Data centers make an interesting, if challenging, target market for integration into the smart grid. Sure, they’re a huge source of power, running about the smartest power loads in existence -- lots and lots of servers, routers, switches, and other IT equipment. That should make them a natural fit for the network of IT that’s connecting utilities to their customers to better manage power across the grid.
Data centers also tend to have a pretty hands-off attitude when it comes to hooking up to the local utility. Most data centers have installed expensive batteries and backup generators to take over during outages -- but they’re not very interested in turning over those resources during peak power times or other such grid emergencies, since that’s when they’re also most likely to be facing their own power crunch.
But rising power prices, combined with the IT world’s insatiable hunger for more server space, are bound to push data centers and utilities closer together. Beyond lowering power bills, data centers face key pinch-points in capacity that need to be handled right away -- some customers may need to increase computing capacity in the same crowded space, while others may need to increase capacity without exceeding the amount of power their local substation can provide.
Luckily for the data center world, it appears that their IT needs and their energy demands can align nicely for savings for themselves and the grid. According to an August report from Lawrence Berkeley National Laboratory (PDF), data centers can shave power bills by up to a quarter, simply by managing their IT resources more intelligently -- and with the grid’s needs in mind.
The study included funding from the California Energy Commission’s Public Interest Energy Research (PIER) Program and utilities Pacific Gas and Electric and San Diego Gas and Electric. It also saw participation by two data center efficiency startups, Santa Clara, Calif.-based PowerAssure and Sacramento, Calif.-based SynapSense, which are both working with data center partners in the state.
According to the study, “With minimal or no impact to data center operations, a demand savings of 25% at the data center level or 10% to 12% at the whole building level can be achieved with strategies for cooling and IT equipment, and load migration.”
The report came with a long list of caveats, however, including the fact that it only tested four data centers. It also noted that not all of the responses used for maximum energy savings would be appropriate for “mission-critical” data centers like, say, the ones that control Wall Street or the Pentagon.
It also stressed that “load migration,” or moving computing loads back and forth between data centers to maximize energy market savings and revenue opportunities, would require an underlying level of IT sophistication that not all data centers have.
“If the applications are data-center independent -- if they can switch from one to another seamlessly, which they have to do for reliability anyway -- then you have enough flexibility to play in the energy market,” Clemens Pfeiffer, CTO of PowerAssure, said in an interview last week. “On the other hand, “If the application doesn’t support it, you can’t do it.”
In other words, data centers are already making the IT infrastructure improvements they need to play into energy and grid markets today -- if only they have the tools to recognize it. Becoming aware, in turn, can lead to grid-facing opportunities, both to reduce cost and to generate revenue.
So how have data centers taken up the challenge? We’ve seen a number of projects building the links to allow data centers to interact with the smart grid at large, such as Cisco’s project with NetApp and Pacific Gas & Electric in 2008. That project paid itself off in utility rebates as well as power bill savings.
But the next level of data center energy optimization -- the kind that brings load migration and other more advanced concepts into play -- is far less common. After all, this technology is all brand new, and most data center operators are leery of turning over control to any system that could negatively affect uptime.
Even so, we’re seeing more and more integration of energy data into the way data centers are run today. IT giants like HP, IBM, Intel, Cisco, Microsoft and Oracle are improving server performance per watt, and integrating energy data more closely into their data center infrastructure management (DCIM) platforms. Big grid players like ABB, Siemens, GE and Schneider Electric are also making forays into the data center. Then we’ve got startups like PowerAssure, Vigilent (formerly Federspiel Controls), Sentilla, Vigilent and JouleX, to name a few, each bringing their own combination of capabilities to market via partnerships in the industry.
PowerAssure, for its part, has been working on data center-smart grid integration with Virginia’s Dominion Power since late last year. Earlier this month, it announced a partnership with iTRACS, a maker of data center mapping and visualization software, to provide its suite of software as a cloud-hosted service, or as a turnkey platform for customers concerned about keeping data center data under strict security, Pfeiffer said.
Other startups are linking up with companies that are designing the next generation of high-efficiency gear for the data center. JouleX, the Atlanta-based startup that works with customers including Cisco, Intel and VMware, has also worked closely with Calxeda, maker of ARM-based high-efficiency servers, for example. It has also worked with Cisco on a powered-over-Ethernet (POE) LED lighting system, similar to that deployed by startup Redwood Systems in Facebook’s super-green data center in Oregon.
Underlying all these technical approaches is a common challenge, however, Pfeiffer said -- convincing the human beings in charge of making investment decisions that energy-smart data centers are worth the cost. “Our problem today is, we need to quantify the opportunity, then have the infrastructure to do it, and the tools to participate in it,” he said.
The company is in a busy and bustling space, with everything from multinational firms like Johnson Controls and Siemens to nimble startups like FirstFuel and SCIenergy. But OutSmart is not really like any of those companies, according to Kevin Johnson, founder and CEO of Outsmart.
OutSmart has a solution that uses small sensors on every circuit and transmits information whenever there is a change in energy use. “We send a lot less data with a lot better information,” said Johnson. “We’re the cardiologists of energy management.” He likened the focus on circuit-level information to the sophistication of an EKG, compared to pulling basic utility data, which he compared to a doctor only using a stethoscope.
The solution works best for owner-occupied buildings with high energy density that’s more than $4 a square foot in energy costs. OutSmart is also looking for spaces with high load diversity, said Johnson. The Natick, Mass.-based business finds that supermarkets, food manufacturing, data centers and pharmaceutical labs work particularly well for the technology.
Like other solutions, much of the savings come from monitoring equipment and ensuring that it is all running correctly. “In a lot of companies, energy and equipment are not seen as one and the same thing,” said Johnson. By focusing on the equipment, clients see a 10 to 15 percent savings. The payback for the system is about a year, but can be much faster if equipment is being run incorrectly.
Connecting all of the sensors in a large commercial building to the many circuits is a messy business – often there are just too many wires and sensors to fit into the small area. Outsmart can have up to 32 of its proprietary sensors, called EnergyMate, to a single collector that communicates over powerline. Powerhouse Dynamics also monitors power by the circuit, but its solution is tailored for small commercial and residential.
OutSmart is aware that it’s not working in a vacuum and Johnson said that his company’s solution can work with other building management systems. “We believe our technology fills an important gap in energy efficiency and this financing will allow us to grow our customer base, expand distribution through strategic partners and further enhance the OutSmart technology,” he said.
If a building owner already has a building management system or other efficiency software, OutSmart can feed its data stream coming off of circuit-level sensors into other platforms, or customers can just use OutSmart. “We realize most data is more valuable when it’s combined with more data,” said Johnson. “We think our role is this granular and sophisticated energy monitoring.”
The most recent round of capital brings OutSmart’s total funding to more than $9 million.
Watch the live broadcast of Clean Energy Connections: Share and Share Alike below (click here).
At some point this year, I finally lost track of how many articles, blog posts and PR announcements heralded "the Rise of the Sharing Economy." Or "collaborative consumption"; pick your buzzword. The headline editors might be lazy, but the sentiment is accurate enough -- folks have caught on. If we tap into our networks to share goods and services instead of buying them outright, we can usually get them cheaper and more efficiently. Some of the most-discussed companies of the year follow this ethos. Uber, Airbnb, Solar City, TaskRabbit, ZipCar, Solar Mosaic -- the list goes on.
Which is why supremo angel investor Rob Conway declared the sector 2012's hottest. Why Triple Pundit was able to raise $25,000 in crowd-funding to do a series of investigative articles on the topic. Why Fast Company called 2012 the year of peer-to-peer accommodations. Why Time calls it one of the ten ideas that will change the world. It's why entrepreneurs, environmentalists, and socially responsible businessfolk gush about the idea, and why the web is overflowing with monotonously titled articles about it.
So what did they all say? Not a hell of a lot, really. The sharing economy has been "on the rise" for a good couple of years now, so the revelations are similar in shape: that technology has the capacity to link global customers with local services. That renting is cheaper than buying. That access can be more powerful than ownership. That sharing cuts down on waste and energy. All of it good stuff; not all of it surprising. Yeah, this year we saw the cresting of the hype; talk of collaborative consumption finally reached a fever pitch in mainstream business circles. Next year things will get interesting.
The trendspotters will get tired of bleating the buzz-syllables. The honeymoon will end and the couple will have to awkwardly ease into mundane day-to-day life with all of its boring rules and proprieties. These sharing-based businesses will clash with established traditional service networks, and regulators won't know what to make of them. Uber, the "ride-summoning" service, is up to its eyeballs in lawsuits and citations -- it has rammed headlong into municipal ordinances, unions, and the court of public opinion. Next year we'll see how smoothly Uber can work it out.
Airbnb did the sharing culture a solid when it addressed head-on concerns about safety last year. But it will have to find a way to address mounting criticisms too, as its halo wears off. Next year, it will have to clarify its user policies, and, like Uber, decide how best to navigate local regulatory frameworks. Otherwise it might leave users on the hook for thousands of dollars in fines.
Solar City, a company that allows consumers to lease solar panels instead of buying them, and to reap the benefits of clean local power at no upfront cost, will have its big IPO. We'll see if it's actually worth the $1 billion valuation that analysts currently have it pegged at.
Meanwhile, a host of smaller sharing-based companies will see if they can ride the wave of hype onto more solid, sustainable ground. Weeels, a cab-sharing company that organizes trips to and from local airports and produces an app, should be huge in New York, and may benefit by skirting some of the regs that hound Uber; by encouraging ride-sharing, it can boast a greener rap, too. (Motherboard editor Alex Pasternack is a co-founder of Weeels.) Then there's Solar Mosaic, a brilliantly designed hub for crowd-funding community solar projects that looks poised to follow Solar City's success. And there's Krrb, a nice guide to finding local wares; it maps stuff like garage sales and flea markets. There's Getaround, the Airbnb for cars. There's BrightFarms, a truly cool company that wants to install hydroponic farms directly onto the roofs of the grocery stores that will sell the produce it grows.
There are a lot of apps and sharing hubs and fantastic ideas. Next year, we're going to see which ones start to pan out.
