Archive for photovoltaics

Can the Poor Afford a Community Solar Garden Subscription?

Yesterday, I wrote about Community Solar Gardens (CSGs) and their uses from an investment perspective. One of the goals of CSG legislation is to allow people without access to large amounts of credit the opportunity to invest in solar. Yet there is a clause in the bill that places the size of the smallest allowable CSG subscription at 1kW. A typical home system is usually between 2kW and 10kW, so a 1kW system does not seem unreasonable if the intent is to simulate a home system. However, if the intent is to allow people of all economic means to participate, the 1kW minimum may be onerous.

According to Rick Coen, Director of Engineering at Colorado solar installer Bella Energy, a 1 kW solar garden subscription would probably cost about $2,500 after current Colorado incentives and federal tax credits. Colorado incentives have been dropping quickly recently, as have solar panel prices, so this cost could either rise or fall, depending on which falls faster. Nevertheless, $2,500 seems like more money than most typical low income earners are likely to have at one time, so the minimum subscription may present a barrier.

A bill that was designed to allow low income earners to participate would either remove the 1 kW minimum, or provide for some type of monthly payment plan.

Financing

The Community Solar Gardens bill (HB1342) does allow the developer of the CSG to provide financing to subscribers, but for someone with low income, such loans would likely need to be secured against the subscription itself in order to achieve a low interest rate. If the income from the subscription came close to covering the payments on the loan, a CSG developer could package together a CSG subscription and a loan so that a 1 kW subscription could be bought on a monthly payment plan.

In sunny Colorado, solar farms often have capacity factors as high as 20%. At that capacity factor, typical monthly production for a 1kW nameplate system would be 146 kWh, which is worth about $14.60 a month at typical Colorado residential rates of 10 cents per kWh. Using a mortgage calculator, I found that the income from the subscription would be enough to pay off a $1,400 ten-year loan at 5%, an $1,800 fifteen-year loan at 5%, or a $2,200 20 year loan at 5%. That means that with $300 down, a low income subscriber could pledge the income from the CSG subscription for 20 years, and would eventually be able to use the income from it after the loan was paid off 20 years later. Solar panels can last for well over 20 years, so the subscription could still be worth something at that time.

A more likely option would be for the subscriber to make the initial $300 down payment on the 20 year plan, followed by smaller amounts each month to accelerate the debt repayment, and end up owning the subscription outright sooner.

Despite the potentially daunting $2,500 initial cost of a 1kW subscription, it looks as if developer financing could bring this down to a manageable initial payment. All of this assumes that incentives for solar do not fall faster than the price of solar installations, and that currently low interest rates stay low. On the other hand, if electric rates rise, the income from a CSG subscription might be enough to cover the entire subscription.

Truly Affordable Solar

While financing can in principle allow the low income earners to purchase a Community Solar Garden subscription, it remains to be seen if there will be enough demand for an asset that has no tangible value for twenty years among people without much cash to spare. I doubt that the demand will be sufficient to entice a CSG developer to offer such a complex financing arrangement. A much simpler way to make CSG subscriptions affordable would be to allow subscriptions smaller than 1 kW.

Comments (4)

Community Solar Gardens

A new bill being considered in the Colorado legislature would create "Solar Gardens." Solar Gardens allow people to participate financially in owning part of a solar array even if they do not have a suitable site on their own property. My reading of the proposed legislation is that subscriptions in a Solar Garden would be financial securities, and fall under securities laws. That’s probably a good thing.

Solar for Everyone

Solar panels are elitist: They cost a lot of money, and only homeowners with good solar access can usefully install them. This means that renters and people who can’t come up with at least $5,000 to $10,000 worth of cash or credit can’t own them. That’s the problem Colorado House Bill 10-1342 (HB1342): Community Solar Gardens aims to correct.

HB1342 defines a Community Solar Garden(CSG) as "A solar electric generation facility with a nameplate rating of two megawatts or less… where the beneficial use of the electricity generated by the facility belongs to the subscribers to the community solar garden." A subscriber is a "retail customer of a qualifying retail utility who owns a subscription and who has identified one or more physical locations to which to which the subscription shall be attributed" withing the same county or municipality as the CSG. The bill allows subscribers to change the premises to which a subscription is attributed, and also to sell them to other qualifying subscribers, something which is necessary in case a subscriber were to move out of the county or the utility’s territory.

It’s a worthy idea, although local solar installers are concerned that the superior economics of large installations will eat into their market share, by easing the requirements in House Bill 10-1001 for customer-sited generation. People who own perfectly good sites for rooftop solar may instead choose to buy a CSG subscription because of the convenience and potentially lower price. I think fears that residential customers who are good candidates for rooftop solar might instead subscribe to CSGs are overblown. Although the economics may be better, buying solar in Colorado is not yet a great investment because of the cost an return involved. Instead, I believe people are investing in solar because it gives them satisfaction to think that they are using green energy, and because they want to show off their environmental bling to their neighbors. I know that some people are more interested in the bling aspects of solar panels than the economic aspects, because otherwise there would not be a market for fake panels in Japan, although I don’t know of anyone who knowingly bought fake solar panels in the US.

On the other hand, there is currently a multiplier in the bill which would allow 2 kW of CSG subscriptions to substitute for 3 kW of rooftop solar that I think needs to be fixed to avoid undermining the residential set-aside of Colorado’s renewable energy standard as envisioned in HB 1001.

Energy Sprawl

My greatest concern with the bill is not that it will cause a move towards large installations, but that it will lead to more ground-mounted installations taking up open space, contributing to Energy Sprawl. No matter what you think about the economics of photvoltaics, one advantage that they have over almost every other type of electricity generation (both fossil and renewable) is that they can be placed on otherwise unused rooftops and other structures, giving a use to otherwise wasted space. Only energy efficiency and conservation have less physical impact on the environment than rooftop solar. Some people have told me that their air conditioner ran less after they put solar on their roof.

