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Title:Alternative Energy Stocks: The Investor Resource for Investing in Alternative Energy Stocks
Alternative Energy Stocks: The Investor Resource for Investing in Alternative Energy Stocks
May 05, 2014
Why Traffic Lights Are Turning Green For BioAmber
Jim Lane
As many technologies pivot or delay, one train keeps chugging on
its route to biosuccinic acid, and markets like BDO, resins and
What is it about the business model that keeps on working?
What can every integrated biorefinery learn from its approach?
In Minneapolis, BioAmber (BIOA)
just announced a contract to supply a minimum of 80% of PTTMCC
Biochem鈥檚 total bio-succinic acid needs until the end of 2017.
PTTMCC Biochem is a joint venture established by Mitsubishi
Chemical and PTT, Thailand鈥檚 largest oil and gas company, to
produce and sell polybutylene succinate (PBS), a biodegradable
plastic made from succinic acid and 1,4 butanediol (BDO). The JV
partners are building a PBS plant in Map Ta Phut, Rayong, Thailand
that will have an annual production capacity of 20,000 tons, and
is expected to be operational in the first half of 2015.
Now, let鈥檚 put this in context. According to NNFCC last year, the
global market for succinic acid is between 30,000 and 50,000
tonnes per year. If this were mobile phones, it鈥檇 be like coming
out of the box with a billion hand-set order. A single offtake
deal, with a take-or-pay component, for something like one-fifth
of global capacity? Huge.
The PBS plant in Thailand will consume approximately 14,000 tons
of succinic acid per year at full capacity 鈥 under the new
agreement, BioAmber could supply a minimum of 11,200 tons of
bioisuccinic acid if that PBS plant operates at full capacity.
BioAmber plans to supply PTTMCC from its 30,000 ton per year plant
under construction in Sarnia, Canada.
Putting BioAmber into a larger context
What is exactly so special about a company making roughly 65
million pounds of a little-known renewable chemical, with a
historically tiny global market?
After all, that is roughly equivalent, by tonnage, to a 10
million gallon first-gen biofuels plant 鈥 the kind that generally
closes down these days because of a lack of economies of scale.
There are two reasons that we are looking carefully at BioAmber.
First, as former DOE Biomass Program Manager Paul Bryan opined at
ABLC this year: 鈥淔ocus on the right products first.鈥 Bryan keyed
in on biosuccinic in his ABLC presentation, highlighting the
opportunities and advantages relating to the utilizing the oxygen
in biomass.
Second, BioAmber is avowedly pursuing a strategy based in careful
aggregation of strategic partners that bring investment and
offtake as well as financing relationships, while building further
applications for their molecules in work with R amp;D partners
that could be expected to translate into commercial partners down
the line. Which is to say, starting with an economically and
environmentally advantaged molecule and then working in
partnership with downstream customers to establish markets for
that molecule.
It鈥檚 very different than the conventional biobased fuels
strategy, which has been to set mandates to create market
certainty, and use that to create a favorable financing
environment, and encourage engagement with incumbents.
BioAmber鈥檚 first commercial plant in Sarnia: construction
Moving back to BioAmber, let鈥檚 look at the construction timeline
鈥 which has shifted back 4-6 weeks. The company鈥檚 first commercial
has slipped into early 2015 unless the company can make up some
time, which it indicates it might.
BioAmber CEO Jean-Fran莽ois Huc reports: 鈥淲e鈥檝e completed over 60%
of the detailed engineering and are now focused on completing the
detailed piping and electrical instrumentation work鈥or most for
equipment purchases and work packages鈥e鈥檙e seeing bids there are
coming in on or slightly below budget鈥iving us an increasing
confidence that we can bring the plant construction in on budget.鈥
鈥淭o date we鈥檝e lost approximately eight work days due to extreme
cold and snow. We鈥檝e also identified the potential for delays in a
few key equipment deliveries. The current trend suggests that if
we do not recover the lost days due to weather moving forward and
we鈥檙e not able to mitigate the risks around the equipment delivery
dates, the project completion could be delayed by up to four to
six weeks.鈥
The commissioning period is estimated at five months 鈥 meaning
that the plant could be operating in steady-state as soon as the
end of the first half of 2015 鈥 and BioAmber鈥檚 sales projections
for 2015 are in line with that.
