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Venture Capital is Missing The Solar Train!

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On a day when the Wall Street Journal sings the praise of how much capital is flowing to solar companies like SunRun and Sungevity, Minh Le, director of the Solar Energy Technologies Office, stands before a group of over 800 participants of the SunShot Summit. As the Department of Energy helps solar companies across the country cross the proverbial valley of death, the success rate is remarkably high. So high in fact, it appears that the data is showing venture capital that early stage solar makes financial sense.

$1.8 billion dollars of direct corporate investment for SunShot award winners is the statistic and that does not include the project finance capital used to invest in projects which brings the total to over $3 billion. Regardless of the success of SunShot, there is little doubt that investors are not doing early stage investing in the space. A fact clearly pointed out by Rob Day of Black Coral Capital in his recent piece. Rob knows what he is talking about; his twitter handle is @cleantechvc.

Let’s point out the reasons that SunShot is having success and why there is much more room for VCs to participate in this market. Having the private market replacing the Department of Energy is a reality that top brass at SunShot are hoping for, they do not, in fact, want SunShot to be the early stage investor in the space if the private market is willing to take over.

SunShot has a public goal of bringing solar costs to $0.06 per kWh, which according to the recent procurement by Austin Energy of $0.05 per kWh is already happening but not for the everyday market. The goal is listed as 60% accomplished and the outlined path includes many different parts of the market, creating investment opportunities for all types of venture capitalists.

Solar is a huge market, growing 10x since 2009. It also retains many inefficiencies in the soft cost side of the development structure. An important factor since many VCs look at solar as a sector where they took a beating in the past investing billions in big manufacturing plants. Soft cost inefficiencies are addressable by “3 founders and an iPhone app” according to one panelist at the summit, meaning it is not a capital intensive endeavor. The appetite for soft cost reduction is also there as companies continue to partner and acquire whenever possible.

Soft costs represent 64% of the cost structure according to the SunShot team and that is the opportunity the market with the help of venture capital could and should address. SunShot is accepting approximately 5% of applicants, lower than Harvard but higher than current VC investment in the space. With $1.8 billion in follow on investment, a SunShot syndicate portfolio would surely represent a healthy return to VC limited partners. In simple terms, SunShot says the private investment has been $18 for every $1 of their public investment. Let’s assume a conservative $3.6 billion in valuations (aggregate) and the return to a $100 million ‘fund’ would be quite impressive.

The success rate is proven by the SunShot experiment. Can the investment community look at solar, particularly very early stage, as a valley of opportunity instead of the proverbial valley of death. SunShot is doing its part to de-risk but we cannot expect that to last forever.

Original Article on The Solarserver

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Minnesota’s Value of Solar

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In March 2014, Minnesota became the first state to adopt a “value of solar” policy. It may fundamentally change the financial relationship between electric utilities and their energy-producing customers. It may also serve as a precedent for setting a transparent, market-based price for solar energy. This report explains the origins of value of solar, the compromises made to get the policy adopted in Minnesota, and the potential impact on utilities and solar energy producers.

The Value Of Solar Concept

The basic concept behind value of solar is that utilities should pay a transparent and market-based price for solar energy. The value of solar energy is based on:

  • Avoiding the purchase of energy from other, polluting sources
  • Avoiding the need to build additional power plant capacity to meet peak energy needs
  • Providing energy for decades at a fixed price
  • Reducing wear and tear on the electric grid, including power lines, substations, and power plants

Value of solar is not like net metering, where producing energy reduces your electricity bill just like turning off a light. Fig. A illustrates the difference between net metering and value of solar in Minnesota. It also highlights a few key features of the adopted value of solar policy, including the 25-year contract, and the use of bill credits rather than a separate cash payment.

Minnesota’s Value of Solar

As adopted, Minnesota’s value of solar formula includes all of the basic components of the theoretical policy. The following chart (Fig. B) shows the relative value of the various components, and the total value, based on early estimates filed during the proceedings at the state’s Public Utilities Commission.

A Caution

Although Minnesota’s value of solar policy is a national precedent, the adopted policy had some good elements that were lost in the legislative process, elements that other states may want to revive. The following table (Fig. C) illustrates:

The Impact on Utilities and Customers

Value of solar offers something for everyone. For utility customers, a 25-year contract at a fixed price makes solar financing much easier, and as the cost of solar continues to fall, quite lucrative.

For utilities, the transparency of the market price means no concerns about cross-subsidies between solar customers and non-solar customers. It means a payment for solar energy uncoupled from the retail electricity price.  It may also mean a potential for cost recovery on payments made to solar producers, something not allowed with net metering. In Minnesota’s case, it also means free access to solar renewable energy credits, at a substantial savings compared to credit prices in states with competitive credit markets, i.e. New Jersey, Pennsylvania, etc.

Will Value of Solar End Battles Over Distributed Generation?

If Minnesota utilities report favorably on the value of solar, it may change the debate in other state battlegrounds over distributed generation.

The value of solar delivers a transparent, market-based price for solar. It solves problems for utilities and for utility customers around compensation for distributed renewable energy generation. But its ultimate success lies in whether electric utilities can be convinced that accommodation of customer-owned power generation is in their best interest, or whether any concession of their market share is a deadly threat to their economic livelihood.

This article was first published on the Institute for Self-Reliance website

Original Article on The Solarserver

Solar PV in Latin America

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With the slowdown in growth and contraction in European PV markets in 2012 and 2013, many in the solar industry have been wondering where the next big market will develop, and many have been considering the potential of Central America, Mexico, the Caribbean and particularly South America.

It is easy to see why. The region offers strong market fundamentals, including high retail electricity prices, growing populations and economies which drive the need for more electricity generation, and in areas like Northern Chile and Northern Mexico, some of the best natural solar potential in the world. Additionally, the policy environment in the region has been improving, with Brazil and Mexico passing net metering policies in recent years.

This has sent developers flocking to propose large projects in the region. However, there are still many barriers to development, and the details can be unique to each nation. Some of these include not-yet-developed local solar industries, bureaucracy, transmission limitations, a lack of supporting policies, and difficulty securing contracts to sell power and funding. Despite the ambitions of many developers, the process of moving projects from the planning stage to construction has been much slower than many had imagined.

With this in mind, Solar Server brings you an in-depth look at Latin American PV markets.

Market development: Pioneering projects

Latin American PV markets have not developed as have PV markets in Europe, the United States and Japan where the residential sector led the way to increasingly larger PV projects in the commercial and utility sector. Instead, in many places large PV projects have been developed and built in nations that have small to non-existent PV markets and industries.

The first large-scale PV plants in Latin America were located in Southern Peru, where Gestamp, Solarpack and T-Solar commissioned two PV plants totaling 40 MW in mid-2012. However, these landmark projects appear to be largely a one-off, and the nation has no significant PV market at the residential or commercial scale.

The AES Illumina is the largest PV plant built to date in the Caribbean, and one of the first large utility-scale PV plants to be built in Latin America. Image: Global Energy Services
The AES Illumina is the largest PV plant built to date in the Caribbean, and one of the first large utility-scale PV plants to be built in Latin America. Image: Global Energy Services

The next large PV plant to be built in Latin America was a 24 MW PV plant commissioned by AES in Puerto Rico December 2012. However, Puerto Rico has made a commitment to switch off of oil generation, and was installing smaller PV plants before the AES Illumina, with a modest if notable PV market.

Unfortunately, Peru’s experience has been more typical of the region’s rocky path to growth. When large projects are built, they are not necessarily followed soon afterwards by other projects, and do not necessarily lead to development of other market segments.

 

New market models

Accompanying this very uneven growth, Latin America is seeing an emergence of new market models, including the sale of electricity from PV plants on a merchant basis.

The Aura Solar 1 was groundbreaking not only for its size, but because its power is sold against wholesale market prices. Image: Gauss Energía
The Aura Solar 1 was groundbreaking not only for its size, but because its power is sold against wholesale market prices. Image: Gauss Energía

The next leading project in Latin America, the Aura Solar 1, was built at the Southern tip of Mexico’s Baja California. Here, developer Gauss Energía took a big leap into new territory, by building a 30 MW PV plant that would sell electricity not through a long-term contract, but for wholesale market prices that have no floor under the nation’s Small Power Producer Program. Adam James of GTM Research describes this as a “quasi-merchant” arrangement.

Power market conditions in Baja California Sur play a big part in this decision, as the state experiences high wholesale electricity prices due to its isolated grid and dependence upon imported fossil fuels.

But even under these circumstances, Gauss’ move marks a significant departure for the PV industry, showing that a large project can be built without the backing of a lengthy, fixed-price contract to sell power such as a power purchase agreement (PPA) or contract under a feed-in tariff.

Since that time SunPower has begun construction work on a 70 MW merchant PV plant in Chile, Project Salvador, and SunEdison has built 50.7 MW merchant PV plant in Chile, the San Andres. This is a big move for SunEdison, the PV developer which pioneered the use of the PPA for utility-scale PV.

There is often more going on than meets the eye in Latin America. Yingli Green Energy Americas VP of International Sales Jeffrey Barnett notes that even if the plants are being built on a merchant basis this does not necessarily mean that this is the long-term plan. “The intention is always in the longer term to sign a PPA,” states Barnett. “What these companies are saying is today there is high demand, we feel very comfortable with the downside risk of these merchant projects, because power prices are high in Chile in these particular nodes where they are going to inject power.”

“And as a result, we can take merchant risk for the first three years, because they see very little of it, and once these projects are operating, the intent is to lock in a power purchase agreement a couple of years down the road.”

 

Barriers

These successes with large projects and new models must be accompanied by a word of caution, as many projects in the region have never gotten off the ground.

Latin America is a fundamentally different region than others where large PV markets have developed. Notably, it is a less affluent region than Europe, the United States or Japan, which means that fewer homeowners have the cash or access to credit to afford the up-front costs of PV systems.

It is not only homeowners. Like much of the less affluent and less industrialized world, Latin American nations struggle with access to capital, which can make international support and the role of development banks more important. Coupled with regulatory and bureaucratic barriers unique to each nation, it can be more difficult to bring projects to fruition in the region.

Finally, there is the under-appreciated aspect of culture. The pace of life and business is slower in Latin America, and more emphasis is placed on relationships. All of this can mean that the development of projects will not always happen on European or American timelines.

 

Chile: the long wait

Perhaps no other market has displayed both the high hopes and the hard realities of the region as much as the Chilean PV market. Chile has the largest project pipeline in the region, with over 5 GW approved by the nation’s environmental authorities.

A large number of projects have been proposed for Chile's Atacama Desert, which offers some of the best natural solar potential in the world
A large number of projects have been proposed for Chile’s Atacama Desert, which offers some of the best natural solar potential in the world

This rush of developers to Chile has led many over the last few years to speculate that the nation’s PV market will grow rapidly, and this rapid growth has seemed to be right around the corner for the last two years. While some very large projects have been approved during this time, the nation had less than 7 MW of operational utility-scale PV at the end of 2013.

GTM Research Solar Analyst Adam James notes the disparity between potential and what actually gets built. “There is a very large potential market, but individual projects will depend upon individual business decisions,” explains James.

“A lot of the early gold rush to the Chilean market was by European developers, and there has been mixed success. Developers tried to imitate a business model that they used in Europe and to scale that rapidly, and have failed to do so.”

As for the projects that are moving forward and the ones that appear stuck, geography and off-takers play big roles. Most of the more than 5 GW of approved projects are located in Northern Chile in or around the Atacama Desert, where developers have attempted to sell the electricity to mining companies through power purchase agreements.

