This is your SolarWakeup for April 22nd, 2021
More tomorrow. By the way, Xi Jinping is coming to the climate summit.
Leading Off. Dean Solon, from Shoals, comes in at the top with a great rundown of what it takes to be successful. Looking back, you could always see Shoals standing out from the rest of the pack.
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Yann
This is your SolarWakeup for April 21, 2021
Quick Hits, Fire Season. Washington State has fought 91 wildfires this week, not a great start.
Cyber And Regulatory Compliance. More to come on this topic but get ready to worry about how your assets, especially storage, comply with NERC standards and power market requirements. Software is at the core of everything we are about to do, hence ClimateTech.
Everyone Wants Roads. What will it take to get the infrastructure bill to be bipartisan? Biden is having the meetings to find the unicorn in today’s political arena.
Platforms To Applaud. Congrats to the team at DESRI for turning on a new asset and CleanCapital for bringing $300mm new dollars to their platform from Manulife. That capital will be used for solar and storage assets and expand their platform once again. Also, the company is led by some of the coolest folks in the market so if you don’t find an opportunity to work for me, work for them!
Engie Sells Storage Stake. The investment activity in energy storage continues, this time Engie bringing on a partner in their energy storage division.
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Yann
This is your SolarWakeup for April 20th, 2021
Coal, Unions and Renewables. After my post from yesterday, we get big news from DC on the topic. The coal miners’ union is backing legislation that would create tax credits for the investment of manufacturing for renewable energy products like solar panels and wind turbines in Appalachian coal country. This would be a great feature that tackles the problem of climate change while creating jobs in the right place. One thing to note, the value of tax credits is directly correlated to the total market of tax liability. Now that the corporate tax rate has been nearly halved, so has the demand for tax credits. To make credits more valuable, backstop them with a refundability or direct pay mechanism.
Manchin Headlines. Senator Manchin is backing the bill, which is still short of the 50 votes held by the Democrats in the Senate.
Introducing FTCI. FTC Solar, the Austin based tracker company, has filed for its IPO. Some tidbits, that you can find in their S-1 that popped out to me. The company is planning on raising about $350mm, using about half of it for their balance sheet and some to buy back shares, i.e. create some liquidity for shareholders. Last year the company earned $187mm in revenue with a net loss of $15mm. If the IPO is successful at the range of pricing, expect the market cap to be about $1.6bb, 82mm shares at $19 per share. The folks at FLEX will be watching the valuation considering they have stated NEXTracker is north of a billion in revenue, imputing a value near $10bb for the global leader. Question is, which innovator is coming for this incredible market?
Same Action, Same Results. The CPUC is worried about the PG&E wildfire preparation work and is exercising a higher level of oversight. This is in anticipation of one of the worst fire seasons given that moisture levels is one of the lowest in history. Will the CPUC work to get DERs ready to help as wildfire shutoffs appear on the horizon?
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Yann
This is your SolarWakeup for April 19th, 2021
Joint Talks Agreed To. John Kerry is proving himself a deft handler of diplomatic processes. His counterpart in China and he have issued a joint communique on potential opportunities to raise the ambition on solving climate change. This comes ahead of the virtual climate change summit hosted by Biden later this week. Joint communiques ring hollow in the business world but in the sensitive process of US/China diplomacy, it has meaning. The undercurrent of all things climate for China is that they have spent the last 20 years investing in the infrastructure to be a central player providing the technology needed to solve the climate crisis. The US had much of the technology for solar, silicon and energy storage but thought about the market too short term and ended up ceding the manufacturing leadership to China many years ago.
Will Xi Show? It was largely expected that Xi Jinping would not be at the summit this week but the communication says that China will participate. A visit by the Chinese leader would be meaningful.
The Coal Towns. The role and responsibility for the renewable energy industry in the rebuilding of coal country has long been a complicated thought process. It’s not solar that made coal unwanted, in reality, the resource has been undone by both the emission as well as the volatility created by short term capitalism in that market. However, the opportunity for the energy sector to play a role in rebuilding is greater than trying to ignore the blame. We have spent the last year learning which jobs can be remote and building the systems to allow that to happen. Why couldn’t the tens of thousands of operations, design and back office functions be built out and trained for these towns? We are already sending installation crews to build out the pipelines, why can’t we focus our training dollars to do that for ex-coal miners?