Huc comments: 鈥淲hen you mechanically complete and you commission
and startup your plant, realistically you anticipate a three to
five month period, three months being aggressive and five months
being more conservative鈥ur expectation is that the plant would be
running in a continuous stable mode after five months and鈥e hope
to sell about 45% of the nameplate capacity in the first year.
BioAmber鈥檚 first commercial: customers
The company, meanwhile, has been hard at work on bringing on
customers. The combination of Vinmar and PTT contracts will tie up
nearly two-thirds of the plant鈥檚 nameplate capacity in 2015, and
the biosuccinic requirements of the Vinmar deal will more than use
the full capacity of the Sarnia plant (though Sarnia can be
expanded to as much as 50,000 metric tons).
Huc added: 鈥淲e brought on 18 new customers in 2013 that will help
to base load Sarnia and we worked with a number of companies to
test our bio-succinic acid in new and emerging applications that
offer the prospect of significant growth.
New applications and markets
The key for BioAmber to reach beyond the limited direct market
for succinic acid is through the development of new markets 鈥
using low-cost biosuccinic.
Huc comments: 鈥淥ver the past year we worked with a number of
innovative companies that validated our Bio-SA in several new
鈥淔or example, in artificial leather they demonstrated that the
polyester polyol made with Bio-SA offers better aesthetics
including softer touch than the polyols made with adipic acid.
This market reportedly consumes 150,000 tonnes of adipic acid
annually. Another example is in foams made with Bio-SA and
recycled PET. The Bio-SA provided performance benefits to the
polyols that were made from recycled PET, including reduced
viscosity, increased density and tensile strength, reduced
brittleness and improved stability in addition to increased
renewable content. These foams have been developed for a number of
applications including insulation panels and the near-term market
is estimated at 15,000 to 20,000 tonnes per year but with
significant growth potential.
鈥淪everal coatings companies have also demonstrated that resins
and polyols made with the Bio-SA offer advantages over adipates in
paints and coatings. These advantages include better gloss
retention and higher renewable content. We now believe that the
total addressable market for Bio-SA in coatings is approximately
600,000 tonnes per year.
鈥淥ur goal is to sign supplier agreements with market innovators
in these emerging market segments and to announce product launches
incorporating Bio-SA over the coming year.鈥
The future BDO plant
Let鈥檚 look at BDO in some detail.
As BioAmber explained at the time of its IPO: 鈥淪uccinic acid can
be used to manufacture a wide variety of products used every day,
including plastics, food additives and personal care products, and
can also be used as a building block for a number of derivative
chemicals. Today, petroleum-derived succinic acid is not used in
many potential applications because of its relatively high
production costs and selling price. We believe that our low-cost
production capability and our development of next-generation
bio-succinic derived products including 1,4 BDO, which is used to
produce polyesters, plastics, spandex and other products, will
provide us with access to a more than $10 billion market
The Vinmar relationship. The BDO opportunity
signaled in the IPO became more vivid early this year when Vinmar
has committed to purchase, in a 15-year master off-take agreement,
100% of the BDO produced in a 100,000 ton per year capacity plant
that BioAmber plans to build in North America and commission in
2017, Under the terms agreement, Vinmar also plans to invest in
the BDO plant, taking a minority equity stake of at least 10%, and
has a right of first refusal to invest in and secure 100% of the
off-take from a second BDO plant.