And while environmental approval for projects has been relatively easy, the process of negotiating with mining companies has not. “The mining companies hold all the cards,” notes James. “They can sit back and wait for the best deal to come to them.”

James also notes that many mining companies are usually not interested in signing contracts beyond five or ten years, which is difficult for PV developers whose business model is based on contracts of 20 years or longer.

Santiago's demand for power is cited as a factor in the greater success rate of PV projects proposed in the nation's Central Grid (SIC)
Santiago’s demand for power is cited as a factor in the greater success rate of PV projects proposed in the nation’s Central Grid (SIC)

By contrast, fewer projects have been proposed for the nation’s central grid (SIC), but these have seen a higher rate of success. In January and February 2014, SunEdison completed both its 100 MW Amanecer PV plant and the San Andres plant, both of which are connected to the SIC grid. Also on the SIC grid is SunPower’s Project Salvador project, which was under construction at the time this article was published. While on-site solar potential for all three may not be quite as high as in the Atacama Desert, these plants will feed the growing demand for power in Santiago and other cities, and help alleviate capacity shortages.

With to the commissioning of the Amanecer and San Andres plants, Chile reached 150 MW-AC of solar photovoltaic capacity by March 2014, and a rush of project starts has brought the nation to 225 MW-AC under construction. However, this is still less than 10% of the capacity officially approved.

It is also worth noting that Chile has shown an interest in solar thermal and concentrating solar power (CSP). Sunmark completed Latin America’s largest solar thermal plant in 2013 to supply process heat to a mining operation in Northern Chile, and during the year the government also awarded a contract to Abengoa to build a 100 MW CSP plant. This will be the first full-scale CSP plant in the region.

 

Brazil and bureaucracy

Brazil is another market that developers and market analysts have expressed great interest in which has not yet delivered. While Brazil has installed some high-profile PV systems on World Cup stadiums, the overall market remained small in 2013.

Yingli’s Jeff Barnett describes the Brazilian market at “beautiful, brimming and bureaucratic”, noting that the combination of net metering, strong natural solar potential, high electricity prices and poor quality of electricity generation are matched by formidable impediments.

The installation of PV on the World Cup Stadiums has been important for visibility of PV in the nation, however Brazil's market remains small
The installation of PV on the World Cup Stadiums has been important for visibility of PV in the nation, however Brazil’s market remains small

These include a 14% tariff on imported PV modules and inverters. All Brazilian tariffs and local taxes combined add roughly 25% to module prices, and additionally the weakness of Brazil’s currency against the dollar must be considered. Another major problem is that valued-added tax is applied to the output of PV systems under net metering, which impacts the economics of systems participating in the program.

As for the utility-scale segment, many had been excited about public tenders, and here results have been mixed. While zero solar projects were awarded under a national renewable energy solicitation in December 2013, in the same month the state of Pernambuco awarded 123 MW in the nation’s first solar-only auction.

Brazil is also attracting PV manufacturing. Hanergy signed an agreement in 2013 to build a thin-film PV factory in the state of Rio Grande do Sul, and local manufacturer Solar-Par Participações plans to build a vertically integrated 95 MW PV factory in the state of Espírito Santo.

 

Mexico: A first mover

While markets in both Chile and Brazil have taken longer to arrive than expected, Mexico has surprised many by emerging as the clear leader in the region. By the end of 2013 Mexico had 219 MW of utility-scale PV projects under construction, which GTM Research estimates will cause the nation’s installed capacity to triple to 240 MW in 2014.

Adam James of GTM Research calls Mexico a “hotbed for solar deployment”, predicting growth across the board in 2014 and beyond. The largest capacities of announced projects to date are in the states of Baja California Sur, Yucatan and Sonora, on opposite ends of the nation.

Mexico has a generally attractive regulatory and policy environment, including a national net metering policy. The relatively small charge for developers to “wheel” power from one part of the nation’s grid to another is a particular advantage for projects in Northern Mexico, which has strong solar potential but fewer large population centers. Additionally, Mexican development bank NAFIN has been proactive in supporting PV projects in the nation, including the Aura Solar 1.

These advantages have been important not only for solar, but also other renewable energy projects including wind and biomass projects.

There are also good fundamentals in the Mexican residential market. The nation’s retail electricity rates are structured to punish high amounts of power usage, which can create very attractive economics for projects that allow users to access lower rates. GTM Research expects 40-50 MW of PV projects in Mexico’s distributed generation market alone in 2014.

Mexico is currently changing the structure of its electricity sector, with plans to open up state utility CFE to competition on the generation side. This may change important details for solar developers, and may also delay some projects.

“Energy reform will likely be a very positive force for solar development,” states James. “However, because details about the new market structure are still being developed, there has been a temporary delay in development as companies await the new rules of the game.”

 

Other markets

The many other nations of Latin America and the Caribbean offer a range of opportunities. Island nations in the Caribbean are often highly dependent upon expensive imported fuel, with makes for highly favorable economics for PV and other renewable energy projects.

While Puerto Rico has been the most visible leader, there have been a number of projects planned in the Dominican Republic, and Aruba has announced plans to move to a zero-carbon footprint by 2020, including widespread deployment of PV and wind.

Ecuador has also been seen as a promising market, but here regulatory uncertainty is high. The nation implemented a feed-in tariff in 2011, under which more than 100 MW of utility-scale PV projects were accredited. However, the Ecuadorian government has since rescinded many of these projects and only around 10 MW began construction in 2013.

Central America’s solar market is also growing. Costa Rica commissioned its first utility-scale PV plant at 1 MW in 2012, and in March 2013 Panama’s first PV plant at 2.4 MW came online. Additionally, El Salvador has launched a solicitation for 60 MW of utility-scale PV.

As many communities in Latin America do not have regular access to electricity, there is also an interest in off-grid solar in the region. Peru has launched a program to provide electricity using PV to two million residents living who are not connect to the grid by the end of 2016. However, implementation of the program may be difficult as there is little incentive for suppliers, and the issue of maintenance may be difficult for the program.

 

Fast growth from modest beginnings

When taken together, the growth of the total PV market in Latin American and the Caribbean has been much slower than many have anticipated. Yingli’s Jeffrey Barnett notes that leading analysts and international institutions had predicted a Latin American PV market anywhere from 275 to 850 MW in 2013, while his estimate is that only 200 MW of PV was installed regionally during the year.

With the Amanecer (pictured) and San Andres PV plants, SunEdison brought 151 MW-DC of PV plants online in Chile in January and February 2014. Image:SunEdison
With the Amanecer (pictured) and San Andres PV plants, SunEdison brought 151 MW-DC of PV plants online in Chile in January and February 2014. Image:SunEdison

This is set to change in 2014, when Barnett expects 500 MW of new projects in Latin America to either begin construction or be completed by year’s end. With more than 150 MW completed in early 2014 and another 225 MW under construction in Chile, as well as 219 MW under construction in Mexico, these two nations alone could easily meet this milestone during the year.

GTM Research has higher expectations, predicting that 724 MW will be installed in Latin America in 2014. However, even with this substantial growth the company predicts that the region will represent only 2% of the global market over the next few years.

“2014 is going to really depend on Chile,” notes Yingli’s Jeff Barnett. “Installations in Chile are almost binary, in the sense that a few large projects could make for a substantial PV market in 2014, whereas continued slow progress could make the market seem relatively small compared to its near-term potential.”

Looking only at utility-scale pipelines may be misleading. Barnett of Yingli also says that he sees sustainable solar markets as being based on distributed generation, from which utility-scale projects are a development. In this regard, nations including Chile, with its uneven growth, may be less attractive over the long run than Mexico.

With this caveat, Barnett expects continued rapid growth in the region. “Is Chile, is Brazil, are Mexico’s utility-scale projects going to come on big – fast and furiously?” asks Barnett. “Then we could say new installations in 2015 and 2016 could range anywhere from say 600 MW to just under 1 GW. But there are a lot of things that have to fall into place to hit those numbers.”

Original Article on The Solarserver

In Focus: Solar PV in China

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In 2013 approximately 1/3 of the global solar PV installations were realized in China. The nation installed between 13-14 GW (2012: 5.04 GW), i.e. more than any other country in a single year ever before.

Solar Server’s partner Asia Europe Clean Energy (Solar) Advisory Co. Ltd. (AECEA), notes several reasons why the official national target of 10 GW as announced in January 2013 was exceeded by approx. 3-4 GW.

  • Firstly, projects tendered during Q4/2012 were not facing any FIT reduction as Q4/2013 projects, thus these projects were executed in 2013.
  • Secondly, in November 2012 central governmental institutions approved the last batch of so-called Golden Sun projects amounting to 2834 MW. Accordingly, the deadline of these projects was June 30, 2013, but eventually was extended twice until the end of 2013.
  • Thirdly, in August the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) announced the approval of in total 1823 MW so-called “Solar PV Distributed Generation Demonstration Projects” out of which 793 MW of projects were scheduled to be realized by December 31, 2013.
  • Fourthly, in August/September 2013 new FITs effective from January 2014 onwards were announced and triggered a year-end-rally.
  • Fifthly, despite on-going trade negotiations which created an atmosphere of uncertainty in the Chinese market, combined monthly tendered projects did not show any sign of a slowdown throughout the entire year.

Overall, last year China’s domestic market development is characterized by three main factors, a) in terms of installations, utility-scale ground mounted systems dominate; b) just three provinces (Gansu, Xinjiang, and Qinghai) managed to witness installations constituting a combined market share of approx. 42-45%; and c) the share of distributed generation is growing, however so far confined to eastern provinces and largely the result of the national Golden Sun programme.

 

2014 is China’s Year of the Horse – Will China’s domestic solar PV market gallop away?

The 2014 Year of the Horse is associated with ”wood”, i.e. industries associated with wood like retail, forestry, textiles, and agriculture among others are expected to perform well according to fortune tellers. Since wood fuels flames as well, industries related to the element “fire” are expected to do well as well and this does includes electricity, i.e. solar PV.

Until the middle of January 2014 various Chinese central governmental entities announced different solar PV deployment targets for the year 2014.

The announced installation targets ranged from 8 to 14 GW. The National Energy Administration (NEA) officially announced a 14.05 GW target, divided into 8 GW (distributed generation) and 6.05 GW (utility-scale ground-mounted) to be installed in the course of 2014.

Annual and cumulative PV market development in China
Annual and cumulative PV market development in China

The government’s direction to promote distributed generation (DG) vs. utility-scale projects is obvious; given its 60% share of 14.05 GW. Although project developer support the governments drive towards distributed generation, AECEA is of the opinion to tackle corresponding administrative procedures do pose a challenge at this stage of market development, i.e. to realize a distribution generation type of project requires considerably longer lead time compared to utility-scale projects, where developer benefit from experience gained the last two years.

 

NEA breaks down national annual targets into provincial targets

Interestingly, because for the first time, the NEA released a breakdown of the 14.05 GW national annual target into provincial targets which are divided into both types of project categories (DG and utility-scale). The intentions of this annual target breakdown are obvious, however it remains to be seen how e.g. Gansu province will scale down from approx. 2.6 GW (2013) to just 550 MW in 2014.

In an attempt to ensure a realization of 8 GW distributed generation projects, early February 2014 the NEA released a list of 81 so-called “New Energy Demonstration Cities” and 8 so-called “industrial demonstration zones” spread across 28 and 8 provinces respectively. Accordingly, by the end of 2015 which coincides with the end of the current 12th Five-Year-Plan (2011-215) these cities and zones are required to realize their respective mandatory targets in terms of e.g. XX-MW of solar PV installations and/or share of installed renewable energy power generation capacities.

