I manage a New York-based private equity firm. A substantial portion of the firm’s assets are invested in cleantech and, of that, the largest portion is invested in the photovoltaic (PV) solar power market segment. We are convinced there is opportunity to deliver PV solar power to commercial enterprise nationally.
Available, Sustainable Market
Solar power and commercial enterprise are finally moving forward together as viable, sustainable partners and for a simple reason: solar power has become cost effective. The rise in fossil fuel prices over the past two years has rendered alternative sources of energy more attractive. And, a steady decline in the cost of PV panels has provided additional leverage to this equation.
The difference in the cost of a kilowatt from a solar array compared to a kilowatt from the local utility has grown ever narrower. Today, the two are at effective parity at the retail rate level, and tomorrow, solar will be less expensive by a significant margin.
The result of this is that PV solar power has a true market behind it; one that isn’t reliant on good-for-good’s-sake seed investment and political largesse. It is arguable that much of the opportunity we see in the PV solar power market today would not exist but for the efforts of NGOs, governments and early-stage private corporate investments. But these early-stage efforts were aimed at achieving a market transition from the utility to a clean-energy alternative, in this case PV solar power.
Business Prefers Solar Power
Today, we see a surge in demand for solar power from the commercial side. Granted, the surge comes on top of a relatively small base. Yet, there are very clear indications that this increase in demand has legs and broad shoulders. Much of this outlook has to do with economics but there’s a significant portion that has to do with social responsibility, too.
The primary consideration for business people in sparking a broad-based conversion or transition to renewable solar power among commercial enterprises is to have solar power’s costs in relative parity with the utility’s. And, of course, it must be as readily available and dependable as the utility’s.
There has never been a time when PV solar power had business conditions this favorable. Just on the two fundamental points above, the first condition has been met and the second condition is driving a wave of recent investment to expand available solar power installation capacity. The list of investment activity in this segment below bears this out.
Solar Power Investment
On-site Utility Model
Both the technology and the business model exist to provide PV solar power to industrial businesses, government buildings, utilities, hospitals, etc. on a pure usage basis. This consists of economics that benefit the business customer and provide a return for the solar power provider.
As evidence of that, we recently launched a company, Soltas Energy, to make majority investments in selected solar power companies across the country. Our objective is to build solar arrays on leased industrial buildings, factory rooftops and land plots and sell that power to commercial, government and industrial customers at rates under that charged by the local utility.
This would be the solar power equivalent of an on-site utility. In this model, the industrial customer buys the power it needs, arranged through a power purchase agreement with a solar services company that designs, installs and maintains the PV system. This strategy would also be in line to gain from government incentives, from whatever power goes back into the utility grid and, in future, any market that may exist for carbon credits.
Soltas has the potential to install and operate a gigawatt (GW) of PV solar power capacity within five years in discrete solar power stations across the country – and create about 1,000 jobs in the process.
A New Era for Electric Utilities
As the solar services industry scales up, we anticipate that the costs of providing solar power will continue to decline. Both PV panels and BOS equipment costs will decrease as the market heats up, suppliers proliferate and new, more cost-effective technologies emerge.
We are at the leading edge of an era where we will see the bulk of commercial electrical power supplied by local, on-site solar power arrays. It is an era where the proliferation of solar power stations, as they are known, will democratize the market for power, lowering rates while cutting CO2 and other harmful emissions associated with traditional utilities.
In little more than five years, the national electrical utility grid will look much different. Suppliers of commercial electrical power will increase and the market will become more competitive, very likely characterized by lower costs to customers and consistent innovation within the industry to achieve and maintain the lowest possible cost of operation.
On the commercial side, electrical service will be less costly, rather than constantly on the rise. The electrical utility sector will adopt a customer-service-oriented business approach, rather than the take-it-or-leave-it model we have today. And we will have significantly and sustainably reduced the amount of harmful emissions that pour into the atmosphere each year from fossil-fuel-fired electrical utilities.
Andrew Barron Worden is founder and CEO of Barron Partners LP, a New York private equity firm with significant investments in companies operating in cleantech, including PV solar power. The firm recently launched Soltas Energy Corp. to invest in and mobilize PV solar design, installation and maintenance capacity across the country with the goal of operating a network of solar power stations with a collective total capacity of at least one gigawatt.