Potential payoffs from ubiquitous BIPV

As an MIT alum interested in clean energy, I subscribe to the free semiannual magazine Energy Futures.

The purpose of the magazine is to tout MIT advances in energy technology, but since MIT (with the MIT Energy Initiative) is one of the world's cutting-edge energy research labs, I find that it is often a provocative look into a possible future that may or may not* come to fruition. (*The technology may not work, it may not scale, it may not be cost effective, something better may come out, etc. — such are the risks of technology entrepreneurship).

In the spring issue, one article describes the work of Prof. Vladimir Bulović, recent PhD grad Miles Barr and ex-postdoc Richard Lunt to create transparent solar cells. The cells absorb energy in the UV and near-infrared, but only about 30% of the visible light. This would allow the PV cells to become just another layer on a building’s windows, and could also use the window class to protect the (currently fragile) layers from the elements.



Right now, the efficiency is only 2%, but are hoping to get the efficiency up to 10-12%.

As with any BIPV (Building Integrated Photovoltaic), integrating the PV into windows would eliminate most of the installation cost; it would also mean that the PV is not an obstacle in use of the existing roof, interfere with drainage, need to cope with snow accumulation, etc.

The big win seems to be for large commercial buildings. The article claims that a 5% efficient PV cell could generate 25% of a building’s electricity. Absorbing near IR would reduce cooling in the summer (but increase heating in the window). With such a cost-benefit, the builder of a new commercial building would invest in such efficiencies (even ignoring the LEED bragging rights) while a consumer might worry about increasing the price of a house $20-50k (and would also tend to have more shading problems). If every new skyscraper had such BIPV, it would both generate a lot of energy and also be a big market.

To exploit the opportunity, the three men formed a company called Ubiquitous Energy, where Barr is president and CTO, and the other two are on the scientific advisory board. They have a $1m in seed funding and $375k in SBIR funding so far.

Like any tech startup, it’s a gamble — but this seems one with a big payout if they can solve all the challenges.

Rise and fall of the world’s biggest solar company

In 2011, Suntech Power Holdings was the world’s biggest solar panel producer, shipping more than 2 gigawatts of panels. As Wayne Ma of the Wall Street Journal reported today:

Suntech is now in Chinese bankruptcy court, and [founder Zhengrong] Shi isn't allowed to leave China without court approval, as is customary with non-Chinese executives involved in bankruptcy proceedings

The article is a must-read for anyone who follows the solar industry.

One reason is the dramatic turnaround of the personal fortunes of Shi, a Chinese-born Australian citizen. With his holdings in Suntech, Shi was on the Forbes list of billionaires (with a net worth of $2+ billion) in 2006 and 2008. The WSJ says his holdings were worth $4 billion in 2007 but “around $31 million” today. The pictures also show a man dramatically aged in the past five years.

The failure of Suntech has been assumed to be due to falling solar prices, but this is a pressure that all Chinese producers are facing. It was highly leverage, borrowing heavily to grow capacity and volume after the financial markets collapsed in 2008.

However, there were also unique problems of self-dealing and fraud. The WSJ focused on the investments of Suntech and Shi in Global Solar Fund, which financed European sales of Suntech panels. The story is complicated, but apparently the GSF manager posted fraudulent security for a €554 million Chinese government loan. When GSF got in trouble, the fraud was discovered, and Suntech (an NYSE-listed firm) was forced to report the GSF liabilities on its books and found itself unable to refinance more than $500 million in corporate bonds.

A second questionable deal was that Shi founded a polysilicon producer, Asia Silicon, and provided the unproven startup with both financing and more than $1 billion in purchase contracts. Suntech's failure to disclose its dealings and Shi’s conflict of interest are the subject of a class action shareholder lawsuit filed in San Francisco last year — a lawsuit that’s curiously been ignored by the US media.

After a 2005 IPO and a peak price of near $90, Suntech shares closed Friday at $.61 after trading under $5 for the past 18 months. For Shi, his dreams of creating an enduring industrial empire have been destroyed, as has his personal fortune.

The cost of German solar policies

Bjørn Lomborg is a controversial PhD political scientist who has questioned the cost effectiveness of various efforts to mitigate global warming.

His Feb. 16 syndicated commentary discusses the implications of Germany’s plans to drastically scale back its feed-in-tariff:

Germany’s Sunshine Daydream
By Bjørn Lomborg

Germany once prided itself on being the “photovoltaic world champion”, doling out generous subsidies – totaling more than $130 billion, according to research from Germany’s Ruhr University – to citizens to invest in solar energy. But now the German government is vowing to cut the subsidies sooner than planned, and to phase out support over the next five years. What went wrong?

There is a fundamental problem with subsidizing inefficient green technology: it is affordable only if it is done in tiny, tokenistic amounts. Using the government’s generous subsidies, Germans installed 7.5 gigawatts of photovoltaic (PV) capacity last year, more than double what the government had deemed “acceptable.” It is estimated that this increase alone will lead to a $260 hike in the average consumer’s annual power bill.
…
On short, overcast winter days, Germany’s 1.1 million solar-power systems can generate no electricity at all. The country is then forced to import considerable amounts of electricity from nuclear power plants in France and the Czech Republic. When the sun failed to shine last winter, one emergency back-up plan powered up an Austrian oil-fired plant to fill the supply gap.

Indeed, despite the massive investment, solar power accounts for only about 0.3% of Germany’s total energy. This is one of the key reasons why Germans now pay the second-highest price for electricity in the developed world (exceeded only by Denmark, which aims to be the “world wind-energy champion”). Germans pay three times more than their American counterpart.
…
Using solar, Germany is paying about $1,000 per ton of CO2 reduced. The current CO2 price in Europe is $8. Germany could have cut 131 times as much CO2 for the same price. Instead, the Germans are wasting more than 99 cents of every euro that they plow into solar panels.