But first there's tomorrow. That's when I'll be moderating a panel in New York with some of the prime players in the quickly stratifying sharing economy, this Tuesday at WNYC's Greene Space, I'll sit down with the brains behind Solar City, BrightFarms, Krrb, and Weeels to discuss all of the above, and much more. The talk is an installment in a series called Clean Energy Connections, put on by Solar One and NYC-ACRE. And it'll be fun.
Editor's note: This article is reposted in its original form from Motherboard. Author credit goes to Brian Merchant. We'll be livestreaming the Clean Energy Connections event, so bookmark this article and tune in at 7:00 p.m. EST on Tuesday, Dec. 11, 2012.
GTM Research and the Solar Energy Industries Association® (SEIA®) today released the U.S. Solar Market Insight: Third Quarter 2012. The report finds that the U.S. solar photovoltaics (PV) market installed 684 megawatts in the third quarter (Q3) of 2012, representing 44-percent growth over the same period last year. This quarter marked the third largest on record for the U.S. PV industry and raised the total installed capacity through the first three quarters of the year to 1,992 megawatts -- already surpassing 2011’s annual total of 1,885 megawatts.
Cumulatively, there are now 5.9 gigawatts of PV (which converts sunlight directly into electricity) operating in the U.S. from more than 271,000 installations. Combined with concentrating solar power facilities (CSP), which convert the sun’s heat to electricity, there are more than 6.4 gigawatts of solar electric capacity installed in the U.S., enough to power more than one million average American households.
The third quarter featured strong growth in distributed generation (DG) markets; the residential PV sector installed more than 118 megawatts, an all-time high for a quarter, while the commercial market (including governmental and institutional facilities) hit 257 megawatts, rising 24 percent above last quarter.
FIGURE: U.S. PV Installations by Market Segment, Q1 2010 to Q3 2012
Source: U.S. Solar Market Insight: 3rd Quarter 2012
In addition to solid growth nationally, Colorado, Florida, Maryland, Massachusetts, and Pennsylvania saw growth of 5 megawatts or greater compared to the previous quarter. Behind Maryland, Massachusetts saw the greatest quarter-over-quarter increase, up from 25 megawatts in Q2 2012 to 40 megawatts this quarter. All Massachusetts installations in Q3 2012 came from the non-residential and residential sectors, boosted by the expansion of net metering allowances and an influx of national retailers that offer leasing and other innovative third-party ownership models.
The GTM and SEIA research teams expect third-party leased PV systems to remain a hot option in the U.S. market for homeowners into 2013 and beyond. During this quarter, residential PV markets in Arizona, Colorado, California, and Massachusetts saw third-party systems range from 57 percent to 91 percent of total residential system installations.
“While Q3 2012 was remarkable for the U.S. PV market, it is just the opening act for what we expect to see in Q4,” said Shayle Kann, vice president of research at GTM. “We forecast more than 1.2 gigawatts of PV to be installed next quarter on the back of developers who are pushing to meet year-end deadlines in both the utility and commercial segments. We also expect to see the residential PV market post another record number in Q4, as third-party residential installers gain more traction in mature, cost-effective markets.”
Historically, Q4 has been the strongest for PV installations in the U.S. In 2010 and 2011, Q4 represented 41 percent and 42 percent of annual installations, respectively. U.S. Solar Market Insight® forecasts a similar Q4 bump in 2012 with approximately 1,200 megawatts to be installed. That would not only account for 38 percent of this year’s forecasted total, but would be the largest single quarter on record for the U.S. PV market by far.
Q4 2012 will also be exceptionally strong for CSP installations, with more than 140 megawatts slated to go online. SEIA and GTM Research expect 2012 growth to top 70 percent with a record 3.2 gigawatts of solar installed -- enough to power more than half a million average U.S. homes.
“This quarter’s record residential growth shows the power of innovation in the U.S. solar industry,” said Rhone Resch, president and CEO of SEIA. “With costs continuing to come down and new financing options, solar energy is affordable today for more families, businesses, utilities, and the military. Thanks to smart long-term policy, the solar industry is growing to meet the challenge of putting Americans back to work and helping to grow both our nation’s economy and our clean energy portfolio.”
System prices for PV projects in the U.S. continued their downward trajectory in the third quarter of 2012. Average residential system prices dropped quarter-over-quarter from $5.45 per watt to $5.21 per watt nationally, while average non-residential prices declined 15 cents per watt, falling to $4.18. Utility system prices, which are currently at $2.40 per watt, continue to see the greatest reduction in prices of the three market segments covered, falling by 30 percent since the third quarter of last year.
Over the past two months GTM Research has begun to survey the solar power landscape in a world with fewer incentives.
Specifically, we have been focused on analyzing project economics after expiration of the 30 percent Investment Tax Credit (see here and here for parts I and II in this series). Our core assumption has been that solar markets will tend to reach an initial tipping point when developers can offer customers a PPA at less than retail electricity prices. And if the PPA has an escalator, it should be less than historical increases in retail rates. We can determine when this will occur by comparing the levelized cost of energy (LCOE), a measure of total generation cost in dollars per kilowatt-hour, over the lifetime of a PV system, to retail electricity prices.
Our first two articles focused on broad comparisons across states. While useful for general purposes, this fails to account for the many quirks in individual state and utility territories. For a next step, we’re undertaking a deep dive at the state level, starting with Arizona, a market which is closely approaching “post-incentive” status. Arizona Public Service (APS) claims to be in near-term compliance with the state’s Renewable Energy Standard (RES) for distributed generation and argues that a purely compliance-based budget for 2013 would not warrant further cash incentives. However, in the interest of obtaining the least-cost renewable kilowatt-hours to meet overall RES requirements, the Arizona Corporation Commission (ACC) is suggesting a budget of around $10 million for incentives. The majority of this funding will go toward residential PV, at an upfront incentive level of $0.10 per watt. Once this $10 million is expended, which may be as early as mid-2013, residential PV incentives will drop down to zero. For commercial solar, the ACC staff recommends a production-based incentive cap of $0.065 per kilowatt-hour, about 30 percent lower than the 2012 cap.
As the Arizona solar market transitions to this post-incentive world, our analysis shows the cost of solar has already converged with average retail electricity rates, and will remain cheaper than traditional generation even with expiration of the ITC in 2017.
Our model assumptions for the AZ market in 2012 are as follows:
Source: GTM Research
In order to depict a “post-incentive” world, our model does not incorporate state-level incentives. A 30 percent ITC is applied through 2016, after which it is stepped down to 10 percent for commercial projects and removed completely for residential systems. To determine the viability of distributed generation in the Arizona market, we compared the real LCOE of solar to average grid prices in APS territory, increasing annually at the rate of inflation. It is important to note that avoided costs for solar generally assume little to no savings for demand charges, as these savings cannot be guaranteed. Demand charges are calculated on a per-kilowatt basis for a customer's maximum registered power demand, the most energy used in any 15-minute interval during the billing cycle. These charges reflect the cost of transmission and distribution facilities built to meet customers' peak power demand. We assume that APS’ commercial customers are subject to a demand charge of approximately 12 percent of their total bill and adjust the Energy Information Administration’s blended average rates down to reflect that charge. Through this analysis, we can estimate at what point in time developers can offer a PPA to customers at less than retail prices, with an escalator equal to inflation -- we assume that the benchmark for a good deal is generally 10 percent to 15 percent savings for the end customer.
Source: GTM Research
In the Arizona residential market, we expect solar to become cost-effective starting in 2013 when solar generation costs are over 10 percent less than retail electricity rates. Though LCOE remains below grid prices following the expiration of the ITC in 2016, the discount between solar and traditional generation dips down below our assumed tipping point and does not surpass it again until 2019.
Source: GTM Research
Looking to Arizona’s commercial market, we see a similar price convergence in the near term, with LCOE below the 10 percent discount benchmark by 2012. Once the ITC is stepped down to 10 percent, our model predicts that solar will remain cost-effective despite a lack of incentives.
Based on our analysis, it appears that solar generation in Arizona will be cost-effective without the support of state-level incentives until the expiration of the 30 percent ITC. After that point, the distributed generation market will have a few years where the LCOE of solar remains below traditional electricity prices, but may not be cheap enough to provide substantial customer savings. It should be noted that the viability of solar is driven almost entirely by rate design. Significant increases in demand and/or standby charges could greatly lower the avoided cost of distributed generation.
Arizona is very quickly becoming a market where state-level incentives are unnecessary for solar adoption in the distributed generation space. However, given our near-term price forecast, 2017 looks to be the earliest the ITC could be removed without having major impacts on the U.S. market, and even then it will be a close call, as solar generation costs very closely mirror retail electricity rates at that point.
For more information on GTM Research’s U.S. solar market analysis, contact firstname.lastname@example.org.
In September, U.K.-based polymer lithium-sulfur battery developer OXIS Energy closed a $24 million funding round from South African investor Sasol New Energy, followed in November by a contract from the British Ministry of Defence. The developments at OXIS highlight a year of encouraging activity for lithium-sulfur battery (LSB) technology.
OXIS Energy was founded in 2004 in Oxford, U.K. The company states it has been granted 27 patents, with 32 additional pending. The CEO is Huw W. Hampson-Jones. There are significant Russian technical roots via CTO Vladimir Kolosnitsyn.
The lithium-sulfur battery theoretically has up to five times the storage density of lithium-ion (in practice maybe triple), along with good safety and deep-discharge behavior. However, persistent problems, especially with cycle life, have been a challenge to commercialization. Critical reactants are permanently lost due to solubility reactions, when they pass through a polysulfide stage during cycling. Early cells had a cycle life in the single digits, although recent versions have done much better (vehicle applications require several thousand cycles).
A year of lithium-sulfur activity
- In October 2011, the U.S. Department of Energy awarded $5 million to a consortium headed by Penn State and Johnson Controls, for LSB research.
- In January 2012, long-term (17-year) lithium-sulfur stalwart Sion Power announced a $50 million equity investment from BASF.