Any law which makes solar more likely to be ground-mounted than rooftop is a step in the wrong direction. I think the bill should be amended to prohibit CSGs from being ground-mounted, effectively limiting them to large rooftops and other structures such as awnings for parking lots. This would also have the effect of doing something to limit the practical size of CSGs to available rooftops, which would probably make the solar installers a bit happier.

The Secondary Market for Community Solar Garden Subscriptions

Provisions for a secondary market for CSG subscriptions are included in the bill, since a subscriber moving out of the county in which their CSG is located will not be able to benefit from their subscription. The secondary market and and other security-like characteristics of subscriptions may make them a useful financial tool for small investors. Most importantly, a CSG subscription is (as intended) an excellent hedge against rising electricity prices.

The only real reason to hold a CSG subscription for the long term is as a hedge against rising electricity prices because, like all utility-subsidized solar installations in Colorado, the utility ends up owning the Renewable Energy Credits (RECs), which are defined as all the “environmental attributes of the electricity.” Although most people with solar panels don’t understand this, the fact that they cannot legally claim the RECs means that they are using electricity that is just as dirty as any other Coloradan, with the exception of direct purchasers of RECs or Carbon Offsets, such as Windsource or Colorado Carbon Fund subscribers.

Although the secondary market for CSG subscriptions is likely to be very illiquid, it will probably become a good direct indicator of local expectations for utility rates. CSGs will not be much use to speculators, however, because there are restrictions in the bill which limit the investment to only 120% of estimated electricity usage at the designated physical location of the subscription. Nevertheless, experienced local market professionals with an understanding of market psychology may be able to make small profits trading subscriptions, since the illiquid and unprofessional nature of the market will likely make prices extremely volatile and subject to strong behavioral biases. When electricity rates are rising, subscription prices will likely overshoot their true value as potential subscribers overestimate future increases, and prices will likely undershoot if falling natural gas prices lead to falling interest in CSG subscriptions.

Allowing investors into the subscription market would probably create a more liquid and stable market for subscriptions, but such an outcome is unlikely because of the general public distaste for speculators. It’s also impractical because of the fact that payments to subscribers are at the retail electricity rate, which is considerably higher than the owners of commercial solar farms are allowed, and hence are effectively subsidized by all utility customers, over and above the direct subsidies given to encourage solar in Colorado.

CSG subscriptions have other aspects that will be familiar to investors. The law allows for the CSG to finance the purchase of a subscription (buying on margin.) It also allows the payments for electricity production to either go to offset the subscriber’s electricity bill, or to go to the CSG sponsor. In the latter case, I could see a small subscriber buying a small subscription, and enrolling in the equivalent of a Dividend Reinvestment Plan (DRIP): rather than cash payments, the electricity generation would be used to increase the size of the CSG subscription over time, until the subscriber decided to start taking cash payments. A CSG with a large number of subscribers enrolled in DRIP-like plans might add a new solar module to the farm every month, in order to keep up with the growing subscriber base.

CSG subscriptions could become a valuable financial planning tool for retirees and others on fixed incomes. Because a CSG subscription rises in value with utility rates, an owner would be better able to budget for the utility bill, no matter how wildly electricity prices gyrate. As subscription prices fall with the falling cost of photovoltaics, I can see the purchase of a CSG subscription becoming standard financial advice for retirees.

CSG Subscriptions as Securities

Although professional investors and speculators will have at most a limited role in the trading of subscriptions, CSG subscriptions may legally be securities. The legal definition of a "Security" is an investment in an enterprise with the expectation of profit from the efforts of other people. If I’m right and the draft law is not changed, CSG subscriptions will fall under Colorado securities regulations. (Because CSG subscriptions cannot be sold outside the state, they are clearly matter for Colorado security regulators.)

For small CSGs set up by community organizations, this is unlikely to have a tremendous impact, because securities laws include a number of exemptions for sales to a small number of related individuals. (Note that this is not intended as legal advice! I am not qualified to give legal advice, and even a small CSG should need to consult with someone familiar with the relevant laws.) For large CSGs with many subscribers, securities law may actually require the delivery of a prospectus and fall under a variety of other rules about communications that apply to the CSG developer and its representatives. In general, this is probably a good thing, since it provides a strong legal framework under which regulators will be able to sanction unscrupulous CSR developers who might be tempted to cold-call unsophisticated utility customers and over-promise the benefits of a small subscription in a Solar Garden.

Conclusion

The intent of Community Solar Gardens is a good one, because it allows many more people the opportunity to hedge their electricity price risk. The people in most need of such a price hedge, those living on small fixed incomes, generally do not have both the home ownership and credit that installing a solar system requires. So I’m glad to see Colorado pioneering this concept, and it will be very interesting to see how CSGs and the market for their subscriptions evolve when the final bill passes. With luck, and a few people emailing Claire Levy, the bill’s sponsor, that final bill will have been amended to exclude ground-mounted Community Solar Gardens, and help preserve Colorado open space.

I also hope that some among the majority of my readers who are not in Colorado will suggest your own legislators consider local variations of this idea.

Tom Konrad PhD CFA

Comments (10)

Solar Stocks

In May, I went to Solar 2009.

One panel I attended led to a series of articles on Solar stocks:

  • The outlook for solar stocks
  • Why First Solar (FSLR) is a risky bet.
  • Why Solar Millenium may have what it takes.
  • I also particpated, with presentations on the best incentives for solar investments, and with an analysis of large scale electricity storage, as well as alternative renewable electricity integration strategies.

    Charles also attended, and took a look at the implications of the removal of the $2000 cap on the residential Investment Tax Credit.

    Comments off

    ARRA Symposium notes, March 10 2009

    I’ll be referencing these notes in an article to be published on AltEnergyStocks.com as What the ARRA Means for Clean Energy: One State’s Example on March 15th.

