Solar continues to gain in the U.S.

Posted on January 13, 2014 by meisele

According to SolarBuzz, http://www.solarbuzz.com, The U.S. installed 4.2 gigawatts (GW) of solar power during 2013, a fifteen percent growth over 2012.

The U.S. has passed Europe to become the second largest geographic market for solar, after Asia. These market gains continue, in spite of uneven policies by state and federal governments.

Utility and industrial scale projects accounted for more than 80 percent of new solar capacity. Good project finance rates and demand for projects from utilities to meet state renewable requirements has driven growth, accounting for over three-fourths of these large scale projects. The remaining 20 percent was installed mainly on residential rooftops.

2013 State rankings

California was again the leading state in the U.S. for installed solar PV in 2013; North Carolina and Texas expanded the fastest. Maryland and Colorado dropped from the list of top states. These changes mainly result from changing state policies and incentives for solar, with some states improving incentives and some states eliminating past programs.

Are Natural Gas and Renewable Energy competitors? Or complementers?

Posted on September 30, 2013 by meisele

Natural gas proponents have a tendency to bash solar and wind generated electricity. Both solar and wind are intermittent sources of electricity they argue. Short term weather patterns as well as seasonal variations in temperature and precipitation can create havoc in predicting output from either solar or wind farms. And neither solution is good at handling peak demand, those times when utilities need extra short term capacity to meet demand.

And low natural gas prices over the past few years have accelerated the use of natural gas for new utility capacity. Nearly 90% of new electricity capacity in the western United States is planned to be natural gas fired electricity generation in the next decade, in spite of this area being one of the best areas in the world for both solar and wind energy.

With the big boost in U.S. natural-gas output from new horizontal fracturing technology, some experts concluded that solar and wind energy would be battered by this cleaner, less expensive fuel. Indeed both markets have experienced a slowdown at the utility scale level of development.

I believe this is a reflection of the near term economy and the fluctuating uncertainty around Federal and State tax credits and benefits for solar and wind. For the long term, we predict gas and renewables will coexist in more and more utilities’ portfolios.The recent data shows that both are growing. Natural-gas electricity generation rose 34% from 2009 to 2012, starting from a much bigger base than renewables. Wind generation rose 92% in the same period and solar generation about 4X, according to the Wall Street Journal.

Natural gas plants are compact in size, can be sited in and around large cities, can be quickly permitted, and can be easily financed. Output can be easily turned up or down to meet demand. However, building these facilities means the utilities are now at risk for long term natural gas prices. Yes the prices are low today. But what will the price be in one year? Five? Ten? Regulators know consumers and businesses are notoriously aware of price increases for electricity, so it can be hard for utilities to recover increased costs at the time they incur.

Over the longer term, volatile gas prices and new environmental controls add up to a big risk for utilities. How to hedge this risk? Utilities can resort to price hedging their fuel cost, just as airlines may hedge jet fuel prices. But that may not stop a steady rise in fuel costs over time.

A different hedge is to build a balanced portfolio of electricity capacity that includes wind farms and solar projects. Almost all of the costs for these renewables are upfront and predictable. The future costs of electricity are much more certain than for natural gas fired plants. This alternative view of hedging makes solid business sense for utilities, especially now that the solar and wind industries have the capacity to provide meaningful gigawatts of electricity at competitive costs to natural gas over the long term.

Competitors or complementers? Expect natural gas and renewables to coexist in the utility industry for the next 20 years.

Tesla’s digital car risks

Posted on September 11, 2013 by meisele

Telsa Motors is on a roll. The company will produce about 21,000 vehicles this year, with over 12,000 Model S luxury sedans delivered already in 2013. Tesla’s Model S receives excellent car performance reviews and seems to have solved the range and time-to-charge issues of electric vehicles with their advanced lithium ion batteries and growing network of supercharging stations.

In National Highway Traffic Safety Administration crash tests, Model S received a five-star rating in each of three categories and overall. Tesla’s direct-to-consumer sales model is working, even in states like Massachusetts, where it’s been attacked by car dealers. And Tesla has focused on technology, with over 500 applied for patents, many for battery-related engineering. Tesla already licenses technology and sells components to other car companies, such as Toyota.

With new models on the way and with the recent good news,Tesla Motors stock (TSLA)—reached $20 Billion in market value this week, on par with many established car companies.

