Wednesday, December 23, 2009

Peter's Predictions for 2010


Lightspeed has invested across several cleantech areas, including solar (Stion), biofuels (LS9, Solazyme), clean coal (Coaltek), LED lighting (Exclara), and energy storage (Leyden Energy, f/k/a Mobius Power). Here are some of our cleantech predictions for 2010:

1. There will be increased availability of equity, debt, and project finance capital, along with an increased flight to quality. Despite 2009 being a slow year for venture capital firms raising funds (Q3 featured the fewest number of VC firms raising money in 15 years), the cleantech category appears to have drawn continued commitments.  Several domestic firms raised large cleantech-focused funds earlier this year.  Internationally — from China to Singapore, India to South Africa — a number of local venture and private equity firms are now raising multi-hundred million dollar funds to target cleantech investment.  As such, the global pool of equity capital targeted at cleantech will be greater in 2010, as investors continue to look at the sector as a source of investment opportunity.  The emergence of the debt markets from the depths of the fallout from late 2008 and the growth in capital flows from an improved stock market should also increase the availability of debt, tax equity, and project finance capital.

Despite the rise in availability of capital in 2010, investors will likely remain cautious.  We expect a larger share of dollars to go into emerging leaders and high-potential portfolio companies, as the number of new companies funded in first-time investments grows more moderately.  Larger funds may preserve capital to make more substantial bets in later-stage, “winner’s circle” companies.

2.  Massive project deployments and manufacturing capacity growth will be undertaken, as winners and losers become more apparent. In 2010, we expect a number of prominent VC-backed cleantech companies to be tested, as they emerge from R&D and initial customer acquisition and move into full-scale production and/or deployment mode.  Some companies will rise to market leadership, while others may fall, as the myths and reality of their technology, competitive edge, and ability to scale come to light.The “shakeout” will likely impact the sectors that have seen the most investment in recent years, such as:
  • Solar:  Many up-and-coming solar manufacturers have made bold claims about their capabilities.  As these companies start to ramp their manufacturing capacity, their validity of their claims on efficiencies, yields, cost economics, capital efficiency, and field reliability will become more readily apparent.  Companies will find it much more difficult to “scale first, optimize later,” as pressure on cash reserves increase significantly.
  • Smart grid:  As some of the massive project deployments with nationwide utilities roll out, whether new technologies can truly scale to millions of endpoints cost effectively and reliably will become clearer.  The utilities will also better judge the extent of the value created by the deployed networks and how far it extends beyond advanced metering into areas like demand response, distribution automation, and network management.
3. Momentum in plug-in hybrids and electric vehicles to continue, as a greater variety of vehicles starts to arrive to market.  Electrical storage will be the key enabling technology.
Nearly every major carmaker claims it will launch a plug-in hybrid electric vehicle (PHEV) or all-electric vehicle (EV) some time between 2010 and 2013, as concept cars start to become production models.  Notable target launches for 2010 include the Chevy Volt and Nissan EV-02.  Numerous startups will also look to enter the market, despite the challenges in raising the funding needed to compete in the automobile industry. Another trend to watch in 2010 will be an increased focus for fleet operators to consider adoption of HEVs and PHEVs, as the industry looks to rebound from the downturn and retire more of their aging fleet.  Adoption will still be early, but sustainability initiatives and new emissions regulations should help.The key enabler for the HEV and PHEV revolution will continue to be the battery technology.  While established companies like Sanyo, LG, and Hitachi are all attempting to adapt their lithium-ion battery technology for the automotive market, limitations with traditional chemistries have made it difficult for a clear victor to become apparent; startups have an opportunity to disrupt the market and become alternatives for OEMs.

For example, Leyden Energy (formerly Mobius Power, a Lightspeed portfolio company) is bringing to market Li-ion batteries that offer the high energy density that is critical for EVs, while providing a high degree of safety and long cycle life over a wide operating temperature range.  We expect there to be some healthy competition and progress made here in 2010.

4. 2010 could see several public exits from some of the emerging leaders; consolidation, M&A, partnership, and JV activity expected to growWith the IPO markets opening a crack in mid-2009 after nearly a year-long drought among VC-backed companies, investors appear cautiously optimistic about some public offerings in the cleantech area in 2010.  We expect that IPO demand in this sector will be driven by factors like the success of the A123 offering (although the stock has come down 35% from its high and stabilized at where it opened in September 2009) and the scarcity of quality cleantech public companies. Consolidation and vertical integration in areas like solar and biofuels will continue – many involving distressed companies that can no longer support the high cost of their assets and debt load.  A number of solar M&A deals were announced in 2009, including First Solar acquiring Optisolar for $400 million and MEMC acquiring SunEdison for $200 million.

