This is your SolarWakeup for January 6th, 2020

The Senate Hangs. Yesterday, Georgians went back to the polls in their dual Senate run-off election. At the time of my writing this at about 2am Eastern, it seems a distinct possibility that the Senate will end up in a 50/50 split with Vice-President Harris breaking the tie. IFF (sorry to the non-engineers) that were to happen, you ask yourself what the Biden policy impacts would be since we largely assumed McConnell retaining the gavel. First and foremost, it provides a more realistic path to Biden to confirm his cabinet including those that are focused on climate. It does not however, in my mind, change much on the policy initiatives on energy with Manchin in the middle. Senator Manchin was the ranking member for the Senate Energy Committee and Schumer is unlikely to do anything that helps McConnell’s effort to have Manchin switch parties which he has been telling donors is the plan in the case of a loss in Georgia. So we wait and see for these results as well as the final confirmation later tonight that Joe Biden will be President come January 20th.

Shoals Files IPO Papers. In week 1, one of my predictions is coming true from my year in review last week. Shoals Technologies, the Tennessee manufacturer of balance of system components (and solar expo exhibitor expert), has filed for their IPO. The S-1 filed is a placeholder in advance of their roadshow and final fundraising document. It does give us some of their financial results through Q3 2020. The profitable manufacturer is smaller than many expected at sub $200million in revenue with 30% margin but keeps their overhead low with a great net income number relative to the revenue. If Shoals IPO is successful, and there is no indication of it failing, it opens the doors to many more IPOs at this scale which is much lower than previously assumed by solar companies. In short, if a $25million earnings company can be valued north of $750million or more then hold on to your horses because there is quite a pipeline of solar companies that will want to follow suit. Here’s a word of caution though, $200mm of revenue with north of 10% margin is different for a company with a track record of success and market share growth with the professionalism gained by having a seasoned executive team and owned by someone like Oaktree versus a company that just reached that amount, is growing exponentially with a team that has little track record of previous exits and investors that aren’t on JP Morgan’s speed dial.

It’s All About the Home. Grid planners, investors and realtors are coming together to assess the next decade. In a strange combination of circumstances, the focus on the home has never been greater and the electrification of the homes has never been more apparent. Additionally, the use of the home’s electric system is rapidly increasing with work from home/virtual schooling/gaming/streaming and shifting the gas station to the driveway with electric vehicles.  They say home is where the heart is, but soon we will find that home is where the market is too.

Supply Or Demand. California is leading this discussion but FERC isn’t far behind. Should electricity grid reliability be managed on the generation (supply) or building (demand) side of the meter. I.e. do we need peaker plants or the ability to manage the electricity in your battery or refrigerator? The answer is all of the above, negative electrons through demand response, virtual power plants through distributed resources in solar or storage and stored energy in a renewable generation portfolio. Best of all, the entire demand response market is built without the need for ratepayers to carry the burden because if the market creates a pricing signal the market will respond with many GW of flexible capacity.  

Consolidate Your Power. As you walk back into your offices (remote or otherwise) you will realize that the conversation is about what isn’t available. Modules, inverters, wires, tax equity, labor and other core requirements are in high demand and short supply. On product supply look towards consolidating your purchasing with similar companies to maximize your access and keep your pricing competitive. We’d be happy to give you more information at the SolarWakeup Buyer’s Group. 

Opinion

Best, Yann