Friday, October 28, 2011
Total installed photovoltaic (PV) capacity in Tennessee increased 44 percent from 2.34 megawatts in the second quarter to 3.37 megawatts in the third quarter of 2011. According to GTM Research and the Solar Energy Industries Association’s most recent data, nearly 96 percent of installed capacity in the third quarter came from the commercial segment.
The Tennessee Valley Authority (TVA) offers multiple incentives to drive PV installations in the state. Launched as a pilot program in 2003, the Generation Partners Program offers production based incentives to homeowners and businesses that install renewable generation systems including PV, wind, low-impact hydropower, and biomass. TVA and participating power distributors purchase 100 percent of output from qualifying PV systems at a premium of $0.12 per kilowatt-hour on top of the retail electricity rate in exchange for solar renewable energy credits (SRECs). Additionally, new participants receive a $1,000 incentive to offset upfront cost.
Source: GTM Research
After fueling an unprecedented solar industry boom in the region in 2010, the Generation Partners Program shifted its maximum project size from 200 kilowatts to 50 kilowatts last month. The action was designed to focus program resources primarily on small-scale, renewable projects, which the TVA believes is key to achieving its long-term plan of providing locally produced renewable generation at the lowest cost possible.
By guaranteeing incentives to small-scale projects into the future, TVA hopes to drive continued residential and commercial installations in the state.
Posted by Joe Bono at 10:47 AM
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The hysterics around recent solar industry announcements that in general profit margins are narrowing are, as usual with all things solar recently, completely overblown. "Is This A Death Spiral for Solar Companies?" might be my favorite histrionic headline.
Yes, narrowing margins are making life difficult for smaller, higher cost producers. But this is and has always been a standard part of the evolution of any industry from niche to growth to mainstream. An undervalued name we own and that I’ve used as an industry representative example before, Canadian Solar (CSIQ), announced October 17 that, due to the rapid growth in the solar industry and emerging commoditization of some components, their overall profit margin is expected to shrink to 12 percent by year end 2011.
Meanwhile, their industry is growing at 10 times the rate of the overall U.S. economy and will far more than make up in volume what it loses in margins. This is the normal progression with any new technology, and is usually considered a good thing. In fact, most mature industries operate — profitably — at or below 12 percent. Here's theFortune/CNN 2009 list of profit margins by industry.
According to the list, solar, even with its newly revised lower 12 percent margins, would still rank sixth of 53 on this list (if it were included). And the truth is, as solar grows and grows, and panels become cheaper and cheaper, margins will continue to drop to 10 percent and below. But, again, the industry is maturing into a high-volume business wherein scale will more than compensate for this narrowing just as occurred in most of the above industries. Yet when was the last time you heard a pundit claim that most of these industries was in a “death spiral?” I would argue that with its booming growth, solar is a better long term investment than any of these "stalwart" industries that currently operate between one percent and 10 percent margin rates.
Also bear in mind that as panels become ever cheaper and margins narrow, solar is fastbecoming the cheapest source of electricity of any kind. Extrapolation of current trends shows that solar will be the cheapest electricity in the world by 2018, latest. What happens to industry growth as that day approaches?
After CSIQ's announcement, its shares dropped another 13 percent to $3.00, which is less than one-fifth of their $16.03 per share in cash. Ridiculous. CSIQ was already priced at one-quarter of cash, like a company hemorrhaging money, not making it. So the reduction in margin announcement should hardly have had the effect that it did, so what the further decline represents for me is a buying opportunity.
Bear in mind that China has made a $313 billion commitment to green energy, primarily solar, over just the next four years (the U.S. commitment is trivial by comparison, no doubt thanks in part to some dangerously misguided calls for America to give up on solar altogether). The favored Chinese manufacturers of solar PV will thus have no problem maintaining liquidity much less solvency as the industry, predictably, matures and consolidates. This kind of large, rapid investment in solar PV manufacturing has resulted in global supply outpacing demand at the moment, which is one of the factors causing shrinking industry margins. However, we believe this is a temporary imbalance because we’re observing aggressive solar scaling, utility-scale and rooftop, in nations worldwide. More on that in a later post.