A number of biofuels companies have been active in the last couple of years developing strategic partnerships and joint ventures in order to speed up their market entry.  LS9 and Solazyme (Lightspeed portfolio companies), for example, have teamed up with established giants like ChevronProctor & Gamble, and the U.S. Navyto further their development efforts.
We expect to see these types of transactions and relationships to continue in earnest in 2010, as large companies seek ways to tap into startup innovation, and startups seek ways to scale up in more capital-efficient fashion.

Peter Nieh is Managing Director and a founder of Lightspeed, covering the areas of cleantech, software and the Internet. 

Friday, December 18, 2009

Solyndra Files to go Public


Solyndra plans to go public and raise up to $300 million, the company said Friday.
The high-profiled solar company didn't specify how many shares or at what price for its stock offering, according to its filing with the U.S. Securities and Exchange Commission. Fremont, Calif.-based Solyndra has garnered lots of spotlight for its technology and for winning a $535 million federal loan to build its second factory complex near its headquarters.
The groundbreaking ceremony for the factory project in September this year was a big publicity event that drew Energy Secretary Steve Chu and California Gov. Arnold Schwarzenegger (and a speech by Joe Biden that was broadcast via satellite).
The IPO will be closely watched, and the degree of its success would pave the way for other thin film companies that want to go public in the next year. Thin film solar developers use little or no silicon in their cells, an approach to reduce manufacturing costs.
Solyndra uses copper, indium, gallium and selenium as key ingredients in the solar cells, and getting them to work well is a big challenge. But CIGS cells could do a better job of converting sunlight into electricity than other materials being used, such as cadmium-telluride and amorphous-silicon.
Most of the silicon cells in the panels today use crystalline silicon, which has historically been much more expensive.
Solyndra has announced more than $2 billion in sales deals in the United States and Europe. The announcements have painted an impressive picture of the company, which began commercial shipment in July 2008.
Solyndra sold 17.2 megawatts of panels from Jan. 1 to Oct. 3 of this year, the company said in the SEC filing. It sold 1.6 megawatts last year.
Solyndra posted $58.8 million in revenue and posted $119.8 million in net loss for the first nine months of this fiscal year (ending Oct. 3 2009), the company said in the SEC filing.
It generated $6 million in revenue and posted $232.1 million in net loss in the previous fiscal year that ended on Jan. 3, 2009.
Its customers include Alwitra, Carlisle Syntec Phoenix Solar, Geckologic, Solar Power Inc., and Sun System.
Solyndra said it has agreements in place for delivering up to 865 megawatts of solar energy systems (panels and racks) by the end of 2013.
The company's existing factory is running at an annual production rate of 45 megawatts, and it plans to expand that to 110 megawatts by the end of the next fiscal year, according to its SEC filing.
The second factory complex, which is under construction, would first have the annual production rate of 250 megawatts by the first half of 2012. The $535 million federal loan would pay for this, first phase of the factory project.
The second and final phase would add another 250 megawatts and cost another $642 million. Solyndra plans to use proceeds from the IPO to help pay for phase 2.
Solyndar said it also has applied for a federal loan guarantee of $469 million to help finance phase 2.
There has been a paucity of solar or even greentech IPOs in the U.S. market in the past year. The fist solar company to do in more than year was Specialized Technology Resources (STR), a Connecticut maker of encapsulants for protecting solar cells in panels.
STR (NYSE: STRI) went public in November, but didn't see a spectacular reception for its stock. The shares closed up 31 percent on the first day of trading, and haven't moved much since. The stock closed at $13.71 per share Friday, up 1.78 percent.
Another solar company, Trony Solar, was supposed to debut on the New York Stock Exchange last week. But the Chinese developer of amorphous silicon solar panels postponed its IPO, citing unfavorable market conditions.
Neither company stands out like Solyndra does, however. Founded in 2005, Solyndra has developed solar panels that look unlike most of the panels on the market today.
Instead of having a flat surface of a conventional solar panel, Solyndra's involves a series of solar-cell filled tubes lying side by side inside an aluminum frame.
The cylindrical design enables solar cells to capture diffused and reflected light, the company said. Solyndra, which also has designed a low-profile rack to hold the panels, is targeting the commercial rooftop market.
The panel-and-rack design shaves labor time and costs, the company said, a claim that has drawn skepticism from competitors and analysts.
Few thin film companies worldwide are public companies. But Solyndra wouldn't be the first CIGS developer to go public. Ascent Solar Technologies (NSDAQ: ASTI) in Thornton, Colo., went public in 2006 and is putting CIGS thin films on plastic.
The largest thin film company in the world is First Solar, based in Tempe, Ariz. First Solar (NSDAQ: FSLR) makes cadmium-telluride solar panels

