Category Archives: Solar News

Sandy 5 Years Later: Is the Northeast Closer to Grid Resilience?

In the immediate aftermath of Superstorm Sandy, Northeastern states published resilience reports, action plans and infrastructure goals galore. The storm was devastating, but next time, they said, they’d do better. 

Five years later, the recovery effort shows rebuilding takes serious time. After Sandy, "resilience" became a buzzword and a promise to ensure the grid could stand up to nature’s perils. But with recent disasters in the Caribbean, the Southeast and California, it’s becoming even clearer how much work remains to build that newer, sturdier grid.

“The whole hardening arena becomes a lot more complicated and a lot more important going forward,” said Miki Deric, managing director of utilities, transmission and distribution at Accenture, who worked with utilities on post-Sandy recovery in Connecticut. “With the increased frequency of these large events, there’s a constant reminder that there’s a need to do this.”

A time of introspection

In October 2012, after leaving a path of destruction in the Caribbean, Sandy knocked out power for 8.5 million people in 21 states. The storm topped off months of extreme weather events beginning with Hurricane Irene, which caused 4 million people in the U.S. to lose power.

The “unprecedented weather” pushed cities and states to rethink how they had delivered electricity for a century. In the Northeast, especially, Sandy compelled hard-hit states like Connecticut, New York and New Jersey to take a hard look at resilience.

According to Richard Mroz, president of the New Jersey Board of Public Utilities, it was a time of introspection.

“The board, along with the industry across all the sectors, all of which were impacted, really turned inward to consider what measures had to be addressed,” he said.

The strategies that resulted from this stock-taking largely fell into two categories: microgrids and grid hardening. 

According to GTM Research, in the year after Sandy, states dedicated $56 million to microgrids, with Connecticut spending nearly all of those funds. In 2014, Northeastern states spent $84 million.

Through Q3 2017, the Northeast accounted for the majority of microgrid capacity with 33 percent of the 2,045 megawatts in the U.S. The region also accounted for 27 percent of built microgrids, falling just behind the Southwest, which has a sizable number of military microgrids.

Since 2013, the Northeast has constructed 35 microgrids, with at least one in nearly every state. In 2012, Connecticut passed a law setting aside over $30 million in grants and low-interest loans for microgrid development. The state had one microgrid before the storm; now it has eight. New York went from 10 before to 17 after. New Jersey jumped from three to seven. 

In 2014, New York announced a prize initiative to develop community microgrids. This year it chose 11 projects that will advance to feasibility studies. Three to five should be built between 2018 and 2020, said GTM Research grid edge analyst Colleen Metelitsa, who expects those to be relative boom years for Sandy-inspired microgrids coming on-line.

“A lot of money has been allocated, but not many of the microgrids have actually been built with post-Sandy funding,” said Colleen Metelitsa. “What we’ve seen in Connecticut, for example…a lot of these funds are still there, and a lot of those projects even from round one still haven’t been commissioned. A lot of them are moving forward, but it’s a slower process than everyone has been expecting.”

Some are coming on-line, though, such as New York City’s Marcus Garvey Village Microgrid, part of an affordable housing complex.

That project includes 300 kilowatts of lithium-ion battery storage and is fueled by 400 kilowatts of solar PV and a 400-kilowatt fuel cell system. A New City Energy Efficiency Corporation loan financed the project and L+ M Development Partners and Demand Energy, a subsidiary of Enel Green Power, will share revenue and cover the debt. 

This summer, the New Jersey BPU approved feasibility study funding for 13 town center microgrids that would connect multiple buildings with critical infrastructure such as water and wastewater facilities, shelters and some commercial buildings. Using a $400 million Federal Transit Authority grant, the state is also working on the NJTransitGrid, which would keep transit lines into New York on-line using a dedicated natural gas plant and transmission lines. 

Many of the Northeast’s microgrids still rely on fossil fuels or combined heat and power systems. In the future, more clean energy is the goal.

“That’s really what we’d like to see, is the mix of traditional electric generation and renewables all in one place,” said Mroz.  

Hardening the defenses

In the event of another huge storm, microgrids will allow certain segments of cities and states to island from the main grid, but governments and utilities say they’ve also made strides in reducing the vulnerability of the overall system.

New York City worked with utility Consolidated Edison on prioritizing certain hardening measures, said Susanne DesRoches, deputy director for energy and infrastructure in the Mayor’s Office of Recovery and Resilience. 

That collaboration led to efforts such as the hardening of 16 substations and five generating stations, selective undergrounding in areas like Staten Island, reinforcing transmission towers, installing submersible transformers and network protectors, and reducing feeder segment sizes so that a single failure can affect only up to about 500 customers. 

In New Jersey, the BPU approved $1.3 billion in infrastructure hardening and storm mitigation projects. Public Service Enterprise Group, a utility, set aside $3.9 billion over 10 years to implement smart grid technologies, strengthen distribution infrastructure and underground strategic areas. Atlantic City Electric worked on automated sectionalization and reclosers at 33 of its substations. Other utilities including Jersey Central Power & Light and Rockland Electric also installed reclosers. 

Many of these efforts have been made possible by the formation of green banks.