More on Vinmar. Vinmar has been selling close to
50,000 tonnes of BDO per year for the past several years. Vinmar
also has project development and financing expertise having helped
several partners secure project financing by leveraging Vinmar鈥檚
banking relationships and the take-or-pay agreements that they
Pricing: Huc reports: 鈥淎t recent BDO prices and
to give you a sense of those the global average price over the
past three years was approximately $2,800 per metric tonne
according Tecnon OrbiChem data, the annual sales from this plant
would be approximately 280 million representing over 4 billion in
revenues over the term of the contract.鈥
Execution risk. Producing BDO from succinic at
scale, at commercially feasible rates 鈥 well, there鈥檚 work left to
do. BioAmber reports that 鈥渨e鈥檙e continuing to work with our
exclusive partner Evonik to scale up and commercialize the
catalysts we have licensed from DuPont (DD).鈥
The timeline: Huc comments, 鈥淲e鈥檝e begun the
site selection process in North America, building on the site
selection process we had run a few years ago for Sarnia a lot, as
you can imagine the front-end of this BDO plant it鈥檚 just a big
succinic acid plant, so most of our requirements in terms of site
selection are identical to those we used in finally choosing
Sarnia鈥n parallel we鈥檒l be working to see what kind of government
support we can secure for that project so, that has to dovetail
with a toll manufacturing facility coming online in the U.S. and a
successful startup of the Sarnia plant and ideally all those
things come together in the summer of 2015 so that we鈥檙e in a
position to move to a financial close with a group of lenders and
equity partners.
Cash burn
The company reports: 鈥淥ur goal is to keep our cash burn under 20
million in 2014 while spending more money on BDO development and
engineering for the remainder of this year as we prepare to bring
the BDO toll manufacturing facility online next year.鈥 The company
has $83.7 million cash in hand, after reporting a net loss for
2013 of $33M, after a $39M loss in 2012.
PTT and Myriant
We鈥檒l be watching that 2017 date carefully, for another reason.
It may well suggest a completion date for a biosuccinic acid plant
that PTT has been investigating with Myriant. PTT has, since
January 2011, been a high-visibility strategic investor in
Myriant, putting $60M in the company a few years back 鈥 and
avowedly the companies have been signaling interest in PBS.
Reaction from BioAmber on the PTT deal
鈥淭his first succinic acid take-or-pay agreement is an important
milestone for BioAmber,鈥 said Babette Pettersen, BioAmber鈥檚 Chief
Commercial Officer. 鈥淭his contract guarantees significant sales
volume for our Sarnia plant during its first three years of
operation. PTTMCC is a major new buyer of bio-succinic acid and
locking up this substantial volume commitment will strengthen our
market leadership,鈥 she added.
Jim Lane is editor and
publisher of Biofuels Digest where this
was originally published.
Biofuels Digest is the most widely read Biofuels daily
read by 14,000+ organizations. Subscribe
Posted by Guest Contributor at 09:00 AM | Why Traffic Lights Are Turning Green For BioAmber
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May 04, 2014
Ten Clean Energy Stocks For 2014: May Update
Tom Konrad CFA
showers fell on both the broad market and clean energy stocks last
month, but my picks weathered the storm relatively well. My
clean energy benchmark (PBW)
was down 5.9% since the last update, and my broad market benchmark
(IWM) fell 1.7%. Meanwhile 10
Clean Energy Stocks for 2014 model portfolio also fell
1.7%. For the year so far, the clean energy benchmark is up
4.5%, having given back most of its large February gains, while the
broad market is down 2.5%. My model portfolio is up 2.2%,
having risen less than the benchmarks early in the year, but having
given back much less over the last couple months. The six
income oriented picks continue to outperform the four growth
oriented picks (up 9% vs. down 8%), as is to be expected in this
year's choppy market.
Performance details can be seen in the following chart and the stock
notes below.
Individual Stock Notes
(Current prices as of May 2nd, 2014. The "High Target"
and "Low Target" represent my December predictions of the ranges
within which these stocks would end the year, barring
extraordinary events.)
1. Hannon Armstrong
Sustainable Infrastructure (NYSE:HASI).
12/26/2013 Price: $13.85.
Low Target: $13. High Target: $16. Annualized
Dividend: $0.88.
