This is your SolarWakeup for March 5th, 2020
Personal Update. For the third time since the start of this newsletter, I have a new day job. This time I am excited to be joining the rockstar team at FlexGen as CFO. You’ve heard me talk about FlexGen in the past because over the last decade FlexGen has been at the leading edge of integrating batteries. From the military battlefields to the oil wells and now the grid, FlexGen has earned the right to be the second largest integrator in the Country and the future is as bright as ever. If you want to read more about this, please check out the great reporting from Julian Spector at GTM. I will remain based in South Florida with our company based in Durham. This platform has never been my personal lead gen site but as many of you start thinking about how, where and what around energy storage, please reach out and I’d be happy to connect you with the team. I’ll do some more FlexGen background on Monday so you know where we play in the ecosystem. In my career I’ve been fortunate to work with great people that have become friends, all of the smartest things written here come from them. FlexGen follows a trend that has allowed me to enjoy my work as I join Kelcy Pegler in this venture who joins the company as CEO, you may remember him from his greatest hits at Sofdesk (acquired by Enphase) and Roof Diagnostics Solar (acquired by David Crane’s NRG). Fun trivia for you, it was none other than solar’s number 1 supporter, Bill Walton, that introduced me to Kelcy.
Why Storage, Why Now. For 10 years energy storage was a solution without a market, with niche and pilot opportunities driving any addressable market. As outlined by the record breaking year and hockey puck quarter, storage is now an integral part of the energy transition. None of this is a futuristic notion anymore and energy storage companies are prepped for hyper growth. Storage is also the ultimate climate tech story, where hardware and software meet to create an intelligent and resilient grid. There is a lot of maturity left to find in the market, especially around scope of work to drive down the price and eliminate multiple layers of margin. This maturation reminds me of solar and makes me feel like I have an edge given the experiences I had going EPC, EpC and Epcm scopes as module and hardware scopes continued to fluctuate during solar’s growth. Energy storage also changes the game for solar as a price maker not a price taker in the power markets which enhance every aspect of the market, particularly as storage costs continue to decrease faster than any estimates in the market. In a world where I look to hit a hole in one on every hole, this market opportunity feels like the best way to do just that.
It Continues. Yes, SolarWakeup will continue and I will never stop caring about all segments of the solar market. You will be able to email me back any morning I write something you disagree with or want to ask me questions. This platform will remain a central part of who I am as a professional in the space. Thank you all for the words of support and congratulations, I remain in awe of how many of you take the time to reach out and read this little newsletter that started with 40 readers.
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Yann
This is your SolarWakeup for March 4th, 2020
More Tomorrow. Meanwhile this.
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Yann
This is your SolarWakeup for March 3rd, 2020
Solar Market Webinar. At 10am eastern you can join me and Phil Shen from Roth Capital to talk about the solar market. This is also a great opportunity to subscribe to Phil’s mailing list, with his great coverage of the public companies in the industry.
DC Is Buzzing. Senator Manchin is throwing the doors open on the infrastructure debate, in concert with the White House perhaps? Meanwhile the White House climate team is both real and working.
Product Showcase, Virtual Edition. This is a free virtual product showcase for solar installers across the Country hosted by CALSSA. This two day event is the best thing since standing in a room with 10,000 of your solar friends. Check that out here.
Startup Jobs In Solar. Nevados is a tracker startup that is looking for a Supply Chain Manager and their CEO is doing great work. This company is going to do big things in a huge market. Check out the listing or let me know for an intro.
More news coming shortly, will recap that tomorrow.
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Yann
This is your SolarWakeup for March 2nd, 2020
Granholm Talks Grid. “Clearly the grid, its reliability and its capacity are a huge focus.” That’s the Secretary of Energy talking to the Washington Post about the things that need to happen to adapt to the new normal of stresses on the grid by climate as well as the transition to renewables currently happening. The secretary also teases the inclusion of smart grid and infrastructure investments in an upcoming bill being prepared by the White House.
Carbon Pricing Meets Oil. The American Petroleum Institute is preparing to endorse a carbon pricing policy. As the trade group for oil and gas industries, the move is likely to create a dialogue but unlikely to yield actual legislation. Count me in as skeptical.