Connecticut created the country’s first green bank the same year Sandy hit by leveraging public funds to raise private capital. New York created its bank one year later with $210 million in initial funds meant to supplement private investment for clean energy projects. New Jersey’s bank, funded with $200 million from its federal community development block grant, focuses specifically on resilience.

A playbook for other regions

The progress post-Sandy hasn’t been perfect, and many have criticized it as unacceptably slow-moving. But what has been accomplished has become even more significant recently, as potential examples for areas suffering from recent disasters.

“They have a difficult task ahead of them, particularly the islands,” said Mroz. “There are some things you just can’t prepare for, but I think it’s incumbent on the industry and regulators to prepare and test their systems [and] think about what worst-case scenarios might be.”

Preparing systems for a climate-changed future will take even more work on the parts of system regulators. If Sandy forced utilities and governments to reckon with the reliability of their systems, the spate of recent hurricanes, flooding and fires raise even more questions about resilience -- and whether it's possible to build a grid that can stand up to super-strength natural disasters.

“We can continue to harden these things, and they’re going to do better in these storms,” said Deric. “But there’s never going to be a point where you’re not going to have damage in a storm like Harvey or Irma or Sandy. I just don’t think that’s a reality.”

For now, there's more work to be done on just baseline resilience for Sandy-stricken states. Though the areas most affected by the storm possess the will and momentum to harden infrastructure, tangible progress shows resilience is easier said than done. 

“The reality of it, when we look at infrastructure projects, is that we’ve hardly had any infrastructure projects completed,” said Ceci Pineda, resiliency training and policy coordinator at Good Old Lower East Side, a community housing organization. “When you look at the Lower East Side, a third of the buildings are in construction, a third are in procurement, another third are in the design phase.”

But Pineda notes that after Sandy, GOLES has been able to build relationships and networks with city agencies to prepare for the next storm. In that sense, governments have come to a different understanding on collaboration and what it means to rebuild after a disaster. 

“That’s the broader sense of what resiliency is,” said Mroz. “To think about not just the immediate response, but how you recover from an event and deal with it.”

Ohio’s Clean Energy Mandates Are Back on the Chopping Block [GTM Squared]

How Big Dollars Are Catalyzing India’s Small-Scale Solar Market

In order to meet India’s energy access goals, distributed solar has to scale significantly.

While there has been growth in this Indian market segment, it has been from a very small level of installations. While the government’s target for distributed solar power deployment is for 40 gigawatts by 2022, only 1.4 gigawatts had been deployed by early this year. That means we need a 100 percent compound annual growth rate between now and 2022 -- a blistering pace of development.

Luckily, the distributed solar market in India is ripe for rapid expansion, with falling technology costs and government initiatives that have reduced the levelized cost of electricity to make rooftop solar competitive with not only commercial and industrial tariffs, but also with residential tariffs in many cases. However, it’s also a young industry. Many of the companies are in significant need of early stage funding for project preparation services to help them scale up, de-risk and become investment-ready.

Recognizing this need, the Indian and U.S. governments jointly created -- in partnership with the Indian Ministry of New and Renewable Energy, the Indian Renewable Energy and Development Agency (IREDA), the Overseas Private Investment Corporation (OPIC), the William and Flora Hewlett Foundation, the Good Energies Foundation, the John D. and Catherine T. MacArthur Foundation, the David and Lucile Packard Foundation, and the Jeremy and Hannelore Grantham Environmental Trust -- a facility that leverages the unique risk attributes of grant dollars to mobilize finance for early stage project preparation for Indian distributed solar power developers, called U.S.-India Clean Energy Finance (USICEF). Climate Policy Initiative serves as the program manager.

USICEF will deploy millions of dollars in early-stage project preparation support, including market estimation, product development and testing, and engineering and legal costs, which will help developers become ready enough to attract commercial investment. USICEF’s support catalyzes long-term debt financing for distributed solar power from OPIC, IREDA and other public sector financial institutions, to in turn drive more investment from private sources.

USICEF is based on the Africa Clean Energy Finance Facility, a similar program that successfully leveraged $1 billion in clean energy investment with as little as $20 million in early-stage grants.

Announced a year ago, USICEF recently became operational. It selected its first round of grant recipients, which in total will receive an estimated $900,000 in project preparation support. They are:

  • Argo Solar, which provides custom designed end-to-end solar rooftop power solutions for commercial and industrial organizations in India
  • HCT Sun India, a subsidiary of U.S.-based HCT Sun LLC and an early-stage rooftop solar developer in India
  • OMC Power, an integrated rural power utility company that brings affordable and reliable power to mobile tower operators, surrounding small businesses and communities through smart mini-grids
  • SMG Ventures, which implements rooftop solar projects primarily for commercial and industrial customers in India
  • SunFunder, an experienced debt provider for beyond the grid and grid deficit solar projects and companies, which will provide inventory, construction, and structured asset finance loans for solar lighting, home systems, mini-grids and commercial rooftop solar projects in India

USICEF is continuing to accept applications for support from distributed solar power companies through its website.

The question that arises for these young companies and the dozens of others that USICEF will support throughout the life of the program is whether early-stage project preparation can help distributed solar reach scale. By creating a pipeline of projects, USICEF is hoping to answer that question with an emphatic yes -- an answer that can drive the investment needed for India to achieve a robust, distributed solar power market and energy access for all. 