Current Price: $13.15. YTD
Total US$ Return: -3.5%
Sustainable Infrastructure REIT Hannon Armstrong fell in April as
the market absorbed 5,750,000 additional
shares of stock from a secondary offering priced at $13.00
at the end of the month, including the underwriters' full
over-allotment option. The total raised was $74.75 million
before deducting underwriting fees at a price slightly above the
$12.50 IPO price from last year. Now that Hannon Armstrong
has completed deployment of the funds raised in its IPO, secondary
offerings will be necessary for the company to continue talking
advantage of its many opportunities it has to invest in
sustainable infrastructure projects.
This offering is accretive to current shareholders, since the
company's book value per share was $9.22 in the most recent
quarter, and this will raise the book value (and equity invested)
to a bit more than $10 per share by my calculation. Since
HASI is able to sustain a dividend of $0.88 per share using $9.20
in equity, they should be able to increase that to around $1 per
share as they deploy the money over the next two quarters.
Considering that it took the company approximately a year to
deploy the $167 million raised in the IPO, we should expect
another secondary offering within six months.
2. PFB Corporation
12/26/2013 Price: C$4.85. Low
Target: C$4. High Target: C$6.
Annualized Dividend: C$0.24.
Current Price: C$5.75. YTD Total C$ Return:
19.8%. YTD Total US$ Return:
Green building company PFB announced its 2013
results in March, but I neglected to cover them in the last
update. Revenue and Funds From Operations recovered somewhat
from the depressed levels in 2012, while earnings were boosted
greatly by a one-time gain from a sale-leaseback transaction of
PFB's buildings.
Capstone Infrastructure Corp (TSX:CSE.
12/26/2013 Price: C$4.05. Low
Target: C$3. High Target: C$5.
Annualized Dividend: C$0.30.
Current Price: C$4.06. YTD
Total C$ Return: 18.6% . YTD Total US$
Return: 14.6%
A number of analysts upgraded independent power producer Capstone
Infrastructure's stock in response to the new power purchase
agreement for its Cardinal plant which I wrote
about last month. Four analysts now have a "Buy"
rating on the stock, with three rating it "Hold." Their average
price target is C$4.64.
The company paid its regular quarterly dividend of C$0.075 on
April 30th.
4. Primary Energy
Recycling Corp (TSX:PRI,
12/26/2013 Price: C$4.93. Low
Target: C$4. High Target: C$7. Annualized
Dividend: US$0.28.
Current Price: C$5.49. YTD Total C$
Return: 12.5% . YTD Total US$ Return:
Waste heat recovery firm Primary Energy was also upgraded in
response to its renewed Cokenergy contract, also discussed last
month. Jacob Securities increased its rating from "Hold" to
"Buy," although this change was in part due to the firm's lower
expectations for returns for the overall market of Canadian
The company announced its first quarterly dividend at the new
US$0.07 per share rate payable to investors of record as of May
14th. Note that although the stock trades in Canada, all of
its operations are in the US, so it reduces exchange rate risk by
paying dividends in US dollars.
5. Accell
Group (Amsterdam:ACCEL,
12/26/2013 Price: 鈧13.59. Annual
Dividend 鈧0.55 Low Target: 鈧11.5.
High Target: 鈧18.
Current Price: 鈧14.41. YTD
Total 鈧 Return: 6.0%
. YTD Total US$ Return: 6.2%
Bicycle manufacturer and distributor Accell Group gave a sale
update. Favorable weather helped European sales, but the
cold winter hurt sales in the US. Parts and accessories
sales growth was good, leaving overall revenues in line with
previous guidance. The company's annual dividend was set at
鈧0.55, payable to shareholders as of the end of April.
6. New Flyer Industries
12/26/2013 Price: C$10.57. Low
Target: C$8. High Target: C$16.
Annualized Dividend: C$0.585.
Current Price: C$11.84. YTD Total C$
Return: 13.9% . YTD Total US$ Return:
Leading transit bus manufacturer New Flyer announced its
deliveries, orders and backlog for the first quarter.