It gets worse: because Germany is part of the European Union Emissions Trading System, the actual effect of extra solar panels in Germany leads to no CO2 reductions, because total emissions are already capped. Instead, the Germans simply allow other parts of the EU to emit more CO2. Germany’s solar panels have only made it cheaper for Portugal or Greece to use coal.
…
In the meantime, Germans have paid about $130 billion for a climate-change policy that has no impact on global warming. They have subsidized Chinese jobs and other European countries’ reliance on dirty energy sources. And they have needlessly burdened their economy. As even many German officials would probably attest, governments elsewhere cannot afford to repeat the same mistake.

In Memoriam: 2011 solar shakeout victims

As part of updating a research paper I’m writing on solar policy, I’ve been catching up on the state of the solar business. (Regular readers will note that since I joined KGI, I’ve been paying a lot more attention to biofuels).

To start, I thought I’d look at all the solar firms that died (or otherwise were mortally wounded) in 2011. I traced down the announcements of the firms mentioned in various stories, and here is what I found:

Company	HQ	Stock	Tech-nology	Date	Action	Current Status
Soliant	Monrovia, CA	private	CPV	Mar. 29	Liquidated	Liquidated for 1.5¢ on the dollar
Evergreen	Marlboro, MA	ESLR	ribbon Si	Aug. 15	Chapter 11	Liquidated
SpectraWatt	Hopewell Junction, NY	private	Si	Aug. 19	Chapter 11	In liquidation
Solyndra	Fremont, CA	private	thin film (CIGS)	Aug. 31	Chapter 11	Liquidated
Stirling Energy Systems	Scottsdale, AZ	private	thermal (Stirling engine)	Sep. 23	Chapter 7	In liquidation
Solon AG	Berlin, Germany	SOO1.F	Si	Dec. 13	Insolvency	Seeking a buyer
BP Solar	UK	(division of BP)	Si	Dec. 20	Announced plans to close	Winding down
Solar Millennium AG	Erlangen, Germany	S2M.F	CSP & PV solar farms	Dec. 21	Insolvency	Selling solar farm projects

Most of these were solar system manufacturers, making panels, tubes (Solyndra) or stand-alone thermal generating dishes (Stirling). The mainstream companies (like SpectraWatt) might have IP that’s useful for other PV companies, while the oddball companies (Evergreen, Solyndra, Stirling) had unique technologies of little or no value to other firms.

BP Solar’s decision to get out of PV marks the latest realization by oil companies that biofuels (not solar) fit their existing business model. I hope to blog on this another time.

Solar Millennium is unique in that it was a large solar farm developer, and thus its projects (if they still make economic sense) might be bought by other companies. One of its largest projects is the 1 gigawatt Blythe Solar Power Project that won a $2.1 billion loan guarantee from the DEO and was praised by DOE Secretary Steven Chu and California governor Jerry Brown. It appears that the Blythe and other US projects are being sold by Solar Millennium’s majority owned US subsidiary to SolarHybrid AG.

Livin' On A Prayer

While I was out of town at a conference, one of the big RE stories in California was the 2010 year end report of the California Solar Initiative. California added 194 MW of solar generating capacity in 2010 (vs. 132 MW the previous year).

As Dana Hull of the Merc explained it (with my commentary inserted inline)

In January 2007, California launched an unprecedented $3.3 billion effort to install 3,000 megawatts of new solar over the next decade and transform the market for solar energy by reducing the cost of solar-generating equipment.
…
The California Solar Initiative's road map calls for 1,750 new megawatts of solar power to be installed on residential and commercial roofs in the state by 2016. [Presumably the other 1.25 GW is utility scale. But does state really require that they be on rooftops rather than (say) a carport in a high school parking lot?]

Through the end of the first quarter of 2011, California had an estimated 924 megawatts of rooftop solar installed at nearly 95,000 sites -- putting it more than halfway toward meeting the solar initiative's goal.

Overall, the report left me puzzled as to the efficacy (or expected outcomes) of the CSI program. If in 4.25 years we’re about halfway to the residential/commercial goals — but incentives are almost entirely depleted — where will the remaining adoption come from?

This called to mind the refrain of the Bon Jovi hit that should be familiar to anyone who’s been to a teen dance in the past 25 years:

Whoa, we’re halfway there
Whoa-oh, livin’ on a prayer
Take my hand, we’ll make it I swear
Whoa-oh, livin’ on a prayer

I don’t be able to predict the future, but I can see two possible scenarios for how the remaining 5+ years of CSI will play out.

One is that the price of the equipment is close enough to grid parity that the additional 800 MW will be installed over the remaining years without resort to subsidies (despite calls for California to institute a feed-in-tariff).

The other possibility is that with subsidies gone, adoption will plummet. In that case, the people hoping for success without money behind it inhaled a few times too many when attending rock concerts.

Commodity competition: good for buyers, bad for sellers

Except for those favoring symbolic consumption, electricity is by definition a commodity. For most intents and purposes, the sale of equipment that produces electricity is also commoditized.

Through technology improvements, manufacturing improvements, scale economies and good old fashion competition, prices are getting lower — bad for sellers, good for buyers.

One data point on wind comes from a GE executive, speaking Tuesday at the Renewable Energy Finance Forum-Wall Street. The quote comes from Kevin Walsh, who the GE website says is “Managing Director and Leader of Power and Renewable Energy at GE Energy Financial Services” — in reality the GE spokesman for its RE businesses, part of the $18b/year “Ecomagination” line of products and services.

The quote was in a Renewable Energy World Twitter tweet:

@REWorld: "Cost of wind down 40% in the past 3 years. Call it grid parity -- it's happening folks and that's exciting. " Kevin Walsh of GE #reffws

I looked for RE World to post a real story but so far it hasn’t happened. Still, 40% in 3 years is pretty impressive: not quite Moore’s law (50% in 2 years), but (at 80% every decade) well ahead of the historic PV trend of 50% a decade.

Still, on an annualized basis, PV can top that — both for the past month and the past three years. Prices plunged recently for the upstream supply of crystalline silicon, at least according to Bloomberg New Energy Finance:

The June issue of the Bloomberg New Energy Finance Solar Value Chain Index shows that the spot price of solar grade silicon fell by 28% month-on-month to $53.4/kg, relieving some pressure on downstream manufacturers of wafers and solar cells.