Holding The Power Bag. One of the oldest electric cooperatives serving dozens of local distributors and 1.5million of consumers received a rather large bill from ERCOT. Instead of passing that bill along, Brazos decided to file for bankruptcy instead. Assuming the reporting is directionally correct, Brazos expects to have debts in the $5-$8billion range which it will seek to restructure. This means that ERCOT could have a financial shortfall given that they are in between a buyer and seller, assuming that they have or intend to pay the seller. All eyes on Texas legislators to see how they handle this.
A Book On Jobs. A solar executive and development professional, Eric Pasi, has written a book on one of the most important topics in the industry, jobs. Not on how we create or grow them but a guide to success in this incredible wealth opportunity that is the green recovery. Check it out at https://www.cleanwavebook.com/
Solar Market Webinar. On Wednesday at 10am you can join me and Phil Shen from Roth Capital to talk about the solar market. This is also a great opportunity to subscribe to Phil’s mailing list, with his great coverage of the public companies in the industry.
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Yann
This is your SolarWakeup for March 1st, 2020
Texas Reform Needed? When it comes to ERCOT, it’s been an educational time for many of us. In less than a year’s time, ERCOT experienced huge price spikes from a heating event, outages from a hurricane and now the freezing of an unprotected infrastructure system. It also highlights that the stress tests for the Country’s grid are not tested for today’s needs and variables. Since the start of the pandemic, we’ve shifted our consumption farther to the grid edge, added electric vehicles and adopted electrification. ERCOT, specifically, is going to figure out if the market worked as designed or if it needs to adapt given a more drastic edge case. I can’t help but think that when it comes to our energy system, we are embarking on a road trip with our tank on empty, hoping that the gauge is broken.
Yellow Electrification. This has been an obvious announcement a long time coming. My son rides on a traditional blue bird yellow school bus and I hate that it’s not electric. Predictable routes with no range anxiety, central congregation spot, low speeds and lots of stops, all of which are perfect for an electrified school bus fleet. Like in solar, EV school bus fleets are the best counterparties for 3rd party ownership of those fleets because the capital can be cheap and not encumber the school district. We may not be there on costs quite yet, but this is happening in a big way.
Keeping The Lights On. One of the pictures I got last week, regarding homes in Texas staying on with solar, came from Sunrun. Their CFO was on Bloomberg talking about the ability for DERs to keep the lights on and how the demand in Texas is currently through the roof (or on the roof) for solar plus storage. Sunrun and every other solar company in Texas are hiring thousands of workers to keep up with demand because at a certain point, consumers realize that peace of mind and saving money are actually in alignment. High rises in cities sway with the wind, to absorb the force pushed on itself. In areas affected by earthquakes, high rises can have dampers (spring like devices) installed to absorb the higher forces. When it comes to the grid and its resiliency, DERs and storage will create that balance.
Small Area, Big Market. DC may not be big or a State but when it comes to being a market, it’s a big one for one local solar installer. New Columbia Solar has been leading the charge there and they keep adding capital to their firepower. A great outcome for a great team.
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Yann
This is your SolarWakeup for February 26th, 2020
Congratulations. To the next Secretary of Energy, Jennifer Granholm. I met her when she was Governor of Michigan and a strong supporter of solar then, she remained an ardent advocate for the clean energy market afterwards. Her expertise and executive leadership will be great for the amazing team at DOE.
Paint The Box. The opposition for a clean energy standard will say something about picking winners and losers. In reality, and more and more so publicly, utilities and investors want the Government to state the obvious which is that the energy transition is happening today. By having a ‘mandated’ goal, they have the coverage against the short term traders about doing the work they know will be done anyways.
Sunshine. Is the best disinfectant. Companies with climate risk should state as such, whether they need to do anything about it is up to them and their shareholders. I’ve lived in Florida for over 20 years with a hiatus in Northern California and Maryland. Most of you have lost your power more hours/days in the past 10 years than I have. That’s my way of saying that infrastructure and climate events that threaten that intelligent and reliable grid is no longer an isolated risk.
Have A Great Weekend! Big news next week.
