Despite the awful headlines of 2011, some segments of the solar energy sector are booming.
Small-scale solar — generated mainly by rooftop solar photovoltaic PV panels — has benefited from dropping technology prices and rising utility-generated power prices, say sector watchers.
“So much of the general public does not realize that the [technology] price reductions that caused companies like Solyndrato fail now make solar affordable,” says Edward Fenster, CEO of solar power services firm Sunrun, referring to the scandal-plagued solar technology company that collapsed in 2011.
Fenster says his firm’s customer base doubled, from 10,000 to 20,000 over the past 12 months. He added 96 employees to his payroll in 2011, while his firm’s partner network — the company teams with local solar installers in their targeted markets — also added 1,000 net new jobs last year.
Of the 61,000 new solar PV systems installed last year, only 28 are over 10 megawatts in capacity — a level around which a solar PV installation would typically be considered “utility scale.” That means the vast majority of new installations are the smaller, rooftop versions financed and installed by companies like Sunrun, according to a March 2012 report from cleantech research firm GTM Research and the Solar Energy Industry Association, SEIA.
What's more, the Solar Energy Industries Associationsaysthe cost of well-established solar PV technology has dropped 30 percent since 2010, due to increased efficiency of the technology itself, as well as cheaper manufacturing costs.
That makes it tough for new solar technologies, like Solyndra’s, to gain traction.
But as with other consumer goods, Solyndra’s loss is the buyer’s gain, says Garvin Jabusch, Chief Investment Officer of Green Alpha Advisors.
The Price Is Right
“The steep fall in PV module prices is also proving attractive,” he says, adding that he’s seen estimates of 75 percent to 125 percent year-over-year increases in U.S. small-scale PV installations. “Even the low end of that [range] shows falling prices are encouraging rapid uptake.”
He adds that for long-term investors, it may be instructive to look at the disruption cell phone companies caused to old landline phone companies.
“A lot has been written about the developing world getting on the electric grid for the first time ever via solar, skipping right over coal and going from zero to the sun, like how they skipped landlines and went right to mobiles,” he says.
That same wake-up call could be in store for utilities in this country as well, he says.
Electricity costs aside, rooftop solar PV “adds additional options for investing in growth, such as infrastructure and smart meters,” Jabusch says, because it's a form of “distributed generation,” since the electricity doesn’t come from the power grid.
But the real cost comparison battle for solar is not the cost of solar panels versus the price of coal; it’s the price of financing an installed rooftop system versus the size of your monthly power bill.
Jabusch says solar is winning that battle in many regions, and traditional power companies “don't like it, and to greater or lesser degrees, are trying to slow the growth of a 'million rooftops' (power) grid.”
The US solar market surpassed $8.4 billion in 2011, according to the GTM Research/SEIA report.
Still, many in the industry admit that recent headlines also make it tougher to reach out to investors and customers.
First came the Department of Energy loan scandals and reorganization filings for Evergreen Solar and Solyndra.
Then in late 2011, thin-film solar firm First Solar sent CEO Rob Gillette packing and announced a big earnings miss. The firm’s stock has dropped from over $150 a year ago to the low $20 range, and it has announced the layoffsof 30 percent of its workforce in a reorganization.
But separating new technology plays like Solyndra and First Solar — or the even utility-scale manufacturers competing on a global stage, like Evergreen — from the burgeoning small-scale solar PV industry is one of the toughest jobs in the sector.
“We’re still trying to figure out the best metaphor to make it more clear,” says Nat Kreamer, CEO ofClean Power Finance (CPF) another firm that finances and facilitates rooftop solar PV installations.
“Believing Solyndra’s demise would at all impact CPF would be like believing the demise of a commercial truck manufacturer would impact GE Capital’sauto financing business,” he says. “It’s just not relevant to what we do.”
Google's Solar Push
In late 2011, Kreamer’s firm partnered with Google , which put $75 million into a fund to finance rooftop solar installations.
The search giant also put $280 million into a similar fund last summer with solar panel installer and financier, SolarCity. The firm is expected to launch an IPO in the third quarter of 2012.
For intermediaries like Sunrun and CPF, and for the industry as a whole, extending the current boom could be pretty easy.
CPF’s Kreamer says “it’s important to note that we see residential solar growing steadily with or without ‘breakthroughs’” of the kind promised by Solyndra.
Solar panel clients would also benefit from knowing about existing incentive programs and the continuing incremental technological improvements in the technology, he adds.
Sunrun’s Fenster says simpler permitting processes would help reduce installation costs and hassles.
“The biggest barrier to mainstream solar deployment is not technology, but red tape caused by local permitting issues,” he says, adding that it raises the price of the average installation by about $2,000. “Countries such as Germany have simpler processes that keep solar installation costs 40 percent lower than in the United States."
Nevertheless, Green Alpha’s Jabusch argues that momentum points to “dramatic growth [that] has already begun.”
“Solar is arguably the fastest, and certainly among the fastest, growing industries on Earth right now,” he says.
He says that while policies could always be tweaked, and there could always still be disruptive technology working its way through a lab somewhere, it is critical to realize “solar at scale can compete right now.”
Policy and new technology "could keep their growth on the rapid boil, but probably is not required for their success,” he says.