    Read the rest of this entry »

    Comments (2)

    Investing in Obama’s Stimulus Plan

    Since Obama’s election, my partent Charles and I have been looking at what Obama’s refreshing attitude towards Renewable Energy and Energy Efficiency, combined with the credit crunch, will do for some of our favorite stocks… here are the highlights:

    Companies that may benefit from a solar glut

    How Oil prices affect Alternative Energy Stocks

    Emissions trading stocks under Obama

    What might happen to Solar Photovoltaic companies if consumers pull back

    Charles and I expect divened paying companies to come back into vogue. He has a few dividend paying alternative energy companies and I have a couple dividend paying energy efficiency companies to consider.

    I also revisited my list of Blue Chip Alternative energy companies to see which ones might benefit from the expected stimulus package, while Charles looked at Smart Grid stocks that might benefit from a stimulus package. One technology I’m betting on is Geothermal heat pumps.

    Comments (2)

    Transport Fuels and Solar Technologies: Bird’s Eye View

    For my last couple AltEnergyStocks Columns, I’ve been taking a step back and looking at how we can get an understanding of the broad trends of energy technologies. Last week, I added to the Visual comparison of Electricity Generation Technologies I did last spring with a new Visual Comparison of Transport Fuels.

    Following up, today I published a look at the varius solar technologies through the lens of their applications.

    Before we go back to looking at trees, I hope you enjoy this look at the forest.

    (and don’t miss the National Tour of Solar Homes next Saturday)

    Comments off

    Denver Tour of Solar Homes Sneak Peak; links to National Tour

    Preview the Denver Tour of Solar Homes Online


    The Denver area Tour of Solar Homes takes place in less than a month, and this year you can preview some of the buildings involved online. 
    Check out the Sneak Preview on the right-hand side of the
    Tour of Solar Homes page on the CRES Web site

    .

     

    The 2007 Tour of Solar Homes will take place on Saturday, October 6 in Denver and most locations around the state.  However, some of the activities are slightly different. 
    The Boulder tour will take place on Saturday, September 30. 
    And the tour in Pueblo will span two days: October 6 – 7. 
    See a complete listing of solar home tours in Colorado on the American Solar Energy Society Web site.

     

    National Solar Tour

     

    Outside of Colorado, people you can find tour in your own community by visiting the National Solar Home Tour website.

     

    Volunteers Needed for the Tour of Solar Homes October 6

    CRES needs volunteers to help with the Denver Metro-Area Tour of Solar Homes on Saturday, October 6.  If you step forward, you will assist homeowner with visitors.   

    There are two shifts: morning from 8:30 a.m. to 12:30 p.m., and afternoon from noon to 4 p.m.  

    Volunteers are welcome to spend the half-day they are not working touring homes themselves. Volunteers are also invited to attend a workshop free of charge from 6 – 8 p.m. Thursday, Oct. 4 titled "Solar Photovoltaics and Xcel Energy’s Solar Rewards Program" and presented by Jeff Scott of SolSource and Juliea Gauthier of Xcel Energy.  The
    workshops take place at the National Renewable Energy Laboratory (NREL) Visitor’s Center at 15013 Denver West Parkway in Golden, which is two blocks west of the Denver West Marriott at I-70 and Denver West.

    Following the workshop, veteran volunteer John Avenson will give a brief orientation for volunteers about the duties the day of the
    Tour of Solar Homes
    . To volunteer, contact Patty Roberts via email at: patty at pacificmillimeter dot com

    Comments off

    Wal-Mart completes first stage of Solar RFP

    Today Wal-Mart Stores, Inc. announced a major purchase of solar power from three solar power providers, BP Solar (NYSE:BP), SunEdison LLC, and PowerLight, a subsidiary of SunPower Corporation (NASDAQGM: SPWR), for 22 combined Wal-Mart stores, Sam’s Clubs and a distribution center in Hawaii and California.

    Back in December, when Wal-Mart first put out the RFP, I predicted that SunEdision would participate, and that the solar utility model (where you don’t own the panels, but rather contract for solar power) would continue to gain steam. I think we can take this to mean that BP Solar, Powerlight, and SunEdison are very serious about pursuing this model, and also that they are serious about supplying solar power at a reasonable price. Otherwise, they wouldn’t be doing business with Wal-Mart.

    For more of my thoughts on this business model, see my original article.

    Comments (3)

    Inverter Stocks: A Backdoor to Solar and Wind

    My column on AltEnergyStocks.com this week is about the companies that make the inverters which transform the DC or wild AC current produced by solar panels and wind turbines (respectively) into the type of AC power used by the grid. It begins:

      Whenever there is a gold rush, the people who make the real money are seldom the gold miners, but rather the suppliers to the miners that come home with the lion’s share of the profits. This is not because there is not an incredible amount of money to be made in mining gold, but because the nature of a gold rush is that too many optimistic miners are encouraged by the early profits of a few to rush to pursue too few opportunities.

      To many, the rush into solar stocks seems to be just that sort of gold rush. The boom in solar IPOs certainly reminds me of the type of feeding frenzy in which incautious investors are likely to get burned. And we are also seeing some other signs of rampant speculation, where investors are buying poorly managed (or even dishonest) companies with almost the same fervor of well managed ones. There’s little doubt that the future is bright for solar power, but picking solar companies that are going to survive and thrive in that bright future is becoming increasingly difficult in an increasingly crowded field.

      In a gold rush like this one it makes more sense to look at the suppliers.

    Click here to read the rest of the article.

    Comments off

    Colorado News: Doubling of Colorado’s RPS

    Colorado House Bill 1281, which doubles Colorado’s Renewable Portfolio standard (RPS) (as well as the solar set-aside) passed the state Senate on Friday, and is certain to be signed into law by state lawmakers.

    Here’s how the new requirements stack up against the old Amendment 37 requirements (passed by a popular vote in 2004.)

    rps.GIF
    Not exactly a “doubling,” but is there a better way to describe it?