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Gireesh Shrimali serves as India Director at the Climate Policy Initiative. Justin Guay is a program officer at the Packard Foundation.

The People’s Republic of Storage? [GTM Squared]

Why Local Means Nimble in the Volatile Solar Manufacturing Space

Manufacturing solar hardware in North America is not for everyone. In fact, it’s not for most.

Pricing pressures, especially for solar PV modules, has forced many solar companies to shutter U.S. factories and consolidate manufacturing overseas. Some of those companies are now debating whether to build U.S. factories given the potential looming tariffs due to the ongoing Suniva Section 201 trade case, but ramping up would likely take years. For those that have continued to maintain a manufacturing presence in the U.S., however, they see a distinct advantage no matter what happens with the trade case.   

“Rather than compete with commodity products, we wanted to innovate and be at the leading edge of technology,” said Sam Martens, director of commercial operations at Mission Solar, which has a 200-megawatt manufacturing facility for its solar panels in San Antonio. “Our only market is the U.S., and we want to stay on top of whatever technology trend is important for our customers.”

The U.S. trade commissioners unanimously agreed on September 22 that the import of crystalline-silicon solar equipment has caused "serious injury" to domestic manufacturers, although they exempted imports from Canada, Singapore and several free-trade partners in South America. Inverter manufacturer KACO New Energy, for example, would not be affected directly by the trade case as it pertains to manufacturing, but would feel the overall market impact if tariffs make some U.S. solar projects economically unviable.

The Solar Energy Industries Association estimates that there are more than 250,000 solar jobs in the U.S., although less than 1 percent of those are manufacturing-focused. If the tariffs are imposed at the levels requested by Suniva, however, nearly 90,000 U.S. jobs could be affected, according to SEIA.

“Since there are many details that remain to be confirmed, we don’t have much to say about the ITC trade case,” said Eduardo Casilda, senior director of sales for KACO New Energy North America. “But we see value in local manufacturing and supporting a supply chain here in the U.S. We also see Texas as our hub for the growing solar market across the Americas and the Caribbean, and not just for the U.S.”

Whether they make inverters, modules or trackers, the companies that are committed to U.S. manufacturing point to an ability to respond to regional market needs faster with a combination of local manufacturing, servicing and R&D. GTM Research analysts noted in response to the trade case decision that manufacturing helps drive innovation.

“We don’t have three redundant manufacturing hubs,” said Karsten Mall, director of business development at KACO New Energy, which has facilities in Germany, South Korea and Texas. “We have consolidated expertise of certain products in each location.”

A nimble position in trying times

One of the most basic advantages to local manufacturing is shorter lead times, which reduce risk. “If we don't have to ship something from overseas, that eliminates another layer of potential risk,” said Mall. “We can meet lead times that others can’t.” Mission Solar also pointed to its ability to meet special requests with shorter turnaround times.

In the inverter space, service is a considerable component of the business, and having a local presence that brings together R&D, manufacturing and service expertise is key. “If you need support [for engineering questions] from a subsidiary overseas, the level of response is incomparable to a partner with localized support,” said Mall.

Solar tracking manufacturer NEXTracker also sees an advantage to a highly localized approach, with manufacturing in more than 30 countries, and sales support to go along with it.

For module manufacturers, service support close to the manufacturing hub may not be as critical as it is for inverters or trackers, but North American-based module manufacturers do point to the quality of their engineering teams to produce a higher-quality product.

Silfab touts its Canadian facility as having the lowest defect rate for modules sold in the U.S. Mission Solar noted the ability to tap the global talent pool available in the U.S. that allows the company to have an exceptionally high-quality design and engineering team that sits right next to the production team.

While there are upsides to a local presence, there’s no denying the challenges. Mission Solar, for example, laid off 170 people at the beginning of this year as it restructured and pivoted to residential and C&I products. The company is now scaling back up and rehiring, said Martens.

Thin-film manufacturer First Solar, which also has some U.S. manufacturing capacity, modestly raised its guidance earlier this year after restructuring and optimizing its manufacturing late last year, which included laying off 450 people in Ohio. Overall, America’s share of global solar manufacturing is on a downward trend, according to GTM Research.

FIGURE: U.S. Share of Total Imports and Domestic Production

 

Local with a regional flair

Just as the U.S. solar market is highly diversified among states and regions, for solar manufacturing in the North America, local is in the eye of the beholder. KACO sees San Antonio as its hub for all of the Americas, and does not see the need for an additional facility in Latin America at this time, although that could change in the future. NEXTracker, on the other hand, expanded its manufacturing presence in in Mexico last year, although it also manufactures in the U.S. With Canada exempt from any decision regarding the trade case, some companies may look to expand manufacturing just north of the U.S. border.

One issue for those that choose to manufacture in North America is the presence of a robust local supply chain, something that allows them to further shorten their lead times. “Material sourcing and transportation is challenging,” said Martens. That problem only grows more acute as more module manufacturers pull out of the region.

