Gen110 Announces Funding from KPCB

05/18/2012

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It's been an exciting week. We just announced that Gen110 received venture backing by Kleiner Perkins and got a ton of press about it. Here is an example:  "Venture Backing for Distributed Generation Firm Marks a Shift".

So what has changed since the funding? Not much really. It's obviously an honor to be part of the Kleiner network. Plus the (self-inflicted) pressure has certainly increased. But success in this industry comes down to day-to-day execution, setting up the company for long-term success and withstanding short-term shocks. The residential downstream market is getting more and more competitive as installation and financing costs are coming down. As less reputable new entrants are trying make quick profits in the short-term, KPCB's backing allows us to think longer term and build a distributed energy powerhouse. It won't be easy but having KPCB behind us is a critical step to success.
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Renewable Enthusiasm in Germany

05/02/2012

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I just returned from a trip to my home country. It’s always fascinating to observe the political and popular mood towards renewable energy in Germany and compare to the US. Here are a few observations that I found particularly interesting:

- Renewable energy news is front page stuff. It’s all over regional and national media outlets. Most Germans are familiar with the key trends in the solar and wind industry.

- Currently most of the press is focused on the flood of solar bankruptcies and plant closures in Germany. All major German solar module manufacturers are in or near bankruptcy. Only the inverter makers like SMA appear to be healthy.

- The German solar lobby has done a fantastic job in lobbying policy makers and the general public to blame the demise of the German solar industry on the cuts of the feed-in tariffs. The real problem is that the (ridiculously high) feed-in tariffs created an unsustainable bubble and windfalls for the industry. Overcapacities were created and companies became complacent as they stopped innovating to further reduce costs and stay ahead of their Chinese competitors.

- There is still enormous support and enthusiasm for renewable energy in Germany, despite the price all utility customers are paying for it. (The feed-in tariff is mandated by the government but it’s the utilities that have to pay the producers for solar and wind electricity produced and fed into the grid.)

After speaking with a lot of people during my trip, it was obvious again that a huge difference in sentiment for renewable energy exists between Germany and the US. In Germany, the support is unwavering. Even after all the pain the industry is going through. It’s more a matter of figuring out the next steps like finding solutions to the intermittence and distribution problems of a growing percentage of renewable energy generation assets on the grid. 

In the US, the general public is still highly skeptical about renewables. At the highest level that is due to a) the lack of belief that adverse climate change is an urgent problem to worry about, and b) an unwillingness to invest today to build a better energy infrastructure for tomorrow. It will be in the hands of a few states to drive innovation and design sensible renewable energy policy.

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It’s the “you can’t prove smoking cigarettes causes lung cancer!” argument

03/31/2012

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The best article I've read recently about the topic of global warming: http://thinkprogress.org/romm/2012/03/29/454476/a-message-from-a-republican-meteorologist-on-climate-change/

Schopenhauer said “All truth goes through three stages. First it is ridiculed. Then it is violently opposed. Finally it is accepted as self-evident.” 
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Week 5 - Consumers Beware and Other Pricing Distortions

02/10/2012

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This is the fifth and last of a series of posts about the CSI data. Please check here for the original posts with some background about the data.

This last chart shows the average cost of install per kW for the top 10 installers in 2011 for residential installs only. There are some interesting take-aways in this data. First, buyers need to be careful when picking who they are working with. There are clearly companies out there that charge well above the market average. I certainly don't like bashing competitors in the industry. We all know how hard it is to build a profitable business in the solar space. However, when companies charge 50-100% above a competitive price, they need to be called out. Headlines like "Solar company rips off customers" will hurt the whole industry. It's still a riddle to me how Galkos Construction (aka GCI Energy) can get away with it. 

Another interesting observation from the data is that some of the established players in the market like Sungevity and SolarCity also have relatively high average prices ($8-9/kW). That seems to be contradicting our knowledge of the market place where these two companies are very competitive in their pricing to consumers. The reasons could be that the data reported to CSI by those companies is really the transfer pricing that's used to capture the 30% cash grant/ITC. The higher the transfer pricing, the more can these companies get from the government to subsidize their installs and pass the benefit on to their customers through lower leasing costs. The problem with this practice is that the transfer pricing rules are not well established and everyone has their own interpretation of what a reasonable price is for the discounted future cash flows of the revenue stream from a third party financed install. Without clearly established rules from the government agencies, different financing providers will always interpret the vague guidelines differently and therefore distort the market. The status quo promotes aggressive transfer pricing practices that could quickly throw third party financing into the line of fire.
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Week 4 - Movers and Shakers in Residential Solar

01/15/2012

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This is the forth of a series of posts about the CSI data. Please check here for the original posts with some background about the data. 

These two charts show the top 10 installers by number of installs in 2009 and 2011. A few interesting observations:
1) SolarCity, Real Goods Energy, Verengo and PetersenDean are clearly the winners in terms of growth and scale.
 2) REC Solar interestingly dropped significantly from 2009 to 2011 with decreasing installation volume despite operating in a growing market.
 3) Akeena went from # 4 in California in 2009 to exiting the business in 2010.

There were 400+ installers in the CSI data in 2011 that installed at least 1 system. The Top 5 installers in 2011 took roughly 1/3 of the entire residential solar market in California. A clear proof for the long-tail distribution of the installation market.

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Week 3 - Emergence of Third Party Ownership

12/23/2011

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This is the third of a series of posts about the CSI data. Please check here for the original posts with some background about the data.