The price of 6" multicrystalline silicon wafers dropped by 23% in June to a record low of $2.39/piece. At the next point in the production chain, multicrystalline silicon cell prices were down 15% in June to $0.92 per Watt.

Module prices are also falling, though at a slower rate, with a 6.5% decline in June bringing crystalline silicon modules to $1.68/W. Chinese manufacturers are offering modules at significant discounts, with prices at $1.49/W, while modules manufactured outside of China are still priced higher, at $1.79/W. Prices for solar modules are now 58% lower than in the third quarter of 2008.

The “June” results are based on a survey conducted between June 2-8; “The Solar Value Chain Index started in May 2009 and the Module Price Index was launched in November 2010.”

Why the precipitous fall?

Martin Simonek, solar analyst at Bloomberg New Energy Finance, said: “Currently the markets are oversupplied with modules, as manufacturers seek to reduce their inventories in markets that are demanding cheap modules because of reductions in subsidies. Producers are preparing for a painful consolidation that could see several players exit the solar industry.”

Naturally, price cuts are a double-edged sword for the industry: lower prices spur adoption and total industry volume, but hurt (or kill) profits.

Or as another speaker at the REFF Wall Street conference remarked this morning:

@REWorld: Solar system costs cut by 1/3, now they don't like the stocks. People still aren't happy but we'll get there. -- Amy Smith #reffws

Note: I interviewed Simonek today for additional clarification. More in my next post.

Rational non-adoption of PV

On Monday, Matt Hunter of CNBC asked provocatively “Does the Solar Industry Have a PR Problem?” The story was based on a fall study done by students at the SJSU Sbona Honors Program, and as someone who helped mentor the students, I was proud to see it published.

However, the conclusions reported by CNBC were different than those of the March webinar that discussed the report. To quote from Hunter’s report:

Jim Nelson, CEO of solar manufacturer Solar3D, says that, true to the perception, solar technology is not quite ready for prime time.

The problem, says Nelson, is that solar is generally still not price competitive with fossil fuels for energy generation, says Nelson. Paradoxically, government efforts to subsidize the purchase of solar panels actually slow down the adoption of innovation that should ultimately make renewable energy more affordable.

By encouraging consumers to buy immature and inferior solar technology right now, government subsidies risk locking people into solar systems that are inefficient, expensive, and may or may not ultimately pay off to the consumer. “They’re encouraging people to use things that don’t work,” he says.

At current kilowatt-per-hour rates, solar energy costs about 4 times more than power drawn from the grid, says Nelson. (Energy Secretary Steven Chu aims to bring down the cost by 70 percent to 75 percent by 2020.)

Reduce that by another quarter, and solar becomes attractive for both residential and industrial customers. (10 cents a kilowatt hour is the average cost of electricity in the U.S.)

Hunter quoted another expert that noted the payback period for residential PV is normally 10 years or more.

The reality is that today, solar makes economic sense for some people but not for others. (As Hunter notes, some people who are affluent or “passionate about green energy” may buy it even if it doesn’t pencil out.)

There are five things that drive the economics o PV adoption:

1. cost of the system
2. subsidy for the system
3. amount of sun
4. cost of capital to finance the system
5. the price of the substitute (grid power)

The press tends to focus on the first three. However, in talking to people in industry, the real action is where electric rates are high: with PG&E’s tiered rate structure, running an air conditioner in the Central Valley is prohibitively expensive and thus even an expensive PV system looks attractive.

Certainly the “grid parity” curves on PPT decks for the past decade assumed increasing fossil fuel prices (which may be a false assumption). In places like the Central Valley — or especially Hawai‘i — the substitutes are already expensive enough to make solar cost-competitive.

As it turns out, on Monday I had a farewell lunch with one of my coworkers, Gita Mathur of the SJSU College of Business. Gita noted that her 1985 first doctorate (of two) was on GaAs photocells, and the lab efficiencies she was demonstrating 25 years ago were almost the same as those for commercial products today. In her view, the subsequent innovation was mainly in the packaging — reducing the balance of system costs (including labor) to get those cells installed and available to generate power. This is certainly the area where industry continues to make strides, and in fact the basis of the low cost (and low efficiency) thin film startups.

Green vs. Green

USA Today updates the rest of the USA today on the fight in the Mojave between the supporters of Tortoises for Global Warming™ and the anti-AGW environmentalists.

The headline and the first paragraph say it all:

Solar plans pit green vs. green
By Keith Matheny

Plans to create huge solar energy plants in the deserts of California, Arizona, Nevada and elsewhere in the West are pitting one green point of view vs. another.

The There’s really nothing new for those who have followed the controversy for the past two years, but the article does update the score: 9 projects approved and 2 pending (plus 2 approved in Nevada). It also mentions “More than a dozen other utility-scale solar projects are in the permitting pipeline in California, Nevada and Arizona.”

The article does briefly mention the controversy over Ivanpah — as well as its $1.37b in Federal loan guarantees — but not the planned IPO of its intended operator, BrightSource.

I’d commend Matheny (of the Palm Springs Desert Sun) for bringing this to a national audience, but Ivanpah alone has been covered a few dozen times in the New York Times. Still, any publicity on the issue is good for the public policy debate over the serious tradeoffs here between the predicted (although not provable) impacts on AGW or certain endangered species.

A testament to the power of bureaucracy

While many Californians seek to promote green power, there’s an even strong and more renewable form of power: government bureaucracy.

On behalf of SolarTech, the PV trade association, our SJSU business honors students have completed one study on overcoming permitting obstacles for residential solar in the state, and are about to finish another.

Meanwhile, the Sacramento Bee shifts the problem from an insider’s concern to a broader political audience in an article entitled “Permit Process Clouds Solar Energy Project.” It notes that politicians have talked about streamlining permitting for utility-scale solar, but not residential solar. This oversight calls into question the goal of a “Million Solar Roofs” by 2018.

A few paragraphs capture the heart of the problem:

Solar providers often complain about having to wait hours in line to submit permits and weeks to get final approval.

The result: Installing rooftop solar panels often takes two to three months from start to finish. In contrast, installing a central air conditioning system, which requires about the same amount of work, can take two weeks, Hahner said.