    “A37″ are the old requirements for investor owned utilities (affectionately known as IOUs,) “HB 1281″ are the new requirements for IOUs, and “Co-ops” are the new requirements for Rural Electric Co-ops (which previously had an opt-out, although a few decided not to opt out.)
    The opt-out contained a provision that each Co-op’s members (i.e. customers) vote to opt out, which most of them proceeded to do (one exception is Holy Cross, which chose not to opt out, however, this has led to some contention with Xcel as to whether or not their existing power purchase agreement with Xcel included the renewable energy credits (RECs) associated with Xcel’s generation of electricity from renewables… since both utilities use these RECs to meet their requirements.)

    While the opt-out elections all seem fair and democratic, that is before you realize that all the information most members were getting was coming from their co-op’s management. This is fine with progressive co-ops like Delta-Montrose and Holy Cross, but when it comes to troglodytes such as the management of the Intermountain Rural Electric Association (IREA), it’s a little more Orwellian.

    In the recent House and Senate hearings, IREA was arguing for another opt-out from HB 1281, arguing that IREA’s members had voted against it in the first election, and that it would force IREA to raise rates (despite the fact that the bill specifically states that rural co-ops only have to meet its requirements if they can do so with less than a 1% rate increase (the more stringent requirements for IOUs can be met with an up to 2% rate increase.) In some ways IREA’s failure to get their opt-out into HB 1281 was due to their own maneuverings. In response to IREA’s funding of a global warming skeptic this summer led many of IREA’s members to wonder what else Stan Lewandowski was doing with their money that they did not know about. They founded IREA Voices to try to get a greater say in how their customer-owned utility is run. (If you know anyone who lives in IREA territory (just south of the metro Denver area, make sure they know to vote for the IREA Voices candidate in their district. (Mike Kempe, Mike Daniels, or Jake Meffley, if one appears on the ballot that came with their last IREA bill.) If you don’t live in thier districts, they are funding their campaigns out of their own pocket, plus any donations. Help out if you can!

    It’s ironic that co-ops, which supposedly exist to serve the best interests of their members (as opposed to shareholders) are often the laggards (and in IREA’s case, even deniers) of the environmental effects of our reliance on coal for electricity. I believe that Stan Lewandowski believes he is doing the right thing by trying to keep rates down, and damn everything else, but in the end, the farmers he feels he is serving will be the ones who suffer some of the worst effects of global warming.

    Anyway, it looks like momentum is finally on the side of those of us that realize the magnitude of the disaster facing us, but time is also of the essence, and the faster groups like IREA Voices can catalyze change, the better for all of us.

    So let’s cheer Colorado’s doubling of the Renewable Portfolio Standard, but let that one victory inspire us for the struggles ahead. We’re a long way from the time when we can declare victory and go home.

    Comments (1)

    CitizenRE leaked memo

    Looks like I’ve been out of the CitizenRE loop.  According to this leaked memo it looks likely that they’ll pull their whole MLM (multi-level marketing) scheme because they won’t be able to build enough volume of panels to satisfy demand.  Will current signees get their panels?  Possibly.  But as I said in response to an earlier controversy, PV is not a great financial investment, and there are green things you can do with your money that have much better returns.  So if you’ve already signed a FRA, I say wait and see (unless some other outfit comes along with panels in hand to offer you a rental agreement.)  If you have not yet signed, it does not look worth the bother.

     I still believe that the rental/utility model is sound… we just have to wait until the technology and production capacity of PV are such that they will actually be able  to deliver enough systems to homeowners.

    I do think there will be other companies offering the rental model to homeowners in the next few years, but it will probably be much smaller scale, and locally based in states with high incentives.   They’ll probably also charge higher rates for the electricity to make up for their higher per unit cost (compared to CitizenRE’s rosy projections.)

    I hope the rental model (or the PV industry as a whole) will not be tarred by association.  At least MLM could not exactly lose much in terms of reputation. 

    Comments (1)

    Visual Comparison of Electricity Generation Technologies

    I just put together a couple graphs for a talk I’m giving on Monday to give people a visual feel of the various technologies for generating electricity.  These come with a gigantic caveat: the numbers are far from precise.

    With changing technologies, it’s impossible to represent any of this with a single number anyway.  I’m trying to show how the technologies compare to each other, and I used four parameters:

    • Cost ($/MWh),
    • Availability (better the closer the profile of the technology matches a normal demand curve (wind is bad, baseload is okay, dispatchable is best, solar),
    • Emissions (and I count waste storage when it comes to nuclear),
    • Bubble sizes represent the size and durability of the resource (I’ve tried to combine in one number how much power we can get from the resource, but also how long supplies of fuel will last.) 

    In both charts, the “best” technologies are in the upper left (low cost, low emissions, and available when we need them.)

    I know that I’m going to upset a lot of people because I was too harsh with their favorite technology, so feel free and comment on the numbers I’m using, but also please provide references for where you get your numbers.  Most of these are off the top of my head, so their accuracy is admittedly questionable.   Here are the numbers I used to make the graphs.

    Comments (24)

    CitizenRE:REvisited

    There is an excellently researched article on CitizenRE (also see my previous blog entry which has been in my top posts constantly since January) on Renewable Energy Access by Jeffery Wolfe of groSolar.  As the CEO of a solar installer/distributer, he is rightly worried about CitizenRE’s ability to cannibalize his business…. especially if they sign a bunch of people up, and then go bust.

    This is a valid concern, both for groSolar and those of us who want the solar industry as a whole to grow and succeed.  My thought on this is if you are seriously considering installing solar on your home yourself, you should go ahead and buy it from an established solar contractor.  There are many uncertainties with CitizenRE, and the most surprising result would be if they actually get their plant running and start installing solar on people’s homes on time in late 2007.  If they do get everything working, 2009 or 2010 before a customer sees his/her solar panels is much more like it.

