Navigant Research Blog

Solar Market for Base of Pyramid Not So Pico

— April 14, 2014

In an upcoming report on pico solar lighting products (<10W) and solar home systems (<200W) sold primarily to rural communities in Africa and Asia, I cover the unit sales, revenue, and capacity of these small solar photovoltaic systems globally.  One of the most important trends covered in the report is that pico solar has transitioned from a humanitarian aspiration to big business – more than $100 million in 2014.  Corporate involvement in rural electrification has traditionally come in the form of corporate social responsibility initiatives, but real money is now flowing to solar companies serving the base of the pyramid market.  The success of a number of off-grid solar lighting companies and social enterprises has attracted interest from major corporations such as Panasonic, Schneider Electric, and Philips, as well as funding from investors.  Some of the more notable investments include:

  • In early 2014, d.light raised $11 million in Series C funding from DFJ, Omidyar Network, Nexus India Capital, Gray Ghost Ventures, Acumen Fund, and Garage Technology Ventures.  The company is one of the leading pico solar manufacturers, and has now raised $40 million and sold an estimated 6 million pico solar systems reaching 30 million people.
  • In early 2014, Persistent Energy Partners acquired Impact Energies, a pay-as-you-go, off-grid solar service provider working in West Africa that has reached 30,000 customers since 2011.  The renamed company, Persistent Energy Ghana, installs village solar microgrids and solar home systems.
  • In late 2013, Khosla Impact invested $1.8 million in a Series A round with BBOXX, a U.K.-based company that sells portable solar kits ranging from 7W to 185W and plug-and-play solar systems that range between 2 kW and 4 kW.  The company also provides a mobile pay-as-you-go service enabled by remote battery monitoring, which was the primary interest of Khosla.
  • In 2012, Greenlight Planet, one of the leading designers and distributors of solar light-emitting diode home lights, raised $4 million from Bamboo Finance and Dr. P.K. Sinha, co-founder of ZS Associates.  The investment followed previous financing by Dr. Sinha.  Greenlight Planet has sold more than 1.8 million solar lamps since the company was founded in 2008.
  • In 2012, Barefoot Power, one of the largest pico solar manufacturers, raised $5.3 million from three social investment funds (d.o.b. Foundation, ennovent, and Insitor Fund), existing shareholders (The Grace Foundation and Oikocredit Ecumenical Development Cooperative), and a number of private angel investors.

The full report will be released in the next few weeks.  It will discuss industry market drivers and challenges, and includes more than 20 company profiles and country-specific forecasts from 2014 to 2024.

 

As Race Tightens, Renewable Energy Costs Fall Quickly

— March 20, 2014

The most common metric used to compare the costs of different power generation technologies is levelized cost of energy (LCOE).  LCOE is defined as the average cost per unit of electricity over the life of a project, which is driven primarily by capital costs, operating costs, financing, and capacity factor (power output relative to the installed capacity).  All of these factors vary by technology and are continually changing.  The chart below shows a snapshot of LCOE for various technologies estimated by Navigant Consulting as of late 2013.  Note that each estimate provided represents an average of a wide range of values, given the many variables such as plant size, age, and location that exist within each technology.

U.S. Levelized Cost of Energy

(Source: Navigant Consulting)

PV Solar Cost Continues Its Precipitous Decline

This chart looked much different 5 years ago, and it will likely be very different in another 5 years.  Photovoltaic (PV) solar and wind in particular have seen dramatic cost reductions in recent years.  For example, average selling prices for PV solar modules have dropped from $3.50 per watt in 2007 to a current price of below $1.00 per watt for large customers.  In addition to declining costs, PV solar has been experiencing improved performance.  Different technologies will also have varying impacts on overall system output.  In warmer climates, for example, thin-film modules will generally produce higher capacity factors compared to crystalline silicon.  Similarly, tracking devices – which allow solar panels to follow the sun – improve the capacity factor of a PV system.  Over the past couple of years, single-axis tracking systems have seen an increase in market share due to lower prices and increased reliability.  While most of the adoption is currently in western states, where the performance benefit of tracking is the greatest, we expect to see more tracking systems across the entire market as prices continue to decline and reliability increases.  For example, Public Service Company of New Mexico recently filed for approval of 23 MW to be built in 2014 at a contracted price of just $2.03 per installed watt.