When NEXTracker expanded in Mexico, for instance, it pointed to the benefit of the increased capacity reinforcing its local supply chains. A robust supply chain is one of the reasons that China has been able to push down the cost of module production. GTM Research analysts have argued that the U.S. government could look at ways of subsidizing the supply chain as one way to beef up solar production domestically.

If the government sets high tariffs in the trade case, some local manufacturers should have a leg up in the short term, but for some buyers, the importance of locally made products is already high. Many government contracts, whether local or national, favor locally made components. There are also some homeowners who care where their panels are produced and whether their local installers are working with U.S.-based suppliers. 

At the end of the day, however, all of these companies are competing on a combination of price and value -- not just the presence of a “Made in USA” sticker. “As the solar market becomes more educated and looks not just at the dollar-per-watt upfront cost, but also the long-term levelized cost of energy, there will be more value in panels that produce more power over a certain amount of time and also last longer," said Martens.

Given the service component and the quickly evolving inverter landscape, “it just makes sense" for KACO to build and assemble some products in the U.S., said Mall. “As long as we can build to a cost that is needed,” he added, “then everything is justified.”

FERC Faces Barrage of Comments on DOE’s Coal, Nuclear Cost-Recovery Rule

With the deadline for public comment on the Department of Energy's controversial proposal to provide cost recovery for coal and nuclear power plants fast approaching, all sides have been weighing in.

The DOE’s notice of public rulemaking (NOPR) is currently in the hands of the Federal Energy Regulatory Commission (FERC), which recently agreed to an expedited review period. 

Initial comments are due October 23, and reply comments are due November 7. The DOE has asked FERC to issue a decision 15 days after that -- although many people familiar with the agency's rule making procedures say that's highly unlikely.

On the pro side of the issue are coal-state lawmakers, nuclear industry groups, and labor unions supporting the grid reliability and market failure claims made by the NOPR, and making a plea to support the jobs and economic activity these rapidly retiring power plants provide. 

On the con side are a panoply of energy industry groups, former federal energy commissioners, free-market think tanks and environmental law groups, whose complaints range from why the NOPR is terrible policy, to why it isn't even legal for FERC to consider. 

These are some of the highlights from the comments being filed with FERC in the NOPR docket. We’ve already covered the genesis of this proposal, the backlash from major sectors of the energy industry and regulatory complex, and how FERC’s current commissioners have been reacting. 

All of this is happening within what many observers say is an impossibly short timespan -- with just 45 days to submit public comments. Many key parties, such as state utility commissions and regional electricity coordinating groups, were still filing requests for standing as an intervenor in the docket. 

Among the more noteworthy entries was a Thursday filing from eight former FERC commissioners, three of them Republicans and five Democrats, declaring the NOPR a “a significant step backward from the Commission’s long and bipartisan evolution to transparent, open, competitive wholesale markets.” 

While a resilient power system is a worthy goal, DOE’s proposal wouldn’t help that, they wrote. Instead, it “would instead disrupt decades of substantial investment made in the modern electric power system, raise costs for customers, and do so in a manner directly counter to the Commission’s long experience." 

Subsidizing resources that would otherwise retire as uncompetitive could actually distort markets by driving out unsubsidized competition, raising prices on consumers, and evaporating confidence in markets, which “tend to collapse” under such circumstances, thereby undermining reliability.

The former commissioners -- Pat Wood III (R), Joe Kelliher (R), James Hoecker (D), Betsy Moler (D), Jon Wellinghoff (D), Donald F. Santa, Jr. (D), Linda Key Breathitt (D) and Nora Mead Brownell (R) -- offered a different solution. They urged FERC to work on what they described as the key issue for grid reliability: utility transmission and distribution system recovery after a storm or emergency.

“While there have been some instances of generation-related customer outages, fuel supply emergencies have been an insignificant cause,” they wrote. 

The legal argument for killing the NOPR

Meanwhile, at least two legal groups filed comments seeking to short-circuit the need for FERC to review the DOE’s proposal at all.

In a filing this week, Ari Peskoe, a Harvard Law School senior fellow writing for the Harvard Environmental Policy Initiative, laid out a Iegal argument he discussed days after the NOPR first came out during an interview on The Interchange with GTM Research chief Shayle Kann. In simple terms, DOE hasn’t shown, or even proposed, that current wholesale rates in FERC-regulated jurisdictions are “unjust and unreasonable” or “unduly discriminatory” -- and without such a finding, FERC has no justification to act to change what’s already in place. 

“This glaring omission dooms DOE’s proposal under Section 206 of the Federal Power Act and allows the Commission to issue a swift rejection without weighing in on the merits,” he wrote. 

Even without this consideration, Peskoe wrote, DOE’s failure to provide definitions of key terms like “resiliency,” a word never used by FERC in connection with wholesale rates, means that commissioners and interested parties would have to, essentially, invent a meaning in order to create a rule that values it in energy markets. That violates a legal requirement for rulemaking to present a range of alternatives to what's being proposed.

“[T]he NOPR does not propose even a single definition, let alone a 'range of alternatives,'" according to Peskoe.

Columbia Law School’s Sabin Center for Climate Change Law also argued in its comments that DOE has failed to demonstrate “unjust and unreasonable” market rules, preventing it from moving forward. It also argued that the proposal’s call for compensating particular fuel types means it requires a National Environmental Policy Act review -- something that can’t happen within 45 days. Finally, it declared the NOPR “a politically motivated gambit to allocate resources to the support of coal- and nuclear-fired generating capacity.”

