Solar Industry May Get Reprieve From German Tariff Cuts

July 6, 2010

German policy makers look poised to deliver the solar industry a jolt of good news

A compromise plan to reduce the country’s generous solar feed-in tariff would cut the subsidies less than expected. With the plan gaining ground in the parliament, German solar stocks moved higher, though solar stocks traded in the United States did not follow suit.

The new proposal would trim subsidies for power that rooftop solar panels feed into the grid by 13 percent, instead of the 16 percent previously anticipated.

Subsidies for ground-mounted systems would fall 12 percent, instead of 15 percent, and military and industrial installations would see an 8 percent cut instead of an 11 percent one.

The initial reductions had been expected by July 1, but were hung up when the Bundesrat upper house of parliament didn’t sign on. The upper house will vote on the new reductions on Friday.

The new plan could still be turned aside, but the Bundestag lower house could overrule the vote.

The smaller cuts would be a welcome reprieve for the industry. Solar companies have been anticipating slowing demand in the world’s largest solar market – Germany – even as purchases accelerated earlier this year in anticipation of the cuts.

Despite the compromise proposal, expect the battle over tariffs to continue. Opposition Social Democrats say they worry about job losses even these lessened cuts would bring.

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Posted by Mark Boslet

ESolar To Branch Into Module Molten Salt Plants

July 6, 2010

Solar thermal has been hot lately (pardon the pun).

This weekend, President Obama doled out $1.45 billion in loan guarantees for Abengoa’s 250 MW, molten-salt farm in Gila Bend, Arizona. Two months earlier, the Department of Energy dispatched another $62 million for technology development and component design.

Among the winners of the DOE award were Pratt & Whitney’s Rocketdyne, Abengoa and eSolar – which finally last week elaborated on the project it has underway with Babcock & Wilcox.  The two companies will use $10.8 million in funding to build and test modular plant components, including a molten-salt receiver, a molten salt to steam heat exchanger and a molten-salt storage system.

The move to molten salt is new direction for eSolar, which up to now has relied on directly heating water to produce steam. The funding will “accelerate the research and development of (the) economic storage” of solar thermal power generation capacity to extend the operating range of plants, says eSolar CEO John Van Scoter.

But despite the new funding, all is not well in the industry. Falling photovoltaic prices pressure plant development at a time when vendors struggle to find financing for a new generation of tower-oriented farms.

These pressures already resulted in the cancellation of two eSolar project, according to a published reports, including one on Green Wombat. PG&E decided to scale back the Alpine SunTower farm in California and replace eSolar’s field of heliostats with PV panels.

A second New Mexico facility where El Paso Electric is to receive power also is switching to PV.

ESolar and partner NRG Energy said in a statement that downsizing the California plant from 92 MW to 66 MW was the result of limited transmission capacity at the site.

But more than transmission, the challenge for solar-thermal developers is low-cost solar panels. PV prices fell sharply last year, and plant financing has become easier. Perhaps the DOE recognized this with its May funding awards urging the developing of lower cost solar thermal technology. According to eSolar, the goal of its work with Babcock and Wilcox will be to achieve the lowest levelized electricity cost of any utility scale solar thermal plant.

That means allowing plant components to be built in a factory and shipped fully assembled to a site. This will simplify permitting and construction.

The completion of the work with Babcock & Wilcox is 2.5 years away. Seems as if there is no time to waste.

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Posted by Mark Boslet

How Big Is The Clean Tech Market?

July 2, 2010

What is the annual market opportunity for renewable energy and efficiency measures, such as building controls, energy reconstruction and electric vehicles? Does $1 trillion sound like an enticing number?

One trillion dollars may sound gargantuan, but it is what the International Energy Agency suggested in a recommendation earlier this week. And it isn’t far from the scale of the global warming efforts called for in other top studies.

In its landmark 2007 report, for instance, the Intergovernmental Panel on Climate Change concluded that mitigating atmospheric heat rise would cost the world 0.2 percent to 3 percent of annual GDP. Mitigation isn’t the same as market opportunity.