Pay Now Or Pay More Later. Winterization in Texas is a pay now or more later problem. Or stated more simply, the design requirements have changed, will the design?
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Yann
This is your SolarWakeup for April 16th, 2021
Trade Rep Talks Climate. Trade is one of the more complicated parts of domestic and international policy. Solving climate change is going to revolve around the global nature of climate and the need for global trade to function properly. Good luck thinking that any one Country can do it all…
Satellite Sniffers. Big emitters will put on a show for carbon mapping technology in space, oil and gas wells may have to hope that methane leaks don’t trace in this technology.
Have a great weekend! Let’s talk maturing clean tech economies and the pace of adoption next week!
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Yann
This is your SolarWakeup for April 15th, 2021
All At Once, With Tailwinds. Everything appears to be headed into the same direction in the energy transition especially as it pertains to energy storage additions. This isn’t me talking my own book, this is in the headlines within the same media publications that have always shaped this newsletter. Bloomberg called for a quarter trillion dollar shift towards batteries earlier this week but are drastically underestimating the cost declines that are coming. We are already seeing a level of market maturity as solar executives are becoming one with the solar+ concept. Underpinning the global market is the shift from internal combustion to electric vehicles. Given the manufacturing overlap and both markets growing together, exponentially, the grid platform will benefit from a crazy increase in that manufacturing.
ERCOT Troubles Continue. On Tuesday morning there was a graph that made the online rounds where demand in ERCOT was forecast to be higher than the available power capacity. This was due to a large amount of thermal generation being down from maintenance, likely still catching up from the winter storm in February. At the 7-8pm hours, energy pricing rose to nearly $2,000/MWh for a short duration and the system operator called for consumers to shed demand as much as possible. The situation mellowed quickly and no emergency had to be declared but it came close.
The Climate Diplomat. John Kerry, as a special presidential envoy, is working with China this week to move along the climate conversations. As Kerry put it, they are talking about talking, working to have the US and China at the table working on climate issues.
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Yann
This is your SolarWakeup for April 14th, 2021
The Corporate Voice. Issues like divestment and ESG are driven by the expansion of the bottom line. It may lack the progressive do better component but in most cases, especially in corporate world, the alignment of higher earnings, better talent and larger markets with lower risk with climate related focus is driving the corporate agenda. Renewables and the broader energy transition has become a reality because solar, wind and resilience has become a more attractive investment for capital, a trillion dollar market that didn’t exist previously. That is why the lobbying done on behalf of our industries isn’t solely resting on trade groups’ shoulders, it includes the corporate and capital interests that want the market to expand further while lowering the risk profile. Interestingly, it’s the combination of wall street and corporate America that is making this lobbying focus even stronger.
Why It Matters. Picking winners and losers was the legislative pushback in the early days of solar lobbying. Let the market decide, especially in light of the need for subsidies some 15 years ago, and now the markets have declared renewables the winner and corporates, as customers and investors, are throwing their support behind it full force. Not just the support for policies that enable a better functioning market but also against policies that attempt to hurt the opportunity to compete or limit access to these new sources. The headlines may label this as a ‘woke’ effort to push societal desires but when it comes to renewable energy, the bipartisan support by consumers and voters is loud and clear.
Shifting The Center. One of the topics we covered in yesterday’s market call with Roth Capital was the regulatory fight we often mention on this platform, whether that is NEM 3.0 in California, NEM cap in Michigan or Federal issues. Regulatory proceedings sometimes welcome extreme initial proposals in an effort to draw the boundaries of the argument so far outside of the norm that a settlement would be considered a victory. It is important to see the first overture as an overture but also to reject it outright in most cases with a vigorous fight. I often hear from you saying that things will sort themselves out but they only do when everyone does their part in the process otherwise David cannot take on Goliath.
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Yann
This is your SolarWakeup for April 13th, 2021
Talking Market. Today at 11am eastern, join me and the Phil Shen from Roth Capital as we continue our monthly conversation about the market. It’s been an entire year since the pandemic sparked the market survey index that told us that 2020 wasn’t going to be as bad as predicted. One year later, much has changed including my role in the market. Register here and make sure you subscribe to Phil’s newsletter as well.