Financial results are scheduled for May 7th. The company
delivered more buses and continued to refill its backlog as the
industry recovers from its multi-year downturn. The first
five of the company's new MiDi庐
mid-sized buses entered production in the first quarter.
7. Ameresco, Inc.
12/26/2013 Price: $9.64. Low
Target: $8. High Target: $16. No Dividend.
Current Price: $6.27 YTD Total US$
Return: -35%.
The stock of energy performance contracting firm Ameresco
continued to decline in response to investor disappointment with
forward guidance, as discussed in the last update. Company
CEO George Sakellaris continues to take advantage of the depressed
stock price to buy more of his company's stock. Although I
consider this a long-term play, I added to my own position as
8. Power REIT (NYSE:PW).
12/26/2013 Price: $8.42. Low
Target: $7. High Target: $20. Dividend currently
Current Price: $9.25 YTD Total US$ Return: 9.9%
Solar and rail real estate investment trust Power REIT closed on the
previously announced purchase of 450 acres of land which will host a
60 MW solar farm in Kern County, California. The farm is
expected to be completed this year. It also obtained a $26.2
million credit facility which should allow the refinancing of the
bridge loans used to finance the last transaction.
At the end of the month, Power REIT's board granted CEO David Lesser
an exemption from the requirement that no individual may own more
than 10% of the company's stock. The company's bylaws require
such an exemption because Power REIT would no longer qualify as a
REIT under IRS rules if the top 5 shareholders own 50% or more of
outstanding stock. Since no other individual owns more than
the 5% limit after which a holding would have to be reported, Power
REIT is not at risk of losing its REIT status as long as Lesser's
holding remains below 30%. Lesser told me that he wants the
exemption so that he can continue buying the stock on the open
market at what he believes are extremely depressed prices.
I was personally deposed as a "non-party" in the company's ongoing
civil case against the lessees of its rail asset, Norkfolk Southern
Corporation (NYSE:NSC) and Wheeling and Lake Erie railway
(WLE). The opposing attorney wasted a full four hours of
everyone's time asking me about practically every email I had ever
exchanged with company Lesser, the articles I've written, and the
underlying documents I provided to her. As far as I could
tell, the only things she managed to prove through the exercise were
that my articles should not be a basis for the eventual ruling in
the case (not that this was ever at issue), and that she does not
mind wasting her clients' and Power REIT's money pursuing wild goose
Fortunately, it is my interpretation of the lease agreement that the
lessees should be liable for both their own and Power REIT's legal
expenses. Not that my opinion is relevant; that will depend on
the judge or the terms of an eventual settlement.
She did apologize for the rudeness of a server who showed up at my
house 10pm to give me the summons, but not for wasting everyone's
time. Of course, wasting everyone's time could be precisely
what NSC and WLE want.
9. MiX Telematics
Limited (NASD:MIXT).
12/26/2013 Price: $12.17. Low
Target: $8. High Target: $25.
No Dividend.
Current Price: $10.65. YTD Total US$ Return:
Global provider of software as a service fleet and mobile asset
management, MiX Telematics introduced its web
reporting suite "DynaMiX" to Europeans at the Commercial Vehicle Show
10. Alterra Power Corp.
12/26/2013 Price: C$0.28. Low Target:
C$0.20. High Target: C$0.60. No Dividend.
Current Price: C$0.31 YTD Total C$
Return: 10.7% . YTD Total US$ Return:
Renewable energy developer and operator Alterra Power announced a
joint venture with its partner on a number of previous projects,
Fiera Axium Infrastructure. Alterra will own 51% of the
project and oversee construction.
Two Speculative Clean Energy Penny Stocks for 2014
Ram Power Corp (TSX:RPG,
12/26/2013 Price: C$0.08. Low Target:
C$0.00. High Target: C$0.22. No Dividend.
