When We Struggle, We Learn

If there was one key takeaway from the most recent RenewableEnergyWorld.com and Solar Power-gen webcast it was that the year ahead will be difficult for large-scale solar power development due to poor access to capital, an uncertain policy landscape, the pending trade case against China and module prices that are too low to support a healthy industry.

The webcast: Making it Work, Large-scale Solar Power Development in Uncertain Times brought to light several key issues about the coming year.  Expert speakers included Paula Mints of Navigant Consulting, Bill Walsh of Southern California Edison, Laura Stern of Nautilus Solar and Ed Feo of USRG Renewable Finance.

Navigant’s Paul Mints said that PV module prices are artificially low, so low in fact that they will not support growth and profitability for solar manufacturers. She predicts that by the end of 2012 module prices will go up a bit – from $1.25 a watt to approximately $1.35 per watt to the first point of sale.  But even at $1.35 a watt, Mints says the costs are too low to support a growing industry and she predicts a lot of movement of product from one developer to another, in addition to consolidation in the industry as equipment makers merge, get acquired or simply drop out of the business all together.

Ed Feo told attendees that industry observers have asked him why market capitulation (the point at which everyone gives up) hasn’t yet occurred.  He pointed to the eternal optimism that developers hold about solar power as the reason why the industry remains afloat. Feo also pointed to utilities, such as SCE, as the driving force behind the slow (but steady) uptake of renewable energy. Utilities will need to keep working toward their RPS goals by procuring renewable energy.

Bill Walsh at SCE (the largest procurer of renewable energy in the world) reinforced the idea that utilities are driving the market.  SCE has more than 5 GW of solar power plants that are contracted but not built.  He said that SCE usually figures that about 60 percent of its contracted plants will actually get built. Even so, that’s still more than two gigawatts in the pipeline of just one utility. 

Laura Stern gave the boots-on-the-ground overview of solar power development. She said that the dissolution of the grant has resulted in major uncertainty.  However, she said that at the end of December 2011 there was a huge spike in sales of equipment under the safe-harbor clause, which allowed developers to incur five percent of a projects’ cost by December 2011 and still qualify for the grant. Then they have until October 2012 to specify an exact location for projects that will use the already-purchased equipment.

Feo said that there is enough solar power equipment that has been “safe harbored” to keep developers busy for most of this year.

Overall, it looks as if the industry will continue to limp along in 2012.  Utilities still need renewable energy to meet their RPS goals and that will drive the market to install some renewables despite the low demand for electricity.  Even though module prices are too low to be sustainable and the capital markets are nowhere near where they need to be to finance projects, as Mints said this industry has a long history of making it through and learning from tough times.  In markets like these new business models are developed and manufacturing costs are cut through innovation and other breakthroughs.

“The bad news is we are in a correction year, the good news is we will survive it,” Mints said.

If you missed the webcast, come to Long Beach, California next month and attend Solar Power-gen and Renewable Energy World North America, co-located conferences.  The above-mentioned experts will be there to address your questions and concerns about year ahead for the renewable energy industry.