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Which business models unlock value of solar energy as it grows?

With solar electricity generating more than one terawatt-hour (one billion kilowatt hours) of electricity in the United States in 2010 and continuing to expand rapidly, the key question is, "How can companies best capture value as the industry grows?", said Michael Rogol, global PV analyst and CEO of Boston-based PHOTON Consulting.

Solar opportunities in installation, financing and related services

"The U.S. solar power sector is very profitable, but value is migrating from companies that manufacture toward companies that provide installation, financing and other services. As profit migrates, solar companies and utilities have at least seven models to capture value," said Rogol, during his presentation at the 2010 Solar Terawatt-hours Conference Series  in San Francisco.

Models to capture value in solar energy

• Solar equipment and software engineering and manufacturing
• Related equipment manufacturing such as sensors, monitors and regulators
• Installation and maintenance of installed systems
  
• Regulatory auditing - zoning, codes, renewable credits, etc .
  
• Renewable Energy Credits
  
• Equity investment opportunities
  
• Sales, marketing and outreach about solar energy
• Research, management and strategic consulting services
• Financing of solar systems (residential, commercial and generation)
  

Value Creation with Solar Energy

Strong value creation, including being low cost suppliers, agile traders, value-added service providers, system developers and bundlers of solar power with other technologies. For traditional electricity companies, the biggest challenge, Rogol noted, is to adjust their traditional businesses to create value from solar electricity.

Rogol showed how lower module prices are enabling swift growth in the North American solar market and how, as this occurs, profit within the sector is shifting downstream. The key to success, according to Rogol, is a strong, profitable business model capable of "unlocking value." He provided several key examples of strategies for strong value creation, including being

• low-cost suppliers,
  
• agile traders,
  
• value-added service providers,
  
• system developers and
  
• bundlers of solar power with other technologies.
  

For traditional electricity companies, the biggest challenge, he noted, is to adjust their traditional businesses to create value from solar electricity.

Solar consultants model company, geographic and industry projections from the outside-in, cross checking company announcements with providers and buyers. Photon PV data consists of historical and five-year forward projections for price, volume, revenue, cost, operating profit, operating margin and demand for c-Si and thin film technologies.

"This is not the dot-com boom with easy access to capital. Alternative energy companies need to build profitable businesses largely on their own. To do this requires detailed understanding of changing solar power market dynamics and how the electricity sector is evolving across North America," said Rogol.

Electricity is becoming the energy source of choice for a greener economy because it is possible to generate and transport electricity without the greenhouse gas residuals of petroleum and coal based generation feedstocks.

To support companies as they assess strategic moves in solar power, PHOTON Consulting publishes three in-depth business research reports each year focused on

• company risks,
  
• market risks and
  
• sector risks.
  

PHOTON Consulting's research reports provide solar companies at every step of the supply chain with the tools to make fact-based decisions in terms of price, volume and strategy. 

PHOTON Consulting is the largest dedicated solar energy research consultancy and is a leading supplier of in-depth research, management and strategic consulting services specific to the PV sector. With the deepest, broadest integrated coverage, PHOTON Consulting tracks the solar energy sector from feedstock to factory gate to end customer in every active and emerging market.

PHOTON Consulting is a robust source for research and analysis in solar power based on extensive research and data in the sector. For more information on PHOTON Consulting, visit the Company's website: http://www.photonconsulting.com.

A rooftop solar panel converts sunlight to electricity. In a new study, an expert describes progress toward an efficient and inexpensive method for storing and distributing solar energy in the home. Credit: Wikimedia Commons

New scientific discoveries are moving society toward the era of "personalized solar energy," in which the focus of electricity production shifts from huge central generating stations to individuals in their own homes and communities.

Home-scale electricity generation is the topic of a report by an international expert on solar energy published in the ACS' Inorganic Chemistry: "Chemistry of Personalized Solar Energy" . It describes a long-awaited, inexpensive method for solar energy storage that could help power homes and plug-in cars in the future while helping keep the environment clean.

Daniel Nocera explains that the global energy need will double by mid-century and triple by 2100 due to rising standards of living and world population growth.

Personalized solar energy - the capture and storage of solar energy at the individual or home level - could meet that demand in a sustainable way, especially in poorer areas of the world.

