WHERE ARE WE NOW?

The New Energy industries – and especially the solar energy industry – fought for 18 months to get their federal tax credits extended beyond the end of this year. Then, in the hour of perhaps the most important national political victory ever achieved on behalf of New Energy, came the worst possible news, the news of the financial crisis and with it the evaporation of available financing for energy projects from venture capitalists and loan institutions.

So, on the first day of Solar Power International 2008 in San Diego, the biggest ever gathering of solar industry leaders, the same question kept coming up: Where are we now?

Rhone Resch, President of the Solar Energy Industries Association (SEIA), was celebrative, recounting the travails of the legislative infighting and thanking and praising SEIA members for their activism.

Julia Hamm, chairwoman of the event and Executive Director of the Solar Electric Power Association (SEPA), though like Resch very much looking forward to the victory party in San Diego’s gaslamp district (it turned out to be quite a bash), was looking beyond the celebration.

She was grateful that “…Al Gore created climate change for us [and]…early adopters decided to go solar,” Hamm said smilingly, but the present moment is completely different. The impacts of climate change are “tangible and significant” and the differences between the cost of electricity from traditional power sources and New Energy power sources are shrinking as the recognition of the burden of the former on the environment goes up and technology and economies of scale bring the cost of the latter down.

Hamm exuberantly announced the day’s big news, that Gainseville Regional Utilities approved the first utility-driven feed-in tariff in the U.S.

A “feed-in tariff” is a set rate paid to solar system owners for all the electricity their systems put on the grid. Though common in Europe, the U.S. has not used it as an incentive, opting instead for federal, state and local tax breaks and rebates along with a net metering program.

“Net metering” allows solar and other distributed generation system owners to use the electricity their systems generate and to deduct the price of all the excess electricity they send to the grid from their bills. If the bill reaches zero, however, nothing is earned. Owners argue net metering is inequitable but policy makers argue anything system owners lose to the grid is more than made up for by the many tax incentives and rebates they get.

One answer to the “where are we now?” question, then, is that a debate is about to be joined over whether tax credits, rebates and net metering will develop the New Energy industries better or whether the feed-in tariff is the way to go.

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Some like the feed-in tariff because it seems simpler and more equitable. Others like the present system because it offers more options, financially as well as politically.

Though it will be a debate among industry insiders and policymakers, it will have a major impact on consumers.

But will consumers’ have the money to play a role in the growth of the solar industry in this world of rising and crashing markets and elusive bank loans?

Resch addressed the question frankly, admitting times are tough and undertaking the cost of, or finding a loan for, any home improvement is likely to be troubling. But, he pointed out, that might not last more than 6 or 12 or 18 months. The tax credits were just extended for 8 years.

Hamm, whose organization coordinates between the solar industry and utilities, was optimistic. Big utilities are getting more and more into the photovoltaic (PV) market. They see solar as a source of extra capacity to meet peak demand now and as a source of emissions-free electricity for the time in the very near future when Congress institutes a cap-and-trade system and sources of power that generate emissions will be more expensive.

“Big utility buys are putting [solar panel manufacturing] factories up,” Hamm said.

She also noted two new ownership concepts, (1) the New Jersey plan where homeowners can reimburse utilities for installing systems by signing over their Renewable Energy Credits (RECs) to the utilities and (2) the Berkeley plan in which the city pays for and owns home installations and is reimbursed through property tax increases that offset utility bill savings.

The one thing Hamm failed to mention: All this activity requires big financing from a deep-pocketed lender. Be it a utility or a bank, it is a lender that must surely, these tempestuous days, be wary of large cash outlays (if they still have the cash).

As Hamm herself put it, quoting physicist Neils Bohr, “Prediction is very difficult especially about the future.”

But she was not thinking so much about predicting the future as about making the future. “Be bold, be innovative, be strategic,” she told her audience. “The status quo will not cut it. We need bold new ideas. We are nothing if we don’t overcome this short-term economic situation”

One of the day’s keynote speakers was supposed to be Robert Greifeld, the CEO of the NASDAQ QMX Group. He was tellingly forced to cancel, apologizing with the excuse he could not leave New York City. With NASDAQ a well-known central player in the Wall Street markets, nobody questioned Greifeld's cancellation.

If actions speak louder than words, what did would-be keynote speaker Greifeld’s absence say about Hamm’s hopes for New Energy project financing availability?

John Jacobs, Executive Vice President of the NASDAQ QMX Group, was Geifeld’s replacement. If his take on "where we are now" is right, there is one good, solid, encouraging piece of information: Where we are now is not where we will be in the near future.

Jacobs urged the audience to believe the markets will come back. “Step back from the short term,” Jacobs said. “That’s not investing, that’s day trading.”