PV may have some safety issues. The industry clearly needs a technical solution — say UL certification of computer-controlled panel/inverters — that would make connecting a solar panel as foolproof as plugging in a refrigerator or room-sized air conditioner.

Even more crazy is when these regulations apply to solar hot water, which as my colleague Jim Mokri pointed out, is not high technology but 19th century plumbing.

The Bee offers this vignette:

Ed Murray, president of Rancho Cordova-based Aztec Solar Inc., said he ran into a number of hassles trying to get a permit from San Joaquin County for a simple $5,000 solar water heater.

Usually these kinds of permit applications are handled over the counter, but this one turned into a drawn-out process. Murray said he and his employees had to drive to the unincorporated Stockton area three times as part of the review.

"The customer was about to pull out of the project because he was so frustrated that it was taking so long," said Murray, who noted that the permit was approved Thursday.

This is one of the main reasons that I see California’s RE policy as mereley Grand Kabuki by publicity-seeking politicians, rather than a serious attempt to reduce carbon emissions or the use of fossil fuels.

Politicians can’t change the cost of silicon, the efficiency of CIGS, the cost of capital or the scale efficiencies of the big five Chinese manufacturers. They can, however, change regulations — if they really want to. But obviously they don’t want to.

US: the once and future PV market

Once upon a time, the global PV market was a US market.

Some 60 years ago, AT&T created the PV market. The industry was sustained during the 60s from military and space applications.

This is not just PV. Meanwhile, during the 1970s energy crisis solar hot water became mainstream (at least temporarily) as Californians replaced water heaters and pool heaters with rooftop collectors. In the 1980s, California created SEGS, the largest facility in the world that once comprised more than 90% of the world’s capacity.

As any reader of this blog knows, the German feed-in-tariff (and similar subsidies in selected other EU countries) has created huge growth and shifted the bulk of the global PV demand to Europe. In 2010, 80+% of the global demand was in Europe — and of that Germany was by far the largest with 8+ GW of capacity added in 2010.

Wednesday at the SolarTech 2011 Solar Leadership Summit, Shayle Kann of GTM Research talked about the growth of US PV demand, based on a state-by-state survey it did in cooperation with SEIA.

First off, Kann said "There is really no such thing as a US market. There’s a loose collection of 50 state markets” or even 3000-utility-specific markets.

In 2010, the US installation of PV reached 878 MW (volts DC, i.e. pre-inverter), up from 290 MW in 2008 and 435 MW in 2009. While US growth has been explosive, so has the US share of the global market , flat at 5-6% over the past six years.

However, GTM is expecting the US market growth will now outpace global sales — continuing to double annually, with global growth only 17-18% per annum. If these trends hold, the US share of the global market could triple to 16% by 2015. With European growth slowing, PV companies are seeking growth elsewhere and Kann said they're targeting the US for that growth.

The top 10 states account for about 85% of the US market. According Kann's data, 2010 was the first year that California did not garner for the majority of the US market: from 50.3% down to 29.5%. NJ remains number two (up to 15.6%), but Nevada (6.9%) and Arizona (6.2%) leapfrogged Colorado (6.2%) within the top 5. Florida fell both in absolute and relative terms (from 8.3% to 4.0%).

One key element of growth will be utility scale systems: 6.4 gigawatts (7 years of demand) of utility scale capacity is contracted — with all of that online by 2015. Another 13.6 GW are announced but do not have a signed PPA.

Interestingly, US manufacturing (per GTM numbers) has remained constant at around 38-40% of the market. While Chinese makers have gained share, it’s been at the expense of Japanese makers rather than US ones.

Still, PV remains a drop in the bucket for US electricity generation: PV to date totals 2 GW peak capacity, whereas 50 US power plants (mostly hydro and nuke) have 2GW capacity each. So, as Kann noted, it will be a while before PV actually has a meaningful impact on US electricity generation.

Solar Leadership Summit coming to Santa Clara

The annual Solar Leadership Summit is being held here in Silicon Valley March 28-29. The theme of the conference is “Solar 3.0--A Path from Policy to Profitability.” Speakers include the president of the Public Utilities Commission, CEOs of REC Solar, Cleanpath Ventures, Serious Materials and SolarNexus, and other public and private RE leaders.

The summit will be held at the Santa Clara Hyatt and is sponsored by SolarTech, the solar energy industry trade association. For more information, including pricing and a detailed agenda, see the SolarTech website.

Some observations on global solar adoption

I just spent two days at a workshop for solar equipment producers sponsored by Festo AG. (I was invited to support its efforts to build a Festo-sponsored open innovation community.) Several of the speakers offered great statistics, history and other facts about the development of the industry.

Below are a few “stylized facts” about where PV is being produced and used.

1. Solar Price is Relative

Substitute costs are the key driver of solar adoption. If energy is cheap, no one wants expensive RE. If energy is expensive, RE may not seem all that expensive. European adoption is high due to high fossil fuel prices, while US has historically had cheap energy. However, with our high insolation and high (Tier 4 or Tier 5) utility bills California is almost break-even without subsidies today, Hawaii too. Germany is a long way off, China will be decades away at 5c/kWH.

2. Roadmaps Help

The PC industry grew for 40+ years with a a technology roadmap based on Moore's Law. There is evidence that PV cost cuts also provided a predictable roadmap. According to consultant Ruurd Boomsma, the prices generally fell 5-6% per annum, much more slowly than LCD prices over the past decade. (However, prices fell more dramatically in 2009 and it’s not clear if that’s the new normal or a one-time shock.)

3. US is Inherently Messy

It is clear that the US policy regime is more fragmented, confused and contradictory than either Germany or China. Although Germany has Federalism, the RE policy is mainly at the national level, not the staaten. In most other countries, the states/ provinces are relatively weak and the RE policy is made at the national level. Also, RE policies (eg. for residential solar) are better understood in countries with national policies than in the US (where the major policies are at the state level).

4. Jobs Follow the Entire Value Chain

There's been a lot of discussion (and hand-wringing) on the huge shift of PV production to China and elsewhere in Asia. However, the major shift has been for cells. Modules are more expensive to ship and to inventory, and may continue to be produced near (or closer to) actual use. Installer jobs will also remain in the developed economies and perhaps the balance of system too.