Today, according to AECEA’s assessments, China is well on the track to realize its national target of 35 GW by 2015 one year ahead of time as stipulated in the 12thFive-Year Plan for Solar Energy Development (2011-2015).

 

Another 14-15 GW of new installations expected in 2015

Equally impressive, AECEA estimates another 14-15 GW of new installations in 2015, i.e. most likely China will have 50+ GW of total installed solar PV power generation capacity by 2015. Hence, today’s China’s official national solar target of 50 GW by 2020 will be reached even 5 years ahead of schedule.

According to AECEA’s information, China is considering a doubling of its 2020 target, i.e. by 2020 a minimum of 100 GW shall be installed. Taking above background into account, not only the 2014 Year of the Horse could indeed make the domestic Chinese solar PV market galloping ahead of all other global markets, but very likely as well in the longer-term.

 

Solar PV significantly supports China’s aim of 100% nationwide power supply by the end of 2015

By the end of 2012, China was home to approx. 2.73 Mio people which had no access to electricity. In order to achieve the national target of 100% electrification by the end of 2015, i.e. each and every Chinese citizen shall have access to energy.

Against this background, in the fall of 2013 the National Energy Administration (NEA) released a three-year plan (2013-2015) indicating in total 583 projects for either grid extension or off-grid solar PV systems requiring an investment amounting to approx. EUR 3.5 bln.

Investing approx. EUR 396 Mio helped to supply power by means of solar PV to approx. 1.02 Mio in 2013 alone.

Programme”, numerous local power utilities implemented solar PV projects within their respective local and regional operations. In the remaining years until the end of the 12th Five-Year Plan (2011-2015), a further 100.000 people shall benefit from single-standing solar PV power plants mainly located throughout Western China.

Solar Server cordially thanks AECEA and for publishing permit.

Original Article on The Solarserver

In Focus: Goldman’s “Transformational Moment” in Solar

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Goldman Sachs sees a transformational moment in renewables and plans to invest in excess of $40 billion by 2021. The motivation for Goldman is to create a return on the capital they invest for their firm and clients, but where will it be invested and how can the capital be to your benefit?

Goldman and peer banks are not new to solar investment. The top banks all have been very active investing in solar, a recent sample includes: Goldman Sachs ($500mm to SolarCity), US Bank and JP Morgan ($630mm to Sunrun), Banc of America ($220mm to SunPower), and Morgan Stanley ($300mm to Clean Power Finance).

This sample of capital was announced for project funds, much of which is going to the large expansion of the residential solar leasing market but these and many other banks are also looking to deploy capital into solar in every market segment. Every day, new capital is entering the solar space, looking for the ‘elusive’ good projects in residential, commercial and utility market segments. With all of this new capital coming into solar, much of it looking to deploy money in large funds within a set timeframe, solar companies are pushing hard to satisfy. This requirement to deploy capital rapidly is spawning the rise of solar startups that make the solar development and financing processes cheaper and faster.

Just recently, SolarCity and Vivint have acquired solar companies to make their capital deployment processes more efficient.  Since the start of the year, Mercatus has closed its Series A Venture round to make the deal sourcing and due diligence process faster while requiring less manpower. Making solar professionals more efficient is also the goal of startups like Folsom Labs, which launched a few weeks ago with their product Helioscope. This web based software makes creating a solar layout an easy task which any business development professional can complete within minutes. Innovation in solar continues to center about increasing throughput to make the process more efficient in deployment capital.

While most of the announced big bank money will go to a relative few companies, many market participants will benefit financially from the upward pull.  Any innovation, that increases the speed of system deployment and/or lowers the costs per watt, will see interest at every stage of their growth. VCs are becoming much more active in early stage solar startups. Notable VC, Rob Day from Black Coral, tweeted, “Cleantech recruiters working overtime. LPs getting back into the sector. If the economy holds up, 2014 will be a great year for cleantech.” The Department of Energy SunShot Incubator Program also picked up some pace this year, with Round 8 awarding 16 companies the prestigious award.

When large amounts of project capital make its way into the solar market and large companies continue to acquire companies, the hype becomes a noteworthy trend. Smart ideas that enter the market with efficient use of capital get traction because the market will use every advantage possible to take part of this moment seen in solar today. Goldman Sachs and other banks are stating publicly what 140,000 solar market participants already know, solar is growing and will continue to expand. There has never been a better time to execute on your idea for making solar development and financing more efficient, take advantage of this “transformational moment.”

Yann Brandt publishes Solar Wake Up (solarwakeup.com), a daily rundown of top stories in the solar industry. He can be found on Twitter @yannbrandt

Original Article on The SolarServer

Google The Cleantech Utility

google-nest

Google has acquired Nest Labs, the maker of a smart learning thermostat. The Nest thermostat connects your air conditioning and heating device to the internet and makes it accessible via your phone and computer. It also learns your habits and preferences to predict when it should turn the A/C on or off.

Sounds great, but what does it have to do with your electric utility? Absolutely everything! Your heating and cooling patterns linked with how you use your home can create a system-wide prediction mechanism for when and where electricity is needed. Solar can be intricately linked to your home system, along with the other residential services that are now available.

The key aspects of home services include: home automation (lighting, cooling, etc), home security, residential solar, broadband (cable, internet), and electricity. Google makes a market in all of them  except for home security. Two of the leading providers in home security include Vivint and Alarm.com, both of which are very active in residential solar (Alarm.com has a partnership with 1BOG) and home energy automation. Vivint was a large force in home security before entering the residential solar space, today holding over 10% market share of residential solar. Home security companies are one of the leading threats to energy utilities as mentioned by many Utility CEOs, so keep your eyes on acquisitions in the sector by either Google or Utilities.

Now that Google has an understanding of your heating and cooling habits with the Nest device, it may have all of the information it needs to be a very effective electric utility. More importantly it has been heading into this direction for years. In 2010, Google filed for and was granted approval to be an energy marketer by FERC1.  Key language from the order includes:

“Google Energy requests authorization to sell ancillary services in the markets administered by PJM Interconnection, L.L.C., New York Independent System Operator, Inc., ISO New England Inc., California Independent System Operator Corp., and the Midwest Independent Transmission System Operator, Inc. Google Energy also requests authorization to engage in the sale of certain ancillary services as a third-party provider in other markets.”

Google’s presence in solar is no secret, having invested $75million in one of the latest Clean Power Finance (CPF) funds and also sits on the CPF Board through Google Ventures. Google also hosts a large system on its headquarters and has invested in large utility scale projects. To recap, we already know that Google sees your online habits and now is providing you other service options including: broadband access (Google Fiber), wireless (Android), home automation (Nest), and solar (CPF).

Contrary to 60 Minutes reporting, cleantech hasn’t crashed. Google may just be creating the first smart cleantech utility!

Original Article on The Solarserver

In Focus: The Future of PV Solar

pv-solar-future

Good yields, government funding and secure payments are all proving that investments in photovoltaic panels are cost-worthy once again. Thanks to EU incentive schemes and continuous investment in research and development from manufacturers, the price of solar power has plunged, making it more competitive with conventional sources of energy on price and capacity.

Globally, solar power accounts for less than one per cent of electricity supply, but recent growth in the sector has been extraordinary. Solar PV power has been the biggest source of new electricity generation for two consecutive years in Europe.

While the British government has recently reduced the size of the feed-in tariffs given to the solar energy industry, it does not mean that confidence in renewable energy is waning. If anything, it is a signal that the industry is now robust enough that it no longer needs to rely on government subsidies to survive.

The cost of solar panels and the accompanying installation has fallen by 70 per cent over the past two years. It is estimated that by 2020, four million UK households will have solar power capabilities and that the solar energy industry will employee 360,000 people.

With this in mind, we turn our thoughts to the future of the solar power industry. As always, solar manufacturers are continuing to look for ways in which to increase both cell and module efficiency. This will bring overall production costs down and offer users a better price-to-value ratio. However, solar manufacturers need to take into consideration limited installation space, especially for domestic and small business users in major cities like London.

Solar modules must continue to provide greater levels of efficiency in order to stay competitive with other types of renewable energy. Manufacturers need to find ways to produce the same amount of, if not more, energy with fewer modules, to be a viable source of renewable energy in densely populated cities in the UK. This can be achieved by using a number of new technologies now on offer, such as N-type silicon wafers. N-type wafers have higher efficiency and very low-to-none light induced degradation (LID), the increased longevity of these cells leads to greater energy cost savings for the user.

Solar technology is at the heart of the renewable energy debate, as it is accessible to most. Both households and businesses are now looking at the ways in which they can make savings and have greater control. Households have a sense of environmental responsibility and businesses want to de-risk their organisations by reducing reliance on external energy providers and the price increases currently associated with them.

Manufacturers will continue to focus on research and development to enhance the efficiency of each individual module being produced. This will also help bring the price down to ensure that the technology is available to all.

In the near future, I think we can expect to see photovoltaic modules being absorbed into the ‘smart’ home, in the way that electronic appliances and storage systems already have been. According to GBI Research, the number of ‘smart’ homes will double between now and 2017. The ‘smart’ home would use the photovoltaic modules to produce completely free and renewable energy, and the house itself would coordinate solar production with energy usage. It would know when to use the energy and when to store it for later use. The energy would be used to power ‘smart’ electronic appliances that typically don’t demand a lot of power.

For a lot of manufacturers, all of the ingredients for a ‘smart’ home are already in place; it is just a case of expanding upon current technology and integrating appliances.

By Michael Harre, Vice President, LG Solar

Original Article on The SolarServer

China: Now The World’s Largest Solar Market

china-own-solar

In October 2013 NPD Solarbuzz Inc. (Santa Clara, California, U.S.) published a new analysis which estimates that China represented 25% of the 9 GW of solar photovoltaic (PV) demand in the third quarter of 2013.

“The emergence of China in driving PV demand is impacting both global end-market figures and is also having a profound impact on the financial health of the remaining domestic suppliers,” Solarbuzz Senior Analyst Michael Barker comments. Solarbuzz estimates that China’s share of global demand will more than double in 2013 as compared to 2011, when it was 10%.

Plans for 12 GW of new solar PV in 2014

In November 2013 China’s Bureau of Energy has released a draft plan for 12 GW of solar photovoltaic (PV) deployment in 2014, according to NPD Solarbuzz. This includes 8 GW of distributed generation. Jiangsu will be the leading province, with 1.3 GW of PV in its pipeline, followed by Shandong Province at 1.2 GW and Zhejiang Province at 1.1 GW. These plans show a shift in emphasis towards rooftop PV and to densely populated Eastern China from the far Western regions.

Solar Server’s solar report in November 2013 features recent Chinese PV developments and market perspectives in cooperation with the Asia Europe Clean Energy (Solar) Advisory Co. Ltd. (AECEA) and Intersolar China 2014.

National PV feed-in-tariff revised, effective since September 1st, 2013

In August 2013 the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) announced a new set of Feed-in-Tariffs (FIT) for photovoltaic systems to become effective from September 1st, 2013.

The level of the new FIT is determined by the level of the solar irradiation in a given location throughout the entire country and features three different levels for ground-mounted systems.

In an attempt to prevent further future stress on the existing grid infrastructure in the country the central government additionally introduced a new FIT for projects designed to feature distributed power generation (DG).

In this context, already last year the State Grid Corporation released in a statement that such projects aiming at both on-site generation and on-site consumption with a capacity of up to 6 MW will be exempted from paying any grid connection fee. The new FIT applicable for both types of power generation projects will be granted for 20 years according to the official notification.

