems. The SAM model calculates the cost of generating electricity based on information you provide about a project’s location, installation and operating costs, type of financing, applicable tax credits and incentives, and system specifications. The SAM model is an invaluable tool for feasibility modeling of a proposed project and for working with project financing entities. Its also an interesting tool which we use for targeting the sales process of PV system components.

Netscape was an early Internet browser company that went public with startling success in 1995 and kicked off an IPO binge for companies

The Infamous IPO

associated with the World Wide Web. With the historic IPO and subsequent Netscape stock performance as a result of their 90% marketshare, bankers where screaming for any fast growing Internet companies that could have the same IPO performance and returns.  The resulting number of IPO’s was nothing short of spectacular.

Over the last 8 years, there has been much discussion about when the Netscape moment would arrive for the renewable energy industries. Many thought it would be triggered by putting a price on C0₂, some thought it would be a new disruptive technology company, and some thought it would be an enlargement of government subsidies.

Building It Again and Again

It’s difficult to see how the renewable and solar energy industries will have a Netscape moment. As many Venture Capitalists and other investment organizations who did well by investing in IT are experiencing, renewable energy is a one by one, infrastructure-intensive industry requiring large up front capital with longer return on investment timelines. The classic software model – make it once and sell it millions of the times – is not applicable to renewable energy. While the ROI on renewable energy, particularly photovoltaics, is on par with IT industry returns, more patience is required.

The energy industry is also highly regulated by governments in most locales globally which creates distorted market signals and tends to holds back “irrational exuberance” in the market.

In reality, I don’t believe there is going to be a renewable energy moment with one company setting off an IPO binge. It has been, and will continue to be, a longer, smoother growth curve with a number of significant events along the way that demonstrate value and scale. I believe we are entering that time frame now, as evidenced by recent global events:

• The renewable energy market expanded during the global economic slowdown of the past 3 years. In the solar industry growth exceeded 40% YOY during this time.

• Total SA (FP), Europe’s third-biggest oil producer, agreed to buy as much as 60 percent of SunPower Corp. (SPWRA) for $1.38 billion.

• U.S. Department of Energy (DOE) has conditionally committed to provide US $1.37 billion in loan guarantees to support the financing of BrightSource’s Ivanpah 400MW Solar Electric Generating System, one of the largest solar thermal systems in the world.

• After 10 years of development, 140MW CapeWind received final permitting and global wind energy installed capacity is expected to reach 707GW by 2015, meeting 20% of global demand.

• A rapid decrease in the levelized cost of photovoltaic solar energy systems is enabling $3.00/W installed cost for larger systems with $2.50/W in sight for 2012.

• A rapid increase in global fossil fuel costs (coal, oil and gas), and the recent Japanese nuclear disaster, are allowing renewable energy to achieve grid parity sooner than industry forecasts predicted.

The solar energy Netscape moment has been happening slowly but relentlessly. The business model differences between IT and Renewable Energy combined with government regulation of energy markets suggest that the Netscape “moment” will be more like the early days of large commercial agriculture. Highly profitable companies where slowly but consistently building revenue under government regulation and the finance industry began to consistently invest in companies across the agriculture supply chain.



Following up on my previous post last week on this subject, the average selling price (ASP) on the spot market, based on an informal survey of solar energy supply chain participants for the week ending 4/29/2011 shows:

The weakness in demand combined with seasonal inventory buildup at the distribution level (severe winter weather in Europe in particular) has continued the price pressure.

Of particular note is the pressure on the solar cell and wafer price. The lowest cell price was $0.94 per Watt, which is an all time low and has many manufacturers idling capacity until the demand situation stabilizes or the polysilicon price declines.

The price of the thin-film as a broad category had stabilized last week but this weeks price illustrates that the pressure by crystalline modules price declines requires further thin-film ASP reduction.

At these ASP’s, many in the manufacturing chain will struggle to remain profitable with the exception of poly silicon providers. Across the industry supply chain, the project developers and EPC companies are gaining enormous leverage and will reap the benefits in revenue expansion as a result of previously marginal projects becoming viable.

Some people consider megawatt scale wind turbines ugly and some think they are graceful.

Same holds true for solar energy system installations of any size. An interesting article today in the New York Times titled, Solar Panels Rise Pole by Pole, Followed by Gasps of ‘Eyesore’, focuses on the deployment of individual solar modules on utility poles by New Jersey’s oldest and largest utility, PSEG.

An Aesthetic Enhancement to a Light Pole? - Source: Petra Solar

PSEG, led by forward thinking CEO Ralph Izzo, has been leveraging a technology by Petra Solar which allows solar energy to be inverted at the module level and feed AC energy directly into the grid at the streetlight or utility pole level. The product, which is also Smart Grid ready, takes advantage of already deployed utility assets and turns each pole into a high value energy producer.

The article centers on aesthetics of the pole mounted modules in suburban neighborhoods. While I have always thought renewable energy producing technology is attractive, it’s really difficult to understand the objection of one PV module on each already unattractive light pole. But the 508 comments by NYT readers where mostly in favor and the following 4 comments sum up many of my thoughts generally:

“You know what’s an eyesore, suburban New Jersey? Having your mountaintop blown up and dumped in your stream. Having a hydraulic fracturing well set up shop next door to you. Living a quarter-mile from an aging coal-fired or nuclear power plant. Not only are these eyesores — much, much more than your solar panels — they’re a risk to your health.

Yet this is a reality for millions of Americans. I’m as sensitive as they come about aesthetics, but get over it people. This shows a real lack of awareness and/or concern for the human and environmental costs of the way we typically generate electricity in this country.

Personally, I would pay more to live in a neighborhood with these solar panels. “

“I see those solar panels as objects of pride. The community has moved in a direction that we all need to go. It is a badge of honor (protecting the environment), and evidence of sane planning in an era where carbon fuels are destroying the earth.

Be happy and glad, New Jersey. The entire nation envies you!”

“Count me in as a New Jerseyan who doesn’t even notice the ugly utility poles directly outside of my door, and certainly barely notices the solar panels. The pole has got transformers, wires and a street light hanging onto it, in addition to cables for power and TV–it is what it is.”

“My family lives on a pleasant tree-lined street in a central New Jersey town, and we are thrilled that even this token solar project is being implemented on such a wide scale. I wouldn’t want a coal or nuclear plant next door, but a few small solar panels attached to utility poles? YIMBY – Yes, in my back yard.”