14¢ solar?

The Cleantech Group posts an interesting article about planned price cuts in PV electricity generation in China:

Solar cell maker … were among the companies that submitted a proposal to the Ministry of Science and Technology to cut the allowance for solar power generation [from $0.584] to $0.146 per kWh in 2012. The government had planned to reduce the allowance to that price in 2015.

The 75-percent price drop by 2015 is feasible, according to the Jiangsu Photovoltaic Industry Association. Industry leaders had predicted last year that it would take until 2020 to reach solar electricity at a cost of $0.146 per kWh.

Part of the reason for the accelerated decline is the price drop for polysilicon, which makes up 70 percent of the cost of silicon solar photovoltaic products. Polysilicon hit a peak of $400 per kilogram in July 2008, falling to less than $100 at the end of the year. Polysilicon is now trading for $30 to $40 per kilogram and is likely to continue dropping.

The 14.6¢ cost is significant because it brings solar in line with fossil-fuel based energy.

If the policy takes effect, this would mark an important milestone on the path to grid parity.

However, I don’t quite know what to make of it: the article is unsigned and no source is given. And from my own research on telecom, when it comes to Chinese industrial policy, there’s always more than meets the eye.

Solar panel retail price index

One of the nice things about all the networking events in Silicon Valley is the chance to meet people who know more than you do (or at least know interesting things that you don’t). When it comes to PV, that includes pretty much the whole industry as far as I’m concerned.

At Wednesday’s meeting of the Silicon Valley Photovoltaic Society, I met a few old faces (like SVPVS head honcho Jurgen Daniel) as well as a few new ones. In the latter category was Barbara Nussel, who has a PhD in Chemistry from LMU in Munich. She worked in industry for 12 years before becoming a consultant here in the Bay Area helping companies “all along the solar value chain.”

As I do at any meeting, I ask basic questions that will help me explain the solar industry to my students (and eventually in a research paper). For PV, the main economic questions are “how soon to grid parity” and “what’s holding us up.” Leaving aside that grid parity is a moving target — between the cost of conventional grid energy and changing subsidies — and it’s still an impossibly complex topic.

After the meeting, Barbara sent me some information about the allocation of costs in the PV value chain which I’m still trying to digest. However, one really cool site she pointed to me was SolarBuzz.

In particular, their monthly US/EU “Solar Module Retail Price” report looks like an invaluable resource to provide a starting point for outsiders (journalists, academics, students) to get a relative sense of changing costs in the industry. According to report, the price of larger PV modules in the US fell from $4.84 to $4.81 per peak watt.

Of course, the price of a peak watt is not the same as the price per average output, let alone the levelized cost of energy. But that’s a subject for another time.

Is cheap oil bad news?

The NY Times today has caught up to the idea that good news for consumers (low oil prices) is bad news for the renewable energy industry. This is actually a story that’s been building for months.

Consumer are thrilled that oil prices have pulled back some 50% from their summer record highs, putting money in everyone’s pocket. Oil that was once $147/barrel is now hovering around $40, slightly up from $34/barrel in December. Local gasoline price (with high California taxes) went gone from over $4/gallon to less than $1.70/gallon before coming slightly above $2. These falling oil prices have meant falling consumer prices, down 1.0% in October and 1.7% in November — increasing consumer purchasing power.

By the same token, environmentalists have been worried that falling oil prices will lessen national interest in renewable energy and energy efficiency. I think the worries are overblown for several reason, not the least of which is the strong support for EE/RE that’s a certain outcome of the Obama administration.

Business Week attributes the current turmoils of the PV industry to falling oil prices. I’m not sure I follow the argument, given how small a role oil places in US electricity generation. Coal provides half, and together coal, nuclear and natural gas account for 88% of US electricity.

I think the other factors listed by BW are more important, specifically the excess entry of new startups fueled by VC investments (as they did with dot-coms in the 1990s, and disk drive and PC companies in the 1990s). There is also the general decline of capital spending by firms and consumers — both because cash is scarce (so long-term spending is being deferred) and due to difficulty obtaining financing. No cash, no panels, no sales.

While the nature and amount of Federal support for PV is unknown, our new president has already said he’ll spend money to improve the energy efficiency of Federal buildings. Although no public promises have been made yet, some activists predict this will include LED illumination —which would drive the new technology down the learning curve.

Also, the energy/environment “dream team” nominated for the new administration are expected to take steps to reduce CO2 emissions. The #1 target will be those coal-fired power plants, thus increasing the price of electricity more directly than any changes to oil prices.

On the transportation side, falling gasoline prices have cut sales of hybrid vehicles in half. Hybrids are more expensive up front, and payback periods have doubled since last May’s levels. But I think there will be an opening for real economy cars — like those we had in the 1970s after the first two oil shocks — which are both cheap to operate and cheap to buy. Honda is already on this trajectory

I originally thought there wouldn’t be much impact on electric vehicle sales in the near term. EVs penetration is well under 1% — not yet the early adopters in the diffusion of innovations (Everett Moore) sense. These earliest adopters (called “innovators”) want to be the first on their block to own one, and are not motivated by cost-benefit calculations.