5. California isn’t Serious About Green Jobs

California has spent lots of money on RE subsidies and is proud to lead the nation in such subsidies — just as it led the nation in regulating tailpipe emissions for years. However, the state has been trying for 20 years to destroy the local manufacturing base through regulation and taxation. If not for the dot-com boom, this would have been pretty obvious a decade ago, but the lagging recovery (and 12% unemployment is making them visible now.)

Mayors, legislators and governors claim to want green jobs, but their bureaucracies tie up new manufacturing efforts with red tape through opaque discretionary approval processes. (I heard a few choice examples Tuesday). It’s no coincidence that the silicon has left “Silicon Valley: that Santa Clara-based Intel is building factories in Oregon and Arizona and New Mexico but has closed its last factory in Silicon Valley. SV alumni and VCs start companies here because it’s convenient, but the manufacturing is going elsewhere.

Five years from now, I predict there will be no large-scale solar manufacturing in California. The PV manufacturing growth for California and the Southwest will be in Nevada (no income tax), Arizona and New Mexico.

Tortoises for Global Warming (tm)

I’ve previously written about the perverse goals of some environmentalists and politicians to block RE development protect wildlife. or, worse yet, to save views in Cape Cod or the Mojave Desert. Some of the same activists who want government to force through spending and approval on RE facilities cringe when there’s a tradeoff between reduced CO2 emissions and other environmental goals.

The NYT’s green blogger, environmentalist Todd Woody, does an unusually good job of capturing both sides of this dilemma in his blog posting and article today about how more than 4 gigawatts of newly-authorized capacity (mostly solar thermal) will likely transform the Mojave Desert — despite repeated objections by the Sierra Club and other environmentalists.

The flashpoint of the Mojave controversy is the California Desert Tortoise. As Woody writes:

The protected desert tortoise has become the totemic animal for environmentalists fighting to ensure that the huge solar farms don’t eliminate essential habitat for the long-lived reptile and other wildlife, like the bighorn sheep and flat-tailed horned lizard.

The tortoise has been in decline for decades, and the rampant development of the desert – from casinos and strip malls to subdivisions and off road recreational vehicle areas – took their toll long before construction began late last month on the Ivanpah solar power plant, the first large-scale solar thermal project to be break ground in the United States in 20 years.

However, as Woody also notes, the new plants will provide resources, funding and data to better understand the tortoise and how to preserve it. (In other words, much as building a shopping center sometimes funds archaeological digs that otherwise would not have happened.)

The article suggests that the controversy is far from over. In the short run, it may get stronger as Gov. Brown appoints one or more wildlife environmentalists to replace Schwarzenegger appointees who consi entire favor RE over wildlife. In the long run, the actual evidence gathered by the newly-funded scientists should resolve the debate one way or the other.

GE: green energy or greenwashing?

For more than five years, GE has been branding its green/environmental/sustainability efforts as ecomagination. It has custom domain, a Twitter feed and a prize contest (using open innovation ideas). It event spent nearly $3 million for a 2009 ecomagination SuperBowl ad.

When GE rolled out the campaign, a grad student writing in Monthly Review (which proclaims itself an “Independent Socialist Magazine”) was more than a little skeptical

As environmental degradation continues to expand in tandem with global capitalism, environmental consciousness becomes a new marketing strategy. GE's newest invention is to present itself as an environmental crusader. "Ecomagination" is its latest moniker, proclaiming that one of the world's largest corporations has gone green, embracing environmentally-friendly policies and promising to provide the world with solutions to environmental problems. All we have to do is trust the company and continue our lives, preferably as its customers, and it will bring us the clean, pure world shown in its advertisements.

An anti-envirnomentalist’s op-ed in the New York Sun was equally skeptical:

Environmental activists are cheering General Electric's new "Ecomagination" initiative. That's a hint that the rest of us should beware of the gimmicky-sounding program.

"Ecomagination is GE's commitment to address challenges such as the need for cleaner, more efficient sources of energy, reduced emissions and abundant sources of clean water," CEO Jeffrey Immelt said. "And we plan to make money doing it. Increasingly for business, 'green' is green."

Skepticism or not, there is a substance behind the ad campaign of the $150 billion/year conglomerate.

After selling its first turbine in 1901, GE quickly moved into renewable energy by selling a turbine for hydroelectric power generation. Its turbine expertise also led to its involvement in nuclear plants, as well as a range of fossil fuel power generation systems. Its decades-long experience with power transmission has also made it one of the most aggressive corporate backers of smart grid — the subject of the 2009 Super Bowl ad.

GE’s position in wind is more recent. In 2002, it spent $358 million to buy the wind energy assets of the bankrupt Enron Corporation, which had bought the business five years earlier. Founded in 1980 by Jim Dehlsen, Zond Energy shipped its first turbine in 1981. (Early on, Zond also purchased turbines from Vestas to install in its pioneering Tehachapi wind farm).

While GE’s wind business is the market leader in the US, 80% of its sales are in the US — perhaps a legacy of the lack of global focus by Zond or Enron. In its home market, it seems to be losing share to foreign competitors like Siemens of Germany and Suzlon of India. Like other Western makers, it has minuscule share in China due to trade barriers, and so last month formed a 51/49 joint venture with a Chinese partner.

GE also entered the PV industry via acquisition, with its 2004 purchase of the bankrupt AstroPower and its process for thin-crystalline silicon cells. More recently it has invested in various thin film processes, including CdTe and CIGS. A year ago, a GE R&D exec said solar was “the next wind for us.”

GE mentions solar thermal as a line of business but doesn’t say much about it publicly.

The contribution of these RE efforts to GE are a mystery, as it doesn’t break out wind or solar financials. Overall, the energy infrastructure segment of GE accounted for 24% of its $155 billion in 2009 revenues — but 62% of its $11 billion in profits. In mid-2008 it predicted $1 billion in solar revenues by 2011, but no progress report on how close it is to reaching that milestone.