Early January NDRC announced 10 GW of PV power generation capacities will be installed in 2013. However, given the fact that the revised FIT support scheme came into effect relatively late, caused by the ongoing bilateral negotiations between China and the European Commission (EC) concerning the solar trade dispute, AECEA expects rather a deployment of 6-7 GW, and under an optimistic scenario 7-8 GW will be installed. Ground-mounted or utility-scale PV power plants will continue to dominate the Chinese market; however by Q1-2/2014 the effect of the central government’s decision to encourage distributed projects will be clearly visible.

China plans to create further PV demand in the building sector until 2015

Early in August 2013 the State Council of China published comprehensive policy measures designed to further support the development domestic green industries. Accordingly, by the end of 2015 the total output value of the Chinese environmental protection industry shall amount to approx. EUR 54 billion.

BIPV is an appropriate technology for energy-saving buildings.
BIPV is an appropriate technology for energy-saving buildings.

In the context of the so-called “Green Building Sector” by 2015 approx. 60 million square meters of mainly public buildings shall be turned into energy-saving buildings, and solar energy applications are the only renewable energy technology explicitly stipulated as a means of decentralized / distributed power generation in the official policy document.


Utility-scale demonstration projects illustrating opportunities for international PV players

US based manufacturer of Low Concentrating Photovoltaic (LCPV) modules Solaria teamed up with local Chinese power utilities earlier this year, in order to develop 3 projects with capacities ranging from 500 kWp to 2 MWp, spread across two provinces in Western China.

All systems have been connected to the grid since September / October 2013.

AECEA feels confident that the successful implementation of these three demonstration PV projects will not only help Solaria, but as well create opportunities for other international CPV players to further tap the domestic Chinese PV market in future.

Ministry for Industry and Information Technology releases PV industry restructuring regulations, emphasizes on efficiency, R&D

On September 16, 2013 the Ministry for Industry and Information Technology (MIIT) published an official notification outlining regulations and standards designed to ensure a more sustainable and healthy development of China’s PV Industry. Among these new regulations and standards are:

–   Strictly control the expansion of existing production capacities

–   Any form of production expansion requires a share of private equity of 20%

–   An annual budget earmarked for R&D shall be equivalent to 3% of the companies turnover, but no less than approx. EUR 1.2 million / annually

–   Minimum requirements for production capacities along the entire value chain

–   Environmental Benchmarks for finished products to be met during production

–   Benchmarks in terms of cell efficiencies for all types of solar cells

–   Requires compliance with a host of corresponding standards and mandatory certification schemes

China focuses on R&D to that ensure that only high-efficient PV products shall leave the factory gates. Images: Ja Solar; China Sunergy
China focuses on R&D to that ensure that only high-efficient PV products shall leave the factory gates. Images: Ja Solar; China Sunergy

Overall, the intention is that only the most competitive companies shall prevail, that only high-efficient products shall leave factory gates, and that only those companies who can afford to spend the mandatory EUR 1.2 Mio / annually for R&D undertakings shall sustain whereas others may simply exit the market.

In this context, AECEA remains highly cautious with its forecast by when these requirements will actually result in any form of consolidation and/or reduction of existing production capacities since many other industries in China (e.g. steel, cement, pulp & paper, textile, automobile) have been chronically facing similar issues for several years already and to date the central government achieved a mixed success in addressing the prevailing over-capacities in these industrial sectors. AECEA expects the “desired” industry consolidation to take another 3-5 years.

PV manufacturers are subject to new 50% VAT rebate

According to a notification issued by the Ministry of Finance (MOF), as of October 1, 2013 operators of solar PV power plants are eligible for a 50% VAT refund/rebate until December 31, 2015. The instruction to grant a 50% rebate was decided by the State Council earlier. The termination of the VAT rebate coincides with the end of the 12th Five-Year-Plan Period (2011-2015). Today China’s VAT amounts to 17% and a 50% reduction will certainly improve financial returns of companies operating in the downstream sector in particular. However, at this stage further details on how the VAT rebate will be implemented remains vague. AECEA expects that guidelines about how to apply will be released shortly.  

Latest technologies, national and international policies, market insights at Intersolar China 2014

From March 26th–28th, 2014 the third Intersolar China will be the major platform for the Asian solar markets.

In 2014, Intersolar China is being held in conjunction with CIPV EXPO and Clean Energy Expo China (CEEC) for the first time. CIPV EXPO, as an integral part of CEEC, is the first and only solar industry trade show organized in cooperation with China’s leading utility companies such as the State Grid Corporation of China, China Southern Power Grid, China HuaNeng Group, and China DaTang Group.

Exhibition visitors benefit in particular from this fusion, as in addition to Intersolar China and CIPV Expo, their ticket provides entry to all of Clean Energy Expo China’s exhibitions: Solar Thermal China, Wind Power China, Bio-Energy China and GridTec China.

Around 380 exhibitors are expected at the China International Exhibition Center (CIEC) in Beijing to present the latest developments in the fields of photovoltaics, PV production technologies, energy storage systems and solar thermal technologies on a total exhibition area of 13,000 square meters.

Image: Intersolar China

600 conference attendees expected

During the three-day conference in Beijing’s Kempinski Hotel, 70 industry experts speak about developments in international solar markets to over 600 attendees, with the event focusing in particular on the development of the Chinese market, large PV installations, distributed generation and industrial and commercial uses of roof-mounted photovoltaic systems.

Further information: www.intersolarchina.com

Author: AECEA (Frank Haugwitz); Solar Sever editor: Rolf Hug

Original Article on The Solarserver

Solar PV and Energy Storage The Time is Now

fraunhofer_energy_storage_chart_web

June 16th, 2013 was a big day for renewable energy in Europe. On this sunny, windy Sunday afternoon in the summer, solar photovoltaics (PV) and wind peaked at over 60% of Germany’s electricity demand between 2 and 3 PM. The same afternoon, Italy’s hydroelectric, PV, biomass, geothermal and wind plants met the nation’s entire electricity demand for two hours.

These events marked major progress for the continent’s Energy Transition (Energiewende), and happened sooner than many had anticipated. They also portend a sea change for the Energy Transition. At the point reached on June 16th, not only did other forms of generation temporarily lose all value on Italy’s energy exchange, but the nation was forced to export excess electricity production.

Of course, this was only for two hours. But as more and more variable renewable energy – wind and solar PV and CSP – is added to the grid, compounded by the less dramatic variability of existing hydroelectric generation, this will become more and more of an issue.

Germany is not far behind. Solar and wind are already forcing other forms of generation to ramp down at moments of high production in Germany, and prices on the electricity exchange are at times forced into the negative.

Germany currently exports substantial amounts of electricity at times of high solar and wind production. Image courtesy: Bruno Berger, Fraunhofer ISE using EEX data
Germany currently exports substantial amounts of electricity at times of high solar and wind production. Image courtesy: Bruno Berger, Fraunhofer ISE using EEX data

In short, Europe is at a point where the need for storage to accompany renewable energy generation is no longer a distant future concern.

This need is farther off in the United States, Japan and other locations with lower penetrations of PV and wind. But it is coming, and both utilities, policymakers and the industry are preparing. In California, regulators recently approved a plan to require private utilities to source 1.325 GW of energy storage by 2020, which is expected to dramatically increase the global market.

This report by Solar Server, with support from Greentech Media Research, will look at the rise of energy storage to accompany PV and other renewable energy generation in Germany, Italy, Japan, the United States and globally, as the second phase of the Energy Transition.

Germany: Self-consumption and distributed storage

In the past eight years, Germany has been the leader in raw adoption of PV, with over 35 GW added as of October 2013. It is also emerging as a leader in the promotion of energy storage. The nation’s approach to energy storage is similar to its approach to PV, in that it has created policies to primarily support the growth of small-scale distributed solutions.

On May 1st, 2013 the German government introduced long-awaited subsidies for small-scale energy storage to accompany PV, which will provide up to EUR 660 (USD 870) per kW of the PV system, capped at 30 kW.

This adds to the other economic benefits of adding energy storage, which may not be obvious. While it is often described as a subsidy, Germany’s feed-in tariff has for some time paid producers well below the cost of retail electricity, and this has grown to a substantial difference over the last few years.

Currently feed-in tariff levels for PV systems smaller than 10 kW are set at EUR 0.14-0.15 (USD 0.19-0.21) per kWh, whereas retail electricity is around EUR 0.27 (USD 0.37) per kWh. This means that it is much more cost-effective for many PV system owners to consume the electricity they produce themselves than to sell it back to the grid.

These economics can be improved by storage. According to BSW-Solar, German residential PV system owners who integrate storage can up to double the portion of electricity from their PV systems that they use. While the point at which this happens depends upon a number of factors including the size of the system and the customer’s electricity use, it is possible for such storage systems to pay for themselves by saving consumers on electricity.

In addition to these decentralized solutions, Germany’s high level of variable renewable energy production is also leading to large-scale solutions. Operators of the nation’s pumped-hydroelectric storage plants have begun running two cycles per day, in response to the low daytime prices, and the European Commission is considering support for additional pumped hydro in Germany and expansion of pumped hydro in Austria.

Italy: Large-scale storage

Italy has similar conditions of high penetrations of PV and high retail electricity rates. And while the economics of small-scale storage are good in the nation, Italy is additionally pursuing large-scale storage projects. In July 2013, Italian grid operator Terna announced that it would launch a project to install 130 MW of batteries in four regions in Southern Italy, including the island of Sicily, at a cost of “several hundred million Euro”.

This is will follow two other, smaller scale storage projects that Terna has launched. The first, introduced in 2011, involved a total of 35 MW of projects to recover excess production by wind plants. The second project, introduced in 2012, involves 40 MW of what Terna describes as “power intensive” storage systems which are being installed in Sardinia and Sicily.

These first two projects involve a variety of battery technologies, and include comparative evaluation of technologies. For the 130 MW project, Terna has stated that it is in talks with an un-named Japanese company, and these battery systems are expected to be online within three years.

Terna CEO Flavio Cattaneo has also estimated that the nation could build up to 5 GW of hydroelectric plants with pumped hydro storage.

The United States: Preparing for the future

The United States is in a much different position than either Italy or Germany. Only a few states in the nation are producing large amounts of variable renewable energy. As such the U.S. market for energy storage has so far been focused on frequency regulation, in other words storage to balance out rapid, short-term fluctuations in power output.

However, in some regions high penetrations of renewable energy are beginning to portend additional needs for longer-term energy storage, and both state and federal regulators are responding. California has seen utility-scale renewable energy generation peak at as high as 23% of demand in late September 2013, and the state is already taking steps to prepare for higher levels when its renewable portfolio standard goal of 33% of overall generation is reached in 2020.

California’s AB 2514 is likely the strongest policy move on energy storage to accompany renewables outside of Europe. The law required California regulators to evaluate and mandate targets for energy storage, and in October 2013 the California Public Utilities Commission ruled that the state’s three large investor-owned utilities must procure 1.325 GW of energy storage by 2020.

Greentech media estimates that this will effectively double the global market for energy storage excluding pumped-hydro and underground compressed air storage, and quotes and un-named industry executive in stating that this will require USD 1-3 billion in investment.

Federal regulators have also made rule changes requiring utilities to change the way that they pay for storage, which so far has benefited the frequency regulation market.

Additionally, Texas is looking at energy storage to manage its wind generation, which is the largest by raw capacity in the United States. The state has the additional challenge of a relatively isolated grid.

Texas regulators have passed a number of measures to support energy storage, which are change the way that storage is financially supported, similar to federal regulations. The state currently has two large energy storage projects underway, including North America’s largest battery system at 36 MW and the first compressed-air storage system to be approved in decades.

Penetrations of wind and solar are also high in Hawaii, which unlike Texas has grids that are isolated by geography, not political decisions. Hawaii has served as a test site for a number of energy storage projects.