    That does not mean, however, that no one should sign up.  As I constantly point out, rooftop PV is a lousy investment for an individual from a financial standpoint.  If you have a mortgage, do yourself a favor and use that $8,000 you were thinking of spending on PV and pay down your mortgage instead.  If you really want to spend money to do something for the planet, give your friends some CFLs, get an efficient car, use public transit, or, use that money to buy the stock of carefully selected renewable energy companies or income funds.  Buying stocks always puts your money at risk, but it will take 20-30 years to even recoup your investment when you put up a PV system.  You can do all these things in addition to signing up with CitizenRE (or future companies which I expect will be offering PV via the rental model within a year.)  If they actually come through with the panels they have promised, you and the environment will be even better off.

    One other counter to Mr. Wolfe’s argument is that CitizenRE management thinks that they will eventually be up and running, and they are spending money to support the marketing effort get FRA’s signed.   It will probably take a lot longer than they are saying (these things always do) but they clearly think that they have a decent chance at pulling it off eventually.

    Other good blogs to read up on CitizenRE: SolarKismet, Sietch Blog.  They’re both quite skeptical, and I think that’s healthy.  For myself, I consider money spent on solar panels to be money that could be better spent on other green endeavors.  So what if the skeptics are right?  If I want to invest in solar, I’ll buy a portfolio of the better solar manufacturers out there: they’re volatile, but I expect the payback to be a lot shorter than the 20-30 years I expect from PV on my roof.  In the meantime, signing up with CitizenRE costs me nothing.

    Disclosure: I have signed up as a CitizenRE distributor.  To date, I have not signed a single FRA (Forward Rental Agreement) because I have better uses for my time than sales.    The CitizenRE links in this blog are referral links For Frank Knight, who has agreed to make a donation to an environmental charity if CitizenRE actually pulls it off and you click through one of the links here.

    Comments (10)

    Canadian RE picks

    There’s a good rundown of public Candian Renewable energy companies in the Globe and Mail today by Richard Blackwell.  They mention all of my favorite Canadian companies, and even one I had not yet heard about.logo

    One note, there are several Canadian Income Trusts listed.  These are currently very volatile because of changes in thier tax status.  The extra volatility will undoubtedly lead to some excellent buying opportunities, but they are much more volatile than your standard income investor is probably ready for.  Where once I might have bought them for my more conservative clients, now I’m looking at them for my more aggressive clients.

    Comments (1)

    No Fun at Solarfun (except for the insiders)

    Here’s an excellent aritcle on TheStreet.com by Kevin Kelleher comparing two recent Chinese solar IPOs: Trina Solar and Solarfun Holdings.  The only investors having fun at SolarFun were the insiders who managed to allocate themselves a pile of below market cost stock right before the IPO.

    Not only does management seem more interested in packing away loot for themselves, but they also haven’t spent too much time looking for ways to deal with a well known problem for solar manufacturers: securing silicon.

     This just re-emphasizes the point that doing your homework when trying to pick stocks can pay large dividends (and help avoid losses.)  Honest and competent management can make the difference between a wildly profitbale company and a real dog.

     Thanks to Phil van Hake for the link.

    Comments off

    A Solar Business Model that Makes Sense

    Joel Makower wrote today about Wal-Mart’s RFP (Request for Proposals) for solar panels on their roofs.  This got me thinking about two things:

    1. I’ve sure been writing a lot about Wal-Mart’s sustainability push recently. (see July 30, Dec 3 entries) 
    2. Third party ownership in photovoltaics seems to be the wave of the future.

    Wal-Mart is asking suppliers to build, own, and maintain the PV systems, and sell the electricity to WalMart, allowing them to avoid the large up-front cost, and having to branch out from what they are good at: selling products to consumers.  I say that this is the model of the future for the same reason I like CitizenRE’s model: a business focused on installing and maintaining systems will be able to do it much more cheaply and efficiently than a building owner, who may not know anything about solar.  In the residential space, there is the added advantage that the federal tax credit is not capped at $2000, and the ability to take advantage of accelerated depreciation.

    Update: 5/7/07 Wal-Mart has completed the RFP. According to the press release the winning bidders are SunEdison (as I predicted below), BP Solar, and PowerLight. Thanks to Marc Gunther for tipping me off to this.

    Separate ownership is nothing new on the utility scale: electricity generation is often built and operated by a third party, who receives payment for electricity produced.  For instance, the new solar farm to be built by SunEdison for Xcel Energy in Colorado’s San Luis Valley.

    Speaking of SunEdison, I will be very surprised if they do not bid on  the Wal-Mart RFP.   I heard their CEO Jiggar Shah talk about their model at Solar 2006, and he wasn’t talking about installing solar one residential rooftop at a time.  I admit I was somewhat skeptical at the time… I thought solar installations would take much longer to ramp up than he was saying.  I’ve changed my mind since then.

    Solar power is still a business totally reliant on government policy.  If the customer had to pay the current $6-$9 a watt of installed DC power, the only locations where it would make sense would be off-grid, but with companies able to capture a combination of rebates and tax credits worth up to 80-90% of that price in states with good incentives (the same states, incidentally, in which Wal-Mart is issuing its RFP: California, Colorado, Connecticut, Hawaii, and New Jersey) it’s a whole different ball game.  And, with the Democrats taking power in Washington and many states, the outlook for renewable energy incentives is definitely bullish.

     What does this mean for the investor?  Buying solar electricity will have a negligible effect on Wal-Mart’s bottom line, except if they manage to use the publicity to brighten their public image, which could have some indirect benefits for the bottom line.  However, so long as federal and state support for solar remain strong or increase, it’s good news for PV manufacturers and suppliers.  But don’t just buy anything on the list: do your homework, and look for companies that already have a working technology, and are ready to rapidly increase volumes within 1-2 years.