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Yann
This is your SolarWakeup for February 25th, 2020
Right Job Right Location. Part of our job is to make sure that the energy transition doesn’t change the location of the jobs that people have today. As someone that has moved for work, as many of you have, it isn’t easy to leave behind friends, family and comfort for a new beginning. For many in coal, gas and power sectors they are working jobs that may have been jobs in their families for generations, think coal miners. We’re getting data that show that job opportunities match where the energy transition is impacting the most workers and it’s up to many of you reading this to grow your businesses in those locations and not put them where you are comfortable. Hiring talent is surely one of the toughest challenges you will face in the coming years so go to the talent.
Speeding The Replacements. The fiscal climate dilemma will surely be centerstage this decade. The dilemma is to determine what to do with existing assets that have not reached their end of life while also acknowledging that they are not the best solution anymore especially with societal costs being included in today’s analysis. Yes, it was the wrong decision to build in the first place but now they are installed, capitalized and millions of retirement accounts, pension funds, and investments are taking the assumption of a full life for granted. Should we replace many of those plants? Yes, the climate and grid need it to happen but that doesn’t happen in a vacuum either.
Climate, Jobs And Wealth Creation. We are the center of the greatest wealth creation opportunity in a generation, that is a certainty. Because of that and how the grid is changing, it is also where the largest growth of jobs will happen. As I said in a recent interview, tell me the job you want and I’ll show you the job opportunity in our industry. While this is the SolarWakeup and I remember at every CALSSA board meeting that we have become the big S, solar plus storage industry. The best part is that we are creating jobs, careers, and wealth while ensuring that our kids inherit a cleaner planet.
The First Step. In the coming months and years, we are going to have tough conversations, some of which I outline above. We’ve been having net metering battles since the day I joined the industry 15 years ago and even in California, the biggest market in the Country where solar is literally keeping the lights on during peak shutoff events, the fight continues. The grid is transitioning, changing for the better. We can either work together to make it work better for everyone or we can fight the battles where one side shuts their eyes and points that clean energy is bad, bad, bad. Look at SEIA’s statement about Texas last week, no finger-pointing just simply saying we can solve this problem, shutoffs, and rampant costs, by including the lowest costs and more resilient technologies. It is a long past time for anti-renewables forces to stop saying that consumer choice and self-reliance by investing in their own energy source is bad for the grid and if they aren’t going to stop, then it’s time for regulators to stop hearing it because consumers are tired of it.
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Yann
This is your SolarWakeup for February 24th, 2020
Investigations Start. FERC is going to start looking at what happened in Texas. Meanwhile 4 members of the ERCOT board have resigned after last week’s shutoffs. However, most headlines have failed to highlight the role of the railroad commission and their oversight of the gas infrastructure which were some of the biggest cause of problems. The biggest question will come around winterization, what mandate is needed or what market signal has to be created for generators to spend the extra dollars and prepare for edge cases.
Impact To Generators. We learned quite a bit about the stress test that $9,000/MWh will cause to generators, especially with the situation that the fuel source is unavailable or the external weather event renders the generator inoperable. First, I have yet to hear the compelling reason why anyone will hedge the output going forward. Forget the leverage that the hedge opens up because the lender is going to ask about the what if scenario when you fail to deliver electrons and have to settle in the real-time market. Some generators are thinking about the revenue they lost not being able to monetize once in a lifetime energy rates.
To Retail Companies. This is going to get ugly. Most retailers sell energy to consumers with the plan to buy that commodity at a price lower than that. Sometimes they are upside down but it’s all within a risk range. When rates in the realtime market exceed the delivered price by 200x or more for several days, it’s bad news. You’re going to hear about retail companies seeking bailouts or risk going out of business. Free markets, am I right?
To Consumers. We talked about this on Monday but some consumers took the spread risk themselves. I assume that most had no idea what would possibly happen, not that any energy experts thought $9/kWh was possible. I can almost guarantee that these bills will be forgiven in some form, people aren’t going to pay $10,000 for 5 days of electricity, which means survival in some cases.
A Frozen Slinky. I can’t do this but if you want to explain Texas to your kids and live in the cold, put a slinky outside to freeze and then stretch it. Then compare the one from inside and see what happens to the resiliency and flexibility of the material. ERCOT could have avoided all of this with winterization but we’re also recognizing that the grid everywhere is going to need more mitigation capabilities. DERs, storage (on all parts of the infrastructure) and resilient generation are going to play a role to keep the lights on and business running.