The free-market think tank R Street Institute took a different approach to the legal issues. “RSI sees no defensible case to support the NOPR and as such, only provides comments on staff questions that relate to the 'need to reform' and an additional question on alternative options.”

Instead, the group weighed in on its area of expertise, saying the proposal “lacks empirical support for its claim that an emergency situation justifies massive, abrupt intervention that will likely cost consumers billions without any clear benefit.” R Street urged FERC to “pursue an alternative course to price reliability and resiliency services that enhances the competitive performance of organized wholesale electricity markets.” 

Coal country responds 

Of the comments supporting of the proposal, the most politically weighty to date have come from U.S. Sen. Shelley Capito (R-WV) and three of the state’s Republican Congressmen, asking FERC to act quickly to “recognize the value” of coal and nuclear resources with 90-day fuel supplies.

The lawmakers also laid out a more specific policy for putting the NOPR’s vague concepts into action, suggesting that baseload resources be provided value for reliability and resiliency “during the capacity auction process" used by most interstate grid operators to secure generation supply for reliable operation across all hours, days and seasons of the year. 

They also repeat some of the DOE's assertions that opponents claim are inaccurate. For example, the lawmakers write that “the current price advantages of natural gas and subsidized renewable energy in the electric markets are the result of volatile market forces and impermanent federal policies.” That’s arguable on the market volatility issue, and perhaps prophetic in terms of federal policies. That argument fails to capture that renewable energy’s price advantages are increasingly driven by technology improvements and economies of scale. 

In a Thursday filing, U.S. Rep. Kevin Cramer (R-ND) took the DOE’s argument further, suggesting that cost recovery be extended to include power plants owned by investor-owned utilities, municipalities and rural cooperatives that participate in wholesale markets, not just merchant generators. This argument would appear to extend to power plants that are already subject to cost recovery under North Dakota’s rate-regulated markets, and ask FERC to interfere in the state’s process for determining their status. 

The Regional Growth Partnership, a northeastern Ohio economic development agency, references several other points that have been questioned in relation to the NOPR. It writes that baseload coal and nuclear plants are “able to operate in all types of weather,” ignoring the weather events that have frozen on-site coal piles or forced nuclear plants offline.

The Regional Growth Partnership also cites a “changing and less diverse resource mix, resulting in an electrical grid with untested resiliency and a diminished ability to respond to crisis,” although these statements don’t accurately describe the grid’s condition today, according to U.S. grid operators and the North American Electric Reliability Corporation. 

FERC’s docket has a number of other filings from economic development organizations and labor unions promoting the rule as a way to preserve jobs and economic activity in the face of coal and nuclear power plant closures.

In comments submitted this week, the Utility Workers Union of America provided this argument for why the NOPR is necessary: “The on-site fuel at baseload coal and nuclear EGUs [energy generation units] provides the electricity grid with reliability and resiliency characteristics that are unique across the fleet. This conclusion is not based on theoretical market models or complex algorithms, but on the experience of our members working day and night to run these EGUs. […] The modern electricity grid is increasingly becoming a place where theory replaces experience.” 

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Come join us for GTM's first annual U.S. Power & Renewables Conference in November. You'll get an in-depth look at how the renewable energy market will interact with the U.S. power market, and how those interactions can impact overall industry development and market growth. Curated by GTM Research, MAKE and Wood Mackenzie energy analysts, we’ll take an expansive view of key issues and timely topics, bringing together a diverse group of energy experts and stakeholders to discuss demand dynamics, economics and business model shifts, and policy and regulatory implications.

Renewables May Become the Netflix of the Energy Sector

Six key markers of market disruption hint that the energy sector might be the next industry in line for upheaval, according to a recent paper from Wood Mackenzie.

In the past century, the rapid uptake of new technologies has completely remade certain markets. Take the conversion from horses to cars for example; just over a century ago, a car would stick out on a crowded street. Thirteen years later, though, a horse-drawn carriage became the outlier. 

According to Wood Mackenzie, the energy industry presents all the signs of an industry on the cusp of disruption. Positioned at the center of the shift is the “drive for deep carbonization and the falling cost of renewables,” according to the report. Essentially, the sharp drop in prices, as well as technological advancements, have created a perfect storm to upend energy normalcy. 

“This is not just about decarbonization,” said Prajit Ghosh, head of power and renewables research at Wood Mackenzie. “It’s about rewriting the whole economy.”

The first qualifying marker is a vehicle -- such as the smartphone -- that can change how customers utilize services.

In the energy sector, the vehicle is less tangible than something you can hold in your hand: it’s the electrons shuttling through your wires to power everything you do. Natural gas has already overtaken coal as the largest source of power in the United States -- a phenomenon the Trump administration sees as a significant disruption. Now renewables are encroaching on gas, and energy-efficiency gains have decreased demand for electricity. 

Wood Mackenzie identifies rapid technological advancement as the second indicator of disruption. “'Rapid' is the core word here,” said Ghosh, offering examples of the swift developments in higher masts and turbine size in the wind sector. Between 2007 and 2016, utility-scale PV systems also fell in price by almost 80 percent. Battery prices have fallen precipitously as well, having already hit cost projections for 2030.