However, I’ve since changed my mind. Everyone’s feeling poorer, including the rich who are willing to pay a premium for an EV: their stock portfolios are down, their retirement portfolios are down, their real estate portfolios are down. Like everyone else they are deferring capital expenditures as much as possible.

With or without cheap oil, there will be a shakeout of EV manufacturers. There has already been excess entry (30+ companies thus far) and thus consolidation or shakeout is inevitable. If the Big Three survive, they will add to the competition during a period with high up front costs and limited range. The pressures will be exacerbated by the wariness of individuals and businesses to make capital purchases.

Tesla: yet another troubled car company

Facing trouble raising money (and other problems), Tesla Motors today confirmed cancellation of its planned San José factory. The factory was only announced four months ago, and — in the light of the high government subsidies and deteriorating US economy — seemed dubious even then.

The scoop was researched Wednesday and reported Thursday by the San Jose Business Journal.

As also reported by the Merc this afternoon, the nominal reason for the cancellation was government loan conditions, although the company earlier announced (and then cancelled) plans for a New Mexico factory.

Tesla today still has two dealerships, one in Menlo Park (for Silicon Valley gazillionaires) and Santa Monica (for eco-conscious movie stars). While normally a good strategy for cutting-edge technology — let alone cool sports cars — nowadays California is a bad basket to put all your eggs in. The Merc also reported that 2008 new car sales in our state fell 23% in one year, to the lowest levels seen in 15 years.

OptiSolar: one day, -48% growth

On the 11pm news, one of our local TV stations profiled two local PV companies: one with bad news, one where the news so far is OK.

The bad news was at Hayward-based OptSolar, which is laying off about 300 of its 600 workers. The company’s press release page hasn’t been updated in 5 months and only 2 in 2008. However, press releases are not their thing: the company has long been in stealth mode, with only occasional glimmers of information.

On the TV story, a OptiSolar spokesman is quoted as saying “The economy and access to capital markets have hit us hard.” The best coverage was in the hometown Hayward Argus (sister paper to the San Jose Mercury), which gives the exact numbers as 290 cut and 317 remaining. The paper quotes spokesman Alan Bernheimer as saying

"The major effect of this decision is it suspends our high-volume manufacturing," Bernheimer said.

...

"In this capital market, we just couldn't finance the costs for our expansion," Bernheimer said. "The current work force simply wasn't sustainable. Our expansion was dependent on access to the capital markets. And those dried up starting last September."

Richard Helfrich, managing director of Alamada Capital, was quoted on TV as saying “I thought they would be one of the survivors because they had access to a lot of capital.”

KABC reported that the second company —  SolarCity of Foster City — had raised enough cash in 2008 to stay alive at least for now. Certainly that’s the experience of most early stage Bay Area tech companies right now: if got money, you’re happy, but if you didn’t get money in time, you have to assume that it won’t be coming for a while (if ever).

The difference here is that with the change of regimes, renewable energy (and other cleantech) firms are hoping for a big flood of Federal support for “green” technologies. Will that be R&D subsidies? Purchase subsidies (like tax credits)? And will they come in a form to help capital-strapped firms launch new products, or only to provide cash flow to firms that have products ready to sell?

Get a charge out of this news

The late TV news Tuesday offered a brief snippet about how San Jose is encouraging the installation of free electric vehicle charging stations.

The video clip included the San Jose mayor, Chuck Reed, who like other politicians wants to wrap himself in the popularity of AEVs. The announcement won free publicity for Coulomb Technologies and its ChargePoint network, as well as Richard Lowenthal, CEO of the Campbell-based company.

The near-term impact of these installations will be minimal. Even here in the Bay Area, CBS 5 estimated there are only about 1,000 electric vehicles. A quick check shows that there are 4.3 million vehicles here, or EVs accounting for less than a quarter-percent.

Of course, there is a huge chicken and egg question for true ZEVs, both EVs and also FCVs. So leading the market (to a certain level) makes sense, but obviously we need a larger pool of EVs in consumer hands to justify more stations. (My sense is that PHEVs will not generate any demand for the stations). If we don’t get cars and drivers, then these stations will whither away they did after the EV1 fizzled out.

Ringing in an EE/RE new year

As part of the New Years’ celebration, I spotted two interesting EE/RE milestones that were integrated into the traditional American celebration of the holiday.

First, to mark the most famous US New Years’ Eve celebration, the Times Square Alliance this year has gone EE with an LED-illuminated ball, featuring 32,256 LEDs and 2,668 Waterford Crystals. The ball was programmable to display different patterns, and the ball will be on display year round.

Secondly, a RE car played a prominent role in the Rose Parade, America’s biggest and most watched parade (three simultaneous broadcasts here in the Bay Area). To lead the parade, Honda supplied its fuel cell-powered FCX Clarity, part of a major promotion effort to mark its 50th anniversary of US operations. The car is currently being leased in limited quantities in the Los Angeles region.

The FCX is obviously a reputation builder rather than a major product in the near term, but clearly Honda made millions of people aware of the reality that fuel cell vehicles are not only possible but here.