Japan: Rapid changes

While Japan has a moderately large PV capacity built in previous years, the nation has dramatically increased solar capacities with its feed-in tariff, implemented in July 2012. Additionally, Japan has the world’s largest capacity of pumped hydro storage at 25.5 GW, which can store the electricity from solar production during the day for evening use

Given the nation’s very rapid rate of solar adoption – estimated to be 7 GW this year – Japanese authorities are also looking at other solutions. In August 2013, the nation’s Ministry of Economy, Trade and Industry (METI) announced that it had chosen three companies to install two massive battery systems in different regions, in part to develop the technical abilities to better utilize batteries on the grid in the future.

Additionally, Japan’s METI is subsidizing research and development at sodium-sulfur battery maker NGK Industries, through an initiative whose goal is to lower the cost of battery storage to that of pumped hydro.

Energy storage technologies

The rapidly changing field of energy storage covers a wide range of technologies, each with specific technical characteristics. While Solar Server covered energy storage technologies extensively in our July 2010 report, and will only supply an overview of new developments here, it is important to note some of the technical details.

First, different energy storage technologies cannot be treated as commodities, since the technical features of energy storage systems determine the functions that they can supply on the grid. Ultracapacitors and flywheels offer very rapid power transfer, which can smooth out power fluctuations which last less than one second. For longer-term storage on the order of minutes, hours or days, a variety of battery types can be used. Finally, compressed air, pumped hydro, and methane and hydrogen systems are useful for long-term storage.

Different energy storage technologies are suitable for different applications. Image: Fraunhofer ISE
Different energy storage technologies are suitable for different applications. Image: Fraunhofer ISE
Second, energy storage is not a solution deployed in isolation, and storage technologies can be seen as part of the larger field of intelligent energy management. Inverter technologies can supply related grid support functions, and as greater penetrations of renewable energy are added, regulators are increasingly pushing for these functions to be required of inverters.

Of all the technologies being explored for energy storage to accompany renewable energy, lithium-ion batteries have attracted the most attention in recent years. However, lead-acid batteries remain less expensive and are widely used in small off-grid systems, while sodium-sulfur systems make up the majority of grid-tied battery capacity. Finally, pumped hydro remains the cheapest and most widely deployed means of long-term energy storage.

One of the key advantages of lithium-ion technology are higher cycle lives. Solarpraxis AG estimates that lithium ion batteries can reach a lifespan of 20 years or 7,000 charge cycles if charged and discharged daily, much more than the 2,000 maximum cycles available with lead-acid gel batteries. The two can also be combined, and Fraunhofer ISE (Freiburg, Germany) reports that a hybrid approach of using a larger lead-acid battery with a smaller lithium-ion battery subsystem can create a battery system with a longer lifespan.

Fraunhofer ISE also finds that while lithium-ion batteries are more expensive initially, that over their lifetimes they are nearly as cheap as lead-acid batteries at smaller scales.

Exponential market growth

When we talk about deployment of energy storage, we are talking about multiple different markets at different scales. At the residential and commercial behind-the meter scale, PV systems with energy storage system represent a very small portion of overall PV system sales.

However, this market is growing rapidly, in large part due to German subsidies. At the beginning of September 2013, IHS reported that 1,000 German PV system owners had qualified for subsidies to support 30 MW of storage, with another 4,800 applications being considered. IHS states that the subsidy is causing the PV energy storage market to boom in the same way that feed-in tariffs caused the PV market to boom in previous years.

Battery companies have been preparing for this moment for some time, and in the last two years a number of companies began producing lithium-ion batteries to accompany residential and small commercial PV systems, including Panasonic, Conergy and Saft. Many of these and other systems have been rolled out in the German market.

At the larger scale it is difficult to put a number on the size of the current market, as deployment is uneven from year to year. However, with the large number of projects that have been announced, it is clear that this market is also growing.

IHS and other market analysts have made predictions about the future size of the global energy storage market, with IHS anticipating particularly sharp growth among energy storage systems to accompany PV systems for businesses. And while all predict exponential growth, the size of the market anticipated in any given year varies widely.

Like the PV industry, greater market adoption of energy storage will depend upon a number of factors, including regulatory support and subsidies, with prices falling as economies of scale are built and the industry matures.

It should be noted that the recent regulations in California allow energy storage at multiple scales, including behind-the-meter systems, to meet the 1.325 GW target. The main limitation is that pumped hydro systems larger than 50 MW do not apply. As such, while this will be a massive boost to the market, it is currently unclear what impacts this will have on various segments of the storage market.

This is not only true of California. We simply do not know what the future global energy storage market will look like, including what technologies will dominate. But what we do know is that as more and more renewable energy is added to the grid globally, energy storage will inevitably be a major component of our energy systems. The future is here.

Original Article on The Solarserver

In Focus: Why Energy Storage is Cost Effective

energy-storage-battery

California’s electricity system has reached a transforming regulatory milestone. On September 3, Commissioner Carla Peterman of the California Public Utilities Commission (CPUC) authored a proposed decision ordering a 1.325 GW utility energy storage procurement target for California’s electric grid by 2020, if viable and cost-effective. The CPUC is expected to decide on a final number for the target in the coming months. But many have seen the “cost-effectiveness” part of the equation with curiosity: “if cost-effectiveness is a requirement,” they ask, “why are procurement targets necessary?” It’s a sensible question – and the CPUC’s conclusions show that specific targets are key to getting much-needed storage solutions onto the grid.

 

What is Energy Storage?

Energy storage does exactly what the name suggests: it takes energy and stores it for use at a later time. This can be accomplished many ways: chemically (e.g. batteries), gravitationally (e.g. pumped hydro), mechanically (e.g. flywheels) and thermally (e.g. molten salt).  On the electric grid, where supply must always equal demand, this enables more efficient utilization of existing system assets – whether it’s by avoiding expensive transmission and distribution upgrades or substituting for the least efficient and most polluting “peaker” power plants. Energy storage is also a very diverse asset class, so it has many benefits that can address a variety of needs and locations across the grid.

As compared to many status quo grid solutions, energy storage demonstrates superior performance and system benefits. For example, while a state-of-the-art gas turbine can take 10 minutes to “ramp” to full power, many energy storage technologies can do so in under one second. In a system where supply must precisely equal demand, this flexibility and accuracy is extremely valuable. Whether it is substituting for less-efficient “peaker” plants, smoothing renewables’ output, integrating micro-grids, increasing efficiency of conventional generation, or alleviating local transmission/distribution congestion, energy storage enables greater system efficiency across the entire grid in a way that no other energy resource does.

Industry and government leaders are now recognizing the true value of these many benefits.  New system models are showing that energy storage is cost-effective when its full range of services and benefits are fairly accounted for.  The reason for this is that energy storage can deliver multiple services from one resource (e.g. reducing peak demand and providing frequency regulation).  It is also recognized as a necessary part of the grid of the future: with more intermittent renewables, increasingly scarce and expensive fossil fuels, and system goals including emissions reductions and greater efficiency, energy storage is needed system-wide.

 

If Energy Storage is Cost-Effective, Why are Targets Necessary?

AB 2514, California’s law directing the CPUC to consider establishing procurement targets, directs the CPUC to “open a proceeding to determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems” for 2020. A comparable framework is required for publicly owned utilities.  The cost-effectiveness requirement is appropriate because it ensures no incremental cost for ratepayers – but establishing targets is still crucial. Here are a few reasons why targets are necessary.

First and foremost, utility procurement targets will motivate utilities to embrace fundamental system change. This is necessary, as we need a comprehensive transformation of the electric power system, from public policy to markets to infrastructure.  But energy storage has never been part of the core “toolkit” of load serving entities and other stakeholders. As a result, there are barriers to bringing energy storage resources online – including the inability to have ALL the benefits provided by an energy storage asset fairly accounted for in system planning and procurement.  A procurement target will help overcome status quo inertia and more quickly bring about the change we need: a more efficient electric power system.

The importance of procurement targets is demonstrated by California’s renewables portfolio standard (RPS) adopted in 2004. With the RPS, load serving entities are directed to procure increasing levels of renewable energy over time. Renewable generation capacity in California increased by 77% from 2004-2011, compared to 33% from 1996-2003.  In 2011, California generated almost 12% of all energy needs from renewable sources, and is on track to achieve the targeted 33% RPS by 2020. The California RPS is achieving its goals, and an energy storage target will do the same. Better yet, energy storage resources procured as a result of Commissioner Peterman’s proposed target must be cost-effective by law, so there will be no additional burden on ratepayers.

Installation targets (not just procurement targets) also provide a much-needed market signal to energy storage manufacturers, developers, installers and investors. This clear market signal is needed to justify vital investment in technology development and deployment, including many locally-sourced high skill jobs. With a constantly-evolving technology class such as energy storage, widespread investment is key to increasing cost-effectiveness, performance, deployment, and related grid benefits.  Investments and related societal benefits occur throughout the value chain – in design, manufacturing, installation, commissioning, and maintenance.

Policies impacting energy storage abound – and procurement/installation targets will help focus them for the greatest societal benefit. With concrete targets, government agencies and utilities statewide will appropriately prioritize energy storage as part of their core toolkit for electric system planning and procurement.  Cost-effectiveness evaluation and procurement processes will become standardized, installation and interconnection policies will become refined, and appropriate contracting mechanisms will be developed.  Targets encourage focus – a prerequisite for any new market development.

In the case of energy storage, this market development is timely – to help address California’s major near and long term grid challenges, including for example, once-through-cooling plant retirements and permanent closure of the San Onofre Nuclear Generating Station. Energy storage will help bring more renewable energy resources online, reduce pollution, increase system efficiency and reliability, and decrease costs for ratepayers. Because any new energy storage added to the system must be cost-effective by law, everybody wins. For this reason, we applaud Commissioner Peterman’s vision – and encourage all stakeholders to consider her proposed target as a floor, rather than a ceiling.

Original Article on The Solarserver

PV Industry Recovery: Is It Happening?

pv-panels-deep

The global solar photovoltaic (PV) industry has been struggling for almost two years. Massive over-capacity and slower-than-anticipated market growth caused by changes in European feed-in tariffs led to a collapse in prices and consistently negative margins across the value chain. This in turn led to a number of insolvencies, layoffs and acquisitions, particularly in Europe.

However, second quarter 2013 results are showing the first concrete signs of PV industry recovery. While many manufacturers are still not profitable, PV module prices and shipments are rising as demand booms in China, Japan and the United States.

This recovery has not yet extended to all parts of the value chain. Additionally, those manufacturers and developers which have not been able to adapt to new industry dynamics and a new geography remain in trouble.

Market shift

As predicted by Solar Server and market analysts, as feed-in tariffs in Spain, Italy and Germany have either been reduced or closed, the center of the global PV market has shifted to Asia. The first six months of 2013 have seen more PV shipments to Asia than Europe, as the sharpest geographical shift in the PV industry to date.

This massive increase in Asian market demand is the primary factor in PV industry recovery, as new demand from China, Japan and the United States has more than made up for the fall in European demand in raw terms. However, each of these markets is very different, and these differences determine the details of this recovery.

China

Inspired in part by pending trade action, China has massively boosted its domestic goals, setting a target in July 2013 to install 10 GW annually, to reach at least 35 GW by 2015.

While such ambitious goals might be met with skepticism following India’s failure to meet deliverables under its National Solar Mission, China appears to be a very different case. Aided by a number of pre-existing policies including the Golden Sun Program and a feed-in tariff, the nation’s PV industry has boomed overnight, with particularly dramatic growth in the utility-scale sector.