To obtain an economy where 50 percent of electricity come from renewable sources, the world will need to build the generation listed above

But it defines the magnitude of the effort – and perhaps the willingness of business to respond with innovation.

To put the IPCC’s projection in annual dollars, consider that the world’s gross domestic product is $61 billion. Three percent of that comes to $1.8 trillion a year. The IPCC’s report says the effort would hold temperature increases to between 2 degrees and 4 degrees Celsius.

The Paris-based IEA looks at impact from a different angle. The agency projects that the world will need to spend $46 trillion between now and 2050 to be sure half of all electricity comes from renewable sources. This includes improving energy efficiency.

Divide the number out and it comes to about $1.2 trillion a year. Most of this spending is to come from consumers buying more efficient, low-carbon equipment and, particularly, cars. Of course some of the money will be paid back through lower fuel use.

But achieving an economy where 50 percent of electricity comes from renewable generation requires an industrial investment as well beyond what might be anticipated to meet growing energy demand. That approach includes the annual construction or deployment of:

*More than 30 nuclear reactors;
*Thirty-five coal-fired plants with carbon capture technology;
*Two hundred biomass plants;
*Nearly 16,000 wind turbines;
*Forty-five geothermal plants;
*Three hundred and twenty-five million solar panels; and
*Fifty-five solar thermal plants.

Energy-efficiency improvements in developed countries also must continue at today’s almost 2 percent a year pace, a pace that is almost double from the 1990s.

The IAE points out that in 2008, the world invested about $110 billion in wind, solar and other renewable generation. Investment levels remained relatively stable in 2009, despite the downturn.

Still, they are one-tenth of where they need to be. It sounds like a monster of an opportunity.

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Posted by Mark Boslet

Solar Tops Venture Investing But Watch Out Below

July 1, 2010

Overall, the second quarter appears a stable investment period for venture capital and clean tech.

A breakdown of second quarter clean-tech investment categories shows the prominence of solar

Venture capital firms poured $2.02 billion into 140 companies despite a relatively tumultuous three months in the public markets. This global total nearly matches the $2.04 of the first quarter and is up 43 percent from last year (an almost pointless comparison given the depths of the global downturn last year).

What’s really interesting in Thursday report from the Cleantech Group and Deloitte is the amount of money VC continued to put into solar start-ups, despite the prevailing wisdom that these cash-intensive investments so popular several years ago had seen their day. Without that money – $811 million – venture investing looks depressed and should signal a warning for the rest of the year.

Solar drew the largest chunk of the money, and big deals were the fashion of the day. Solyndra took in $175 million; BrightSource claimed $150 million; and Amonix, a developer of a concentrating photovoltaic technology, won $129.4 million from Kleiner Perkins Caufield & Byers and others.

The conclusion one might draw is that VCs continue to think solar will be a big money maker and a substantial piece of the world’s energy future. But there are a variety of factors at play, some not so sanguine. Solyndra took its money after withdrawing an IPO that was unlikely to be welcomed on Wall Street. There may have been no alternative except for venture investors to walk away from money already spent.

BrightSource, too, had special needs. It is trying to secure its first solar thermal plant in the Southwest desert and faces an end-of-year tax credit deadline and a September 2011 construction deadline for its $1.37 billion in federal loan guarantees. It needs to have a lot happen between now and then, including taking in private money to match the public funds.

The second largest category, biofuels, roped $301 million. But this total also needs to be examined closely. Of the amount, Amyris captured almost $109 million. The company is shortly headed to the public markets for an IPO, so is a special investment case. Virent Energy Systems, a Wisconsin biofuel maker, attracted an additional $46 million from Shell and Cargill (not typical venture sources), and Kior of Texas took in $40.

The remaining categories of smart grid and energy efficiency posted investments of $256 million and $147 million, respectively.

In other words, while the quarter appeared stable, several large deals with special needs were responsible for a big slice of the total. Without them, a stable seeming clean-tech venture capital environment might be down in the dumps.