Made in Washington


Starting this fall, residents and businesses will be able to buy the first made-in-Washington solar panels.
Arlington-based Silicon Energy LLC just received a key safety certification giving it the green light to put its products on the market. Thanks to generous state tax incentives for homegrown solar, Silicon Energy could be the first of several Washington-based solar companies helping boost the number of local solar-powered homes from the hundreds to the thousands.
“It means that all of a sudden, solar is no longer just the province of the Prius set,” said Mike Nelson, director of the Northwest Solar Center, part of Washington State University’s energy program. “This is solar for everybody.”
Solar power still represents a tiny fraction of the state’s energy portfolio. For example, Washington’s biggest solar installation, at Puget Sound Energy’s Wild Horse facility in Kittitas County, will pump out one-half of one megawatt when completed. The same plant’s wind turbines can generate up to 229 megawatts.
But Silicon Energy’s rollout is a key step in a long-standing state effort to spur a renewable energy industry. State lawmakers created a solar tax incentive in 2005, and expanded that incentive in this year’s legislative session.
One indication that business may be responding: Nelson said he is aware of at least four other groups developing business plans to try to follow in Silicon Energy’s footsteps.
Washington residents and businesses can now get payments of 15 cents for every kilowatt-hour of energy they generate. That rises to 18 cents with the use of a made-in-Washington inverter, a device that converts direct current into the alternating current that powers household appliances. But if they also use solar modules made in Washington state — which for now means Silicon Energy’s products — the incentive triples to 54 cents per kilowatt hour.
Based on the current usage pattern of Puget Sound Energy customers who use solar power, a homeowner using Silicon Energy’s products could cut monthly power bills in half on average and get a utility rebate of at least $1,050 each year.
When the 2005 law was passed, that incentive was capped at $2,000 per year and set to expire in 2014. But in this year’s legislative session, lawmakers raised the cap to $5,000 and extended the incentive to 2020.
When combined with a new, more generous federal incentive, a residential solar power system using Washington-made modules could pay for itself in roughly 10 years. Silicon Energy will sell to qualified contractors and installers rather than directly to homeowners, and the contractors will set the final price. But a typical residential system might sell for $20,000 to $30,000.
Silicon Energy, a wholly owned subsidiary of Arlington-based inverter manufacturer OutBack Power Systems, had been working for some time to get a certification from Underwriters Laboratories Inc., a third-party safety testing organization. It cleared that key hurdle on July 16.
Gary Shaver, president and CEO of Silicon Energy, said his company is busy right now fulfilling contracts for utilities. It is making 300 panels for Puget Sound Energy’s Wild Horse Wind and Solar Facility near Ellensburg in Kittitas County. Silicon Energy’s panels will add 50 kilowatts, which is about 16 to 25 times the capacity of an average home system.
Silicon Energy also already sold a system that now sits on the roof of Avista Corp.’s headquarters in Spokane. Dave Holmes, manager of applied research at Avista, a power company, said the system has performed well this summer with no problems.
“I think they’re going to be really busy producing panels here in Washington,” he said.
Silicon Energy’s rollout to the general public comes at a tough time in the solar power industry globally. Some large manufacturers in other countries ramped up rapidly to meet soaring demand, and the industry is now in the midst of a shakeout, with some products being unloaded at bargain-basement prices.
Silicon Energy’s Cascade Solar System has a couple of features that distinguish it from lower-cost panels. The modules are very strong, with glass stacked on glass, as opposed to the more typical plastic backing. The system has a much higher fire safety rating than a typical solar system. It is built without frames on the top or bottom, which prevents dirt and ice from accumulating and allows rain to wash the modules clean,
Even with the smaller tax incentive available to date, the number of solar energy users in Washington state has grown rapidly — though still a tiny minority. Seattle City Light, for example, has at least 150 customers using solar power, up from 47 in 2007.
The average solar customer is producing enough energy to account for half or more of the home’s energy usage, said a Puget Sound Energy spokesman.