Financial markets and the energy industry are connected in many ways, Jacobs said. Investment in solar will come. “We have a track record. We did it for IT. We did it for the web…We’re going to do it for solar power…”

So “where we are now” is waiting for the venture capital to come back and not knowing when, or even IF, it will.

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The distinguished and honored General Wesley Clark was the headliner for the day. He sits on wind energy and solar energy company boards and, yet, is a strong advocate for the ongoing use of oil and natural gas and the development of “clean” coal and “next generation” nuclear.

Does this mean that “where we are now” is about to take a turn back toward the “all of the above” philosophy?

Clark’s position is much more nuanced. He talked about energy first and foremost as a national security issue. In terms of moving an army, there is no doubt oil remains crucial. But Clark understands, as many in the Pentagon do, that global climate change is much more of a national security issue than whether or not there is drilling in the outer continental shelf.

Here’s how Clark described his bottom line. “We’ve crossed the threshold, we’re into a new age…a national RPS, that’s where we have to move regardless of what the price of oil is. For the long term it’s very clear what we have to do is decisively change our sources of energy…”

He also talked about the development of a new transmission grid as an urgent national issue and complimented the work done by Senator Harry Reid (D-Nev) on SB 2076 to fund a new energy superhighway.

So “where we are” includes understanding that New Energy is not only an environmental issue but a matter of national security. And building transmission is as important as building New Energy.

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Finally, “where we are now” and the grid parity surprise: Grid parity is the holy grail of New Energy. It is when the price of energy generated from New Energy achieves parity with the price of the traditional sources of energy supplying electricity to the grid.

As the financial crisis deepens and economic activity diminishes, energy demand is expected to temporarily drop off. This puts a downward pressure on energy prices generated by existing infrastructure like coal plants and nuclear power plants. The price of oil is already dropping. New Energy, which still includes the cost for building new infrastructure in its price, is at a disadvantage.

When asked if this is a threat to solar energy, Hamm answered, with a hint of defensiveness, that “…grid parity shouldn’t be the be-all and end-all for the future of this industry…”

But Resch interrupted. “In many markets we’ve already achieved grid parity and what we need is rates that reflect the true costs [of the other energy sources].” He went on to explain that in many markets peak power prices are much higher than the cost of new solar.

Bottom line: Where we are now is, all in all, a pretty exciting place to be.

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Solar Power International 2008

WHO
Solar Electric Power Association (SEPA); Solar Energy Industries Association (SEIA);
Robert Greifeld, Chief Executive Officer, The NASDAQ OMX Group; General Wesley K. Clark, U.S. Army Ret. and former NATO Allied Supreme Commander Europe

Parity is coming. (click to enlarge

WHAT
Solar Power International 2008 (called Solar Power Conference and Expo in previous years), THE solar industry business to business trade show. And, CCSE’s annual Solar Energy Week.

WHEN
- October 13 – 16, 2008
- Opening Plenary: Tuesday, October 14, 2008.
- Created in 2004 as Solar Power Conference and Expo.
- 1,100 attendees at 2004 event, 12,500+ expected for the 2008 event

WHERE
- San Diego Convention Center (111 West Harbor Drive, San Diego, CA 92101)
- Representatives of at least 70 countries expected.

WHY
- A variety of industry leaders and guest speakers held forth on “where we are now.”
- It is the biggest solar event in the Americas.
- 60+ breakout sessions, 425 exhibitors, encompassing the complete range of solar energy technologies (photovoltaics, concentrating photovoltaics, concentrating solar power, solar hot water, space heating/cooling).
- Builders, taking a greater interest in solar energy systems than ever, will take a bigger part this year. The building sector is responsible for 70% of the U.S. use of electricity.

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QUOTES
- General Wesley K. Clark, keynote speaker and supporter of Global Green USA's Climate Action Initiative to protect Coastal Cities: "Global warming's increasing threats to our communities and coastal cities along with our dependence on fossil fuel and foreign oil are all critical national security issues that are threatening America and the World…Solar power is one of the immediate solutions that can help us solve these challenges and put Americans to work building the sustainable, renewable energy future for our country. I'm looking forward to meeting the men and women who are charting this new course."
- Ron Kenedi, vice president, Sharp Solar Energy Solutions Group (SESG) of Sharp Electronics Corp./Sharp Corp. U.S.:“The global solar industry increases in size and complexity with each passing year, and the organizers of Solar Power International have kept pace by expanding the conference program while retaining its quality and accessibility…The market for solar energy knows no borders, and Solar Power International continues to be an important event for us to engage with partners and customers from around the world. The event’s location in the heart of the American solar industry is especially significant because global companies like ours have recognized the growth potential of the U.S. market.”