Accurate data is notoriously hard to come by in China, a detail which was explored in Solar Server’s August 2013 report. However, many analysts predict that China will come close to reaching its 10 GW goal for 2013, with Mercom Capital forecasting 8.5 GW of installations.

 

Japan

The Japanese government has also been slow of late in releasing statistics, and thus it is difficult to quantify demand in the second quarter of 2013. However, Japanese PV demand reached 1.73 GW in the first quarter of 2013, and every indication from both quarterly results and limited statistics released by the nation’s Ministry of Economy, Trade and Industry (METI) suggest that this has been matched in the following three months.

This growth has been driven by the nation’s feed-in tariff, which is considered the most lucrative in the world for developers. This policy has particularly aided the utility-scale segment, which has gone from a very small fraction of projects to the large majority of installed capacity and the overwhelming majority of feed-in tariff applications.

Another fundamental change in the market driven by this rapid growth is the shift from mostly domestic supply to a large amount of imports. Of the 1.73 GW of Japanese PV shipments in the first quarter, imports represented 800 MW.

Few large PV makers have not benefitted from this change. Canadian Solar, JA Solar and SunPower all reported strong sales into Japan in the second quarter of 2013, and Trina expects additional sales into Japan in the second half of 2013.

As Japanese PV module selling prices are higher than in the United States or China, this has translated into higher revenues and margins for companies able to take advantage of this significant opportunity.

The United States

While not as large as the Japanese or Chinese markets, the rapid growth of the U.S. PV market has also been important for the global PV industry. The nation installed an impressive 976 MW of PV in the second quarter of 2013, a 32% increase over the second quarter of 2012.

The U.S. market is still dominated by utility-scale PV. First Solar has been able to carve out a strong market position based on its business model whereby it develops and builds very large plants for which it supplies the PV modules, and similar downstream vertical integration has also served well other companies including Canadian Solar. However, Yingli, Trina and all other top-tier c-Si PV makers have benefitted from the increase in U.S. demand.

While much has been made of the impact of third-party solar on the U.S. residential market, both the residential and small commercial segments still represent a small share of the total market. As the United States has never had a national feed-in tariff or effective state feed-in tariffs, it has yet to see the kind of dramatic growth that Europe and Japan have seen in this sector.

 

PV industry recovery by segment: modules

Recovery in the PV industry has been uneven from segment to segment, and vertically integrated PV module makers have been the primary beneficiaries to date. The second quarter results of the top four PV module makers by volume (Yingli, Sharp, Trina, Canadian Solar) show consistent improvements, with margins rising year-over-year for every one. Margins additionally rose quarter-to-quarter for every PV maker except Sharp.

Readers will note that I have omitted First Solar from this analysis, due to the very large share of its project development business and the very different quarter-to-quarter shifts in revenue from that business model.

Yingli and Trina are still reporting negative operating margins, but these have been reduced to -3.8% and -5.4% respectively. Most importantly, c-Si PV prices are rising. Chinese-made c-Si modules PV hit a low of USD 0.53 per watt in January and February 2013, and rose to EUR 0.56 in June and July, according to PV Exchange.

Manufacturers’ margins have also been supported by rising shipments, translating to higher capacity utilization rates, with shipments exceeding capacity ratings in some cases.

Cells and wafer makers struggle

With the shift to vertically integrated manufacturing, many of the largest PV makers produce wafers and cells for their own PV modules. As one of the last remaining large Chinese PV cell makers, JA Solar’s results have improved in recent quarters, but this may be in part due to its shift to more PV module sales. Like Yingli and Trina, JA Solar is not yet reporting a profit, but reduced its operating margin to -2.1% in the second quarter of 2013.

Taiwanese PV cell makers appear to be doing much better, buoyed by Chinese demand for tariff-free PV cells for the U.S. market.

Big wafer makers continue to struggle with low prices. LDK Solar, one of the leaders by shipments, continues to report very heavy losses, and analysts have speculated that the only way that it has avoided bankruptcy is the support of Chinese banks.

Other large players got out of the wafer business in recent years, including REC ASA, which shed its wafer manufacturing at three sites in Norway in 2011 and 2012 in favor of vertically integrated manufacturing in Singapore.

 

Polysilicon prices remain low

Polysilicon makers also continue to struggle. While industry leaders Wacker Chemie, Hemlock and REC had traditionally maintained very high margins, these have fallen sharply over the last two years, following a collapse in polysilicon prices.

Polysilicon prices saw a modest recovery in the first six months of 2013. However, as most of the market demand is in China, high Chinese tariffs on U.S. and EU polysilicon make it unlikely that any of these companies will see the benefit of price recovery. But given the large overcapacity in the market, it is unlikely that Chinese polysilicon prices will rise significantly in 2013.

It should be noted that China has struggled in the past to compete with the quality of polysilicon being produced in the West, however LDK, Daqo and ReneSola have all recently completed hydrochlorination upgrades.

As OCI Chemical was given a much lower tariff rate, it is in a very good position to benefit from these changes, and the company’s overall margins improved in the second quarter after falling for two years.

Manufacturing equipment

The manufacturing equipment sector is still suffering. Second quarter industry data has not yet been published, and first quarter data showed the eighth consecutive quarter of book-to-bill ratios below parity as orders fell to USD 174 million, typically representing orders for equipment upgrades instead of capacity expansions.

Meyer Burger has seen a number of new orders. Applied Materials’ PV equipment revenues remain at a very low level, and the company’s book-to-bill remains well below parity. Centrotherm has not yet released second quarter results, but reports the cancellation of a USD 380 million contract to supply a PV factory in Algeria.

Polysilicon equipment makers are doing better, particularly those selling into the Asian markets, where there is a need for technical improvements. The hydrochlorination upgrades for major Chinese polysilicon translated into sales recovery for GT Advanced Technologies, which has suffered from a lack fo PV equipment orders.

IHS has predicted that capital investments in PV manufacturing will increase 30% in 2014, a view which analysts quoted by Bloomberg have shared. However, NPD Solarbuzz argues that instead of adding capacity, many Tier 1 PV manufacturers will instead take advantage of the underutilized capacities of smaller competitors, in a “fabless” strategy borrowed from the semiconductor industry.

Prices, shipments to continue to improve in H2 2013

Based upon the shipment, revenue and margin estimates of major PV module makers, the third quarter of 2013 is expected to show continued improvement in selling prices. This is in part due to the price undertaking deal reached between the EU and China, which has brought Chinese crystalline silicon PV prices up to EUR 0.56 (USD 0.74) per watt.

There is an irony that initially trade action against China was described as punitive, given that the price undertaking has raised selling prices for top-tier Chinese PV makers which are struggling to regain profitability.

Furthermore, IHS predicts that shipments will continue to grow in the second half of 2013 for Yingli, Trina and Canadian Solar. The larger industry picture is of course dependent upon market conditions, which so far look positive at least for the remainder of 2013.

Warnings of grid overcapacity and transmission constraints have not yet translated into a slowdown in shipments into the Japanese market, and the Chinese market continues to boom, with some very large projects announced, particularly in the West of the nation.

2014 and beyond

Looking beyond 2014, it remains to be seen how long the Japanese market can sustain its current levels of dramatic growth, and how much of the 17.5 GW or more of utility-scale PV projects that have been approved under the feed-in tariff will actually be built.

The ongoing disaster at the Fukushima Nuclear Power Plant has cemented public support for renewable energy, despite the rule of the Shinzō Abe’s pro-nuclear Liberal Democratic Party. The nation has contracted several very large energy storage projects, which show a will to push technical boundaries in integrating renewable energy.

Despite these positive signs, it should be remembered that the PV industry has suffered in the past from overdependence upon large markets driven by feed-in tariffs.

China and the United States both look set for medium-term growth, in the case of China backed by enormous project pipelines. China needs to significantly invest in new transmission to integrate even its existing renewable energy capacity, but has shown that it will continue to build new, large projects regardless of whether adequate transmission or other technical needs are yet satisfied. Here, the role of Chinese PV projects as a way to absorb demand from its PV manufacturing and keep Chinese citizens employed cannot be underestimated.

Another change is that following its retaliatory trade action against U.S. and EU polysilicon makers, China is now in a position to dominate another part of the PV value chain. If anything, this shows both that China remains firmly invested in PV, and that government warnings that a solar trade war would only damage the West appear to be accurate predictions.

It the third quarter of 2013, the global PV industry has become a new industry, based on new markets. We will see what tomorrow brings.

Original Article on The Solarserver

Review: The 2012 Solar PV Industry

pv-industry-2012-review

The difficulties that the global solar industry experienced in 2012 were both clear and expected. Continuing excess solar photovoltaic (PV) manufacturing capacity spurred a collapse in prices across the PV value chain, creating consistently negative margins and negative profitability for upstream PV manufacturers.

This led to a large number of bankruptcies, insolvencies and acquisitions, but also trade wars between the United States and China, the EU and China, and between India and everyone else.

However, as in 2011 these difficulties masked the continued progress in PV markets, policy and technology. Many of Solar Server’s predictions for 2012 played out, including the increasing diversification of global PV markets and the dramatic expansion of a number of emerging markets in 2012.

A difficult year: falling prices

The most fundamental problem of the global PV industry in 2012 was, and continues to be, too much manufacturing capacity for global demand. Exact numbers are hard to come by, given the difficulty in information collection in China, where much of the new capacity is located. However, Greentech Media estimated that in 2012 global PV module manufacturing capacity  reached nearly 60 GW, with global polysilicon, wafer and cell capacity more than 40 GW each.

This represents a module capacity roughly double the estimates of the 2012 PV market. Given that large inventories are still left over from 2011, a continuing collapse in prices was inevitable.

Polysilicon spot prices fell an estimated 47% in 2012
Polysilicon spot prices fell an estimated 47% in 2012

And fall they did, across the PV value chain. In the first 11 months of 2012 crystalline silicon module spot market prices had fallen between 19% and 29%, with Chinese crystalline silicon modules falling to EUR 0.56 (USD 0.74) per watt, according to Sologico. This follows on a price fall between 36% and 46% from January 2011. In just two years, Chinese c-Si modules are being sold for a little more than a third of their previous market value per watt.

Polysilicon spot prices likewise fell an estimated 47% globally in 2012 to a low of USD 15.3/kg, with Xinhua reporting a fall of more than 50% in China, as the second straight year of price collapse. While much polysilicon is sold through long-term contracts, the collapse in polysilicon prices has eroded the contract market, making manufacturers more willing to depend on the spot market.

Wafer and cell manufacturers have reported similar stories. The net result is that the only large PV manufacturers reporting positive operating margins in 2012 are those who have diversified into PV project development.

PV equipment manufacturing revenues fell 72% to USD 3.6 billion in 2012
PV equipment manufacturing revenues fell 72% to USD 3.6 billion in 2012

Perhaps the worst hit are makers of PV manufacturing equipment, who have seen orders collapse over the past six quarters. While some orders continue for upgrades, most expansions have been halted. SEMI’s most recent report found that PV equipment bookings remained flat in the third quarter of 2012 at only USD 234 million, 56% below a year prior, and Solarbuzz reports that global sector revenues fell 72% to USD 3.6 billion over the full year 2012.

Again, diversification has been key, and those players that have survived often have multiple product lines in multiple industries to soften the impact of the collapse in PV equipment demand.

Bankruptcies, insolvencies and acquisitions

The fallout of the collapse in profitability has been a large number of bankruptcies, insolvencies and acquisitions among PV manufacturers. The largest of these was Q-Cells’ insolvency and subsequent sale to Hanwha Chemical Corporation, a major fall from its position as global PV market leader in 2008.