- In March 2012, Stanford Linear Accelerator Center (SLAC) researcher Dr. Johanna Nelson published a breakthrough study on polysulfide loss. A powerful x-ray system was able to image the battery during cycling, radically modifying previous hypotheses. (For a readable account, see here.) The study bears, among other names, that of Dr. Yi Cui, a respected battery theorist.
- Also in March 2012, a LMU Munich/University of Waterloo team published results of an LSB study using a mesoporous carbon cathode. Performance was dramatically enhanced on several parameters, leading to a nominal 1200 watt-hours per kilogram, as well as further improvement in problem areas.
- In September 2012 at the Cascadia Beyond Oil conference in Seattle, recently retired General Motors Vice Chairman Bob Lutz predicted that electric vehicles will be switching to lithium-sulfur batteries within five years. He has been stating for some time that lithium-sulfur or possibly metal-air chemistry is what will bring electric vehicles to the mainstream.
- In November 2012, the second largest of 66 grants (and the largest in energy storage) awarded in the Advanced Research Projects Agency-Energy (Arpa-E) “Open 2012” grant round was $4.5 million for a water-based LSB. The grant was awarded to PolyPlus in partnership with Johnson Controls. PolyPlus had until recently been receiving more attention for its lithium-air work than for its lithium-sulfur research.
Caution is warranted in assessing new battery developments -- the devil is in the details. For example, the LSB does not yet approach as high-rate a discharge as has been achieved with lithium-ion and nickel-metal hydride, so vehicles may need a supplementary surge buffer, perhaps an ultracapacitor. Furthermore, in recent years, old-line battery manufacturers such as Johnson Controls have tended to fare better than startups (witness the recent bankruptcies of Ener1 and A123 Systems).
However, the prize here is serious. Imagine a Chevy Volt with a 150-pound battery pack (instead of almost 400 pounds), or a Nissan Leaf with a 200-mile electric range (instead of about 75). With apologies to Envia and others, there is unlikely to be nearly as much headroom for improvement in the lithium-ion battery at this point.
From OXIS Energy
The debut GTM Research and Azure International China Wind Market Quarterly called 2012 “the best of times and the worst of times.”
The industry passed the 50 gigawatt cumulative installed capacity milestone and will likely set a new record for annual installed capacity at more than 12 gigawatts. Yet analysts believe the industry will be lucky to build 3 gigawatts and hold onto two-thirds of its workforce in 2013.
The PTC Bleeding and the Deal
One: “This bleeding must stop!” AWEA CEO Denise Bode declared last spring in calling for renewal of the vital $0.022 per kilowatt-hour production tax credit (PTC). But it has not been renewed and the bleeding has worsened.
Two: Thousands of manufacturing and supply chain jobs have been lost. Sinovel, Goldwind and Ming Yang (NYSE:MY) each recently let hundreds go. Vestas, Gamesa and Iberdrola have cumulatively dismissed thousands. Facilities all over the U.S. have shuttered or moved to other industries.
Developers are frantically finishing projects to qualify them for the PTC but there is almost no construction pipeline beyond December 31. Ramping up again will take a year to eighteen months.
Three: In August, the Senate Finance Committee approved a PTC extension but election and fiscal cliff turmoil prevented Congressional ratification. Wind’s leaders believe the negotiated, bipartisan measure will pass in a tax extenders package during the next two to ten weeks.
Too late to salvage the coming year, the committee’s one-year extension will likely provide incentive to projects that begin construction by the end of 2013, making new development viable. It also provides an investment tax credit for offshore and community wind.
Billionaire entrepreneur Philip Anschutz’s Power Company of Wyoming got final DOI approval for its $4 billion to $6 billion, 2,500-megawatt Chokecherry and Sierra Madre Wind megaproject. Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) subsidiary MidAmerican Energy Holdings now owns 2,000-plus megawatts of wind, much of it acquired in 2012 as a hedge against volatile fossil fuel prices. And Google (NASDAQ:GOOG) continued to invest in wind.
The Wake of the PTC Fight
Four: Wind became a political issue when President Obama endorsed a long-term PTC extension, Romney spokespeople responded that he favored letting it expire and the former Massachusetts Governor said, “You can’t put a windmill on a car.” During the second debate, Romney tempered his position but the damage was done. Post-election polls showed Republicans lost crucial pro-renewables voters.
Five: AWEA expelled multinational giant Exelon, a wind developer, when it opposed a PTC extension because low wind-generated electricity prices make Exelon’s nuclear investments vulnerable. Billionaire oil magnate Charles Koch claimed, however, that federal support to wind has resulted in “five times” higher energy prices.
Governor Sam Brownback (R-Kansas), Senator Chuck Grassley (R-Iowa) and other Republicans responded by calling for a PTC extension and Democratic interest group Citizens for Strength and Security called for “wind and low electricity prices.”
The first real discussion about a PTC phase-out also began.
Six: As hope for a timely PTC extension waned, wind developers turned from the U.S. market. Goldwind, Vestas and GE (NYSE:GE) looked to Latin America, Ming Yang and Suzlon to India, and EDF Renewables to Turkey.
Seven: Despite record installations, discouraging 3Q financials from Goldwind, Ming Yang and Sinovel, China’s three biggest players, suggested a period of rationalization may be ahead.
Goldwind’s net profit fell 93.74 percent year-on-year, Ming Yang’s total income dropped 94.4 percent from Q3 2011, and Sinovel had an 82 percent year-on-year drop in operating income.
Issues that impeded growth included inadequate transmission, undispersed government subsidies and the anticipated U.S. market collapse.
Eight: AMSC (NASDAQ:AMSC) got a hearing October 26 in China’s Supreme People’s Court on one of four cases requesting $1.2 billion in losses and damages for Sinovel’s alleged abrogation of contracts and criminal violations of AMSC intellectual property (IP) rights. A verdict is imminent. The legal fight will likely set an historical precedent covering foreign intellectual property protections there.
Nine: The U.S.-based Wind Tower Trade Coalition last year petitioned the U.S. Department of Commerce (DOC) and the International Trade Commission (ITC) to investigate countervailing duties allegations against Chinese tower makers and to investigate anti-dumping allegations against Chinese and Vietnamese tower makers. In June, the DOC preliminarily imposed deposit requirements ranging from 13.74 percent to 26 percent on tower imports.
Final DOC and ITC rulings are expected by February 2013 but the impacts may not be felt immediately because, a U.S. tower manufacturer told GTM, “There probably isn’t going to be much of a wind business here until the PTC passes.”
Ten: The 420-megawatt Cape Wind offshore wind project is now fully permitted and on the verge of becoming the first U.S. utility scale offshore installation to go into construction. The project won big victories when its higher than average PPA prices were approved by Massachusetts regulators and validated by the Massachusetts Supreme Court on the grounds that it offers “unique benefits” that justify the prices.
Newly elected Democratic Massachusetts Congressman Joe Kennedy III broke with grandfather Robert F. Kennedy, uncle Robert F. Kennedy, Jr., and great uncle Edward Kennedy during his campaign and became the first Kennedy to endorse Cape Wind.
DOI issued new Eastern Seaboard leases and the success of Principle Power’s two-megawatt WindFloat floating turbines and StatOil’s (NYSE:STO) three-megawatt Hywind floating turbines may soon make harvesting wind off the U.S. and Japanese Pacific coasts economic.
The SolarCity IPO is expected to price after market close on Dec. 11 and begin trading on Dec. 12, according to sources close to the deal and Bloomberg.
SolarCity hopes to sell 10 million shares of its stock at $13 to $15 per share in its maiden offering. A total of 65,012 shares are to be sold by stockholders. SolarCity's plans to raise $201M have been pulled back -- the firm now looks to raise approximately $151 million, according to this filing with the SEC.
According to the S-1, Elon Musk, the chairman of the board, "has indicated his intent to purchase $15.0 million of our common stock in this offering from the underwriters at the initial public offering price."
Debra Fiakas, the Managing Director of Crystal Equity Research, writes that this is "a deal worth considering, but only after the shares get some seasoning. A $13.00 per share price puts a $932 million market value on SolarCity and implies a multiple of 8.4 times revenue. This seems a bit pricey given that the company has not been consistently profitable."
In the investor road show, Founder and CEO Lyndon Rive highlights the no-money-down aspect of the SolarCity residential leasing model and the rapid growth of the firm. Rive spoke of the SolarCity opportunity with growth of EVs and its SolarStrong and Walmart business.
Here is our recent coverage of the long-awaited liquidity event:
SolarCity, the VC-funded and tax-equity-bankrolled solar installer and financier, aims to reverse that trend.
SolarCity will launch its $200 million maiden public offering before the end of the year, according to a person close to the deal who was cited in Reuters. The institutional investor road show starts after the Thanksgiving holiday in the U.S.
SolarCity has benefited from the glut of solar manufacturing capacity, the collapse of solar panel pricing, and the questionable solar manufacturing policy of the Chinese government. Cheaper solar panels means lower costs for SolarCity and presumably for its customers. As per the firm's S-1, Trina, Yingli, and Kyocera are the primary module suppliers for SolarCity. Inverters are sourced from Power-One, SMA, Schneider, and Fronius.
SolarCity's third-party financing model allows residential and commercial customers to install solar with no money down. Third-party ownership is one of the few solar success stories of recent years, having long surpassed 50 percent of residential solar customers in California, Arizona, and Colorado. Here's the statewide growth of third-party ownership in the U.S., according to GTM Research:
Source: GTM Research
SolarCity's S-1 registration emerged from its JOBS Act-imposed review in October and shows the 2,000-employee company looking to list on the Nasdaq under ticker symbol SCTY, with Goldman Sachs, Credit Suisse and BoA Merrill Lynch as co-lead underwriters.
Losses are growing at the firm, but so is revenue. The firm had $59.5 million in revenue in 2011, $32.4 million in 2010, and $32.6 million in 2009. The firm had $49 million in net losses on $71 million in revenue for the first six months of 2012, compared to a $35 million net loss on $20 million in revenue for the first six months of 2011.