Wednesday, December 16, 2009

1200 Applications for FIT in Ontario

Toronto, ON, December 16, 2009 - Seven hundred Ontarians from Ottawa to Windsor to Thunder Bay – including a member of the popular band Barenaked Ladies – will be celebrating a green holiday season after being the first to receive offers to generate renewable electricity under the province’s new feed-in tariff program.

The new microFIT program encourages the development of small-scale renewable energy (10 kilowatts or less) from a diverse range of producers, including homeowners, schools, farmers and small businesses. It is part of a broader Ontario feed-in tariff program (FIT), the most comprehensive program of its kind in North America. FIT is also aimed at encouraging community-owned and aboriginal-led projects.

“It's a thrill to be able to power my own lights while at the same time contributing to my city's electrical needs,” said Jim Creeggan, bassist for the band Barenaked Ladies. “Now that the microFIT program is up and running, it makes solar a realistic option for more households.  With enough homeowners on board, communities will have a greater impact on where our power is coming from.  I'm glad solar power is getting out of the fringe and into the mainstream.”

The FIT program, one of the cornerstones of the Green Energy Act, provides stable, guaranteed pricing to renewable energy producers of all sizes. It supports the province’s commitment to eliminate dirty coal-fired generation by the end of 2014 — the single largest climate change initiative in Canada. FIT and other initiatives under the Green Energy Act will support the creation of 50,000 “green collar” jobs.

“The new microFIT program literally brings power to the people,” said Gerry Phillips, Minister of Energy and Infrastructure. “It allows homeowners, farmers, schools and Mom and Pop businesses to help power our future and get paid for it, while investing in a new era of ‘green collar’ jobs and expertise.”

“The tremendous initial response to the feed-in tariff signals a strong future for renewable energy in Ontario,” said Ontario Power Authority CEO Colin Andersen. “We’ve cut the red tape and made it simpler for ordinary Ontarians to become electricity producers and they’ve raced to embrace green energy.”

The Ontario Power Authority has received nearly 1,200 microFIT applications since the program began accepting applications on October 1, mostly for residential roof-top solar power systems. These proposed projects have a combined capacity of about 8.6 megawatts (MW), enough to power about 1,000 average homes.

Between October 1 when the program launched and December 1, the Ontario Power Authority also received about 1,000 applications for projects over 10 kilowatts (kW). This large number of applications ensures there will be more than enough high-quality projects to deliver the 2,500 MW of renewable energy earmarked for the first round of the FIT program. These larger scale FIT applications are still being assessed.

The Ontario Power Authority estimates that the first FIT projects will generate in excess of $5 billion in investments in manufacturing, design, construction and engineering and lead to the creation of thousands of new jobs.

The Ontario Power Authority is responsible for ensuring a reliable, sustainable supply of electricity for Ontario. Its four key areas of focus are: planning the power system for the long term, leading and co-ordinating conservation initiatives across the province, ensuring development of needed generation resources, and supporting the continued evolution of the electricity sector. 

Tuesday, December 15, 2009

SF AB811 Residential Solar Financing

SAN FRANCISCO — Energy- and water-related building improvements that save money in the long run could be available early next year under a zero-down San Francisco financing program.
Solar panels, insulation, water-saving bathroom fixtures, and energy-efficient heaters and boilers are among the list of improvements that could be purchased and installed in residential, commercial or industrial buildings under the San Francisco Sustainable Financing Program.
The program allows The City to lend up to $50,000 for improvements from clean-energy financing firm Renewable Funding to a property owner, who would have up to 20 years to repay the money through property taxes.
"It simply doesn’t cost you any money out of pocket," Mayor Gavin Newsom said Monday.
Up to $150 million could be available, and the program is expected to launch in February or March.
"If people are interested in saving money, this is a pretty good program," Newsom said.
The program has been supported by the Board of Supervisors, which must provide final approval.

Monday, December 14, 2009

AB811 Residential Solar Financing Oakland


Oakland has become the latest city to allow residents to finance solar panels, insulation, new refrigerators and other efficiency improvements through their property tax bills. "This is a dream way to do solar," City Council President Jane Brunner said. "The problem with solar has always been the up-front costs. This eliminates that problem."

The council unanimously voted to join California First, a state plan based on the solar financing package first adopted by Berkeley in 2007.
The plan allows residential and commercial property owners to make energy improvements without paying up-front costs. Instead, they pay installments through their property tax bill over a 20- or 30- year period, in most cases at a lower interest rate than what they could obtain individually.

The investment can be recouped through savings on energy bills, coupled with federal tax credits and rebates as high as $15,000 from Pacific Gas and Electric Co. Contractors approved by California First perform the installation work and are paid up front by California First.