    Update 1/18/07:  It turns out that there is a company in South Africa called NuRa using this same model.  When it comes down to it, people want electricity, not solar panels.

    Comments (2)

    Solar panels for the price of the electricity

    Many of us would like to have put solar photovoltaic (PV) panels on our home, and generate our own Citizenre Corporationelectricity.  Until now, I’ve always told people that they have better uses for their money.  Even with the recent extension of the federal tax credit until the end of  2008, and (in Colorado) the rebates being offered by Xcel Energy in order to meet their Amendment 37 requirements for customer sited solar electric, the return on investment for the electricity generated at current prices (about $8 per watt for the panels & system; $4.50 per watt rebates from Xcel, and a $2000 federal energy credit), a 4 kW system only returns 1.4% per year in electricity savings.  (I got these numbers from a workshop presented by Jeff Lyng, who will be vice-chair of The American Solar Energy Society next year, and calculated the return from those.  Jeff was speaking as a consultant for Xcel on their solar rebates program.)   To me, it makes more sense to invest in renewable energy or energy efficiency companies, which are likely to yield a higher return (or put the money in a CD and use the interest to buy RECs or give away CFLs).

    Until now.  CitizenRE is offering to install photovoltaic panels on you house, and charge you only for the electricity.  Better yet, the price you will pay is equal to the same price (or less) than your utility charges.   If you like, you can lock in your current price for electricity for up to 25 years (although 5 is standard.)

    You do still have to get power from your utility company… there is no provision for battery backup, and they require a $500 deposit which you don’t get back until the end of the contract.  Also, you are only renting the panels from CitizenRE, but you are responsible for damage to them from other than normal wear (as you would be for any other rental), so they suggest that you include them in your homeowner’s policy.

    Still sounds pretty good, doesn’t it?  Here’s the big catch: they are signing people up now, but they plan to manufacture the panels at their own plant, which will not start operation until at least September 2007 (and, being a cynic, I’d expect further delays.)  Realistically, don’t be surprised if you don’t have your panels until mid-2008.  But for people who don’t have an extra $10,000 burning a hole in their pocket, you probably weren’t going to get a system until 2008 or later anyway.

    This is probably not the only place you’ve heard about them… I’ve read several other blogs (here, here, here, and here. ) about them so far, and part of the reason for that is they are using a multi-level marketing scheme (MLM) (although they don’t like to call it that).  I don’t think any of the blogs I linked to back there are MLM-ers… I also came across several blogs like that (most of which had clearly been started for the sole purpose of selling CitizenRE), and decided not to do them the favor.  I’m not generally a fan of MLM, but I have to admit that it’s probably the best way to reach a lot of homeowners quickly.   As part of my research for this blog, I decided to sign up (it was incredibly easy… I did have to get 4/5 on a quiz, but three of the questions were general ones about solar and electricity, so I only had to guess right on one out of two, which I managed on the first try (but I could have tried again after 2 hours)… they have tutorials for people who are serious about this stuff, but who has time for that?)

    Instead, I spent my research time reading the Forward Rent Agreement (FRA) contract their customers have to sign, which is where I got some of the above caveats (also note that they do reporting through a land telephone line, so if you sign up, you have to maintain telephone service for the duration of the contract.  That might be a problem for me, since I use Voice over IP.)

    I also browsed through their marketing material, which was available after I took their little test.  After all, if putting solar on your own home is not a good financial proposition, why are they paying their associates $150 for each sale, plus 4% or more of the electricity sold in order to put panels on your house for you?  Here’s what I concluded:

    1. They will have lower costs than an individual homeowner.  Most of us have to pay contractors around $8 a watt for our systems.  Since they will be hiring their own dedicated installers, and install only equipment that they manufacture themselves, they think they can do it for around $4.50 per watt, a price which (In Colorado Xcel territory) would be covered completely by Xcel’s Solar*Rewardsprogram referenced above.
    2. As a business, they can deduct 30% of the full amount of the installation cost under the production tax credit, and it is not capped at $2000, as it is for homeowers.
    3. Also as a business, they are eligible for accelerated depreciation, which basically amounts to an added massive tax deduction.
    4. They get interest on your $500 deposit.  Not much, but if you have 1000 deposits, it starts adding up to real money.   1/15/07: Via PeakEnergy and The WorldWatch Institute I read that interest on the deposit is credited to the consumer.  Checking the associates’ website, it says: “Deposits are invested into 1 year treasury notes. Interest is compounded for the benefit of the customer.”

    Starting to come clear?  By my ballpark estimate, if it costs them as much as $6 a watt to install a system in Colorado, they will be able to collect at least that much back under the various tax programs and rebates, and any money they collect from you, the customer, will be pure profit.

    So it sounds like a legit business model to me.  In fact, when you look at the above, it’s somewhat surprising that no one has done it before.  If you still want to sign up (and if you want solar on your roof, this seems like the best financial deal currently on offer).

    I don’t want to sign up anyone myself… I already have two full time jobs as an investment advisor and environmental activist, but if you use this link, for Frank Knight, who has agreed to make a donation to an environmental charity for any referrals (but not untl you get panels and he gets paid.  Contact me if you have a particular charity you would like to see the money go to.

    If you want to become an associate, here’s the link for that.

    If you think this whole thing is a scam, and want a random associate, go directly to CitizenRE (there will still be as sales commission paid to some associate, but it will be someone assigned at random.)

    I never thought I’d be telling people they could put solar on their roof (in an economical way) so soon.  Keep in mind, this does cost more than your normal electricity bill, because you pay for insurance for the panels, as well as losing the interest on your security deposit, but if you don’t plan on moving, and expect electricity prices to go up a lot, you may come out ahead anyway, because they let you lock in your electricity rate for the duration of the contract (up to 25 years, at your option.)

    By the way, I think I read an article recently about a company that’s doing the same thing with solar hot water in Canada (only charging for the price of natural gas not used), but I can’t seem to Google it.  If you saw it too, please let me know.