As an aside, we disagree with current U.S. based efforts to sue China for solar panel price dumping. Dumping, which is defined as selling a product under production cost to capture market share, is not the same as out-competing, which has the same effect. If China has invested so much more in its solar capability that its cost of production is significantly lower than ours, so be it; the appropriate response is to invest in our domestic industry to make it more competitive. It will be interesting to see what the WTO concludes, but I don’t think the dumping case is necessarily clear. In any event, winning the case will allow the U.S. to apply tariffs to foreign solar panels, thus raising the cost for consumers, prolonging our dependence on fossil fuels (although that may be the point) and keeping energy prices higher overall.
Again, solar is a booming growth industry that is adding jobs, revenue and profits worldwide (including here in America), that is going to keep growing, and fast, for years if not decades: how many of us are aware that already, solar employs 100,237 people in the United States and is booming, compared to coal's 80,600 and shrinking jobs? [Note: the coal jobs figure is from the U.S. BLS. The BLS does not keep track of solar jobs, but refers interested parties to The Solar Foundation’s “National Solar Jobs Census,” cited above.]
The trick for investors is to find the low cost manufacturers with access to capital and with already profitable business models. Solar as an industry is here to stay; investors who own the best solar companies now will be very pleased in the long run.
Posted by Joe Bono at 10:46 AM
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Wednesday, October 12, 2011
New Hampshire, U.S.A. -- The solar industry on Wednesday launched its opening salvo to build support for an extension of a Treasury Department program its says has the potential to add tens of thousands of jobs while continuing to spur billions in private investment. By Steve Leone, Associate Editor, RenewableEnergyWorld.com
Rhone Resch, president and CEO of the Solar Energy Industries Association (SEIA), spoke with the media to discuss the soon-to-expire Section 1603 Treasury Grant program, which allows energy developers in many industries such as solar, wind and biomass to receive a 30 percent grant in lieu of an existing tax credit. This direct payment comes only after a development comes online.
The grant, said Resch, has helped the solar industry become one of the fastest growing sectors of the economy. Since its inception in 2009, the program has helped partially fund nearly 20,000 commercial solar projects with a combined capacity of more than 800 megawatts. It was conceived as a tool to combat a sagging tax equity market that developed during the economic downturn in 2008. Since then it has become a vital part of financing for all types of renewable energy projects, giving developers the type of liquidity needed to draw new investment.
Resch warned that allowing the grant to expire could cause the American solar industry to contract. A new report by EuPD Research released by SEIA on Wednesday found that a one-year extension could add more than 37,000 jobs — 18,000 directly in the solar industry and 19,000 in industries affected by industry growth.
“These are electricians, roofers, plumbers, steelworkers, those in sales and accountants,” said Resch. “You can’t outsource these jobs.”
The report also looked at scenarios for two-year and five-year extensions. Under the two-year scenario, more than 50,000 jobs would be added while well over 100,000 jobs would be created under the five-year plan.
The industry has already gone down this avenue in search of an extension. This time, though, the road may not be as well paved. Last December, lawmakers pushed through late legislation that extended the program through the end of 2011. But that was in a much different Washington. Since then, the House has swung firmly under Republican leadership and Democrats now hold a fragile advantage in the Senate. And nearly all legislation geared toward renewable energy must overcome conservative skepticism that has been fueled by the Department of Energy’s loan to now-bankrupt Solyndra.
Still, Resch said getting bipartisan support for a one-year extension is possible if the industry can successfully outline the economic and security benefits of Section 1603. While it’s still too early to tell what kind of broad support there is for an extension, or to which piece of legislation an extension would be attached, solar industry representatives will meet with legislators to explain how the program’s expiration could impact businesses and communities.
More than anything, Resch said an extension would quench a business appetite for a more consistent policy and municipal demands for the increased tax base that is often sparked by energy development. According to Resch, these have been staples of an energy economy that has been built upon subsidies and incentives aimed at the fossil fuel industries for decades.
“What we’re asking for is a level playing field,” said Resch. “It’s difficult to gain investment with an on-again, off-again policy.”