However, Q-Cells was the tip of the iceberg. Mercom Capital has counted 35 solar bankruptcies or insolvencies in 2012, and 50 restructuring or downsizing announcements, including major workforce reductions at SMA and Schott’s departure from crystalline silicon PV manufacturing.

REC closed the last of its wafer production in Norway during 2012 (Image courtesy REC ASA)
REC closed the last of its wafer production in Norway during 2012 (Image courtesy REC ASA)

While much noise was made about the US PV industry, the United States never had a very large scale of PV manufacturing to begin with. Instead, Europe was the hardest hit, particularly silicon wafer production. REC ASA completely shut down its wafer division at three locations in Norway during 2012, with Schott and PV Crystalox closing wafer facilties in Germany.

Chinese manufacturers also spilled considerable red ink during the year, however none of the large Chinese PV companies have failed yet. Instead, Chinese manufacturers have posted worse and worse balance sheets, have received minor bailouts from government entities, and in some cases have sold off portions of their businesses to state-owned enterprises.

Global trade war

The global solar trade war which erupted in 2012 must be seen in light of these extremely difficult conditions. Prompted by a coalition led by SolarWorld, the United States slapped anti-dumping and countervailing duties of 24% – 255% on Chinese-made PV cells, and modules made from those cells. However, these tariffs have been easy to avoid, given the option to outsource cell production and the relatively small size of the US PV market.

The trade investigation before the European Commission has the potential to impact the global PV industry much more than US tariffs (Image courtesy jlogan)
The trade investigation before the European Commission has the potential to impact the global PV industry much more than US tariffs (Image courtesy jlogan)

Much more serious is an EU investigation into imported Chinese PV products, which is currently underway. Meanwhile, China has not sat idly by while all of this has occurred. It has launched an anti-dumping investigation of its own into US and EU polysilicon, from which 30-50% tariffs are expected.

Not to be outdone, India has also responded with anti-dumping investigations into PV products, naming China, Malaysia, Taiwan and the US.

While many in the industry have opposed these trade actions, the extremely difficult positions that US and EU PV manufacturers and Chinese polysilicon producers have found themselves in is undeniable. What is more difficult to establish is the intentional damage alleged by some claimants. In the end, there is simply too much capacity for the market.

The good news: A growing PV market

Despite all of the difficulties which manufacturers are facing, the global PV market continued to grow by 10% – 17% in 2012 to an estimated 31 – 33 GW, with growth even in highly mature PV markets like Germany. The latest figures from the German Ministry of the Environment indicate that despite feed-in tariff cuts, Germany’s 2012 PV market reached 7.6 GW by the end of the year, another world record for annual PV installed.

The Italian market for large commercial and utility-scale PV has been effectively killed by the near-elimination of the feed-in tariff in the fifth Conto Energia, but as this came in August, Italy will still post impressive 2012 installation figures, estimated by Mercom at 3.5 GW.

However, other trends indicate that the big story will not be in Europe anymore.
Asian PV markets rise

In our 2011 year in review, Solar Server noted the passage of feed-in tariffs in China and Japan as among the most important trends in the global solar industry. In 2012, we have not been disappointed.

China installed an estimated 5 GW of PV in 2012, making it the world's second-largest PV market (Image courtesy Astonergy)
China installed an estimated 5 GW of PV in 2012, making it the world’s second-largest PV market (Image courtesy Astonergy)

It is likely that the Chinese PV market more than doubled again this year. While final numbers are not in, IMS Research’s October 2012 prediction of 5 GW installed in 2012 would make China the world’s second-largest PV market. This includes not only installations under the feed-in tariff, but also 1.7 GW of projects under the nation’s Golden Sun Program.

Japan likewise has seen an extraordinary boom in PV installations, driven by what may be the world’s most lucrative feed-in tariff and a need to put generation online to replace shuttered nuclear power plants and reduce costly fossil fuel imports.

Mercom Capital estimates that Japan’s PV market doubled to 2.5 GW in 2012. Also, JPEA found that the nation’s PV cell and module imports increased more than 300% year-over-year in the third quarter of 2012 to 32% of the total market, as Japan’s PV manufacturers struggled to meet this sharp increase in demand.

Ongoing diversification

China and Japan were hardly the only markets that grew dramatically in 2012, as PV technology continued its viral growth across the globe. While both India and the United States showed impressive growth during the year, the growth in other emerging markets in 2012 may indicate a more significant trend over the next decade.

Throughout 2012 there were frequent announcements of utility-scale projects either initiated or completed on six continents, including locations as unlikely as Costa Rica, Ghana, Kazakhstan, Nigeria and Peru.

Of these emerging markets, one that is notable for its size is South Africa. The end of 2012 was filled with a flood of project groundbreakings and supply deals for the 1.45 GW of PV plants which were approved under the first phase of the nation’s Renewable Energy Independent Power Producer Program (REIPP), which aims to install 8.2 GW of PV by 2030.

Other notable regions include Southeastern Europe. While Romania installed only 29 MW, the Greek and Bulgarian markets were much more impressive. A number of large PV plants came online in both nations during 2012, including a 50 MW PV plant built by Astronergy and a 60 MW PV plant built by SunEdison in Bulgaria in 2012.

Chilean Energy Minister Jorge Bunster at the Calama 3 PV plant. While more than 3.1 GW of solar projects have received approval, the nation had only 2.4 MW of utility-scale PV commissioned by the end of 2012. (Image courtesy Chilean Ministry of Energy)
Chilean Energy Minister Jorge Bunster at the Calama 3 PV plant. While more than 3.1 GW of solar projects have received approval, the nation had only 2.4 MW of utility-scale PV commissioned by the end of 2012. (Image courtesy Chilean Ministry of Energy)

Many had higher expectations for Latin America. Chile has built an impressive pipeline of over 3.1 GW of solar projects which have received environmental approval, but the nation reached only 2.4 MW of installed utility-scale PV capacity by year’s end, with another 2.5 MW under construction.

Peru showed greater progress, with four PV plants 20 MW and larger, totaling 84 MW, commissioned during 2012. AES Solar also commissioned a 24 MW PV plant in Puerto Rico, one of several utility-scale projects underway in the island territory.

Also this year two very large projects were announced in sub-Saharan Africa. Blue Energy announced plans to build a 155 MW PV plant in Ghana, and Helios Energy signed an MOU with a state government in Nigeria to build a 30 MW PV plant.

Technology progress: CPV

At 30 MW, the Alamosa Solar plant is much larger than any previous CPV plant (Image courtesy Amonix)
At 30 MW, the Alamosa Solar plant is much larger than any previous CPV plant (Image courtesy Amonix)

As predicted by Solar Server at the beginning of 2012, during the year concentrating photovoltaic (CPV) technology continued its progress into the mainstream. In April, Cogentrix commissioned a 30 MW CPV plant in the US state of Colorado, the Alamosa Solar project. The plant is many times larger than any existing CPV installation, and was featured by Solar Server as our November 2012 Solar Energy System of the Month.

Also, in December 2012 Soitec announced the long-awaited opening of its CPV factory in Southern California, which will supply modules for hundreds of megawatts of plants under contract which are based on its Concentrix technology.

CPV also saw new technical achievements in 2012. In October 2012 Solar Junction announced that it had reached 44% cell efficiency with its multi-junction technology, and in the same month Amonix reported that it had achieved a 33.5% outdoor efficiency with its CPV modules.

CPV still faces many challenges, most notably bankability. However, 2012 saw important progress for CPV, with more growth expected in 2013 as developers begin work on large projects in South Africa and California.

2013 and beyond

Given the fundamental underlying problem of overcapacity, the difficulties faced by the PV industry in 2012 are far from over. Multiple research firms have forecast an ongoing fall in sale prices in 2013, and IHS has made the particularly grim prediction that the number of companies in the PV supply chain will be reduced by 70% over the course of the year.

However, these falling prices have aided market growth, particularly in nations such as the United States, and have benefited developers and installers.

Global PV markets continue to grow and diversify, and with this diversification comes new opportunities, including in those markets which were previously considered closed to outsiders.

NPD Solarbuzz has predicted significant opportunities in the PV balance of systems market in China, and Japanese industry data shows that despite the cultural preference for domestic products in the nation, the share of imported PV is growing rapidly in Japan.

The center of the global solar market is moving towards Asia (Image courtesy Solar Frontier)
The center of the global solar market is moving towards Asia (Image courtesy Solar Frontier)

In other nations, falling prices mean that PV is finally becoming cost-competitive without subsidies, as has been shown by successful “grid-parity” projects underway in Spain. 2013 promises to be another difficult year. However, for the companies that survive, there are excellent  prospects for substantial long-term growth in the PV industry. We can look forward to a new PV market that is both more global and more stable, less prone to strong quarter-to-quarter changes and less dependent upon boom-and-bust cycles in individual nations.

by Solar Server International Correspondent Christian Roselund

 

Original Article on The Solarserver

 

Derek Brown of Clean Fund Discusses PACE

Derek Brown is managing director and co-founder of Clean Fund LLC, a specialty finance company that invests in commercial PACE bonds. He is responsible for working with energy service companies and commercial property owners to identify PACE-eligible projects and to structure the PACE terms for those projects.

Prior to Clean Fund Derek worked with Solar industry leaders such as SunPower, Fat Spaniel and Shoals Technologies on product strategy and market development. Other accomplishments include building and managing Apple’s software business for Europe and launching 3Com’s Macintosh products business. Derek’s finance work was in corporate finance for Smith Barney and venture capital with Whitney Ventures.

Solar Server: Explain for our readers what PACE financing is, and how it differs from other forms of financing?

Derek Brown: PACE is a municipal finance structure that solves the collateral challenge commercial properties have with obtaining financing for solar and energy efficiency improvements. PACE uses a special tax assessment to support long-term financing. This is how community benefit improvements in the U.S. have been funded for a hundred years – things like fire houses and schools.

The breakthrough of PACE is that commercial building energy improvements can now access 100%, upfront, long-term financing at attractive rates.  No longer does a solar system with have 5-10 year payback have to compete on an ROI basis for the property owner’s scarce capital.  With 100% external financing the “I” goes away and cash flow becomes the project benchmark.  When you can finance a 7 year simple payback solar system over 20 years there’s a cash flow that literally comes from the sky.

Apart from the financing long term the PACE structure has a number of advantages for the commercial property owner.  First, the PACE assessment is an obligation of the property and not the owner, and it simply transfers with the property in the event of sale.  This allows short term owners to profitably make long term improvements.

Second, the property owner typically owns the improvements outright, which in the case of solar means they get any and all tax incentives, utility rebates and production incentives, as well as the entire value produced by the system.

Third, some common commercial lease structures allow property taxes to be passed through to tenants. So instead of tenants enjoying all of the benefits of energy improvements through lower utility bills but paying none of the costs, now tenants bear the costs and benefits.  With economically rational, cash flow positive projects, tenants get a net benefit that would be hard to complain about.

 

Solar Server: I recall the excitement around the PACE program for residential financing in the United States in 2009, before Fannie Mae and Freddie Mac essentially crushed the movement. Will PACE as a nationwide movement be revived in the commercial sector?

Derek Brown: Yes, and that is happening. There are commercial PACE programs turning on across the country. Most of California is already covered by active commercial PACE programs.

We’ve learned that we need different programs for commercial PACE as opposed to residential. For one thing you don’t have the big consumer protection element of residential, and commercial properties need customized project finance, as opposed to one-size-fits-all consumer finance.

Commercial PACE programs can be very simple and inexpensive to establish and run.  The City of Edina, Minnesota established a program in response to a request from a local solar integrator and a local property – at a total cost of $11,000.