These developments have brought about the third marker: technological convergence. Solar and wind have become more viable as replacements for traditional fuel sources when paired with storage capacity.

The lower costs of renewables, in addition to innovations in battery capacity, led Tesla to become a beacon of another essential marker: technology converging with industry. Since their introduction in 2012, Tesla’s electric vehicles have made up a larger and larger portion of the approximately 17.5 million cars the U.S. sells per year. And although Tesla’s heavily anticipated Model 3 has hit numerous snags, most recently with the company's firing of hundreds of employees, the vehicles have still been able to make the jump from a niche market to a larger audience.

The fact that traditional automakers are eyeing the electric space further illustrates technological convergence with industry. Volvo and General Motors have both committed to dramatically increasing the number of electric models they offer. 

The case of electric cars, and their ability to cause a large-scale shift in energy markets, is analogous to Netflix overtaking video rentals. The on-demand entertainment company originally started delivering DVDs to consumers' doorsteps, taking a chunk of demand and putting companies like Blockbuster out of business. But when Netflix began offering streaming and producing original content, it started to go after the larger television industry, compelling many traditional players to innovate just to keep up.

Renewables are applying the same pressure to oil and gas majors. Just last week Shell purchased a Dutch electric-car charging company, announcing it was setting its sights on the electric future.

Ghosh said based on examples like Netflix, it’s essential for the entire energy sector to reflect on the side effects of drastic market shifts. “As you go through this change, you have to think about the unintended consequences…and who comes out as winners and losers,” he said. Many majors have expressed similar sentiments, increasing investment in renewables so as not to be left behind. 

In the early 1900s, Ghosh explained, cars were seen as a solution to the piles of manure and rotting horse carcasses clogging city streets -- a win for everyone. But few imagined the invisible puffs of pollution and smog that would come to choke urban areas, the dense highway systems that would change the landscapes of cities, or the cultural repercussions of domestic gender roles in suburban areas. Identifying the deep impacts that renewables have the capacity to inflict on the energy sector will give industry players a head-start on the disruption. 

And for electric vehicles or other renewable technologies to deeply upend energy markets in innumerable ways -- much like cars did -- they must also change practices at the consumer level. Ghosh said few people believe they have changed their power consumption, but innovations in the products we use and the efficiency of our power markets have invisibly shifted consumption, which will eventually lead to what the report calls “staggering levels of energy savings.” Renewable markets have also created “prosumers,” consumers that are also producing power from sources such as roof solar panels. 

Per the report, the next step in market disruption is digitization, in the form of artificial intelligence and machine learning. Among renewables trends, AI gets less play than diminishing costs and the rising dominance of electric vehicles, but the technology is certainly on the minds of industry players. Google has already been using AI to cut its energy use.

These six market disruptions are already playing out in California -- where there's a mandate to boost renewables to 50 percent by 2030 and cut greenhouse gas emissions 80 percent by 2050. Operational challenges are sure to spring up on the path to deep decarbonization, Wood Mackenzie notes.

A look at California’s average hourly generation mix in 2017 and 2036 "reveals the operational complexity in terms of ramping requirements, overgeneration issues and flexibility, among others," the report states.

According to Wood Mackenzie, the factors at work in the energy industry present all the markers of an industry staring over a cliff. While majors, utilities and many governments are hoping to position themselves in an advantageous position, the report notes that even with preparation, “this will be a bumpy ride.”

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Come join us for GTM's first annual U.S. Power & Renewables Conference in November. You'll get an in-depth look at how the renewable energy market will interact with the U.S. power market, and how those interactions can impact overall industry development and market growth. Curated by GTM Research, MAKE, and Wood Mackenzie energy analysts, we’ll take an expansive view of key issues and timely topics, bringing together a diverse group of energy experts and stakeholders to discuss demand dynamics, economics and business model shifts, and policy and regulatory implications.

AMS Beefs Up Leadership Team With SolarCity’s Grid Services Guru

After the departures of two high-level leaders, Advanced Microgrid Solutions picked up a new C-suite member.

The San Francisco-based commercial storage developer hired Ryan Hanley, formerly vice president of grid solutions at SolarCity, to serve as chief product officer. In that role, he'll oversee "product" in an expansive sense -- not just the battery systems going into stores and office buildings, but the economic optimization software that operates them and the analytics used to prioritize new project sites for customers.

Hanley has spent the past few years trying to build actionable business strategies around the frequently discussed idea that distributed energy resources can serve as lucrative grid assets, providing value to host customers, grid operators and ratepayers alike. He led the effort to transform the largest rooftop solar installer from a "construction business" into a "platform company" that leverages its portfolio of customer-sited assets for grid services.

"The fact that we can bundle [solar, storage and other DERs] together and actually sell a product that saves the customer money, provides the utility service and also makes us a profit is a big milestone -- maybe an under-spoken milestone of where we're going,” he said at an event in the fall of 2016.

SolarCity, though, remained first and foremost a company that installs solar on people's roofs. Then it got subsumed into Tesla, which first and foremost makes electric cars and spun off a side business packaging its batteries for stationary storage. The grid services concept still hasn't risen to the top of the company's crowded and high-stakes to-do list.