Innovative technology, commodity electrons

One of the points I make when teaching about solar energy — as I did for three classes this week — is that the economics of renewable energy are fundamentally different from that of IT, biotech, or earlier technology-based industries.

The challenge facing renewable energy entrepreneurs is that no matter how innovative a company’s technology, in the end it’s going to be used to produce commodity electrons. And even if the government has a policy that aggressively favors “green” energy over all others, makers of flat silicon panels have to compete with thin film CdTe, CIGS, CPV, solar thermal as well as wind, small hydro and anything else that comes along.

So in the end, really cool technology is going to be judged on cost and reliability during the long life of an expensive capital good. PCs may be thrown away after 3 or 5 years, but solar panels are expected to run 20 years or more. This means that high-volume, high-repeatability, low-cost manufacturing is usually more important than some great advance in science (unless of course that advance cuts costs or improves efficiency more than it raises costs).

Attacking this point is Thursday’s column in GreentechSolar by Tuan Pham, an energy analyst (and HelioVolt biz dev consultant) turned solar investment fund manager. The column’s subtitle says it all: “Considering the implications of the fact that solar is really an energy industry, not a technology industry.”

Some of his points are familiar: commodity electrons, the unsuitability of VCs to invest in capital-intensive projects, and unrealistic growth expectations. Others should be familiar, including the near-commoditization of high insolation land intended for solar farms:

Because we can site solar nearly anywhere the sun shines — solar resources at any given location have been studied for decades by NASA and the National Weather Service — our projects are much easier to develop than other energy projects. … Why would property owners expect to charge significant premiums for land if the sunlight is the same 50 miles down a transmission line?

Other points are more contrarian, including this:

Yet, despite all of the tech money that has flooded into solar in recent years, technological advances have not lived up to expectations. In fact, most of the "technology" that is being funded in solar projects is relatively old. Crystalline-silicon (c-Si) cells were invented at Bell Labs in 1954 and since c-Si efficiencies hit 14% in the 1960s, not very much has changed with the technology. Likewise, the other pieces (balance of systems) that go into a solar generating system involve fairly uncomplicated electrical work and few moving parts. These well-known and reliable generating assets, not an elusive magic technology bullet, are what energy and project investors will fund.

While some of Pham’s conclusions will create heartburn among solar activists, the nudge towards increasing accountability should not. Pham singles out “Pretend PPAs,” in which Purchase Power Agreements are quoted with unrealistic prices and costs that will eventually become obvious.

The recommended antidote for regulators and utilities being compelled to buy renewable energy:

• Increase and enforce penalties on non-fulfillment of projects
• Shorten execution time frames (at least for PV).
• Enforce stiffer penalties on projects that are late.
• Require bigger proposal deposits.
• Expedite the interconnection process.

Accountability is good and necessary for buyers, sellers, investors and society. A lack of accurate information and accountability creates market distortions that lead to bubbles and crashes.

The solar industry is approaching a shakeout period, with the strong consolidating the weak. Many venture investors supporting a company with more than $100 million of equity funding will eventually seek other exits if the firms are unable to IPO in the next 18-24 months. (Don’t ask me which ones will go first — my Ouija board is on the fritz.)

Let’s hope that more accurate information leads to the survival of the most efficient and best run firms, rather than those who were lucky at the VC roulette wheel but who lack the resources and capabilities necessary for long-term survival in this competitive industry.

A completely different Akeena

Anyone who lives in the South Bay has probably seen or heard from Akeena. The company occupies a former car dealership in Los Gatos, and has been aggressively promoting sales workshops at our local wine bar. I kept telling my wife we should go, but apparently now it’s too late.

Last May, Akeena agreed to effectively become an arm of Westinghouse, which didn’t actually have to put up any money to buy the company. Instead of selling “Akeena” solar panels, the company agreed to sell its future panels under the Westinghouse brand, including those it’s already selling at the Lowe’s home improvement warehouses. Akeena Solar, Inc. is now doing business as (d/b/a) Westinghouse Solar.

(Akeena’s already-distressed stock has drifted off into penny-stock land, which will allow Westinghouse to eventually buy the company for less than 5% of what it was worth at its peak.)

Now two different blogs have reported that Akeena is getting out of the installation business to (it claims) avoid competing with dealers. As PV-tech reports:

"Expanding our channels to include authorized dealers in California will accelerate the growth of our distribution business," said Barry Cinnamon, chief executive officer of Westinghouse Solar. "California is the largest state in the country for solar products, accounting for approximately 50 percent of the U.S. market… As we transition to a distribution model in California and sign up new dealers, we will continue to focus on securing new distribution partnerships and adding dealers around the country. We will honor all outstanding installation obligations, and in many cases expect to work with new Westinghouse Solar dealers to take over our remaining backlog of California installation projects."

When GreentechMedia reported on the shift last week, it was generally optimistic. Akeena had already exited installation elsewhere in the US, because it was competing with its installers. However, as it also reported:

A strategic shift like this, however, also means layoffs. Employees said that began today.

Alas, no more sales seminars at the wine bar, and one less large-scale California installer. Some 19 months ago, Borrego Solar got out of residential installation, selling its California and Massachusetts operations to Vermont-based groSolar for an unspecified amount.

So according to a 2009 analysis, that’s two of the four largest California residential installers changing hands in the past two years. Only SolarCity and REC Solar are bigger in the state: while I’d like to say that’s the end of it, clearly more consolidation is coming to the installation industry — not just to panel manufacturing.

Update, Sept 14: Akeena later sold their installation backlog to Real Goods Solar. 

Applied Materials curtails thin film business

Update 2:30pm. In response to a reader’s feedback, I’ve corrected the story.

The Merc this morning had a rather ambiguous story about the layoffs at Applied Materials that mark a retrenchment of its diversification from integrated circuits into PV.

GreenBeat (at VentureBeat) has a much clearer and more complete story that explains how the company is scaling back providing equipment to thin-film silicon manufacturers. (The Merc’s GMSV morning blog even acknowledges the superior VentureBeat coverage). PV-Tech also has a more precise story than the abbreviated Applied press release.