SolarCity's $210 million in VC funding and $1.9 billion valuation comes from Elon Musk (with a 31.9 percent pre-IPO stake), Draper Fisher Jurvetson (26.3 percent), Generation Investment Management (7.5 percent), DBL Investors (7.4 percent), with the remainder coming from Silver Lake Kraftwerk, Valor Equity Partners, Nicholas Pritzker, the Mayfield Fund, et al. SolarCity landed more than $1.5 billion through tax-equity investment funds and other financing vehicles.
Rob Day notes that the structure of the most recent round from Silver Lake "adds pressure for this to be the last round of financing into the company before an IPO (barring possibly just re-opening the Series G if needed), and it puts the company into an 'IPO or bust' situation, as far as some very important investors are concerned."
The Woodlawn Associates analysis of the SolarCity S-1 (cited by Rob Day here) provides an analysis of SolarCity's IRRs. Day notes that "SolarCity appears to be getting pretty industry-standard IRRs...but it also suggests there's no magic returns advantage to the company, other than benefits of scale to attract the lower-cost capital." Day notes that customer acquisition costs have started to drop after several flat years, although this may be due to customer mix rather than process improvement.
There are a few lawsuit red flags in the S-1 related to the U.S. Treasury Grant program and SolarCity's accounting.
The Office of the Inspector General of the U.S. Department of Treasury has issued subpoenas to a number of significant participants in the rooftop solar energy installation industry, including us. The subpoena we received requires us to deliver certain documents in our possession relating to our participation in the U.S. Treasury grant program.
In particular, our subpoena requested, among other things, documents dated, created, revised or referred to since January 1, 2007 that relate to our applications for U.S. Treasury grants or communications with certain other solar development companies or certain firms that appraise solar energy property for U.S. Treasury grant application purposes. The Inspector General is working with the Civil Division of the U.S. Department of Justice to investigate the administration and implementation of the U.S. Treasury grant program, including possible misrepresentations concerning the fair market value of the solar power systems submitted for grant under that program made in grant applications by companies in the solar industry, including us.
We are not aware of, and have not been made aware of, any specific allegations of misconduct or misrepresentation by us or our officers, directors or employees, and no such assertions have been made by the Inspector General or the Department of Justice. However, if at the conclusion of the investigation the Inspector General concludes that misrepresentations were made, the Department of Justice could decide to bring a civil action to recover amounts it believes were improperly paid to us. If it were successful in asserting this action, we could then be required to pay damages and penalties for any funds received based on such misrepresentations (which, in turn, could require us to make indemnity payments to certain of our fund investors).
And this, also from the S-1:
In October of 2012, we were notified that the Internal Revenue Service was commencing income tax audits of two of our investment funds which audit will include a review of the fair market value of the solar power systems submitted for grant under the 1603 Grant Program. If, at the conclusion of the audits currently being conducted, the Internal Revenue Service determines that the valuations were incorrect and that our investment funds received U.S. Treasury grants in excess of the amounts to which they were entitled, we could be subject to tax liabilities, including interest and penalties, and we could be required to make indemnity payments to the fund investors.
If the Internal Revenue Service or the U.S. Treasury Department disagrees now or in the future, as a result of any pending or future audit, the outcome of the Department of Treasury Inspector General investigation or otherwise, with the fair market value of more of our solar energy systems that we have constructed or that we construct in the future, including any systems for which grants have already been paid, and determines we have claimed too high of a fair market value, it could have a material adverse effect on our business, financial condition and prospects. For example, a hypothetical five percent downward adjustment in the fair market value in the approximately $325 million of U.S. Department of Treasury grant applications that we have submitted as of August 31, 2012 would obligate us to repay approximately $16 million to our fund investors.
So, is SolarCity's IPO the liquidity event that frees cleantech from its fiscal winter?
On one hand, solar installation and finance is a different world from PV panel manufacturing, one with actual profit margins. SolarCity profits from the remarkable drop in solar pricing and the growth in third-party ownership financing. Greater scale means more access to lower-cost capital. SolarCity has shown strong growth, while its management has executed on its business plan and adapted to changing markets. There's also Chairman Elon Musk, who seems to have his own reality distortion field and a hot hand of late.
On the other hand, if you view SolarCity as a solar company (rather than a specialty leasing/finance firm) there are potential headwinds from investors. Recent solar IPO aspirant BrightSource could not sell its IPO because of "market conditions" -- and because it was overpriced. Enphase, the pioneering solar microinverter firm, made it through the public window, but its stock is being painted with the same savage brush as the rest of the solar industry. If the market treats SolarCity the way it treats Enphase or Suntech, the company has a problem.
What competitive advantage does SolarCity really have? How high is the barrier to entry in this business? Are there more efficient sales channels to the solar customer? Are Vivint, OneRoof, SunPower or SunEdison better positioned for customer acquisition and scale? When will SolarCity stop losing money and turn a profit? And how are the returns from the firm's many projects split between its funding partners?
In any case, December now has the potential to be a very exciting month for cleantech.
Unless the United States, China, and the European Union (EU) step back from a mutually destructive trade war, the next decade for the solar industry could resemble the world economy in the 1930s.
Back in 1929 and 1930, Congress passed -- and President Herbert Hoover signed -- the Smoot-Hawley tariff, despite the warnings of Henry Ford, the CEO of J. P. Morgan, and a petition signed by 1,028 liberal and conservative economists.
As we now know, the results were a round of retaliatory trade restrictions by the world’s leading economies and the deepening of the Great Depression.
More than eight decades later, in what has been a fast-growing worldwide solar industry, history is repeating itself, with consequences that are predictable but still avoidable.
Ostensibly to protect U.S. solar cell manufacturing, the German-owned company SolarWorld initiated a trade case aimed at restricting the importation of Chinese solar panels.
After a year-long battle fought at the Department of Commerce and U.S. International Trade Commission (ITC), SolarWorld won most, but not all, of what it wanted. Despite its “victory,” SolarWorld admits that these tariffs have not protected U.S. solar cell and panel manufacturers.
More importantly, since SolarWorld filed its complaint, numerous retaliatory trade actions have taken place throughout the world.
First, in addition to filing a trade petition in the U.S., SolarWorld filed a similar complaint in the EU, and the EU began an anti-dumping investigation this summer which, if successful, will have an even larger price impact on the world solar market.
Then, for its part, China began an investigation into the alleged dumping of polysilicon by U.S. companies. Additionally, China has alleged in a petition to the World Trade Organization that the EU and some member states gave illegal subsidies to photovoltaic solar projects that used EU-produced equipment.
And now there are indications that India too plans to initiate an investigation into solar dumping by Chinese, U.S. and Malaysian solar cell manufacturers.
Those of us who have worked hard to build a solar industry in the U.S. to compete with fossil-fuel-generated power need to take a collective breath and think clearly about the consequences of an all-out solar trade war. The big winners will be the producers of coal, oil and natural gas, not solar manufacturers in the U.S., China, the EU or anywhere else.
Instead of retaliation and recrimination, we need education and reconciliation. We need to work together to create an international framework for a worldwide solar industry.
Here in the U.S., local manufacturing is important. We need to figure out the best strategies to advance the latest breakthroughs and commercialize the most efficient technologies be they the manufacture of cells, polysilicon or machinery to process cells or equipment required to operate panels. Recognizing the rapid pace of discovery and change, we should determine what types of manufacturing to encourage and which types of manufacturing may be best suited for our economy, workforce and geography.
Internationally, we should negotiate our trade relationships, not use a blunt -- and highly ineffective instrument -- such as tariffs, to set the terms of trade.
U.S. trade laws are archaic, rigid and designed to reward the petitioner, not to consider the consequences to an entire industry and consumers.
The most basic lesson we can take from the SolarWorld case is that oft-repeated quotation from George Santayana: “Those who forget the past are doomed to repeat it.” We in the solar industry repeat the Smoot-Hawley tariff lesson at our peril.
As the world learned during the 1930s, no one wins in a trade war.
Jigar Shah is the president of the Coalition for Affordable Solar Energy and the founder of SunEdison, a solar energy services company.
What's the easiest way to avoid purchasing costly catastrophe insurance for your renewable energy project? Answer: Don't site your project in an area with a high probability of natural disasters.
But this is easier said than done. Given the worrisome increase in the frequency of these disasters (see Figure 1), combined with a growing demand for renewable energy in places where various natural disasters are frequent, avoiding these high costs is becoming more difficult.
James Green from JLT Group claimed in a 2011 report titled "Managing Risk in Renewable Energy" that in order to combat these high costs, more developers are looking at alternative risk transfer products like catastrophe bonds to cover losses from large catastrophic events such as hurricanes . Having never heard of these financial instruments before, I set out to find how catastrophe bonds work and determine their potential role in managing risk for the renewable energy industry. To help me understand the mechanics of these bonds, I contacted Mr. Barney Schauble of Nephila Capital, who proved to be a crucial resource during this process.
Image via Munich Re
How Does a Catastrophe Bond Work?
Catastrophe bonds came to prominence in the early 1990s after insurance claims from natural disasters like the Northridge earthquake in California and Hurricane Andrew in Florida wiped nearly $30 billion off the balances sheets of insurers and reinsurers. This severely stressed the ability of firms within the insurance industry to meet their financial obligations . Up until this time, the existing insurance and reinsurance markets had been fairly comfortable with natural catastrophe risks, but the staggering amount of insured losses from these catastrophes led protection buyers to explore alternative sources of risk capacity. These buyers soon realized that the only entity large enough to assume the risk of these considerable catastrophes was the capital markets, so with the help of some creative financial engineering, they began to sponsor catastrophe bonds.
A catastrophe bond is a form of insurance-linked security (ILS) that is sold in the capital markets. To issue a catastrophe bond, the sponsor, typically a reinsurance company, creates a special purpose vehicle (SPV) that issues the individual bond notes to capital markets investors (shown in Figure 2 ). Unlike a corporate bond, the money contributed by investors is held by the SPV in low-risk securities, such as U.S. treasuries, and not on the sponsor's balance sheet. The coupon that is paid to investors is made up of the return on these low-risk investments and the premiums paid to the SPV by the sponsor.