At AMS, though, grid services are pretty much the reason the whole company exists.

"AMS has always been a company that saw where this industry is going, moving into something distributed and transactive, and formulated itself to really bet on the industry going that way," Hanley said in an interview at the company's airy rooftop conference-room gazebo.

The business model chases two stacked value streams. It deploys fleets of energy storage across commercial and industrial customers' portfolio of properties, sharing the energy bill savings achieved by demand management. Meanwhile, AMS contracts with utilities in those areas to dispatch its fleet of batteries on command.

The company has 120 megawatts under contract in California, 90 megawatts of which will serve utility Southern California Edison.

Fifteen systems are already up and running, serving customer demand management with lithium-ion batteries made by Tesla. The first 2 megawatts of the SCE contract obligation will kick in November 1, with the rest coming on-line staggered over the coming year.

That makes Hanley's arrival timely, as he rounds out the leadership team under CEO Susan Kennedy, who founded the company after a career in two California governors' administrations and serving on the California Public Utilities Commission. 

Co-founder and Chief Commercial Officer Katherine Ryzhaya left early this year to join the leadership team at solar-plus-storage developer Lightsource North America, the new U.S. arm of the British company. Then, in June, residential solar company Sunrun hired away Audrey Lee, AMS' vice president of analytics and design, to serve as that company's vice president of grid services.

"Ryan's vision, experience and passion for transforming the grid by scaling clean distributed energy is unmatched," Kennedy said. "Combined with the incredible talent of the AMS team, it's a hell of a lot of firepower.”

As for the specifics of what's on his plate, Hanley couldn't say much, having just started. He did identify several challenges ahead for the storage industry more broadly: reduce the cost of batteries, streamline the permitting process, expand fair wholesale market access and expand data transparency.

He also hinted at international expansion to come.

"The opportunity is global, and AMS is set to be global," Hanley said. "What AMS has already put in place allows [us] to have lofty aspirations, and what it has put in place applies in different markets around the world."

That's a sentiment we've been hearing more and more lately.

Green Charge recently discussed leveraging its corporate parent Engie for international storage development. AES Energy Storage is forming the Fluence joint venture with Siemens to push storage through the latter's global sales network. Greensmith's acquisition by Finnish power equipment maker Wartsila this summer sets the stage for a similar strategy.

Before it can conquer the world, though, AMS needs to deliver on its hefty SCE contract. That should keep Hanley busy for the time being.

How America Should Promote Energy Innovation in the Face of Extreme Weather

The extreme weather events of the 2017 hurricane season have brought home yet another reminder of the devastating effects of our changing climate.

Climate change is a challenge that ultimately requires a global solution. As veterans of the Obama administration, we witnessed firsthand what can be achieved on a global scale as a result of American leadership. While the Trump administration has disparaged the Paris Agreement and relinquished leadership on clean energy and climate change matters, there is still much that can be accomplished by public- and private-sector efforts across the United States to address the climate challenge. In particular, such efforts must include increased support for developing new clean energy technology innovations. 

Clean energy technologies are already presenting visible economic opportunities. Solar and wind energy jobs grew in 2016 by more than 25 percent nationally. According to the U.S. Department of Energy, jobs in solar and wind now employ nearly half a million people -- more jobs than Apple, Google and Facebook combined -- and nearly nine times more jobs than coal mining.

Beyond jobs, investors are also validating the promise of this sector. Tesla, once a relatively small startup, earlier this year spent several months as the most valuable U.S. automaker. Moreover, Bloomberg New Energy Finance projects $8.7 trillion worldwide in zero-carbon power generation investment through 2040. As the Paris Agreement notes, existing technologies alone will not be enough to fully meet the threat of climate change, but the emerging clean energy industry is growing. 

The challenge now is to build on these economic trends and support further pragmatic solutions to deeply reduce carbon emissions. America’s ecosystem of energy startups, innovative businesses, and transformative government research and development (R&D) programs can and should be leveraged to support entrepreneurial efforts that can lead to needed additional breakthroughs. We recommend the following series of actions to enable such efforts.

Provide new government financing programs 

Clean energy startups rely on a mixture of equity, debt and grant capital as they grow. Unfortunately, venture capital funding for clean energy technologies has not recovered to its pre-recession levels, and has fallen 30 percent since 2011. Such a decrease in equity funding impacts the formation of clean energy startups, limiting the potential for new breakthrough technologies to emerge. 

Government funding programs can provide an important backstop against this funding shortfall and should be expanded. The Mission Innovation program announced in Paris in 2015 brought together 22 countries, including the United States, with a commitment to double government R&D budgets. A centerpiece of the U.S. proposal was expanding the Advanced Research Projects Agency-Energy. 

ARPA-E has, since 2009, provided grant funding awards averaging $2.5 million to more than 580 project teams. ARPA-E startups have collectively received over $1.8 billion in private sector follow-on funding.  Over the course of this year, unfortunately, the Trump administration proposed canceling ARPA-E funding and has further proposed reducing funding for the Department of Energy’s Office of Energy Efficiency and Renewable Energy, as well as the associated clean energy funding to the department’s national laboratories. 