Current Price: C$0.07 YTD Total C$
Return: -12.5% . YTD Total US$ Return:
Geothermal power developer Ram Power completed the sale of its
Geysers Project to US Geothermal (NYSE:HTM.) The proceeds
should help cover operating expenses while we await the results of
the stabilization period and performance test of Ram's marquee San
Jacinto-Tizate project. Depending on the results of that
test, Ram may be eligible for distributions from the
project. The test is expected to conclude on May 25th.
Finavera Wind Energy
12/26/2013 Price: C$0.075. Low Target:
C$0.00. High Target: C$0.22. No Dividend.
Current Price: C$0.125 YTD Total C$
Return: 66.7% . YTD Total US$ Return:
Shares of wind project developer Finavera continued to appreciate
slightly in response the completion of the assignment of its
184MW Miekle wind project to Pattern Energy Group (NASD:PEGI)
which I discussed last month.
Final Thoughts
After the amazing run the stock markets had last year, it's not
surprising that this year is more subdued. The summer months
tend to be particularly weak ones for the markets. Hence I
expect my safer picks to continue to do relatively well, and I am
starting to increase the size of my market hedges.
If I were to buy any of these stocks today, I'd be looking at Ram
Power, because its performance is going to be all about the results
of the geothermal capacity test due at the end of May, not about
what the broad market is doing. While I'd be tempted to buy
MiX Telematics and Ameresco at current prices, I would not want to
do so without a market hedge, because I feel weak market conditions
could easily drive either lower.
DISCLAIMER: Past performance is
not a guarantee or a reliable indicator of future results.
This article contains the current opinions of the author and
such opinions are subject to change without notice. This
article has been distributed for informational purposes only.
Forecasts, estimates, and certain information contained herein
should not be considered as investment advice or a
recommendation of any particular security, strategy or
investment product. Information contained herein has been
obtained from sources believed to be reliable, but not
Posted by Tom Konrad at 09:46 AM | Permalink
| Comments (0)
May 03, 2014
Can Alternative Energy Mutual Funds and ETFs Continue to Beat the Market?
By Harris
Alternative Energy Mutual Fund Returns
Alternative energy mutual funds have proven to be an excellent
investment over the past year or more, but those gains have
flattened out as of late. MFs are up 33% on average with even the
lowest returning fund, Gabelli SRI Green AAA (SRIGX),
up 15% for the year.
The alternative energy sector is by far beating the overall market.
For comparison, as of April 21 the tech heavy NASDAQ was up around
27% for 12 months, the S amp;P 500 by 20%, and the Dow Jones
Industrial Average only 13%
Alternative Energy ETF Returns
Green ETFs are posting excellent gains overall for the past 12
months, up 51% on average. As with MFs, quarterly returns are
relatively flat, with the exception of nice gains in First Trust
ISE-Revere Natural Gas Index Fund (FCG) and iPath Global Carbon ETN
An indication of how much the fortune of alternative energy ETFs
have changed can be found by looking at long-term returns. Currently
alternative energy ETFs are down 5.9% on average over a three-year
time frame. Eight out of 14 funds, or a bit less than half, are
trading down. Compare that with a year ago, when alternative energy
ETFs were down 15.5% on average over a three-year time frame, with
more than 70% of funds showing a loss. When looking at where annual
returns were a year ago, about 40% of the alternative energy ETFs
were down. On average the ETFs were flat for the year, as compared
to the large one-year gains alternative energy ETFs are showing now鈥
Individuals involved with the Roen Financial Report and Swiftwood
Press LLC do not own or control shares of any companies mentioned
in this article. It is also possible that individuals may own or
control shares of one or more of the underlying securities
contained in the Mutual Funds or Exchange Traded Funds mentioned
in this article. Any advice and/or recommendations made in this
article are of a general nature and are not to be considered
specific investment advice. Individuals should seek advice from
their investment professional before making any important
financial decisions. See Terms of Use
for more information.