The report describes development of a practical, inexpensive storage system for achieving personalized solar energy. 

Fuel Cell Solar Energy

At its heart is an innovative catalyst that splits water molecules into oxygen and hydrogen that become fuel for producing electricity in a fuel cell. The new oxygen-evolving catalyst works like photosynthesis, the method plants use to make energy, producing clean energy from sunlight and water.

"Because energy use scales with wealth, point-of-use solar energy will put individuals, in the smallest village in the nonlegacy world and in the largest city of the legacy world, on a more level playing field," the report states.

SOURCE:

"Chemistry of Personalized Solar Energy"
Inorganic Chemistry

Community solar continues to attract a lot of attention as a means to expand participation in distributed solar energy generation.

Massachusetts New Metering

In the past year, Massachusetts has implemented a statewide neighborhood net metering program approved in 2008 legislation.

• Under the final rules, all net metered systems, including neighborhood net metered systems, may over-generate relative to on-site load.
• Regular net metered customers may either rollover credits in perpetuity or allocate excess generation credits to other customers of the same distribution utility.
• Neighborhood net metered customers must have a minimum of ten residential customers identified for distribution of excess generation credits and all customers served must be within the same municipality, ISO-New England's load zone, and service territory of one distribution utility.
• Regular net metered system credits are based on a fully bundled retail rate, excluding customer charges and a public goods charge.
• Neighborhood net metered system credits are based on the fully bundled rate minus the distribution portion and also exclude the customer charge and public goods charge.
• Excess generation credits are allocated as a dollar amount and are based on the rate class for which a host customer takes service.

A number of states continue to discuss community net metering programs in various contexts including California, Colorado, New Jersey and Washington.

Given the potential promise community solar programs offer in expanding solar markets and the intersection of community solar policies with net metering, IREC anticipates being involved in these states as they move forward with implementation. As part of those efforts, IREC has begun development of a community net metering model designed to incorporate the best practices of net metering within the larger framework of community solar.

SOURCE:  IREC 2009 Annual Report

Solar Growth Trends

Regulation of Solar Services Agreements (SSAs) has emerged as an important issue in supporting solar growth.

Confusingly, Power Purchase Agreement "PPA" is often used in reference to SSAs, however, PPA has long been the term for an wholesale sales agreement between a generator and a utility, but a SSA is actually a retail sales agreement between a solar array owner and the utility customer hosting a solar array.

This arrangement has become the norm, as SSA providers are able to use the available federal tax credits and depreciation, and free the host from tying up capital and taking on the risks of ownership.

By overcoming a number of barriers to customer uptake of solar, SSAs have become the preferred means for the financing solar by commercial customers and the use of solar SSAs is beginning to be seen in residential markets.

Because the use of solar SSAs is so beneficial to the growth of solar markets, IREC has been actively involved in state proceedings addressing participation of solar SSA providers in net metering and regulation of solar SSA providers as public utilities.

State Policies for SSAs

Over the past year, IREC has participated in proceedings in Colorado, Nevada, Arizona, New Mexico, Massachusetts and Michigan that addressed the legal and policy issues surrounding regulation of solar SSAs. 

As part of Michigan's adoption of net metering rules, the Michigan PSC clarified the definition of customer-generator to ensure that SSA providers would be allowed to participate in net metering.

Likewise, Massachusetts clarified in its net metering regulations that net metered systems may be owned by third-parties.

IREC continues to be involved in Arizona and New Mexico's consideration of the matter and anticipates being active in Washington as well.

The event will take place in San Diego, CA, September 14-16, 2009 at the Marriott Del Mar.  As a sponsor of this event, I am pleased to be able to invite you to attend the summit at a 33% discount.

You can register on the event website at http://www.infocastinc.com/utility09 or by calling Infocast directly at 818-888-4444.  To take advantage of this special offer, just enter discount code 097112  (to receive 33% off).You may either enter the discount code toward the end of online registration or mention the code to Infocast's customer service representative.  This offer does not apply to individuals already registered.