    (Note: apparently you can avoid the deposit if you sign a 25 year contract.  I’m not sure  if that’s a better deal or not… how many of us stay in one house (or even two) for 25-years?  Also, five to ten years from now, the technology will probably reach the point where it does make sense to borrow the money and put up your own panels.  I guess I’m just not a big fan of 25 year contracts for anything.  Mortgages, for instance.)

    12/14 I’ve been thinking about this some more, and here are a couple other things to be wary of:

    1. They say they’ll start production of panels in September 2007.   But these things always take longer than expected.  If you sign a contract with them, you’re basically saying that you’re not going to use your roof for anything else while you wait.  At best, you’ll have your panels a year from now, but at worst, they might end up stringing you along for years, when you could have gotten solar from some newer outfit that came along in the meantime… if this model really works, it won’t bee too long before they have competition.
    2. Don’t expect to make money as an associate (salesperson) before 2009, or even later.  A lot of associates are already paying (out of their own pockets) for classified ads, but they don’t start earning any money until systems are installed on homes.  And who is to say that your sales are going to be the first in line… as far as I can tell, they can install systems in whatever order they choose, which means that the location with the highest rebates will probably get all the first panels produced.  Basically, the better a financial deal this is for the customer, the later they are likely to get their systems.  If you are considering signing up as an associate, treat it like a hobby, and don’t pour a lot of money into it.  Frank may be kicking in $75 to charity for each referral I give him, but at least he’s not putting a lot of money in up front… he does not pay unless he is paid.

    You may also hear about the CitizenRE offering under the product name ReNu, as well as a couple of thier marketing websites www.jointhesolution.com, and www.powur.com.  The /xxxx at the end of the url is the associate’s ID which they use to track which associate brought in that particular customer.

    2/14/07: Given the recent growth in controversy about CitizenRE, I’ve written a followup article here. 

    Comments (18)

    Other Peoples’ Clean Tech Investment Ideas

    Just ran across this article on investing in renewable energy in the New York Times.  The author Norm Alster thinks that the new Democratic Congress will be good for renewable energy (I agree.)  For instance, I think there’s an excellent chance that the Dems will renew the Production Tax Credit before it expires at the end of 2007, and most renewable technologies, especially wind an geothermal will see big boosts when that happens.

    He interviews several asset managers, and their picks are Sun Power in for solar, Zoltekfor carbon fiber used in wind turbines (no mention of the fact that Zoltek is currently embroiled in a nasty lawsuit with Structural Polymer Group over breach of contract), corn ethanol producers (too much overbuilding for my taste), Headwaters(more of a emissions reduction company), Herman Miller (I hadn’t realized they were big into recycled plastics) and Interface (one of my faves, but I wish it were cheaper) for the green building angle.

     Just looking at the list of companies above, I can think fo good reasons to buy, as well as good reasons to sell every company mentioned (except Herman Miller & Headwaters, which I have not researched.)  I won’t do anything just because I saw them mentioned in the NYT, but that doesn’t mean that it’s not interesting.

    I like to look at other people’s ideas about how to invest in renewable energy, because it tells me what other people are thinking about.  I look for ways to invest in renewable energy that not a lot of others are thinking about… that way, when they do start thinking about (and buying) the ones I have bought, the price rises.   That’s the theory anyway.

     Another way to use others’ research without getting caught in the stampede it to start watching the ones other people like, and wait for them to get bored.   If a company does not produce any good news for several months, people who got in on a rush of excitement will get impatient and sell… that’s the time to get in… unless the company really is boring.

    Nobody said investing was easy. 

    Comments off

    Five minutes with Xcel’s Dick Kelley

    Richard C. Kelly

    Dick Kelley, the President, CEO, and Chairman of the Board of Xcel Energy spoke to the board and invited guests of Western Resource Advocates last Friday.  I was invited as a supporter of WRA.

     

    His speech was widely reported in the press because he called for national regulation of greenhouse gas emissions.  The AP story emphasized Kelly’s shift from being an environmental skeptic to calling for national Carbon emissions regulation.  This is a big shift, and a giant step for a utility, but Kelly is not so much of an environmental advocate as he might sound.

     

    I had a short conversation with him before dinner.  After we introduced ourselves, I told him I’d been making his life harder recently at the Colorado PUC.  Like anyone who’s been successful in business, he didn’t miss a beat, and told me that it was great, and the more people’s input we had, the better.

     

    He said that Xcel had been opposed to Amendment 37 because of the cost of the solar set-aside, a position I’m actually sympathetic with.   After all, is it better to have 1 MW of solar photovoltaics on people’s roofs, or 20 MW of Wind?  When you look at the subsidies needed to get people to install PV (which is an Amendment 37 requirement), we could probably get 20x as much wind energy onto the grid for the same cost.   It’s not that wind cost 1/20 as much as solar, but since the price of electricity from wind is comparable to the price of coal, it does not take much to get a lot of wind, while solar needs to be heavily subsidized.

     

    What I really would have liked in A37 was an allocation for Demand Side Management (DSM) and energy efficiency.  If the same incentives could have gotten us 20 MW of wind or 1 MW of solar, it could also have gotten us 40 MW of DSM and energy efficiency.  (none of these numbers are precise… it’s hard to tell what an incentive will accomplish until it is implemented, but we do know that DSM is cheaper than wind is cheaper than solar.)  But energy efficiency was not on the table when A37 was being written… polling data said that adding “energy efficiency” to the bill dropped popular support by so much that we couldn’t have gotten it passed.