Wind Cost Resumes Its Downward Trend

The LCOE of wind power has experienced a similar decline since its modern day peak in 2009.  Average power purchase agreement prices for wind plants in the interior (windy) part of the United States were around $50 per MWh (in 2013 dollars) that year, compared to an average of $23 per MWh in 2013.  The newest generation of wind turbines have capacity factors that are approximately 10 percentage points higher (i.e., 45% instead of 35%) compared to just 5 years ago.  With the new large rotor turbines yet to be integrated into the U.S. fleet, we can expect continued improvements in the years ahead, with many projects achieving capacity of factors above 50%.

Mature technologies are also able to secure more favorable financing.  This is due to the lower perceived risk by financial providers, which improves the price competitiveness of these projects.  Both wind and solar are now becoming mainstream technologies and will ultimately become cost-competitive without the need for incentives.  As the newer renewable technologies mature, we expect them to benefit from more attractive financing terms, as well.

Readers should be cautioned that LCOE is only part of the story.  The short-term variability of renewables imposes some cost, especially at higher penetrations.  Resources and projects may require new or expanded transmission investment, which is typically not included in general LCOE estimates.

For those interested in hearing a lively discussion on this subject, representatives from Navigant Consulting, the Lawrence Berkeley National Laboratory, and the National Renewable Energy Laboratory will participate in a panel session covering LCOE forecasts for renewable energy and grid parity projections as part of a renewable energy workshop on May 5, 2014 at the AWEA WINDPOWER 2014 conference in Las Vegas.  For more information, click here.

Notes:  The chart assumes federal incentives only (e.g., 30% investment tax credit [ITC] for solar and accelerated depreciation).  PV is fixed axis.  Concentrated solar power (CSP) assumes trough technology.  Natural gas price of $3.00 per MMBtu.  Geothermal assumes installed cost of $5 per watt, capacity factor of 80%, and ITC of 10%.  Wind assumes 35% net capacity factor with no production tax credit (PTC)/ITC.

Bruce Hamilton is a director in the Energy Practice of Navigant Consulting.

 

Facing Solar Waves, Utilities Should Learn to Surf

— March 5, 2014

In my last blog, I described the relatively rapid fall that many incumbent telephone companies have suffered as wireless technology has replaced landlines as the dominant service providers for not only our voices, but also our data communications needs.

Why, as a participant in the electric utility industry, should you care?

Because the very same thing could happen to incumbent electric utilities, and maybe sooner than you think.  Solar panels and plug-in electric vehicles (PEVs) are spreading rapidly, allowing consumers to generate and even store their own power.  Prices are falling, and with or without government incentives, the penetration of renewable, distributed generation will continue to accelerate.  Storage will get better and commercial customers like Walmart will put panels across thousands of acres of rooftops.

All of this creates challenges for grid operations and (especially) electric utility business models.  (See my blogs on net metering and feed-in tariffs.)  As the fight over net metering has made abundantly clear, the century-old utility business model wasn’t designed for distributed generation – and this transformation is still in its early days.

Ride the Wave

But, couldn’t it also provide an opportunity?  In the first 10 years of wireless telecom service (according to surveys by CTIA), subscribership grew to just under 34 million.  In the second 10, it added 174 million, and since 2005, that figure has nearly doubled again.  That hockey stick phenomenon will happen in the solar and PEV industries, too.

NRG Energy, a retail energy marketer based in Princeton, New Jersey, has taken a proactive stance to solar.  Its NRG Solar division creates large-scale solar facilities and performs installations on commercial rooftops.  The NRG Residential Solar Solutions (RSS) division leases solar systems to homeowners, providing the panels, system design, monitoring, and performance guarantees, as well as several termination options (system removal, lease extension, or purchase).  RSS operates in 10 states, plus the District of Columbia, and has expansion plans in more states.  What’s more, NRG’s eVgo network is a privately funded electric vehicle infrastructure network of home charging stations and public fast charging stations.

NRG’s Alternative Energy division (which encompasses its solar activities) grew revenue to $83 million in 3Q 2013, up from $49 million the year before.  And while it still bleeds red ink, I can assure you that telcos lost money on their wireless divisions for many years before those units became the cash machines they are today.