About the author
Harris Roen is Editor of the 鈥淩OEN FINANCIAL REPORT鈥 by
Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT
05401. 漏 Copyright 2010 Swiftwood Press LLC. All rights reserved;
reprinting by permission only. For reprints please contact us at POSTMASTER: Send address changes to Roen
Financial Report, 82 Church Street, Suite 303, Burlington, VT
05401. Application to Mail at Periodicals Postage Prices is
Pending at Burlington VT and additional Mailing offices.
Remember to always consult with your investment professional
before making important financial decisions.
Posted by Harris Roen at 06:28 PM | Permalink
| Comments (0)
May 02, 2014
Can't Put Solar On Your House? Four Ways To Invest In Solar Leases
Tom Konrad CFA
Disclosure: I and my clients have long positions in HASI. I
have sold NYLD $40 and $45 calls short.
The secret sauce for bringing residential solar into the
mainstream is the solar lease. With the simple value
proposition of little or no money down and cost savings from day
one, a homeowner does not have to be an environmentalist or green
to be interested in the green of a solar lease. He or she
simply needs to live in a state where the combination of annual
sunshine and state incentives provide the economics to make solar
leases profitable for the lender and installer.
Low interest rates and the rapidly falling price of solar panels
have rapidly expanded the number of states where solar leases are
available in recent years, so much so that residential solar lease
pioneer SolarCity (NASD:SCTY)
grabbed 26% of the rapidly growing residential market in 2013.
Of the top five residential solar installers on GTM
Research鈥檚 2013 U.S. PV
Leaderboard, four offer solar leases. Commercial
solar leases were pioneered by SunEdison (NASD:SUNE)
a decade ago, but they only began to transform the solar market
place when SolarCity and competitors like SunRun and Vivint Solar
began offering them to homeowners.
Solar Gardens
While the opportunity to take advantage of attractive solar
economics is expanding rapidly to more states, not every home
owner has a suitable unshaded roof. Those who want to
democratize the solar opportunity usually favor community
solar farms, also known as solar gardens. These
structures allow community members to each buy a share of a larger
central solar installation, receiving credits on their electric
bill, as well as a proportional share of the tax benefits.
Unfortunately, creating solar gardens requires specific state
legislation or action by the local utility or utility regulatory
commission, and the difficultly of making such rule changes means
that solar gardens are available in far fewer locations and to
fewer individuals than solar leases.
Solar Crowdfunding
Mosaic is also working to democratize solar investment
through crowdfunding. The company avoids the complexity of
direct investment in solar farms by making loans to solar
developers backed by a solar farm鈥檚 cash flow. It then
offers pieces of loans to small investors though its crowd funding
portal, taking a small cut of the interest to pay for its
operations. While individuals can investment as little as
$25, securities laws currently limit this opportunity to
accreditied (i.e. wealthy) investors and residents of California
and New York.
In practice, an even greater limitation has been the lack of
available projects, with only $5.6 million invested in 34MW of
projects since the first investment in late 2012. That is
approximately as much solar as 5,683 typical 6kW residential solar
Fortunately, the size and number of Solar Mosaic鈥檚 loans has been
increasing. One particularly intriguing forthcoming project
is the Mosaic
Home Solar Loan in partnership with national installer
I expect this product will appeal to Solar Mosaic鈥檚
investors, since it will finance residential systems.
Financing solar for a homeowner will likely have more
emotional appeal than financing a commercial installation on a
convention center or school.
Another crowdfunding site, SunFunder,
enables individuals to invest in solar projects bringing power to
the developing world. It offers interest-paying investments
to accredited investors. Ordinary investors can participate
with loans that earn repayment of principal as well as interest
credits in the form of 鈥淚mpact points.鈥 Impact points cannot
be withdrawn, but they can be re-invested in other projects.
Solar Bonds
It seems likely that it will be some time before Mosaic can get
enough solar loans (residential or otherwise) into its system to
satisfy investor demand. Until that happens, and until
Mosaic is able to offer investments to ordinary investors
nationwide, many will have to look elsewhere to invest in solar
One promising option on the horizon is bonds backed by solar
leases. SolarCity was the first to issue such bonds, with a
million offering in November of last year. That
offering was 71% backed by residential solar leases, with the
balance backed by commercial solar. They followed this with
a 87%
residential $70 million offering which closed on April 10th.