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Yann
This is your SolarWakeup for February 23rd, 2020
Save California Net Metering. Sign this petition if you want to see the largest solar market continue thriving. Pass this on to your friends and colleagues, make sure to join CALSSA as well.
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Yann
This is your SolarWakeup for February 22nd, 2020
Independent Texas. On Friday I told you that ERCOT was an islanded grid, separated from the rest of the Country to avoid FERC jurisdiction. Shockingly, that was not correct but the correction will leave you shaking your head. The Blackwater DC Tie is a relatively small interconnect between ERCOT and SPP, in the eastern interconnection network. This means that supposedly, FERC could, at their discretion, argue jurisdiction to ERCOT but the counterpoint is that ERCOT could sever that tie and reestablish solitary confinement. So did this interconnection help during the winter storm? No, because the system at Blackwater was undergoing planned maintenance.
Unhedged Hedges. For the third time in this century, lack of winterization has caused generation to find itself on the wrong side of settlement trades. Building cheap in Texas is no longer the best business process, we’ll see if asset owners react differently going forward. Over the next few weeks and months, we will see hundreds of millions in losses announced as well as bankruptcies (see below about consumer impact). RWE renewables is first to identify a $300-$600million loss for its wind portfolio, of which they were part owner (meaning asset losses were even higher). While generation owners have their pricing hedged with off takers, they also have a production requirement to meet those deliveries. Since the turbines were frozen and unable to operate, RWE needed to go to the market at rates as high as $9,000/MWh to meet their contractual obligation. In short, being hedged caused a loss far exceeding any upside for being hedged in the first place since the hedge simply shift the risk from pricing to fuel availability layered on market rates. If you buy at $9/kWh and sell for $0.02/kWh, you’re underwater by 450X. If this happened for 3 days, the next 5 years will go to make up the error.
Understanding Texas Subsidies. Conservative leaders and primetime programming on Fox News are arguing that wind subsidies ruined the Texas grid. For the sake of the argument, we will ignore the fact that the lack of winterization caused the issue (regardless of fuel source), and look at where this is coming from. The root cause of the argument is that a transmission project called the Competitive Renewable Energy Zone (CREZ) was paid for by ratepayers and largely benefitted wind development. Since this cost was not paid by developers directly politicians are calling this a subsidy. CREZ caused wholesale power prices to drop by quite a bit, has plenty of gas generation connected to it and wasn’t paid by taxpayers. Here’s a 2014 review of the project by ERCOT in case you want to dunk on Tucker Carlson on Twitter.
The Fracked Methane Spike. Supply and demand will meet price gouging when it comes to Texas. At the peak energy crisis, natural gas prices went through the roof in Texas and abroad, something I wrote about last week. None other than the Dallas Cowboys’ owner Jerry Jones was the big winner and may find his CEO in front of a Senate committee. His words may already speak for themselves, see here.
Impact To Consumers. One of the first questions I asked on Twitter was whether consumers had exposure to variable pricing of if the retailers would suffer the negative spread. Most consumers are on fixed pricing agreements which means retailers lose the difference between contract and grid price. But some consumers, probably with some level of naïveté, signed variable cost agreements which match the market cost of electricity. One such provider, Griddy, has told its 29,000 customers to find an alternative source given their expectation that consumers will not be paying the $9/kWh that it cost them to heat their home.
POLR Vortex. Provider of last resort, POLR, is the customer acquisition following the winter event. Retailers will be suffering losses, some will not be able to survive from, and the big utilities like TXU, NRG and Reliant are fighting to get their share of POLR allocation which means consumers without retailers get assigned to them. There’s a certain stickiness to consumers so a $0 customer acquisition cost is business positive.
Solar’s Role. Solar was largely left out of the headlines. With only 6.5GW of capacity on the grid, solar generated nearly 3GW most of the time. Some capacity was offline due to grid shutoffs and some plants suffered from snowfall. We have not heard from asset owners about potential hedge issues at this point or how well storage owners were able to benefit during the peak pricing events.
Goodbye MOPR. FERC ends the pricing subsidy and PJM will be able to have the next capacity auction with more market driven bids.
Save California Net Metering. Sign this petition if you want to see the largest solar market continue thriving.
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Yann