Tesla’s Model S may be the most digitally advanced car ever produced. Model S can be controlled by a smart phone for example, to turn on air conditioning or unlock the car or schedule charging of batteries. These features sound wonderful….if the software is bug free, if there is no interference from other phones (the reason cell phones are turned off for airplane takeoff and landing), and if the system is secure. George Reese, the director of cloud management for Dell (NASDAQ: DELL ) recently wrote in an article that the Model S has a security flaw that leaves it exposed to hackers.

Privacy could also be an issue. Tesla employs comprehensive data gathering on its cars to aid diagnosis of problems, to deliver car system software improvements, and to proactively recommend service, all potentially great features. But if insurance companies and governments have access to the same data, you might be in for an insurance premium surprise, or worse.

Tesla’s business model also puts them at risk for breakdowns and security breaches of today’s electrical grid. Any power outage of more than a few hours would strand travelers and commuters who depend on their Tesla.

Tesla has opened an exciting chapter in the automotive industry. We’ll see how the digital technology challenges unique to Tesla play out.

Obama on climate change: big talk, not much action

Posted on June 26, 2013 by meisele

The President’s climate change program offers nothing new to impact carbon emissions.

On June 25, President Obama announced a goal of curbing greenhouse-gas emissions 17% from 2005 levels by 2020. The key program to accomplish this is “…establish carbon pollution standards for both existing and new power plants.”

This would be the first-ever federal effort to regulate greenhouse-gas emissions from electricity generating power plants, the source of about one-third of such carbon emissions in the U.S. The main strategy is to reduce the use of coal, in favor of cleaner, less carbon emitting fuels, mainly natural gas.

Obama is only a decade behind! In the past decade (see charts), the electric utility industry has already reduced its coal usage by over 1/3, from 51% of total electricity generation in the U.S. to 37% in 2012, as reported by the Nuclear Energy Institute .

Natural gas has taken up all of the slack, because natural gas fired plants are physically smaller, can be situated near customers in large cities, have much shorter regulatory approval cycles, and because horizontal deep fracking drilling has made natural gas plentiful and cost effective, now and in the future for North America. Over 90% of the new capacity for electricity currently in the approval process in the U.S. is for natural gas fired plants. Natural gas’s portion of total electricity will continue to rise, with or without regulation by the federal government.

President Obama’s plan includes other measures meant to reduce emissions, including $250 million in federal loan guarantees for cleaner fossil-fuel energy projects; new fuel-economy standards for heavy trucks; and greater cooperation between the U.S. and major economies including China, India and Brazil. These proposals are either too small to have a meaningful impact, or they lack any specific proposals that could achieve meaningful results. Big talk, but little results will come.

Mr. Obama’s proposals don’t require congressional approval. One can expect legal and congressional challenges to regulating carbon emissions from power plants. But the electric utility industry will continue its progress away from coal, with or without those regulations.

Darkness before the (solar) dawn

Posted on April 16, 2013 by meisele

How could it happen? On March 4, the board of Suntech Power (STP) fired its founder and chairman, Zhengrong Shi, replacing Shi with Susan Wang, a Suntech director. This was the second demotion for Shi, who lost his job as chief executive officer last August.

Suntech reported losses of more than $1Billion in 2012 after making a profit in 2011. And, Suntech is being forced by eight banks into bankruptcy after defaulting on $541 million of convertible bonds due March 15. The company’s finances are being investigated in China.

A global supply glut and cuts to government subsidies for alternative energy in Europe has spurred losses for Chinese solar manufacturers since 2011. Suntech, with the largest industry manufacturing capacity, but also the largest debt of any Chinese module maker, was particularly vulnerable to the price and demand pressures in the solar market.

Suntech’s downfall is as unimaginable as the New York Yankees going to the minor leagues…. Dr. Shi is the superstar scientist, educated in prominent Western universities, who founded Suntech in 2001. Suntech was the highly visible, successful international growth company created in the modern Chinese way, with world-wide market presence, leading technology, and the world’s largest factory capacity financed from state backed lenders. The results have been stunning for a decade: listing on the New York Stock Exchange in 2005, number three word-wide photovoltaic supplier by 2006 as well as supplier to the Olympics, and the world’s solar module market share leader by 2009, with modules that are world class in efficiency. With Suntech in the lead, China was clobbering the U.S. and Germany and all comers in solar.