     

    Dick Kelley also told me that Comanche 3 (a new 750 MW coal plant) would be the last conventional coal plant that Xcel would build.  I told him Comanche 3 would be fine with me, if they’d just shut down Comanche 1 and 2 (a couple old, less efficient plants at the same site.)  That was an option that’s clearly off the table, but he did say Xcel needed to find a way to clean up the emissions of those plants.  I suggested wood chips, like Aquila is doing at their  Clark Generating Station in Canon City.  By co-firing wood and pine needles from necessary forest thinning, Aquila is able to reduce net CO2 emissions, as wel as NOx, SOx, and Mercury.

    I mentioned the option of hybridizing concentrating solar thermal power (CSP) with existing coal plants.  He didn’t really understand the concept, and thought I was talking about photovoltaics.  I’m not sure I was able to explain myself well.  Put simply, when heat is available from the sun, it can be used to displace heat from coal (or natural gas) in an existing generator.

    Kelly also said he’d like to raise wind to 20-25% of generation, but after that they’d have to see what the effect on reliability of the grid would be.  I brought up the idea of Pumped hydro or CAES.  He didn’t seem familiar with the fact that Colorado’s Big Thompson Project could be adapted for pumped hydro fairly easily.  As he said, new big hydro is not going to happen.  Which is all the more reason for adapting out existing reservoirs for energy storage with pumped hydro.

    I was encouraged that he has recognized that Carbon Emissions are a massive problem, and that the utilites, who are the biggest emitters of carbon, are going to have a big part in the solution, but discouraged that he knew so little about several pieces of the solution that have great potential to be quickly viable.

    Xcel likes wind, but is not looking at new ways to increase how much they can put on their system… they’ll just go to 20-25% and see what happens.  They’re pursuing IGCC (Internal Gasification Combined Cycle a.ka. “Clean Coal”) with carbon sequestration in a pilot plant, which many environmentalists feel is just a distraction from renewable energy, pointing out that no one has ever done any sort of sequestration on a large scale.  To me, that is an argument for IGCC with Carbon Sequestration, on a small scale: let’s give it a try and see if we can make it work or not.

    IGCC is a lot better than one of the other ideas that Kelly brought up in his speech: he thinks that part of the solution will be nuclear power.  Nuclear power is indeed carbon neutral, but it requires diminishing uranium supplies, or the use of breeder reactors which make plutonium, an element which is not only extrememly toxic, but also an excellent material for making nuclear bombs.  We still haven’t figured out what we’re going to do with the waste from our existing reactors… until we do that, I think it’s crazy to look into building more.  And considering the real threat of terrorism, a nuclear reactor or wastepile makes a much better target than a solar array or wind farm.

    When it comes to Kelly’s call for national regulation of carbon emissions, it’s a great step in the right direction, but it was a far cry from calling for a carbon tax (which economists think would be the most effective method of carbon regulation.)  Kelly knows global warming is real, and he knows that our politicians are going to do something about it.  By calling for national mandatory regualtion (but not a tax) he’s trying to shape the debate to come out in a way that Xcel will find easier to deal with. 

    With a little more education about alternatives such as CSP, and ways to make the grid able to accept more intermentent resources (Time of use pricing, DSM, and energy storage), he may come to realize that Xcel has lots of ways to live in a carbon taxed or carbon limited world.  And he seems willing to listen; so if you get his ear for five minutes, try to make the most of it.

    Comments (1)

    Net Zero Electricity for less than $700

    A few months ago, I wrote a blog comparing the number of negawatts you could produce by giving away Compact fluorescent Light bulbs (CFLs) to the amount of electricity you can produce with a rooftop photovoltaic system.  The CFLs had photovoltaics beat six ways from Sunday, and I concluded that you could do better by putting the money you were considering investing in a PV system in a Bank CD, and using the interest to give away CFLs.  Since I actually believe my own calculations, I set out to do just that.

     

    I offered a $2 a bulb rebate (up to $5) for anyone who bought CFLs and sent me a receipt.  Apparently, $5 is not enough money to get most people off the couch, and I did not get a single receipt sent to me (the offer is still on, by the way.)  However, I also give away CFLs (usually something interesting like an outdoor spot or a candelabra bulb… most of my prospects have already replaced everything they can with the twisty type) to potential clients who come by my office, and the blog started making the rounds of the internet, eventually making it to Marc Dreyfors, who is on the board of the Environmental Educators of North Carolina (EENC).  EENC was planning their annual conference, and they usually offset the carbon from their conference by giving away CFLs, and Marc had the bright idea of asking me to fund it.

     

    They calculated (with the help of Clean Air Community Trust) of
    Asheville, that they needed to replace 51 60-watt incandescents with CFLs to offset the 16.7 tons of Carbon their conference was expected to produce.  My thought was: “we need to think bigger than that!” because I wanted to offset some of my own carbon as well.  They were fine with that, they just didn’t want to be greedy.

     

    In the end, I funded the replacement of 320 60-watt bulbs (with 11w CFLs) and 80 100-watt bulbs (with 25w CFLs).  After the tax deduction, that cost me about $600, and EENC was able to use my grant to persuade Progress Energy (their local utility) to stump up a $500 donation to expand the program further.

     

    I arbitrarily decided that EENC would get half the carbon offsets from my donation for their work, and I’d get the other half for coming up with the cash.  Assuming the bulbs we gave away are used just 1 hour a day, that means that all my CFL giveaways are saving someone over 12 kWh of electricity each and every day, which is more than my wife and I use.   With the help of a programmer-friend, I’m tracking the progress on my website. (on the right hand side.)  Note that the offsets cost only about half a cent per kWh over the lifetime of the bulbs, about a third of the cost of buying green tags from someone like Sterling Planet.   If I tried to produce 12kWh a day with a PV system here in Colorado, it would cost about $12,000 after all the rebates, and I’d save about $170 a year on my electricity bill.

    Now I just have to do the calculations to figure out how many bulbs I need to give away to offset my use of natural gas, gasoline for my wife’s Prius, and biodiesel for my Jeep. 

    Comments (5)

    Older Posts »
    Follow

    Get every new post delivered to your Inbox.

    Join 142 other followers