Today's chart shows the rapid emergence of the 3rd party financing industry in the residential solar industry. Companies like SunRun, SolarCity and Sungevity as well as new entrants like Clean Power Finance and Sun Edison are making solar more accessible for a broader market. Since 2008, that part of the industry has grown by a factor of 10x. It’s a sure bet to assume that in 2012 and beyond, 3rd party owned systems will represent the majority of all installed residential solar systems in California. As long as banks find this asset class attractive, the residential financing sector will become a lot more competitive. Customers will benefit.

Happy Holidays!
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Week 2 - Growth of the CA Solar Industry by Sector

12/04/2011

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This is the second of a series of posts about the CSI data. Please check here for the original posts with some background about the data. 

This week's graph shows the industry's development by sector. The main takeaway is that the residential industry has seen steady and health growth over the years since the start of the CSI program in 2007. Government and commercial industry revenues have been much more rocky over the years. The CSI data for these sectors might be less reliable, however, since many installations are likely to fall outside the CSI data. 
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Rich Data – Top 5 Most Interesting Facts from the CSI Data

11/27/2011

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The California Solar Initiative has an incredible rich data set capturing all solar installations that applied for for the California State Rebate. And it’s available for anyone to download. For free. http://www.californiasolarstatistics.ca.gov/

The downside of the data is that it’s pretty messy. Additionally, the sheer volume of data makes high-level analysis of the data challenging. Taming it with Excel will likely drive you nuts. Having tried several times I’ve finally discovered a far more powerful big-data analysis tool called Tableau. Despite this neat software, my analysis still might include errors. If you spot any or have any comments, please let me know and I’ll try to correct them immediately. The underlying data for the following analysis was downloaded on 11/23/2011. 

Over the coming weeks I’ll post one chart per week. You can subscribe to the email list to automatically receive future charts and analysis.


Week 1 - Size of the California Solar Industry

This chart shows the total value of all installed solar systems by rebate payment date. Since the completion date is often not available, using the rebate payment date is the next best alternative for estimating the total size of industry. Why am I not using the rebate reservation date? The main reasons are that some companies in the industry see significant drop off between rebate reservation and actual installation due to cancellations. Additionally, from a financial perspective the installation date is more relevant since it's when companies can generally recognize revenues.

In 2011 the total installation value in California will top $1.5 billion and industry will have grown by 50% from 2010. It’s important to note that these figures often do not include financing costs. And this data also doesn’t include installations in California outside the three main utilities. For example, installations in LADWP or SMUD would not be captured. But this chart provides a good ballpark number of how large the solar industry is in the biggest solar market in the US.

Picture
Total cost of installed solar systems per year.
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Staying calm

10/17/2011

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From an interview with Bill Clinton in the Financial Times this weekend:

He had his own way of defusing the madness. In 1999, on the 30th anniversary of the moon landings, "when there were still raw feelings...the impeachment...I got Nasa to loan me a moon rock...I put it on the table in the Oval Office and when people started the crazy stuff, I'd say 'Wait a minute, guys. See that rock, it's 3.6 billion years old. We're all just passing through, take a deep breath, calm down, let's see what makes sense.' It had an incredible calming effect!"
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Solar After Solyndra

10/09/2011

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Solyndra’s sudden death is attracting a lot of media attention. It’s unsurprising that the solar industry is interested in the story. Interest beyond the industry’s boundaries is clearly a result of the DoE loan guarantee. It’s an easy political feast for the GOP to attack the Obama administration for their clumsy involvement. The notion that a government can pick winners in new, fast-changing industries is pathetic. If you consider that the best venture capitalists are elated if one 1 in 10 investments turns into a successful company, we cannot expect any government to get close to that success rate. And governments cannot afford to lose 9 out 10 bets they are making (at least not as publically and as clear-cut as in Solyndra’s case). However, I do think the Obama administration will recover from the mishap. It’s not enough cannon fodder to build the GOP’s campaign on over time.

But what does Solyndra’s bankruptcy mean for the rest of the solar industry?
  • An unintended consequence of the failed loan guarantee is that solar was lifted onto the national media stage. Before, the general public cared very little about the industry. Now everyone knows something about it and is curious. I lost count of how many customers, friends and family members over the past weeks have asked me “How does Solyndra’s bankruptcy affect your industry?”. After the dust has settled, I believe this heightened attention will benefit the industry. We are on an exciting path to provide cheaper and cleaner electricity. If we can stay on that path, it will be a transformative development that needs to be broadcasted to the public to maintain momentum.
  • Other solar companies will quickly follow Solyndra’s fate. Any module manufacturer that cannot reach scale and profitability with their current cash reserves will struggle to raise new funds. The margins in the industry have come under so much pressure that new technologies like CIGS have to beat ever decreasing cost targets. It’s just a matter of time that more modules makers will run out of money and declare bankruptcy or sell their technology for cheap. Investors will be lucky to get their initial investment back.
  • Customers, utilities and technology-agnostic solar companies will benefit. After all, the bankruptcies and industry consolidation is a direct result of drastically lower pricing. Exactly what the industry needs to push solar to cost-competitiveness with fossil fuels on a level playing field. 
  • The real winners are yet to emerge. As in other new industries, the early movers often do not win the game (think MySpace/Friendster vs. Facebook, Lycos/AltaVista vs. Google).  It’s still too early to call the winners. Many will be Chinese. Many are yet to be discovered.
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