In the wake of these developments, Congress must not approve these cuts in its forthcoming budget. In addition, there is now an urgent need to step up at the state and local levels to catalyze private-sector capital. Similar smaller-scale programs can also be established at the state and local levels. Programs such as the Massachusetts Clean Energy Center and Illinois’ Clean Energy Trust are strong examples of programs that bring a range of funding mechanisms and can be replicated in other regions.

Creating and expanding support for startup incubators and accelerators

Clean energy incubator and accelerator programs help address the unique challenges of developing new technologies. Incubators provide a place-based community of mentors and investors, whereas accelerators focus on providing a time-bounded program for developing and expanding a new business. Support can come from a variety of sources, such as local governments, corporate sponsors and proceeds from exits by portfolio companies.  

Both models have been successful in supporting innovative technologies. For example, the highly noted Silicon Valley startup accelerator Y Combinator has supported successful startups across sectors, from tech startups Airbnb and Dropbox, to the mobility startup Cruise Automation.

Efforts by city and state governments can play a role through providing financial support and physical space for incubators and accelerators. The state of California in 2016 made $20 million in awards to support four such entities through its Regional Energy Innovation Cluster program. The awardees -- Cyclotron Road, Los Angeles Cleantech Incubator, Cleantech San Diego and BlueTechValley -- stand as examples of this promising approach.

Developing new entrepreneurial talent at colleges and universities

Additional steps are also needed to cultivate the entrepreneurial talent pool at our institutions of higher education. Students and academic researchers are a key source of talent and expertise for new clean energy technology companies, and many have gone on to found new companies in the sector.

New efforts to support talent development at colleges and universities can take the form of mentorship, laboratory space and cultivating startup communities, such as SkyDeck at the University of California, Berkeley and StartX at Stanford University.

Transforming our economy to combat climate change should not be a choice, but rather a requirement. The tools and resources necessary to drive that economic transformation through new clean energy technology innovations exist across the United States -- in government, the private sector and academia. The time to act is now.

***

Kenneth Alston served in the Obama administration from 2012-2016, most recently as Special Advisor to the U.S. Secretary of Energy. He is now Investment Manager at the California Clean Energy Fund. 

Yuvaraj Sivalingam served in the Obama administration from 2013-2017 at the U.S. Departments of the Treasury, Commerce and Defense. 

Solar Securitizations Expected to Pass $1 Billion in 2017

2017 is on track to set a record for solar securitizations, after several new players entered the field.

The combined asset-backed securitizations (ABS) for solar loans, leases and power-purchase agreements (PPAs) will break the $1 billion mark this year, following the expected close of an offering from Mosaic later this month. Solar financiers are demonstrating new levels of market interest in these products, which free up capital for new solar loans and leases.

This level of solar ABS activity surpasses all previous years, and there's reason to believe the numbers will continue to grow next year, said GTM Research solar analyst Allison Mond.

"The first ABS has a lot of procedural hurdles to overcome, so it can be a really time-intensive process," she said. "It’s a more streamlined process to securitize for a second or third time. Once a company has invested in doing it once, it makes sense for them to continue securitizing different assets as a way to raise capital."

Here's the year's tally so far:

  • SolarCity: $185 million (loans) in January
  • Mosaic: $139 million (loans) in February
  • Sunnova $255 million (leases and PPAs) in April
  • Dividend Finance: $129 (loans) in October
  • Mosaic: $308 million (loans) expected in October

This list doesn't include property-assessed clean energy securitizations that contain solar along with other types of assets.

SolarCity kicked off solar securitization with a $54 million lease and PPA offering in 2013 (note how the average deal size has increased since then). It conducted the first solar loan securitization in 2016. SolarCity no longer offers its own loans, so this year's securitization may be the company's last foray into this market, but it still offers leases.

Loan provider Mosaic has had an active year. Its $139 million securitization in February, comprising nearly 6,500 installations, was oversubscribed, indicating ample market demand. The company followed up with an agreement in September to sell $300 million of loans to Goldman Sachs, and is in the process of closing its second securitization this month.

Residential financier Sunnova completed its first ABS in April, as part of a larger $615 million funding raise.

Dividend Finance focuses on servicing the long-tail installers, including newer and less established companies, Mond said. The company provides rigorous training to ensure quality among its installer partners. The October deal marked its first securitization.

Dividend saw growth in market share and loan volume this year. It captured 9 percent of solar loan market share, ranking fourth in that segment for the first half of 2017, according to GTM Research data. Mosaic takes the top spot, with 45 percent market share.

The increase in solar loan securitizations reflects the growing share of customer-owned systems relative to third-party owned. After a period of third-party-owned dominance in the market, the tables turned in Q4 2016, and now more customers buy their own systems.

Loans became more attainable as system prices fell and active loan providers proliferated. As financiers complete more loans, they gain a pool of assets they can sell to increase their liquidity and offer even more loans.

"It's too much paperwork to do a securitization for just a couple of megawatts," Mond said. "Now that solar lending is as popular as it is, it's possible to do this sort of financing."

Both the trend toward customer ownership and the growth of the solar lending community show little sign of stopping. That means that next year could be another big one for solar securitizations.