Since Berkeley adopted its plan, hundreds of cities, counties and 17 states have enacted their own versions. Oakland's program differs from Berkeley's in that it allows energy efficiency projects besides solar panels and the number of participating property owners is not capped.

"Property owners should start to see a savings on their energy bills on day one," said Garrett Fitzgerald, Oakland's sustainability coordinator. "That's our expectation." The city will bear no financial liability, although it will pay $20,000 for administrative costs, Fitzgerald said. The property tax payments stay with the property even if it is sold.

Some solar installers said the plans, so far, have had mixed results."On paper it's a very good idea," said Szilard Szabo, partner of Super Solar in Oakland. "But the financing seems to be falling through." He said some clients are obtaining cheaper interest rates on their own. Despite the number of cities adopting the program, he said he has not seen an increase in clients referred through the financing plans.

In Oakland, property owners can sign up for projects ranging from $5,000 to $75,000 or 10 percent of the value of their property. The program will get under way in June. Property owners should check the city's Web site, www.oaklandnet.com, for enrollment information in coming weeks.

Tuesday, December 8, 2009

Energy Efficient Fed Rebates?


NEW YORK (CNNMoney.com) -- President Obama proposed a new program Tuesday that would reimburse homeowners for energy-efficient appliances and insulation, part of a broader plan to stimulate the economy.
The administration didn't provide immediate details, but said it would work with Congress on crafting legislation. Steve Nadel, director at the American Council for an Energy-Efficient Economy, who's helping write the bill, said a homeowner could receive up to $12,000 in rebates.
The proposal is part of the President's larger spending plan, which also includes money for small businesses, renewable energy manufacturing, and infrastructure.
We know energy efficiency "creates jobs, saves money for families, and reduces the pollution that threatens our environment," Obama said. "With additional resources, in areas like advanced manufacturing of wind turbines and solar panels, for instance, we can help turn good ideas into good private-sector jobs."
The program contains two parts: money for homeowners for efficiency projects, and money for companies in the renewable energy and efficiency space.
The plan will likely create a new program where private contractors conduct home energy audits, buy the necessary gear and install it, according to a staffer on the Senate Energy Committee and Nadel at the American Council for an Energy-Efficient Economy.
Big-ticket items like air conditioners, heating systems, washing machines, refrigerators, windows and insulation would likely be covered, Nadel said.
Consumers might be eligible for a 50% rebate on both the price of the equipment and the installation, up to $12,000, said Nadel. So far, there is no income restriction on who is eligible. That would mean a household could spend as much as $24,000 on upgrades and get half back.
Homes that take full advantage of the program could see their energy bills drop as much as 20%, he said. The program is expected to cost in the $10 billion range.
It's not clear how the home efficiency plan would be administered - the government may issue rebates to consumers directly, homeowners might get a tax credit, or the program could be run via state agencies.
If consumers have to spend a lot of money up front to get the credit, it could throw a wrench in the works, David Kreutzer, an energy analyst at the Heritage Foundation, told CNN.
"This will not be something that's attractive to people who are having trouble already making their budget payments month to month or week to week," he said.
To keep consumers from having to spend thousands of dollars before getting reimbursed, Nadel said, one idea is to have contractors or big box retailers pay part of the cost up front.
Fraud issues could also come up, Kreutzer said.
"Any program that is going to run through a third party and is going to distribute billions of dollars needs to have lots of checks and balances to make sure there's not abuse," he said.
Nadel noted that as a way to guard against fraud, contractors would have to be certified to participate.
Energy company boost
Obama's new spending plan also calls for renewable energy companies to get additional support. That could come in the form of loan guarantees - basically, money the government uses to secure loans for startups.
In the original stimulus bill passed earlier this year, $6 billion was earmarked for such loan guarantees. But then lawmakers took away $2 billion to fund Cash for Clunkers - the popular program that paid people to turn in their old cars.
The $4 billion from the original bill has funded about $40 billion in loans, said the staffer on the Senate Energy Committee. Meanwhile, firms are hoping for another $4 billion in loan guarantees, since they have another $40 billion worth of projects that need funding.
A bill on energy efficiency reimbursements already has supporters in the Senate.
"Not only will [such legislation] increase our energy security and transform our energy infrastructure to a modern, clean and efficient one," Senate Energy Committee Chairman Jeff Bingaman, D-N.M., wrote in a recent op-ed column in the Hill, a Capitol Hill newspaper. "But it also will position the United States to lead in the development of clean energy technologies."