Image via GAM
Catastrophe bonds usually mature in two to three years and issue quarterly interest payments (coupons) with typical yields ranging from 500 bps to 1,500 bps above benchmark interest rates . Traditional ratings agencies have rated these bonds anywhere from A to B . Because they derive their value from the frequency of natural phenomena, they are relatively uncorrelated with fluctuations in the financial markets, making them attractive fixed income investments for institutional investors looking to diversify their portfolios and insulate themselves from market volatility.
On the flip side, the estimated high returns reflect the relatively high-risk nature of catastrophe bonds. Catastrophe bonds are structured around the likelihood of "super" catastrophes, which are defined as having around a 1 percent annual probability . Damage from hurricanes and earthquakes are the most common types of losses against which sponsors protect themselves, but bonds protecting against damage from other events such as tornadoes and large hailstorms are also created. In the event that the specific natural catastrophe mentioned in the bond causes a specified amount of damage, the bond is "triggered" and all or a portion of the original principal can be used to pay those obligations.
CAT Bonds and Renewable Energy Finance
On the subject of renewable energy stakeholders utilizing catastrophe bonds to secure lower-cost coverage from the capital markets, Barney Schauble of Nephila Advisors mentioned a precedent: catastrophe bonds had been used by a utility in the past to secure coverage for their generating assets and transmission infrastructure. In 2011, French utility Electricite De France (EDF) sponsored its Pylon II Capital catastrophe bond to secure €150 million of European windstorm damage to its electricity transmission and generation infrastructure in mainland France .
So could a similar bond structure be applied to renewable energy projects? Like so many questions in business, the answer appears to be that it depends. Schauble articulated that one of the most important factors for potential bond sponsors to consider, beside the degree of exposure to natural disasters, is the amount of coverage desired. In the catastrophe bond market, a general rule of thumb is that the size of any bond issued should be at least $100 million . Below that amount, the transaction costs of sponsoring the bond, modeling risks, and finding investors for the bond would surpass the cost of traditional insurance, making the process unattractive for sponsors. However, for developers or owners of large projects or pools of projects with more than $100 million in assets that also have an inherently high degree of risk of damage from natural disasters, sponsoring a catastrophe bond could lower the cost of this type of protection. This would also lower the project's levelized cost of energy (LCOE), making the project more attractive to potential financiers.
In addition, Schauble noted that potential bond sponsors are also examining the use of catastrophe bonds to address the issue of credit risk aggregating in a single geographic area. If, for instance, a regional utility purchased traditional catastrophe insurance for all of its renewable energy projects from a single insurer, a single catastrophic event could compromise the ability of that insurer to fulfill the payment obligations. To address this problem, the utility could secure the same coverage from the capital markets in the form of a catastrophe bond, similar to EDF's actions in 2011. While it is possible that sponsoring the catastrophe bond would be more expensive than traditional insurance, the bond may be the more attractive option for the utility, as it would eliminate the elevated credit risk of the traditional insurer.
As the number of natural disasters increases worldwide and as large-scale renewable energy development expands into new geographic areas (offshore wind in the U.S. and U.K.), more large-scale developers and utilities may look to catastrophe bonds to address large risk concentrations. Additional studies are underway at NREL that will examine how this topic fits into the larger realm of the cost of insurance in renewable energy development, so stay tuned to the FinanceRE website for upcoming reports on the topic.
 The Economist. (2011). Economist Intelligence Unit, "Managing the Risk in Renewable Energy," http://media.swissre.com/documents/EIU-SwissRe-Managing-Risk-Renewable-Energy.pdf. Accessed June 15, 2012.
 GAM. (2012). "Catastrophe Bonds — The Birth of a New Asset Class," http://www.britishchambershanghai.org/sites/default/files/catastrophe_bond_-_the_birth_of_a_new_asset_class_june_2012.pdf. Accessed July 10, 2012.
 Risk Management Solutions. (2012). "CAT Bonds Demystified," www.rms.com/Publications/Cat_Bonds_Demystified.pdf. Accessed July 19, 2012.
 www.artemis.bm. (2011). Pylon II Capital Ltd. http://www.artemis.bm/deal_directory/pylon-ii-capital-ltd/. Accessed July 19, 2012.
 Wiedmeyer, J. (7 August 2012). Personal communication with Barney Schauble of Nephila Capital. [Phone interview conducted at the National Renewable Energy Laboratory in Golden, CO.
 Munich Re. (2012). "Catastrophe Trends and Pools, " presented at the National League of Cities Risk Information Sharing Consortium Conference in St. Louis, MO. May 11, 2012. http://www.nlc.org/File%20Library/Utility%20Navigation/About%20NLC/SML/NLC-RISC/Resources/Conference%20Materials/2012%20Trustees/RISCTrustees-2012-HazardsUpdate-MunichReFinal.pdf. Accessed on October 30, 2012.
This may be the closing chapter of A123 Systems as a U.S.-owned firm. According to news reports citing sources with knowledge of the matter, lithium-ion battery maker A123 is now owned by Wanxiang Group, China's largest maker of auto parts and a major supplier to Ford and General Motors.
Wanxiang's $260 million bid bested a joint offer from Johnson Controls and NEC for control of most of the assets of A123, including the automotive battery business that Johnson Controls had wanted to purchase, a representative of Lazard Freres, investment banker for A123, told Reuters. Germany's Siemens was also a bidder, according to news reports.
Wanxiang's apparent winning bid is sure to raise an outcry in Washington, D.C., however. A123 had received $250 million in U.S. Department of Energy grants and has spent about half of the funding to build its key battery plants in Michigan. The company is also developing battery storage technology for the U.S. military, an area that could raise national security concerns -- although according to reports, A123's government business will be sold separately to U.S.-based Navitas Systems for $2.25 million, which could assuage some concerns on that front.
Congressman Bill Huizenga, a Michigan Republican, wrote on his Facebook page: "I have serious concerns over the Chinese firm Wanxiang Group Corp attempt to buy A123. I am concerned this transaction poses a threat to U.S. national security, America's global innovation leadership and job creation." According to Huizenga, A123's contracts with the DOE involve power grids, advanced armor, unmanned vehicles and portable power systems.
A123, founded in 2001 and funded with $200 million in VC investment, went public with a $2-billion-plus valuation in 2010, only to crash and burn amidst consistent losses, slow growth for its electric vehicle battery business, and a fatal recall of its lithium-phosphate batteries from key EV partner Fisker Automotive. In fact, the fate of Fisker and A123 seem to be increasingly intertwined. Recently, Fisker announced that it has idled production of its Karma plug-in hybrid sports cars due to A123’s reduced output, though it looks for the situation improve -- with ownership of A123 established.
The sale must be approved by Delaware Bankruptcy Court, where it is on the schedule for Tuesday. The Committee on Foreign Investment in the U.S., chaired by Treasury Secretary Tim Geithner, still must weigh in on the sale. It is not clear if the balance of the Obama grant can be transferred to Wanxiang.
To facilitate the transaction, A123 and all of its U.S. subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. A123’s non-U.S. subsidiaries were not included in the filing. This action is expected to allow A123 to provide for an orderly sale of its automotive business assets and all other assets and business units under Section 363 of the Bankruptcy Code and help maximize the value of its assets for its stakeholders.
Andy Karsner, U.S. Assistant Secretary of Energy, EERE (2005-2008), notes in a Facebook posting, "In the wee hours of last night, in a quiet bankruptcy auction, A123, once at the vanguard of advanced energy storage for mobility and security, was bought by the Chinese for less than the value of the Stimulus grant it was awarded. [...] If the U.S. government would exercise even a fraction of the involvement to ensure intellectual property it cultivates stays at home, rather than investing overwhelming hype on Ed McMahon-sized checks, press events, and ribbon-cuttings, the nation's energy economy would be less politicized, more competitive and more secure. This is a sad story and embarrassing end to a once promising American startup."
The Obama DOE has shown inconsistent judgment in funding the manufacture of new technologies in solar (Solyndra, Abound) and in flywheel energy storage (Beacon Power).
The administration has not fared well in battery technology either. A123 is gone. LG Chem, a Korean battery company with a factory in Holland, Michigan, furloughed 200 workers in September. That factory was to provide batteries for the Chevy Volt and was built with the help of $151 million in DOE Recovery Act Awards. Ener1, now bankrupt, won a $118 million award from the DOE to build batteries in Indiana.
Jeff St. John contributed to this article.
Green Will Trump Red and Blue: After the 2012 elections, politicians from both sides of the aisle are looking for issues on which they can agree. Solar will increasingly become one of these issues; 92 percent of Americans agree it’s important to use and develop more solar. What’s more, extreme weather like Hurricane Sandy has leaders across party lines calling for America to tackle climate change. The need for a smarter, cleaner, and safer energy future will transcend politics in 2013.
Solar Service Leaps Beyond: The winners in solar will be those who understand that the relationship with the customer is everything. We’ll see this distinction become defined among companies in the third-party-owned solar sector this year, as homeowners realize they want a reliable service in addition to solar without the high upfront cost.
The Continued Rise of the Solar Middle Class: Third-party-owned solar is driving growth across all income levels. For example, the number of home solar projects in California’s middle-income markets has increased by 445 percent since 2007. At the same time, Americans of all incomes continue to go solar in record numbers. Industry projections indicate there will be more residential solar installed in 2012 alone than in all the years through 2009 collectively. We’ll see these trends continue in 2013.
Smart Policy Will Foster Solar Scale: Net energy metering and rate design will remain integral to solar policy discussions in 2013. Programs that offer certainty while promoting scale, such as the California Solar Initiative, will continue to help drive solar adoption and cost reduction.
Pocketbook Environmentalism Prospers: In a survey Sunrun conducted recently through Harris Interactive, Americans cited “saving money” as the primary motivating factor for making green lifestyle changes. Now that there are environmental choices that are also smart, easy choices for consumers’ bank accounts, more Americans will opt for them.
Lynn Jurich is co-CEO of Sunrun.