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Posted by Mark Boslet

Another Setback For PACE

July 1, 2010

PACE’s goal of simple, easily accessible home energy finance hit another roadblock last month when a California judge held up distributing $30 million to get local programs off the ground.

The legal dispute delays or slows PACE programs in 23 counties across the state. California has been among the leaders in PACE, or Property Assessed Clean Energy, financing, with two-third of the state scheduled to have working programs by year’s end.

Under PACE, homeowners borrow government money for home energy improvements and repay the loans as assessments on their property tax bills. Municipalities sell bonds to come up with the cash.

Lawsuit holds up $30 million that would jumpstart California programs

The legal wrangling pits PACE’s two greatest constituencies – energy-efficiency contractors and solar installers – against one another. Both hope to benefit from the flow of government money.

In the suit, the Western Riverside Council of Governments – representing 16 southern California cities – lays claim to $20 million of the $30 million in PACE funding. Its application for the money was turned down because the region wants to make it easy for homeowners to install solar panels. In doing so, it rejects a state requirement that homes reduce energy use 10 percent or more with energy retrofits before considering solar. The requirement is typical of PACE programs.

The California Energy Commission instead awarded the money to San Francisco, Los Angeles, and the counties of Sonoma, Sacramento and Humboldt. The Western Riverside Council of Governments protested the decision, but was told it failed to appeal by the required deadline. It filed suit, and the court ordered its appeal to be heard.

Riverside country officials did not respond to several requests for comment.

The impact on the state is far reaching. Michael Levy, chief counsel for the California Energy Commission, said the 23 counties granted the money plan to leverage more than $370 million of tax credits, utility rebates and other funding to jumpstart energy retrofits at homes and businesses and create 4,353 jobs. The financial limbo also backs the state up against a deadline: the federal recovery act money paying for the PACE initiative needs to be distributed by Sept. 30 or used for another purpose.

The dispute is only the latest to engulf PACE. In May, Fannie Mae and Freddie Mac roiled PACE efforts when the two mortgage lenders suggested they would shun homes with PACE payments, or liens. They fear a PACE loan would get priority over their mortgages in the event of a default.

The Fannie Mae and Freddie Mac letter put the brakes on PACE programs across the country, including in San Francisco, where officials stopped approving PACE applications this month.

The council of governments’ dispute creates another layer of uncertainty. “It really dramatically impacts our program,” says Johanna Partin, director of climate protection initiatives for San Francisco.

San Francisco kicked off the nation’s largest PACE program in April and hopes to use the $2 million it won from the California Energy Commission to lower PACE interest rates to about 7 percent from an estimated 8.5 percent. (An even lower interest rate is planned for low-income households.)

The city found a small amount of money from another source to move ahead with its interest rate reduction effort. But the money filled the gap only because the city received a trickle of 20 PACE applications. The Fannie Mae and Freddie Mac controversy slowed interest.

A similar setback is facing John Haig, energy and sustainability manager for Sonoma County. Haig expected to use his $2.6 million award to lower the cost of energy audits, market PACE to residents and get financial advice on selling bonds. None of this can take place.

“Not having the grant causes us difficulty in going to the next phase,” says Haig. Sonoma’s program continues with $1 million in municipal funding.

An even greater impact confronts the 14 counties of the CalforniaFirst initiative, which includes Sacramento County. The counties qualified for $16.5 million to kick off PACE, but now the efforts are on hold. “The level of uncertainty does cause tension across the program,” says Peter Ucovich, a senior planner with Sacramento County’s infrastructure finance section.

Ocovich says Sacramento isn’t likely to begin approving homeowner financing until the Fannie Mae and Freddie Mac issue is resolved. But two hurdles are worse than one.

The California Energy Commission is to appear in court on Friday to attempt to free the money. But of course no one knows the outcome of the hearing

Talk to PACE officials across the state and the only acceptable resolution: is one that let the programs move ahead.

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Posted by Mark Boslet

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