(Update: The press release itself says that Applied will no longer sell its SunFab integrated lines for manufacturing thin-film solar panels, but still plans to sell tools for thin film manufacturers. My original title “exits thin film business” was not true, but it’s hard to find what’s really happening behind the AMAT euphemisms.)

The VentureBeat story argues that Applied’s losses are just a matter of a bad bet, placing too many eggs on the future of thin-film amorphous silicon. The story predicts a cascade effect for two local PV manufacturers:

This is bad news for companies like First Solar and of course NanoSolar, which have both invested heavily in thin-film technology. Applied’s decision to migrate away from amorphous panels is yet another blow, a move that could raise the alarm among investors looking for smart, more capital-efficient investments in solar.

However, I think the GMSV commentary raises the broader and more important questions:

Others bring up that Applied CEO Mike Splinter indicated a few months ago that the U.S. solar industry was losing to China, which is building cheaper solar panels, and that the company’s latest move is symbolic of a broader problem for the U.S. energy tech industry. China is now the world’s largest exporter of solar panels, the Wall Street Journal says.

This seems to be one of the well-understood but little-remarked problems with America’s so-called “green jobs” strategy.

Consistent with the Vernon product life cycle thesis, in most tech industries the early production and manufacturing are in the developed home country, and it’s only later in the maturation of the industry that the production is moved offshore. Intel took 40 years to move manufacturing out of Silicon Valley, and similarly the software industry had a good run of several decades before penny-pinching American firms discovered Bangalore.

Today, even before American startups ramp up to meet domestic demand, they are shifting production (or contracting for production) to offshore locations. This not only has implications for the production workers, but also for the startup companies themselves: if the materials and production are offshore, is their value-add strong enough to preserve a permanent source of competitive advantage?

Of course, Apple successfully moved to contract PC manufacturing more than a decade ago — a pattern extended to the iPhone and iPad — and continues to post record sales and earnings. However, Apple is one-of-a-kind in the PC and cellphone industries, so it’s hard to say this is a feasible path to profitability for many companies.

The reality is that PV companies are producing technology-intensive, capital-intensive capital goods that produce commodity electrons. Because the substitutes — conventional electricity generation — are so cheap, they face commodity price pressures far earlier than in most tech industries.

So I think the GMSV concern is warranted: even if the irradiance and cost trends assure that California and the American Southwest will be powered by solar energy in 20 years, that doesn’t mean the profits for this infrastructure buildout will accrue to American firms. (NB: The $1.45b loan guarantee for a Spanish solar thermal producer.)

Perhaps it is my college-educated, college-teaching bias, but I also don’t think having American workers install foreign-made panels is the same as having US firms creating export-oriented manufacturing jobs in renewable energy.

Estimating the cost-benefits of solar energy

The key question of renewable energy is cost-effectively producing commodity electrons. One of the most pressing questions for SolarTech, Silicon Valley’s solar energy trade association, is accurately estimating the financial returns of rooftop PV and other RE systems.

In the Spring 2010, SolarTech commissioned a consulting team of finance students from the Sbona Honors Program to look at the most commonly used tools for calculating solar returns. (I supervised a second team on local permitting, and initiated the cooperation between SolarTech and the SHP for both teams.)

The actual report is available on the SolarTech website and was announced Wednesday in a SolarTech press release, timed to next week’s InterSolar conference in San Francisco. Because it is a building block of the SJSU-SolarTech cooperation, I wrote more about the background and goals of the study in our new Solar Workforce blog.

The short answer: the students think the best alternative (of the four) is the NREL’s Solar Advisor Model. The caveat is that study was mainly on features and usability, and there still needs to be an audit (by subject experts) of the accuracy of the calculated results.

Still, this is a great example of how business schools (and undergraduate students) can be relevant to the emerging renewable energy industry. It also offers some insight to us in business schools how to bring the industry’s real business problems into the classroom.

Route 66 views are more important than clean energy

The NYT report Tuesday covered several angles I hadn’t seen on Sen. Diane Feinstein’s bill to block solar energy development in the Mojave Desert.

First, it said that Feinstein’s concerns is not protecting flora and fauna, but aesthetics — having solar panels out there would look ugly. Of course, to renewable energy advocates the prospect of large facilities satisfying the energy needs of entire cities is quite attractive — and this is certainly not something that has discouraged the Germans or Spaniards. (Perhaps the senator should travel more). But this is also the argument that is often made against windmills on ridgelines.

Secondly, the article noted that even the prospect of legislation has killed the idea of developing solar farms in that part of the Mojave. In the face of uncertainty — high political risk — solar entrepreneurs have stopped working on projects for the area. When we teach business, we normally think of political risk as something that happens in third world countries, but of course it’s a problem in any context where the government is heavily involved in the market.

The article summarized a visit by Feinstein and her entourage to prospective solar sites in the Mojave:

As conflicts over building solar farms in the Mojave escalated earlier this year, Mrs. Feinstein trekked to the desert in April. …

The presentation over, the entourage rolled on to the next solar project site to hear the developer’s pitch. Mrs. Feinstein gave the developers a hearing but was not moved by their arguments, according to five people present on the tour. The senator seemed concerned about the visual effect of huge solar farms on Route 66, the highway that runs through the Mojave, they said.

Third, while this is an awful idea — legacy-building by a US senator who will be 79 when her current term expires — few Californians (union, solar, environmentalists, government officials) are willing to say so for fear of political retaliation. (Again, another example of why governing based on political influence and whim rather than policy is a terrible idea.)

Fourth, despite what renewable energy advocates said about George W. Bush, a Bush-era effort pushed for more solar development in the Mojave and other Southwestern deserts to meet society’s energy needs with renewable energy. (I guess the common thread is that if there’s something private industry could build to provide more energy, the former oilman was in favor of it.) The NYT makes it clear that Obama and particularly Feinstein are placing much more emphasis on conservation than Bush did.

So in the end, the indictment of the Feinstein plan comes from one of the few people who’s powerful enough to stand up to the senator — the namesake of a martyred US senator and nephew of the most popular Democratic president of the past 50 years:

“This is arguably the best solar land in the world, and Senator Feinstein shouldn’t be allowed to take this land off the table without a proper and scientific environmental review,” said Robert F. Kennedy Jr., the environmentalist and a partner with a venture capital firm that invested in a solar developer called BrightSource Energy. In September, BrightSource canceled a large project in the monument area.