Tendril, a vanguard startup in the hard-to-crack home energy management market, has completed restructuring and has raised an additional $15 million of growth capital. The Boulder, Colo.-based company says it is now profitable, and is close to completing a deployment to more than 1 million homes in an ongoing $50 million project with Duke Energy.
“When we all started on this journey, we were fairly unfiltered when it came to picking customers,” CEO Adrian Tuck said. Now, his company -- and others -- trying to grow market share in the still nascent field of home energy technology are more focused on landing big partners to stay in the game for the long haul. In other words, no more chasing pilots, unless they end with a full deployment.
“This is the new race,” Tuck wrote in a blog post, “to win the meaningful deals with the most innovative and progressive utilities that are ready to go to scale.”
The new round of funding comes from existing investors, including VantagePoint, Good Energies, RRE, Siemens Venture capital and GE. The $15 million is in addition to a $25 million convertible debt financing round that came at the beginning of the restructuring in May.
Tendril announced layoffs in May and the move away from hardware. Currently, Tuck said the company’s headcount is just under 100 people. “We are significantly leaner,” he said. “The big thing is that we’ve focused on our external developers.”
The now hardware-agnostic Tendril has more than 500 registered third-party developers on its platform. “We don’t have do everything ourselves anymore,” said Tuck. Instead, utilities can pick up Tendril’s Energize platform to roll it out quickly and then develop their own apps or pick up apps from third-party developers to customize the experience for customers.
Just a few years ago, there were hardware companies -- some just in-home displays, others with newfangled thermostats, and others only offered behavior-based analytics. Today, the convergence of the market has made many companies with home energy management offerings (EnergyHub, Opower, Silver Spring Networks, Energate) look more like each other, but with subtle differences.
“We differentiate ourselves because we think of most others as taking an Apple-esque approach,” said Tuck. “We see ourselves much more like Android.” He noted that some companies have tightly integrated products, where one company develops a platform for one or two specific thermostat makers, and that comes with a nifty smart phone app and other bells and whistles. But Tuck said that Tendril’s open platform that can work with any hardware is a differentiator moving forward.
The bulk of Tendril’s business, 80 percent, is coming from licensing its platform to utilities. But the rest of the income comes from developers and device manufacturers. Despite the talk of Green Button and the prevalence of hackathons, utilities or third parties are not picking up energy apps widely -- yet. Tendril is excited about this area, but knows that it is very, very early days.
In the meantime, Tendril is focusing on its $50 million deal with Duke Energy, which puts its platform in about 1.2 million homes by early next year (they are currently in nearly one million homes). The company will continue to expand in Europe in 2013, but is also looking toward Japan, which is a market Tuck said is moving very quickly.
Despite the move to profitability, Tuck is hardly a doe-eyed optimist about the market as a whole or the certainty of major success in 2013. “We’re in a financing nuclear winter for cleantech,” he said. “We’re really just starting to come out of the trough of disillusionment.”
Washington insiders at both ends of the political spectrum have begun talking about a carbon tax.
The document "A Progressive Carbon Tax Will Fight Climate Change and Stimulate the Economy" by Richard Caperton of the Democrat-aligned Center for American Progress (CAP) is a little surprising because the assumption since 2009 has been that some version of a market-based cap-and-trade program was the only politically viable way to put a price on carbon emissions.
Advocacy for a carbon tax by academics at the Republican-aligned American Enterprise Institute (AEI) is astonishing because the word "tax," thanks to Grover Norquist, seemed to have been synonymous with the word "unpatriotic" on that side of the aisle.
But with both parties struggling with how the federal government can put its fiscal house in order, things may have changed.
At an AEI-hosted conference in July, AEI researchers Kevin Hassett and Aparna Mathur and Brookings Institution researcher Adele Morris jointly proposed the idea as part of a broad fiscal reform program because it could be a “significant source of revenue.”
A tax “starting at about $20 per ton of CO2 in 2015 and rising at 4 percent over inflation would raise over $100 billion in the first year, rising to over $400 billion per year by 2040,” they estimated. And, they added, a tax “that funds deficit reduction or offsets other distortionary taxes would be a lot less costly to the economy than one that doesn’t.”
They recommended a progressive structure so that a rebate program would not be needed to protect vulnerable businesses and those with low incomes.
“A greenhouse gas tax can reduce the need for both more burdensome regulation and other federal outlays and tax expenditures,” they said, putting them in agreement with other AEI presenters who noted that a carbon tax has advantages over the traditional regulation conservatives disdain at least as much, adding that it provides an incentive to reduce consumption, drives emissions reductions via the lowest-cost options, and is more transparent.
California’s just-initiated cap-and-trade program was instituted by a Republican governor committed to action against climate change at a time when conventional wisdom said a carbon tax would be a political impossibility. In its November 14 successful first round, all 23,126,110 metric tons of allowances for 2013 emissions were sold, at bids ranging from $10 to over $90. The average bid price was $10.09 and the median bid was about $13.
Bids exceeded the availability of carbon credits by three times and 97 percent of the credits were purchased by actual businesses, not investors. The auction ran smoothly. The low allowance price was a market-driven indication that the cost of climate change abatement will be affordable.
A cap-and-trade system is one way to combat climate change, the Caperton call for a carbon tax acknowledged. But 2009 cap and trade legislation could not get through the Senate and a new proposal would be unlikely to get through the present House. “Three years later, cap and trade is off the table largely because of a polluter-funded effort to deny climate science and delay action on pollution reductions,” Caperton wrote. “But Hurricane Sandy, the fiscal cliff, and the debate over clean energy incentives have together made it clear that we must put a price on carbon.”
An effective carbon tax, Caperton wrote, would assimilate to regional environmental programs and target greenhouse gas emissions cuts of seventeen percent from 2005 levels by 2020 and 80 percent by 2050. It would also drive investment in renewables and efficiency, grow green jobs, and prevent polluters from moving to countries without protections.
Like the AEI presenters, Caperton would require a carbon tax to also stimulate the economy, protect vulnerable businesses and those with low incomes, and provide revenues to attack the federal budget deficit.
Indicative of the curious left-right meeting of minds, both the CAP and AEI proposals suggest that a carbon tax of $15 to $25 per ton would accomplish their objectives, a price quite near where the California cap-and-trade auction came out.
But cap-and-trade is “a damaged brand,” Caperton said. “Nobody in Washington is working on cap-and-trade legislation or a Clean Energy Standard at the federal level,” he explained, “because they basically have a zero percent chance of happening. A carbon tax has some momentum behind it that can make it a part of the conversation.”
And, he added, by the time the political process builds offsets, a price floor and ceiling and strategic reserves into cap-and-trade or writes exemptions and compliance flexibility into a carbon tax, “they start to look pretty similar.”
Former South Carolina Representative Bob Inglis, Bush 43 CEA Chair/Romney economic adviser Greg Mankiw, senior McCain campaign advisor Douglas Holtz-Eakin, and former ExxonMobil CEO Rex Tillerson are all Republicans who are on the record supporting a carbon tax, Caperton said, along with some leaders of the Christian Coalition and former Heartland Institute associates in the R Street Institute.
“But,” Caperton acknowledged, “I am unaware of any sitting member of the House or Senate on the Republican side who is supportive of this on the record. That is a reality check for us.”
Nowhere in the country is the cost recovery and implementation of smart grid more convoluted than in Illinois.
On Wednesday, the Illinois Commerce Commission unanimously approved Commonwealth Edison's request to delay the installation of its smart meters until 2015, which ComEd says is necessary because the commission had reduced the amount of money the utility could charge.
Just last week, the Illinois Senate voted on a resolution that protested the rate cuts that had been imposed by the ICC -- although it is unclear what difference the non-binding resolution would make.
At odds are the legislature’s Energy Infrastructure Modernization Act approved by the full assembly last year, and how the ICC is allowing the state’s large utilities to recover costs of smart grid projects – including smart meters.
Last May, the Illinois Commerce Commission told Commonwealth Edison it had to cut about $100 million from the rates it could expect to collect from customers over the next five years. Some of that money had to do with smart grid, but not all of it. ComEd has also taken the matter to court.
While the rate plan was rejected, the ICC did approve ComEd’s smart grid plan. The final approval of ComEd’s plan came about a month after the ICC rejected the Ameren Illinois smart grid plan altogether.
Essentially, rates will go up for ComEd customers to recover the costs of the investment, but they will not go up as much as ComEd says it needs. The way it stands now, ComEd customers will start paying more in January even though the smart meters will not be installed for two more years, according to the Chicago Tribune. ComEd is still moving forward with other smart grid projects, such as automating some switches on distribution lines.
The savings in smart meters will come from not needing to send meter readers into the field and from reduced outage time by using the meters to better pinpoint where the power is out.
The Chicago Tribune is also reporting that not only will the estimated $187 million in savings from efficiencies achieved through two-way digital smart meter use not be passed on to consumers as soon as hoped, but that the price of the meters, which are being supplied by Silver Spring Networks, is expected to rise by $5 million.
The issue of smart meters saving the average consumer money is a tricky one. Although it is commonly laid out in rate cases, the reality is that those savings will almost never result in far lower bills for customers in the long term.
The problem is that smart meters might give consumers greater insight into their energy use, assuming it comes with a robust delivery method to show people where they’re using energy and how to reduce it, but the minimal savings will most likely be offset by rising utility rates to cover the cost of the investment.
In truth, smart meters, by themselves, will not save significant money for the average utility customer, but rather they will allow for efficiencies so that rates don’t rise as fast or as high as they may have without the technology.
That’s not exactly a tagline the utility can fit on a poster.
Illinois is not the only state grappling with who should allocate funds upfront for technology that will eventually save significant amounts of money. The issue of who gets those savings is also up for debate.
In Maryland, the regulators rejected Baltimore Gas & Electric’s proposal a few years ago, on the basis that the plan’s surcharge to customers was not justified and that it lacked sufficient consumer education. Eventually the plan was approved with a far lower surcharge and more robust consumer offerings. Other state regulators have also pushed back against utilities, such as Hawaii Electric Co., Consumers Energy in Michigan and Duke Energy in Indiana, on how much they can charge upfront.