Posted by Joe Bono at 9:22 PM
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Friday, October 7, 2011
Utilities across the country need more money for grid updates and pollution controls, and are passing the huge bill on to consumers. Laura Colarusso on why electricity bills are rising. By: Laura Colarusso. A reporter at The Daily Beast.
Already weary of high gas prices and 9.1 percent unemployment, many Americans are about to get another kick in the wallet thanks to large increases in their electricity bills.
From Alaska to Georgia and Wyoming to Florida, utilities are seeking permission to pass on hundreds of millions of dollars in new charges to customers to help upgrade aging infrastructure and build new or retrofitted power plants that comply with tougher environmental regulations, a Daily Beast review of regulatory filings has found.
The influx of requests, many still pending before state regulators, has left energy experts convinced that electricity prices will be on the rise for the foreseeable future as the industry struggles to modernize its aging infrastructure.
“They desperately need to upgrade,” says Bill Richardson, the former New Mexico governor and Clinton-era energy secretary who once famously called America a superpower with a Third Worldpower grid. “You’re seeing rate hikes everywhere because this is a widespread, national problem.”
The pending rate hikes are bad news for poor and elderly Americans on tight budgets, as Congress and the White House begin making cuts to programs that help people cope with their utility bills. One program in particular, the Low Income Home Energy Assistance Program, was slashed during the budget negotiations earlier this year, and is slated for even deeper reductions this fall.
During the budget battle, Congress cut $500 million from the program to bring this year’s total to $4.7 billion, down from a high of $5.1 billion in 2010. For next year, the Obama administration requested only $2.6 billion, leaving states with roughly half the assistance they’ve had in the past. The White House rationale relies on the assumption that energy prices will decline, but regulatory filings have indicated the opposite trend is in store.
In the latest round of budget negotiations, House Republicans have suggested adding $822 million on top of Obama’s request for next year, but the gap could still result in rationing.
Already this summer, Illinois cut back on its energy-assistance grants, forcing seniors and poor families to forego air conditioning during the sizzling August heat. And governors of cold-weather states such as Michigan’s Rick Synder and Maine’s Paul LePage—both Republicans—are fighting the drop in funding, warning that people could freeze. Northeastern Democrats are equally concerned by the president’s proposed cuts.
“During these tough economic times, it is critical that we both fully fund LIHEAP and ensure that states have timely access to the funding they need,” Rep. Rosa DeLauro, D-CT, says. “These changes could prevent states from being able to respond quickly to severe cold weather and leave the most vulnerable Americans out in the cold.”
The Beast’s review of regulatory filings found at least 16 utilities covering 6.1 million customers are seeking rate hikes of 5 percent or more. Almost half of those want increases of 10 percent or more.
And several more utilities already have received approval for large increases.
For instance, close to three million customers in parts of Virginia, Kentucky, Ohio, and West Virginia that get their electricity from American Electric Power have seen their rates increase between 48 and 88 percent over the last few years. Those rates are expected to rise an additional 10 to 35 percent in the next three years. The reason? AEP officials are quick to blame environmental regulations that they say are going to cost the company $8 billion in compliance and upgrades.
AEP, which operates in 11 states, says it is raising rates because it needs the cash to upgrade its infrastructure. The company plans to retire five coal plants—which amount to 6,000 megawatts of generation— and build at least two natural gas plants by the end of this decade.
“None of this is cheap,” says Mike Morris, AEP’s chief executive officer. Morris predicts that rolling brownouts also could loom on the horizon because the current system can’t keep up with demand, which is expected to grow by 44 percent by 2035.
Electricity rates were static for most of the 1990s and early 2000s. According to the Energy Information Administration, the average residential customer saw his or her bill increase just seven-tenths of a cent per kilowatt between 1998 and 2004. Between 2005 and 2010, the average price spiked about 2.5 cents and then flattened out over last year as natural gas prices dropped, EIA says.
Dozens of factors affect rate increases, but one of the biggest is that much of the transmission system was built at a time when the radio was still the main form of entertainment. The power grid simply can’t keep up with modern demand as more people use more appliances, computers, and gadgets.
Posted by Joe Bono at 5:55 PM
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