This proposal is among the worst examples of NIMBY-ism. Society wants and needs renewable energy, but various interests game the system to say “sure, but not in my back yard.” Laws are passed based on the intense opposition, overriding a more diffuse public need; hearings will be about saving the views and the flora and fauna, not the difficult it creates for meeting the state and country’s renewable energy goals.

As RFK Jr. notes, the Mojave is the best solar land in California and perhaps the world. There are many other scenic desert vistas in the United States — but further from large power-hungry metropolitan regions.

Perhaps Californians might have to drive to Utah or Arizona or New Mexico to see such vistas — or into one of the thousands of acres of existing monuments in California. But if it were put to a vote of California voters, I think the decision would be overwhelmingly in favor of using the desert for renewable energy rather than a monument to one senator’s political clout.

Feinstein strikes a blow against renewable energy

Setting up a fight with Governor Schwarzenegger, Senator Diane Feinstein (D-Calif.) today introduced legislation to restrict development on more than 1.3 million acres of the Mojave Desert. (WSJ says 1.7 million). The proposed legislation would create two new national monuments, national wilderness and extend two existing national parks.

Fights over the appropriate use of the California desert are as old as the modern environmental movement — at least 40 years. The fight has traditionally been to protect flora, fauna and their associated habitat from traditional enemies such as military tanks (at the sprawling Army’s Fort Irwin and the Marine’s Twentynine Palms bases) and off-road vehicles.

However, what’s new is that these proposed restrictions are aimed squarely at using the California desert for renewable energy generation. With few clouds, southerly latitudes (35°-36° North), and located 50-100 miles from downtown LA, the Mojave is ideally situated for providing solar power for the 13 million people in metropolitan Los Angeles, as well as the larger five-county Greater Los Angeles that holds half the state’s population.

It is thus not surprising that America’s first significant utility-scale solar energy plant — the Kramer Junction Solar Electric Generating System — was developed in the Mojave more than 20 years ago. In addition to this 165 MW solar thermal facility, a new 553 MW facility is planned by the same operators to sell renewable energy to PG&E.

Other parts of the Mojave are well suited for wind energy. The Tehachapis (at the west end of the Mojave) are one of California’s two major wind energy producing regions, along with the Altamont Pass east of Oakland.

Some might wonder whether renewable energy is an unintended victim of restrictions aimed at off-road vehicles, but public statements in the LA Times report make it clear that the damage is quite intentional:

During a tour of the area Sunday, David Myers, executive director of the Wildlands Conservancy, scrambled up a rocky hill at the base of a row of snaggletoothed mountains freckled with clumps of brittlebush.

"Heroic country, isn't it?" he said. "Just a few months ago, there were plans to cover this entire landscape with solar and wind farms. Instead, with this legislation, we are striking a balance with the insatiable demands of population growth."

Establishing a national monument or wilderness is one of the most bureaucratic approaches that could be imagined to restrict renewable energy development: it’s not “striking a balance,” but slamming on the brakes. With the Federal protections in place, environmentalists will be able to delay or block renewable energy development for years if not decades.

California has told utilities they need to buy one third of the state’s electricity from renewable power sources by 2020. Thus the state has the proper motivation to strike a balance between two competing environmental goals — carbon-free energy production and habitat protection — in the way the Feds never will.

It would have been nice if California could have created its own state park in this region to mediate such a balance. However, that approach might have suffered the same problem as the federalization of the Mojave. Last summer, the legislature passed SB 679 (vetoed by Gov. Schwarzenegger) which would have required any land taken for non-park use be replaced by additional land — also discouraging use of the land for renewable power generation. As the governor wrote in his veto message:

Under existing law, the Director of Parks … may sell, exchange, and acquire State Park property deemed necessary for the extension, improvement, or development of the State Park system. Whether it is roads, water and energy infrastructure, or areas necessary for the installation of renewable energy facilities, maintaining the flexibility of the current process is absolutely necessary as the state continues to strive to meet its infrastructure needs for a growing population.

Up until this point, the interests of wildlife environmentalists and global warming environmentalists have usually been aligned, with rare exceptions like birds dying in the Altamont Pass windmills. These two sets of competing values — habitat protection vs. renewable energy production — need to be reconciled through open debate and our public policy process. I think the proper place to do so is at the state level, not in Washington DC. California has a proud record of being at the forefront of the environmental movement for more than a century (think John Muir).

Utility scale solar power stations will be an essential part of any realistic effort to achieve the mandate of 33% Renewable Portfolio Standard energy by 2020. Such an effort — harnessing private industry to replace fossil fuels burned every day to support our society — is more concrete than all the hot air spewed by so-called “green” politicians over the past decade. Saying you support restrictions on greenhouse gasses and renewable energy but blocking renewable energy development is dissembling even by the low standards of career politicians.

Update 4:30pm: The actual map released by Sen. Feinstein today makes it clear that most of the area being restricted is on the Eastern edge of the state. (The exception is the proposed “Sand to Snow National Monument” (an odd name) west of Joshua Tree, which seems to include ridgeline land that could be a potentially valuable wind generation region just north of the existing Palm Springs wind farm.)

The proposed national wilderness and the Mojave Trails National Monument border the Mojave National Preserve and the east side of Fort Irwin, including plots of sunny land near major electric transmission lines. As the WSJ reports:

The Mojave is particularly attractive because it not only offers nearly uninterrupted days of bright sunshine in a sparsely populated area, but lies near a major electric-transmission corridor from California to Nevada.

In addition to the I-15 corridor to Nevada, the restrictions would overlap the I-40 and Route 66 corridors to Arizona. If, as the WSJ notes, a major environmental concern for large renewable energy plants is building new roads to access the plants, then the corridors along these three national highways should be a high priority for energy development.

We’ll see how “balanced” this proposal is when we hear from the governor and electric utilities. My guess that solar entrepreneurs will be too scared to openly oppose the Feds, in case the legislation passes and they have to beg the Feds for the right to develop in one of the national monuments.