The ICC’s chairman, Doug Scott, called the delay in Illinois “a way forward.” But the delay of technology while still charging customers -- even less than $2 per month -- will likely build even more resentment amongst the public against the utility than there is already (as can be seen in comment boards in local papers).
This is hardly the last word in the matter, however. David Kolata, executive director at the watchdog group, Citizens Utility Board, told the Chicago Tribune that the approved delay essentially pushes the ball down the road until April, when the utility has to file a progress update with the commission.
While rates will rise in January, so will the stakes for ComEd. Starting in 2013, the utility has to prove it’s meeting performance metrics or pay penalties.
Home energy efficiency audits and retrofits are known to pay themselves off in a couple of years, leaving homeowners enriched over time. Likewise, low-to-no-cost rooftop solar from third-party installers and financiers such as SolarCity and Sunrun is, for many homeowners, a no-brainer.
But what’s good in aggregate is, on a house-to-house basis, quite complicated. Each home has different characteristics, making them better or worse targets for different solutions, ranging from insulation to whole-home HVAC overhauls -- not to mention solar. Any party looking to optimize the return on investing in home energy efficiency -- whether it be a utility offering rebates, a company offering a sale, or a government agency offering an incentive -- will need to have someone go to each home, meet with each family, and figure out each customers’ individual needs, to make each efficiency dollar count.
Next Step Living has taken a community organizing approach to this business challenge, and with gusto. Since its founding in 2008, the company has grown to 450 employees and has audited about 25,000 homes so far, by working with nonprofit groups, utilities and corporate customers. On Wednesday, the Boston-based startup announced it had raised $18.2 million from investors including VantagePoint Capital Partners, which led the round, and existing investors including Black Coral Capital and Mass Green Energy Fund.
Next Step Living has previously raised about $12 million, bringing the company’s total to just more than $30 million. That’s a lot of money for a startup in energy efficiency, particularly during what’s been a very slow year for green VC. The company also differs from many of the other software-focused startups that have gotten funding so far this year, in that it relies on lots of employees, as well as technology and business expertise, to grow to scale.
But CEO Geoff Chapin contends that people are a critical part of solving the home energy equation -- and that means well-trained and enthusiastic employees, as well as a network of community and nonprofit organizers eager to help spread the word.
“We believe that the relationship starts when you’re in someone’s home, and you have to be there to know what the home needs,” he said in a Wednesday interview. Right now the startup is auditing about 3,000 homes per month, he said, and for the third or so of customers who end up signing up for retrofits, energy savings can add up to 20 percent to 40 percent, he said.
The startup’s biggest single project is with the city of Boston and the Mass Save state efficiency program, where it has served about 6,000 homes so far. It also works in Maryland and Connecticut, and the new round of funding will help it expand to other states, including New Jersey and New York, according to the company's web site.
Most of its projects in the region tend to follow similar patterns, Chapin said -- “the solar is low-to-no-cost solar,” from providers including Sunrun, “and the heating systems are everything from high-efficiency gas furnaces to electric heat pumps" from Mitsubishi Electric.
Utilities already spend billions of dollars per year on residential efficiency programs that provide financial support for projects like these. That market is served by lots of local and regional energy auditors and contractors, as well as a host of larger companies, such as Ecova, Honeywell, Johnson Controls, Ameresco, Eaton and others, as well as the energy services branches of utilities like Con Edison and Florida Power & Light.
But while big commercial and industrial customers may get the full energy services treatment, most home utility efficiency programs today are simple installation rebates, Chapin noted. That means that anyone coming for an in-home visit is likely to be from an installer or vendor, rather than from an independent third party, he said. Energy auditors, who may be independent, usually don't stick around to help the homeowner do the actual retrofit, on the other hand.
Next Step Living essentially combines those two functions into one, and gets paid along the way by the parties involved. Often, that’s aided by rebates like the Mass Save program’s, which can significantly cut the $2,000 to $4,000 per home insulation and heating upgrades typical in the project, Chapin said. The startup also works with corporate clients, including Raytheon and Staples, to offer employees its home audit and retrofit services, along with various perks and payment plans the company may choose to offer.
Next Step Living has also built up its fair share of homegrown IT to manage the entire process, Chapin said. For example, the company has developed software that analyzes homes based on utility and property data to predict which ones will be the best targets for different combinations of projects, he said. We’ve seen a host of startups offering similar data analytics tools to help better direct efficiency spending, from the likes of FirstFuel and Retroficiency for commercial customers to startups like Bidgely, Opower or Recurve Software (bought by home energy startup Tendril) on the residential front.
Likewise, Next Step Living has collected data on the various local, state and federal government grants and tax breaks, utility rebates and pricing plans, and other financial incentives available for home retrofits in the state. Chapin knows his way around the nonprofit world -- he previously served as senior manager at the Bridgespan Group, a consultant to nonprofits and cities including San Francisco and the Packard Foundation, and has a long list of previous clients in public housing.
But Next Step Living isn’t tapping low-income utility customer funds or other such revenue streams for its services, he noted. Instead, the startup’s middle- and higher-income clients usually simply aren’t aware of how much efficiency and renewable energy can save them, he said. Likewise, many haven’t been told how much of it can be paid for via rebates, incentives or via programs like property assessed clean energy (PACE) or utility bill financing.
There’s certainly billions of dollars of energy efficiency savings potential out there in the residential sector, as studies from McKinsey and many others have proven over the years. For the most part, that’s good old-fashioned work like reinsulating the attic, replacing old windows, and getting rid of old refrigerators.
Still, there’s room for new technologies to make an even deeper impact. We’re seeing residential solar companies like SolarCity offering energy efficiency audits and retrofits as part of their services. Another development is home security providers like Vivint (acquired by Blackstone Group for $2 billion in September) selling third-party solar and home automation to their customers. Startup Alarm.com raised $136 million in September to boost its plans for home automation with energy-saving features such as lights linked to motion detectors and door locks and smart thermostats.
At the same time, home broadband providers like Comcast, Verizon and AT&T are starting to offer home automation and energy efficiency gear to residential customers. Then you’ve got the tens of millions of smart meters have been deployed around the country -- a few of them are starting to turn on their home area network (HAN) capabilities to connect customers to real-time energy data, beamed directly from the meter.
How all these technologies will end up working together to save energy and money is anyone’s guess. But it’s likely that somewhere along the way, a professional -- or perhaps a community volunteer -- will be called in to help set it all up.
This is the second article in a two-part AOL Energy series -- read part one here.
Enthusiasm over the U.S. natural gas production renaissance has been steadily building over the past few years, and the prospect of increasing production of both gas and oil from shale deposits came up numerous times during the 2012 U.S. presidential election cycle. However, not everyone views shale gas as a supply panacea, which is the thrust of a book due out next spring written by Bill Powers with a forward by Arthur Berman.
Potential Gas Committee executive director John Curtis rejected Berman's reliance on the committee's "probable" category, which is based on gas in existing fields.
"He's dead wrong," Curtis said, arguing that restricting the resource estimate to only "probable" gas ignores the existence of highly productive plays like the Marcellus and the Haynesville that were not initially included in that category because they had not been drilled.
Curtis added that any deficit between a field's actual production and its resource estimate may reflect a lack of pipelines or undeveloped markets for the gas rather than a resource that undershoots expectations.
The PGC's latest estimate, published in 2010, is for total U.S. shale resource of 687 tcf, including "probable," "possible" and "speculative" gas. Including all categories of gas, the committee estimated a total resource of 1,900 tcf, not far below the EIA's assessment of 2,203 tcf.
Ahead of the next PGC report, due in April 2013, Curtis said there was no indication of a need to cut its current estimate of gas resources, and there had not been in 2010 compared with the previous report two years earlier.
The Thorny Issue of Reserve Estimates
"From year-end 2008 to year-end 2010, we saw no reason to move away from our position for the quality and quantity of resources, and from 2010 to now we still do not," he said.
For his part, Powers cited the EIA's own data in support of his case, noting that the organization sharply cut its estimate of unproved technically recoverable resource to 482 tcf in the latest outlook from 827 tcf a year earlier, largely because of a big decline in its TRR estimate for the Marcellus Shale to 141 tcf from 410 tcf a year earlier.
"The EIA is starting to walk back from its earlier claims," Powers said in an interview ahead of the book's scheduled publication in May 2013. He said the EIA's credibility was hurt when it cut its Marcellus estimate after the U.S. Geological Survey calculated in its own 2011 study that the Appalachian shale play contained just 84 tcf.
Philip Budzik, a spokesman for the EIA, said the changing estimates reflect the industry's increasing experience in the field. "The numbers have been changing significantly over the last couple of years," he said. "Producers have been experimenting with drilling and completion techniques."
Any confirmed cut in U.S. shale gas resources could have far-reaching consequences ranging from reduced energy security to more greenhouse gas emissions and higher energy costs. With increased production and optimistic projections for recoverable resources, natural gas is assuming an increasingly important role in U.S. energy policy.
The EIA estimated the TRR for all forms of natural gas, including tight gas and coal bed methane, is 2,203 tcf, or about a century's supply at the current national consumption rate of some 24 tcf a year. Shale gas represents about a quarter of the EIA's total, or around 22 years' worth; that resource would shrink to just 5.5 years if Powers is right.
Dan Whitten, a spokesman for the trade group America's Natural Gas Alliance, rejected Powers's estimates, saying that shale gas production has risen more than 12-fold over the last decade, and estimates of recoverable resources have risen at a similar rate. Whitten said Powers' assertions have been refuted by prominent organizations, including the Massachusetts Institute of Technology and the Potential Gas Committee.
"There is no question, with continued advances in both the technology used to produce natural gas and our understanding of resource potential, that projections will continue to evolve," Whitten wrote in an email. "While we have not seen Mr. Powers' book, his conclusions run counter to the established science on the abundance of natural gas."
Europe is going to be the next big market for smart meters -- and Germany, the continent’s most populous nation, could be the biggest single customer in that market. But so far, Germany has lagged behind its Northern European and Scandinavian neighbors in deploying smart meters. It also hasn’t matched the big, national smart meter rollout plans of France, Spain and Italy, although it, like every other EU member, is required to have 80 percent of its meters made “smart” in one way or another by decade’s end.