About the Utility Scale Solar Summit

Utility Scale Solar 2009 is the business hub where decision-makers--from project developers, technology providers, utilities, investors, lenders, EPC contractors and other industry players--who are rapidly expanding the utility scale project pipeline come to work out how to move these projects over the finish line.

This is a great chance to Network with over 150 Dealmakers from these organizations:

• 8minutenergy Renewables, LLC
• Abound Solar
• Acciona Solar Power Inc.
• Advanced Green Power Solutions
• Albiasa Corporation
• Black & Veatch
• Boeing
• Borrego Solar
• Borrego Solar Systems Inc.
• Bright Source Energy Inc.
• BrightSource
• Bureau of Land Management
• Chadbourne & Parke LLP
• Chico Electric
• CoBank
• Confoe
• CP Energy Group, LLC
• DAI Management Consultants
• Dewey & LeBoeuf, LLP
• Dexia Credit Local
• Duke Energy
• Edgewood Management, LLC
• Edison Misssion Energy
• EMCORE
• Energy 5.0 LLC
• Enfinity Corp
• enXco Development Corp.
• Esolar
• Eurus Energy Japan
• Fidelity National Title
• Foley & Lardner LLP
• GE Energy
• Gemini Solar Development Co.
• groSolar
• Helio Micro Utilities
• Helio Power
• Hunt Construction Group
• Hunton & Williams LLP
• Iberdrola Renewables
• K&L Gates, LLP
• Keenan Development Associates
• Landesbank Hessen Thuringen (Helaba)
• Maco Tech, Inc.
• Marathon Capital
• Mortenson Construction
• New Energy Finance
• NextEnergy
• NRG Energy, Inc.
• O2Energies, Inc.
• Orrick
• Pacific Gas & Electric
• Pacific Valley, LLC
• Rabobank
• Rabobank International
• Renewable Energy Week
• RMT, Inc.
• RMT, Inc.
• Robert W. Baird & Co.
• Rowths Soare
• Ryan Russell Ogden & Seltzer PC
• Sempra
• Senior Vice presiden of North American Markets eSOLAR
• Signet Solar Inc.
• Siliken Renewable Energy, Corp.
• Simple Solar
• Skadden, Arps, Slate, Meagher & Flom, LLP
• Skyfuel
• SMA America, Inc.
• SMUD
• Solar Energy Initiatives
• Solar Millennium, LLC
• Solar Power Partners, Inc.
• Solar Reserve LLC
• Solar Turbines
• Solar Turbines Incorporated
• SPG Solar
• Starpoint Solar
• Starwoof Energy Group Global, LLC
• Stewart Title Guaranty
• Stirling Energy Systems (SES)
• Stoel Rives LLP
• Sunergy Systems
• Sunpower
• Suntech America
• Suntech America, Inc.
• Swinerton Green
• TD Banknorth Project Finance
• The Boeing Company
• Trina Solar
• Triple M Development
• Turner Industries
• Unirac, Inc
• United Rural Development Organisation
• United Solar Ovonic
• Wanzek Construction
• White Construction Inc
• Wilson Sonsini Goodrich & Rosati
• Xantrex Technology Inc

Solar Decathelon
October 9-18, 2009
National Mall in Washington

The U.S. Department of Energy sponsors the international Solar Decatehlon and this year's participants in DOE's 2009 Solar Decathlon will exhibit a range on new innovations in solar PV and solar thermal technologies -- as well as green building. 

The Solar Decathlon competition challenges students to design and develop houses that can provide their own energy from the sunlight - a clean, renewable source of energy.  

The twenty collegiate teams from the United States, Canada, Spain and Germany will each build a completely self-sufficient solar powered house, showcasing energy-efficient amenities and smart home systems that provide reduced carbon emissions without sacrificing the comfort of modern conveniences.

 "The Solar Decathlon highlights President Obama's goal of improving our national security and transforming the economy by using off-the-shelf, clean energy technologies to reduce our dependence on foreign sources of oil, reduce our carbon emissions, and protect the environment," said U.S. Energy Secretary Steven Chu.  "As part of the building competition, the next generation of green engineers, architects, designers, and professionals gain valuable experience that will help them to lead America toward a clean energy future."