On the residential side let’s just say that the regulatory situation has not been clarified yet. The evidence from the Sonoma County PACE program is that the regulatory fears about residential PACE are not justified.  We’re all hopeful residential will get a green light, which will accelerate momentum on the commercial side even more.

 

Solar Server: What sort of impact do you think PACE is going to have on the commercial solar market in the United States?

Derek Brown: In a word, dramatic. PACE solves the #1 problem commercial properties have obtaining solar financing – credit. PACE finance is at its heart based on property value, not credit. My firm, Clean Fund, has been at the forefront of commercial PACE finance for 3 years. When we negotiate financing for a project we focus on establishing property value.  We don’t even ask for financials until closing.

PACE also solves what for many properties considering solar is a #2 problem – how to repair/upgrade their roof before putting down a 25-30 year solar system. Cool roof improvements are energy efficiency measures that qualify for PACE and can funded through the same financing that covers the solar system.

Currently, because of the tax-based incentives for solar, projects pencil best if the property owner has the tax appetite to fully monetize the tax benefits. PACE is injecting up to 100% financing at fairly attractive, 20-year interest rates, 6 1/2% to 8 1/2%, depending on the project. Depending on local electricity prices, if the owner is able to monetize the tax benefits, 20 year PACE financing can allow a solar system to pencil nicely.

For the many commercial properties with low tax appetite we need to bring in third-party ownership structures that allow tax investors to monetize the tax attributes. The basic model is for the property owner a portion of the system cost through PACE and use the funds to pre-pay a lease or a PPA. The project owner then needs to guarantee power production value at least equal to the property owner’s PACE payments.

The first projects using this sort of structure are currently in the proposal stage.  The potential is vast, as many commercial properties have little ability to use tax incentives.  Keep in mind commercial PACE can be used to finance privately owned non-profits like churches, hospitals and schools.  While these entities may not currently pay property taxes, in most places that are able to voluntarily assume a property tax assessment, which is what PACE needs to work.

Solar Server: What are the main barriers to the spread of the PACE financing model for commercial solar installations?

Derek Brown: The main barriers have been limited geographic applicability and the simple fact that PACE is new.

PACE is geography-specific as a city or county needs to have a program to make the local tax system available.  Most commercial PV integrators in California cover a large territory.  When PACE only applied to a small portion of that territory, the integrator

had better things to focus on. But now that most of the state’s population is covered, PACE has the potential to transform an integrator’s business.  Clean Fund is now working with a number of integrator partners on incorporating PACE finance into their sales and project processes.

The second PACE barrier is newness.  Most commercial property owners still standing after the recent economic roller coaster aren’t lining up to try something new.  But commercial PACE isn’t that new any more.  Sonoma County’s groundbreaking commercial program has been running for several years and has funded over 50 transactions – the majority of which involve solar.  Most notably, Simon Properties, the largest mall owner in America, has done two PACE financings through the Sonoma program.

This past week there was very big news with the announcement of the first financing through the City of San Francisco PACE program. And the property owner is Prologis, the largest owner and manager of industrial real estate in the world.

The project developer is Johnson Controls, one of the leading energy services firms in the world.  Clean Fund was the capital provider – I won’t make an “in-the-world” claim for ourselves but our participation in the deal does speak to our specialized expertise.

But it’s a big deal that now commercial property owners – as well as integrators – can look at PACE and see projects being done by firms like Prologis, Simon Properties and Johnson Controls.

You can look at this and say these are conservative organizations. If it passes their test, this must be something work investigating.

Things are looking really good this morning for commercial PACE for solar. This project in San Francisco was actually a multi-measured one, which is even better. There was a 200 kW PV system, as part of the project, but there is also LED lighting and retro-commissioning. This one touched all the bases, which is nice.

 

Solar Server: Outside of California, what other locations have enabling legislation for commercial PACE?

Derek Brown: There are two levels to that question. First there needs to be state-level legislation in place to empower local cities and counties to do PACE – and 28 states to date have this. What this legislation does is say renewable generation and energy efficiency are measures in the public good and hence can be supported by tax-lien finance.

This state-level authority is a necessary condition for local programs. Just because there is state legislation in place doesn’t automatically translate into a local program. For a state to do this is fairly simple and non-controversial.

Have a look at the PACE map at PACEnow.org. This is the industry website and has the most up-to-date tracking of PACE programs, both residential and commercial. It’s a great resource for people in both the private and public sectors.

Pretty much all of California is PACE-enabled or moving that way.  Florida has a number of programs turning on, Connecticut is looking to do PACE state-wide, the District of Columbia is moving quickly, and almost every week activity is turning up in places like New York, Ohio, Minnesota, and Michigan.

The good news is that a commercial PACE program can be a fairly easy thing to turn on, if you keep it simple. And we are seeing instances where a local business owner and a local integrator go to their city council or county board of supervisors and say “Hey, we have some job-creating projects that we can do, if you give us a PACE program”.

And that’s what happened in Edina, Minnesota, where they turned on a great program for $11,000, which was covered by a grant. PACE is something where local initiative can make things happen.

 

Solar Server: Is there anything else that you think is important for our readers to know about commercial PACE?

Derek Brown: In closing let me go back to the new math that PACE enables – you can sell solar projects based on cash flow instead of ROI.  Combine the project economics with the PACE financing terms and put cash flow numbers on the table.

One thing I should touch on is the issue of mortgage lender consent.  Most commercial PACE programs were designed with input from commercial mortgage lenders, and as a result explicitly protect lender interests.  Most programs give a lender absolute authority to approve a PACE project on a property where they hold the mortgage – and this is a good thing.

The initial fear that lenders would not approve projects has been decisively proven wrong.  Projects with demonstrable economic merit – and where the property owner has a good relationship with their lender – are being approved.  That said, property owners may not have the PACE knowledge and lender expertise to do this on their own, but that is a capability that Clean Fund and a few other PACE capital providers are able to provide.

Thank you for the opportunity to share this perspective on PACE finance with you and your readers!

by Solar Server International Correspondent Christian Roselund
November 14th, 2012

Original Article on The Solarserver

Thin Film: Positioned for the Coming Market Upswing

The drastic consolidations of the past months have caught the entire photovoltaic (PV) industry off guard. Nobody saw it coming, considering the booming regions in Asia, first and foremost India and China, which will lead to an overall record year in 2012 according to IMS Research.

But whoever thinks photovoltaics can now be written off will be wrong, the Swiss engineering firm Oerlikon Solar emphasizes in Solar Server’s topical “Solar point of view”, featuring original sounds from the industy.

“Significant growth will continue to generate increased demand for modules and production facilities in these countries, as well as in established markets such as the USA, and most recently also Japan,” says Dr. Reinhard Benz, Director, Head of Strategic Sales & Product Marketing at Oerlikon Solar. “Companies with the right innovations in their portfolio will profit from this development and be able to assert themselves from a position of strength. We are convinced that our thin film silicon technology will be among the beneficiaries.”

Thin film silicon technology positioned for the coming market upswing

While the large Japanese company Tokyo Electron (TEL) is currently planning to take over Oerlikon Solar, the Swiss are positioning their thin film silicon technology for the expected upswing in 2013. Market researchers such as the US-American consulting agency Solarbuzz predict a noticeable recovery on the market for PV equipment in 2013. The top photovoltaic suppliers are accordingly nearly doubling expenditure on production facilities for manufacturing solar cells and modules. Even if the market overproduces modules, the existing production lines will no longer achieve the necessary economic productivity and efficiency levels and must be refurbished or completely replaced. The operative costs of older plants lie significantly above those using the current technology of Oerlikon Solar, whose competitiveness in the industry was given an enormous boost in the last four years ever since the market launch of Mikromorph® tandem technology at an investment cost of 150 million euros.

 

Cost leadership thanks to innovative advances

The innovation successes accomplished by Oerlikon Solar form a robust basis for continued development of the technology. For example, engineers at Oerlikon Solar have cut module production costs by more than 70% and increased throughput capacity by over 125%, along with an increase of module efficiency of about 24%. Oerlikon Solar’s current fully integrated turnkey production line ThinFab™ 140, launched in 2012, has already set the global standard for producing environmentally-friendly solar modules at the lowest cost of about 0.35 euros/Wp, which means cost leadership in the global solar industry today. This is made possible by various innovations such as optimized tools and processes for plasma-enhanced chemical vapor deposition (PECVD) of the amorphous and microcrystalline silicon absorber layers, or more efficient cleaning of the KAI reactor with the considerably more environmentally friendly atomic gas fluorine (F2), which has a greater etch rate at lower gas consumption. All these improvements reduce production costs and cycle times and increase the performance capability of the production line. Greater investments in research and development also rapidly push forward these trend-setting innovations, which will allow even lower prices for customers.

 

Growth markets offer excellent prospects for thin film silicon

Oerlikon Solar has already turned to the growth markets of Asia for some time now, thus addressing important regions of the world-wide Sun Belt where outdoor installations dominate. Here thin film silicon technology offers significant advantages over crystalline; at high temperatures, modules manufactured on Oerlikon Solar production lines produce five to ten percent more electricity. The micromorph® thin film technology has especially good chances for gaining a significant market share in sunny Japan. With its reimbursement program, Japan has since this summer become one of the central markets of the future. And there need be no fear of competition from CdTe technology, which is not approved in Japan because of its toxicity. Thin film silicon modules manage completely without additives such as heavy metals and are not affected by existing or future market restrictions.

 

Integrated and local production lines in greatest demand in growth markets

The local module production is increasingly state-supported in the emerging Sun Belt regions such as the Near and Middle East. Accordingly, the interest of local companies in starting up PV production has appreciably increased in the past months. Individual integrated production lines are preferred in these countries because of financial hurdles and also existing sales potential, but the modules still have to be manufactured at competitive costs. In addition to its current cost leadership in module production, Oerlikon Solar production lines enable an annual production of about 910,000 modules – corresponding to 140 megawatt – at lowest capital expenditure (capex) of only 0.75 euro/Wp, including performance guarantees and technical service packages. For these countries, this is the most attractive product on the market.

 

Thin film silicon is also interesting for niche markets

The world-wide intensified collaboration between solar companies, architects and construction companies has also opened up new markets for PV suppliers. Pike Research predicts that by 2017 the market growth for building-integrated photovoltaics (BIPV) will be 4.6 GW, making BIPV one of the fastest growing segments in the solar market. An additional uplift is expected for thin film silicon technology due to its semi and complete transparency that allows the use of color filters. Such modules cater to the aesthetic requirements of architects and developers and are therefore in increasing demand. Even the ingenious module mounting technology MMITM from Oerlikon Solar, which functions similar to the press button principle, is an outstanding option for BIPV fields of application.

 

Key brand essence of “Swiss quality” will increase in significance

Along with growing experience in the industry, the topic of quality will continually gain in importance. The customers of Oerlikon Solar have always highly valued the branded

promise of Swiss quality. Oerlikon Solar, for example, conducts so-called accelerated service life tests on the modules as one of numerous quality-excellence fields, subjecting them to the toughest stress conditions and by far exceeding official TÜV requirements: so-called “Biased Damp-Heat Tests” where the modules are operated at 80% air humidity and higher voltage for a duration of up to five times as long without significant power loss. Everyone benefits from the results of such tests: the technology supplier, the module manufacturer, and the solar farm operator. Furthermore, Oerlikon Solar customers appreciate the additional services offered in the form of local support for integrating the technical processes and production ramp-up phase as well as servicing the entire production line by experienced engineers during the warranty period. This service guarantees a smooth production ramp-up and prompt returns, considerably reducing risk for the customer and participating investors.

Original Article on The Solarserver