What’s the holdup? Experts point to a lack of push from regulators, a lack of funding from the government, and a set of complications arising from Germany’s deregulated energy marketplace that have limited residential smart metering projects to a small number of pilot projects. At the same time, Germany has been taking its time to come up with a standard, interoperable set of technologies for every home and other small-scale utility customer in the country before it plunges ahead with millions of new meters.
U.S. smart meter giant Itron and Germany’s Deutsche Telekom announced a partnership last week, aimed at satisfying the long-term requirements of the still-evolving market. Under the terms of the deal, Itron has committed to buy and embed Deutsche Telekom’s SIM cards in its GPRS meters. That could allow Itron to deploy cellular-connected smart meters and other devices across Europe, much as Itron is doing in the United States via its acquisition of SmartSynch.
The two companies didn’t get into specifics on just how and where they’re working together, other than to say they will seek “opportunities in the area of smart energy (smart metering, smart grid, and smart home) in European markets,” backed by Deutsche Telekom’s communications network.
Itron recently reorganized its business to differentiate between the point-to-point, often cellular-based technology used for Europe’s commercial and industrial (C&I) market, and the larger-scale, mesh or powerline-carrier technologies being contemplated in Europe for home energy networks. Deutsche Telekom, for its part, already has a thriving utility and energy machine-to-machine (M2M) line of business, and is working with utility partners, much as Verizon, AT&T and Sprint are doing in the U.S..
“This means that they also have an end-to-end solution offering -- so at first glance, they are competitors,” Andre Wankelmuth, Itron’s director of marketing for metering and home area networks in Europe, said. But the two companies also see lots of room for cooperation, and are already working together in countries including the Czech Republic and Switzerland, he said. As for Germany, the two have their eye on projects there as well, Wankelmuth said, though he wouldn’t provide details.
Germany’s Regulatory and Business Challenge
It’s important to note that Germany has some smart meters already. German law has required smart meters for all new construction or major retrofits since 2010, and many large C&I utility customers have two-way communicating interval meters of various makes and models, just like in the U.S., Japan and the rest of Europe.
Indeed, Itron manages tens of thousands of such C&I smart meters from an operations center in northern Germany, said Jean-Paul Piques, senior marketing director for Itron in Europe. But that’s a small fraction of the potential multimillion endpoints that the country’s mass residential markets offer, he added.
Unlike the United States, however, which directed billions of dollars of stimulus grants toward smart meters, Germany’s government hasn’t offered any subsidies or incentives, as this 2011 report from Frost & Sullivan lays out. Indeed, Germany’s model as it stands makes it hard to pay for smart meters, because while the distribution grid operators are obliged to pay for them, they’re limited by regulations as to how much they can charge for them.
Also unlike the United States, German regulators have chosen to put standards before deployment, not after. Germany’s government and industry representatives have been working for years on the technical and regulatory framework for any mass-market deployment, with a focus on standards-based interoperability, as well as data privacy and security, Wankelmuth said. Until that framework is set, it’s hard for utilities or private investors to stake any claims.
Germany’s Open, Interoperable Home Energy Network?
Still, there are signs that Germany may be turning a corner. An October report from Berg Insight noted that government regulators, disappointed by the slow uptake of smart meter and home energy management offerings being put on the market by retail service providers, may be considering a “regulation-driven” nationwide rollout.
At the same time, Germany’s private-public technical working groups have settled on a set of standards for linking homes to utilities via a device once known as the multi-utility controller, or MUC, but now known as the “BSI gateway,” Wankelmuth said. The name comes from the Bundesamt für Sicherheit in der Informationstechnik (BSI), Germany’s information security office, which is overseeing privacy and security aspects of the plan.
In simple terms, the BSI gateway is a single point in the home or building that links water, gas and electric meters and other in-home devices to the utility’s backhaul networks. Right now, plans call for the BSI gateway to use wireline or wireless Modbus to talk to meters and in-home devices, and cellular or powerline carrier to connect to the utility, he said. That’s a bit different than the typical U.S. model, where smart meters are the endpoints themselves -- but it fits in with Europe’s desire to have low-power gas and water meters contained in the same network, he said.
Having the “smarts” reside in a box that stays with the home also helps in deregulated, competitive markets like Germany, the U.K. and other parts of Europe, where customers can theoretically switch their service provider, and thus their meter, every 30 days or so. At the same time, retail electricity and gas providers can use smart thermostats, in-home energy displays and other devices to attract and retain customers – if the underlying technology is in place to support them.
It’s also important to note that Itron’s big smart grid partner Cisco is also working in Germany’s smart metering market. In 2009, it joined German retail electricity provider Yello Strom in a residential smart meter-home energy management pilot, one of a handful of projects where third-party power providers have leaped ahead of the market at large to offer in-home energy technology. On the broader smart metering rollout front, Cisco is also working on a powerline carrier (PLC) technology known as G3-PLC, along with such industry players as Itron, Landis+Gyr, and a host of semiconductor companies, which Itron hopes to use in Europe.
Are there better solutions to get to higher efficiency photovoltaics?
ARPA-E just awarded $2.4 million to Atwater's group to develop ultra high-efficiency photovoltaics as part of this week's $130 million funding flood from ARPA's Open 2012 program. The $2.4 million is for Atwater's group to set the groundwork for solar cells in the 50 percent to 70 percent efficiency range.
Single p-n junction crystalline silicon cells have a theoretical efficiency ceiling of 33.7 percent (the Shockley–Queisser limit). The best commercial c-Si cells from SunPower (Nasdaq: SPWR) clock in at 24 percent efficiency. Alta Devices has set gallium arsenide (GaAs) solar cell efficiency records at 27.6 percent.
An infinite-junction solar cell under concentrated sunlight has a theoretical limit of 86 percent. The real-world record is held by Solar Junction at 44 percent in a triple-junction cell at 947 suns.
Atwater believes that a combination of light management at the nanoscale and clever device architecture can yield "a quantum leap" in cell efficiency.
Today's "series" triple-junction cells stack three photovoltaic semiconductors on top of each other. Each semiconductor is optimized for a specific wavelength range. But the series nature of the device means that an enormous effort is spent in the growth of the layers, as well as separating or buffering the layers. The layer with the lowest current limits the current for the chip and minimizes the power generated.
The Caltech project envisions a photovoltaic device that eliminates the stack in favor of a parallel architecture where an optical system splits the beam into sub-bands and directs it to the appropriate semiconductor material. This architecture is not new -- Allen Barnett's group at the University of Delaware has explored this layout as part of DARPA's Very High Efficiency Solar Cell (VHESC) program, as has MIT Lincoln Labs -- but materials and optical design remain open to optimization. Atwater said that he envisions anywhere from six to fifteen sub-bands and cells. "The more subcells, the lower the thermal penalty," said Atwater in an interview last week with GTM.
"By systematically addressing the thermodynamic efficiency losses in current photovoltaics, a next phase of photovoltaic science and engineering -- ultrahigh-efficiency photovoltaics -- is at hand," according to Atwater in an article co-written with Albert Polman in Nature Materials (Vol. 11, March 2012).
Conventional architecture of triple-junction solar cell
Spectrum-splitting scheme suggested by MIT Lincoln Labs in 1982. From "Optimal design of high-efficiency tandem cells," J. C. C. Fan, B.-Y. Tsaur, and B. J. Palm, Proc. IEEE PVSC, 1982, p. 692.
Potential efficiencies of many-junction solar cells -- from DARPA
The architecture, materials, and construction proposed by Atwater's group are cutting-edge science. The light-trapping techniques such as photonic crystals, plasmonic designs, and resonant-guided wave networks are more laboratory novelties than commercially deployable processes. Some of the required beam-splitter technologies are already used in optical communications and photonic integrated circuits such as wavelength-division multiplexers.
Atwater sees the precision and complexity levels required for this type of CPV device along the lines of automotive LED lighting. He views it as a design problem that would yield a low-cost solution once high volumes had been achieved.
This type of research project has a set of risk factors that would likely prevent a venture capital firm from investing, despite Atwater's lab-to-market track record (the GaAs technology at Alta Devices has its genesis with Atwater and his colleague, Eli Yablonovitch. Alta is funded by Kleiner Perkins, August Capital, Crosslink Capital,Technology Partners, et al.). This project is probably too early even for angel investors.
But it is elegant science, and few would suggest that the government has no place in funding basic research.
As Cheryl Martin, Deputy Director for Commercialization for the Advanced Research Projects Agency – Energy (ARPA-E), said at a recent AlwaysOn event, ARPA-E is about "funding things that other people won't fund."
First Solar (Nasdaq: FSLR) named Johan Cilliers as Regional Director of Business Development for Sub-Saharan Africa and Managing Director of its new SA subsidiary. Cilliers joins from Suzlon, where he was VP of sales and marketing in SA. Also at First Solar, Tim Harris has been replaced as Antelope Valley Solar Ranch construction manager. Steve Kevish will assume that role, with experience at projects such as Silver State North and Copper Mountain Solar 2.
On-Ramp Wireless, a maker of wireless communications for energy automation and M2M, named Brad Wallace as VP of Operations. Wallace served as the Director of Operations for Intel's New Business Investments. Kevin Hell was named CEO of On-Ramp in early November.
Advanced Energy Economy named Steve Chadima as director of California initiatives and SVP of Communications. Chadima previously served as Suntech's VP of External Affairs. AEE is a think tank and lobbying group that promotes the advanced energy industry.
The UK's National Renewable Energy Centre, Narec, named Ignacio Marti as CTO.
Ostara Nutrient Recovery, a startup that recovers phosphorus and nitrogen from water streams at water treatment facilities to create fertilizer, appointed Scott McDonald as EVP and CFO.
Burt Hamner, co-founder of five-year-old water power startup Hydrovolts, is leaving his CEO post. Mike Layton, COO, is becoming the President of the firm. Hydrovolts plans to capture micro-hydropower flowing out of wastewater treatment plants.