DOE's Solar Decathlon, which takes place October 9-18 on the National Mall in Washington, D.C., consists of 10 individual contests that evaluate the teams' skills in architecture, home design, and communications. The homes constructed by the teams must produce enough electricity and hot water from solar panels to perform all the normal functions of a home -- from powering the lights; to cooking, washing clothes and dishes; to powering home electronics; and maintaining a comfortable temperature.  This year, a new net-metering contest will evaluate each home's ability to produce its own power.  The competition focuses on cutting edge energy efficient and renewable energy innovation while providing a unique green jobs training opportunity for each of the students.

The start of the competition marks the culmination of more than two years of hard work by the student teams.  The twenty teams will assemble their homes on the National Mall in early October.   Following the Opening Ceremony on October 8, the homes will be open for public tours October 9-13 and 15-18.

This is DOE's fourth Solar Decathlon competition since premiering in 2002 with subsequent competitions in 2005 and 2007.  On average, each Solar Decathlon competition has drawn more than 100,000 visitors to the National Mall.

The colleges and universities competing in the 2009 Solar Decathlon are:

• Cornell University
• Iowa State University
• The Ohio State University
• Penn State
• Rice University
• Team Alberta (University of Calgary, SAIT Polytechnic, Alberta College of Art + Design, Mount Royal College)
• Team Boston (Boston Architectural College, Tufts University)
• Team California (Santa Clara University, California College of the Arts)
• Team Missouri (Missouri University of Science and Technology,  University of Missouri)
• Team Ontario/BC (University of Waterloo, Ryerson University, Simon Fraser University)
• Technische Universität Darmstadt
• Universidad de Puerto Rico
• Universidad Politécnica de Madrid
• The University of Arizona
• University of Illinois
• University of Kentucky
• University of Louisiana at Lafayette
• University of Minnesota
• University of Wisconsin-Milwaukee
• Virginia Tech

The Solar Decathlon is sponsored by DOE's Office of Energy Efficiency and Renewable Energy, in partnership with its National Renewable Energy Laboratory, which manages the event.  For more information, please visit http://www.solardecathlon.org/.

THE CLEAN ENERGY ECONOMY: All State Fact Sheets (2009)

A companion piece to the Clean Energy Economy report, individual fact sheets that quantify and describe each state's jobs, businesses and investments in the clean energy economy.

For example:

ALABAMA:  Alabama has a small but growing piece of America's clean energy economy. The state's number of jobs in the clean energy economy in 2007 was less than the national average of more than 15,000 jobs, but it increased slightly between 1998 and 2007 despite a lack of venture capital investments and few clean technology patents, and it exceeded the growth rate for overall jobs in Alabama during the same period.
 

FLORIDA: The Sunshine State has a large and growing piece of America's clean energy economy. Florida ranks in the top 10 states for jobs in the clean energy economy in 2007, with more than 30,000, and it attracted nearly $117 million in venture capital in the past three years, half of which has supported clean energy generation. The state created an Energy Systems Consortium among state universities to leverage the expertise of its research community to boost its clean technology industry.

Energy Productivity is higher in California than the rest of the country. While gains were similar from 2005 to 2006, the gap in energy productivity between California and the rest of the U.S. remains with California's energy productivity 68% higher than the U.S.

Measured as the ratio of energy consumed (inputs) to GDP (economic output), growth in energy productivity equates to more dollars of GDP generated per unit of energy consumed.

In 2006, California produced $2.17 of GDP for every 10,000 BTU of energy consumed. In comparison, the rest of the United States produced $1.29 for every 10,000 BTU of energy consumed.

Therefore, the difference in energy productivity between California and the rest of the U.S. is about 88 cents per 10,000 BTU of energy consumed.

The CALIFORNIA GREEN INNOVATION INDEX (2009) provides insight on a California culture that includes three decades of ambitious state environmental and energy policies, putting California on a path to energy independence and one of the lowest per capita carbon footprints in the nation, all the while growing one of the most vigorous economies in the world.

Solar is one of the renewable energies leading the new green economy in California with the Million Solar Roofs program, extensive solar PV installation training infrastructure development, and utility scale solar PV and solar thermal installations to meet California's demand for renewable energy and mandates in AB 32 and related greenhouse gas legislation.