The right stuff

What will happen to Suntech and its 2 gigawatts of solar capacity? For the long run, Suntech has all the right stuff; leading technology, modern manufacturing capacity that will serve the market for a decade or longer, and world wide application and sales acumen.

Excess dynamic random access semiconductor memory (DRAM) in the 1980s and excess optical fiber data transmission capacity in the 1990s resulted in a surge in development to utilize the unused capacity, as well as a surge in acquisitions and industry consolidation to buy and deploy the assets for a fraction of their cost. I predict the same will happen with Suntech.

On the asset acquisition side, already reports are surfacing of interest from the government of Wuxi, where Suntech is headquartered, to find a buyer or financier. Rumors of Warren Buffet’s interest have been reported. I expect more, quality players will circle the field where Suntech plays, looking to garner a leap forward in capability and capacity, at a fraction of the normal cost.

A bright solar morning ahead

At post bankruptcy prices, the marginal cost to produce a photovoltaic panel with Suntech’s factories could be as low as 10 to 20 cents per kilowatt, essentially just the price of the raw silicon, currently dropping quickly, plus a small operating cost. This is a whopping advantage in the market, and a huge accelerator for large scale solar installations. At 15 cents per kilowatt, solar is cost competitive with utility scale gas fired electricity plants. As companies, governments and utilities look at ways to insulate themselves from future fuel cost shocks, solar from Suntech’s factories is going to look super attractive.

As Shi Dinghuan, president of the Chinese Renewable Energy Society and an adviser to the State Council, told Bloomberg News, “the government won’t let this well-known company enter catastrophe easily.”

The days currently look dark for Suntech and the solar industry in total. But today’s excess capacity and pricing pressures are setting the stage for an amazing growth spurt in the next several years, putting a new light on the solar market.

For a Triple Play, add a carbon tax on imports

Posted on November 13, 2012 by meisele

If you could spur the U.S. economy, reduce the budget deficit, and help climate change, all with one action, wouldn’t you jump on it?

U.S. carbon emissions are at a twenty year low, thanks to natural gas fired electricity plants, efficiency gains and conservation. Meanwhile, by the end of this year, China will be emitting twice as much as the U.S., according to Richard Muller, a faculty senior scientist at the Lawrence Berkeley National Laboratory. This is largely due to China’s dependence on coal for electricity generation.

Thanks to the shale oil boom, the International Energy Agency predicts the U.S. will overtake Russia and Saudia Arabia as the leading oil producer by 2020.

In effect, our public policy, technology, and the recession have combined to give the U.S. an effective energy strategy that also may improve the environment.

How to cement these gains on a global level? The U.S. should add a carbon tax to imported oil and imported goods. These tax revenues will accelerate deficit reduction, strengthening the economy. And, they will provide incentives for foreign countries to move more aggressively away from coal, and utilize natural gas, oil, and renewable energies, all areas of current and emerging strength for the U.S. and making energy a potential export product for the first time in decades.

A carbon tax on imports delivers a triple benefit of economic development, deficit reduction, and incentives for lower carbon usage. It’s a public policy triple play!

Superstorm Sandy’s urgent message: “Backup electricity”

Posted on November 4, 2012 by meisele

The images and stories from Superstorm Sandy are too reminiscent of Katrina. Flooded communities. A fractured infrastructure that cannot help thousands of citizens for days. The storm passes but local, state, and FEMA responses, while well intentioned, don’t stop shortages of electricity, gasoline, food, and transportation.

The key lesson is that all of the needed emergency infrastructure runs on electricity. And we can’t depend on the grid in an emergency. My three point plan for off-grid electricity won’t eliminate hardships, but it will speed the recovery process by days.

First, require cell towers to have power backup. It can be solar, hydrogen cells, or fuel based. Since cell phones provide the most critical communication system, lets require providers to ensure availability and tax the cellular users to pay for it.

Second, require gasoline retailers to have generator backup. Even with fuel onsite, if they dont have electricity, they can’t serve the public. Too much gasoline is sitting in tanks and not helping the public.

Third, use FEMA dollars to equip local public facilities, especially schools and shelters, with backup generators. The fuel source may be tailored to local requirements. In an emergency, people need a safe, warm place to stay immediately, when their home is damaged.

Lets not wait for another catastrophe to upgrade our infrastructure. We don’t know where and when it will happen, but there is no reason to be unprepared. Off grid electricity is the key strategy for minimizing personal hardships and saving lives.