Sizing the Competition

Vivant, SunRun, SolarCity, and SunPower are the big names among standalone solar financing and installation companies today; $1 billion was raised in 4Q 2013 alone for solar system financing.

SolarCity intends to grow its customer base to 1 million by 2018, while SunPower is reportedly about to announce a deal with Meritage Homes.  SolarCity earns about half of its revenue from solar system sales, with a low 5% operating margin, but it earns an attention-getting 66% margin on its lease business.

The level of competition and the public valuations of many of these solar companies demonstrate the market’s belief that solar (panels, financing, installation) will be a growth market for some time to come.

In order to enter the fray, regulated utilities will have to run their alternative energy ventures as unregulated subsidiaries (that’s how the telcos got into cellular), but the consolidated bottom line is what matters to investors.  And, as a consumer, I’m more likely to trust my solar installation and management to my longtime local power provider than an unknown, independent installer.  Ride the wave!

 

Futuristic Glass Spurs Solar Innovations

— January 31, 2014

First invented in the Bronze Age, 5,000 years or so ago, glass is such an integral part of modern life that we rarely give much thought as to how it performs or is produced.  Today, though, the development of novel forms of glass promises to bring high-tech, low-cost advances to a range of applications, including solar power.

Glass has many advantageous qualities and one major disadvantage: it’s brittle.  It shatters on impact.  We long ago mastered the art of molding glass into many different curves and fantastical shapes, but once it’s set, it’s set until you take a hammer to it.

That is changing, as researchers at McGill University in Montreal have adapted structural characteristics from the shells of mollusks to give glass new resilience and flexibility.  The scientists found that the extremely tough and bendable nacre, or mother-of-pearl, that coats the inner shells of the creatures is made up not of an unbroken surface, but of millions of microscopic components or “tablets.”  When the shell is bent or deformed, the cracks between the tablets allow it to bend, yet remain intact.  Think of blocks of sea ice floating on a moving water surface; they rise and fall and compress and spread, but the overall surface of the ice remains the same.

Fractured Yet Flexible

In the same way, the McGill researchers found that they can pre-crack glass with lasers to create a puzzle-piece design.  The resultant microfractures are filled with polyurethane, creating a material that is weak at the boundaries of the tiny fragments, but resilient as a whole.  Flexible glass.

The immediate applications envisioned include less breakable smartphones, for instance.  But advances in making glass more flexible, resilient, and versatile will likely have implications for solar power, as well.

When a technology is as commoditized as solar panels, with prices halving in just the last few years, the tendency is to think that innovation in the materials has reached an apex; the only further development needed is to squeeze more cost out of the manufacturing process.  Solar panels with next-generation glass, however, could help drive the Murphy’s Law process of price reductions in solar technology while also producing panels with a wider range of possible applications.  Crystalline silicon solar modules, which require the rigid protection provided by glass, are more efficient than amorphous silicon modules.  Amorphous silicon (often used in thin-film solar coatings) has the benefit, however, of being flexible, making it applicable in a host of environments where conventional glass is less robust.

Spray On, Not Tan

Developed at the University of South Florida in alliance with the National Renewable Energy Laboratory and being commercialized under the mark SolarWindow by New Energy Technologies, a new glass with tiny transparent solar cells integrated is due to reach the market this year.  New Energy produces both flat glass for windows and structural glass walls and curtains for tall structures that have all the usual qualities of glass and also act as solar panels.  Made of organic polymers (thus grown, not manufactured), the transparent solar cells are the world’s smallest, the company says, measuring less than one-fourth the size of a grain of rice.  They are sprayed onto the glass in a novel process that does not require the high temperatures and vacuum chambers of other spray-on solar technologies.

Meanwhile, building off of NASA’s R&D on solar panels for deep space satellites, Entech Solar has developed a concentrating solar system called SolarVolt that uses tiny versions of Fresnel lenses – originally developed in the 19th century to focus the beams of lighthouses for many miles out to sea.  The miniature photovoltaic array has achieved a 20X concentration of the sun’s rays, enabling much smaller-sized systems per unit of energy captured.

These advances in the structure of glass, a 5-millenium-old invention, could help accelerate the solar revolution and bring closer the day when renewable energy is less expensive, by any measure, than fossil fuels.

 

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