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Yann
This is your SolarWakeup for April 12th, 2021
The Venture Effect. The term ClimateTech is the vertical made in Silicon Valley. Adding tech to a vertical, fintech, agtech, climatetech to name a few, indicate the ability to invest into companies with the objective of creating a 10x return on that invested capital. It used to be hard to imagine this, I first heard the 10x objective circa 2008 and thought that it was crazy. The reason it’s hard to create is the market has to be big enough for an idea to reach a tall objective, but the TAM (total addressable market) for our industries has crossed the threshold of everyone realizing it’s a big market. Can venture save the planet? Yes, if infrastructure capital deployment stands alongside, which it is.
Fall Short On What. After a miss on market forecasts in 2020, I am fearful that we are misunderstanding the market for renewables globally over the next decade. We are entering an era where renewables, depending on the resource/geography alignment, is cheaper than anything else available. Solar also has the advantage of being liked and preferred by everyone regardless of political belief. So take all forecasts with a grain of salt, especially any year over year declines, they will prove to be wrong.
Rolling Up Resi. Sunworks has acquired Solcius, a large residential solar installer. This follows the companies pivot towards residential from the ag sector it had been targeting previously. Last year, Sunworks had agreed to be acquired by The Peck Company but that merger failed due to a lack of vote participation by shareholders. The bigger story is the acquisition of a residential installer which had been complicated to value previously due to a lack of transactions. Expect the consolidation of installers to gain some traction as close rates continue to accelerate and geographic opportunity for solar grows.
Solar To WV. The state legislature is working to approve the solar lease for West Virginians. Enabling solar access to homeowners is a key step to gaining more positive views of the sector for those that have been largely impacted by oil, gas and coal market declines.
Talking Market. Tomorrow at 11am eastern, join me and the Phil Shen from Roth Capital as we continue our monthly conversation about the market. It’s been an entire year since the pandemic sparked the market survey index that told us that 2020 wasn’t going to be as bad as predicted. One year later, much has changed including my role in the market. Register here and make sure you subscribe to Phil’s newsletter as well.
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Yann
This is your SolarWakeup for April 9th, 2021
The Storage Division. This week Nexamp announced the addition of Mark Frigo as the VP of Energy Storage. If you’ve read this column for sometime, you know that I rarely talk about jobs and who starts where but Mark is an indication of a bigger trend so I spent some time talking to him about the move from RWE to Nexamp. From a macro viewpoint, we agree that having energy storage knowledge internally to a solar development business, or more broadly any generation business, is going to be a normal occurrence. Given his experience in storage I asked what some of the misunderstandings are about storage and where we are at in the ballgame. First, Mark believes that there is a lack of appreciation for the technical complexity in energy storage. Second, storage is additive to solar in almost every case but that continues to be expanded depending on the market and price signals that are delivered by the power market operators. We also talked about bankability, risk and market forecasts but I’ll get to that part of our conversation next week. In the meantime, I’d love to talk to more of the energy storage unit leaders in solar.
Level The Market. Treasury’s Janet Yellen is making the case for leveling the playing field for subsidies between fossil fuels and renewables. I am a lone soldier barking up this tree but we really deserve to have equal treatment on active/passive income rules in renewables especially in a market where corporate tax rates, therefore tax liabilities, were cut.
Investment Grade Monopolies. California is going to help PG&E get back to an investment grade credit by aiding in the securitization of certain wildfire related costs. The argument is that higher interest costs are passed along to consumers and therefore this isn’t exactly a subsidy to the utility. It would be equitable to enforce some level of coordination in support of solar and storage in return for the government support given that California is trying to get to 100% clean energy.
A Loanpal IPO. The worst kept secret in resi solar has been the Loanpal IPO. Over the past year, the company has been rumored to be moving to Texas and recently did a raise that very much felt like a pre-IPO round. The largest lender for resi players with a unique focus on sales team channels has been strong at building the market share without giving up margin according to those in the know. This is expected to be priced well above $10billion and should add a few folks to the Forbes list we highlighted yesterday.
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Yann