Like most green
bond issues in recent months, SolarCity鈥檚 bonds were only
available to institutional investors. SolarCity has little
incentive to offer these bonds to small investors, because demand
from institutional investors greatly exceeded supply.
Another company likely to issue bonds partially backed by solar
leases is Hannon Armstrong Sustainable Infrastructure (NYSE:HASI.)
This REIT invests in a wide range of sustainable
infrastructure, and then issues Sustainable Yield Bonds (SYBs)
backed by these projects, but also keeps some on its balance
Hannon Armstrong鈥檚 CEO, Jeffrey Eckel, told me in an interview
that he believes Hannon Armstrong is unique in that it explicitly
measures the climate emissions reduction associated with each
project it invests in. The first $100
million round of SYBs, issued in December, invested in
projects which reduced greenhouse gas emissions by 0.61 metric
tons per $1,000 investment. That means a typical US-based
investor with a carbon footprint of 17.6
metric tons per year could offset a year鈥檚 worth of
emissions with a $28,852 investment in the first tranche of SYBs.
While that is far more than the cost of equivalent carbon
offsets, such offsets are a cost, while SYBs are an investment
which also pay a competitive 2.79% interest rate.
Investors interested in funding solar leases should be interested
in Hannon Armstrong鈥檚 future SYB rounds, since the company just
signed two deals to fund solar leases. On April 16th, the
company announced
a deal to jointly originate and fund up to $100 million
financing for distributed solar projects with Sol Systems.
This followed the April 3rd announcement that the company
had provided $42 million in debt to fund SunPower Corporation鈥檚
residential solar lease program.
According to Eckel, solar leases tend to have a lower climate
impact per dollar invested than most of it other investments, but
the impact will be positive for both these investments.
Solar Lease Stocks
With bonds backed by solar leases mostly being sold to
institutional investors, stocks are probably the easiest way for
individual investors to gain exposure to solar leases. Both
SolarCity and Hannon Armstrong are retaining a portion of their
solar leases on their own balance sheets. By far the purest
exposure to solar leases will come from industry leader SolarCity,
while Hannon Armstrong鈥檚 exposure to renewable energy projects
will always remain below 25%, since this is a requirement of its
REIT status.
SolarCity had deployed approximately 380 MW of solar through the
end of March. With a market capitalization of $5.28 billion,
that means each $14 dollars invested in SCTY was backed by 1 watt
of a solar lease. In other words, if you鈥檙e thinking of
investing in SolarCity stock as an alternative to putting solar on
your roof, you鈥檙e essentially paying $14 a watt. That is far
more expensive than any installation SolarCity has installed.
The typical cost per
watt for a residential solar system in California was $5.75
in the fourth quarter of 2013.
While Hannon Armstrong has funded far fewer solar systems, the
two deals for $142 million described above should account for
about 15% to 20% of its future market capitalization. If the
$42 million for SunPower comes in at $6 per watt, and the $100
million of distributed commercial systems cost $4 per watt, that
will amount to a total of 32 MW of solar. As of the end of
2013, Hannon Armstrong had invested 32% of its capital (or $202
million) in clean energy projects, some of which would have been
solar. If 20% of this was solar at $5 per watt, that would
amount to another 40MW of solar. Putting this together, my
best estimate is that each $10 to $20 invested in HASI will
include funding for 1 watt of solar, as well as 5 or more watts of
wind and geothermal projects and yet more energy efficiency.
Unlike SolarCity, Hannon Armstrong is currently profitable
and pays a 6.6% dividend yield at the current $13.34 stock price.
Another yield-focused stock with some investments in solar leases
is NRG Yield (NYSE:NYLD.)
This company has a dividend yield of 3.1% at the current
stock price of $42.50. The company owns a mix of thermal and
renewable generation, with 34% of its generation from renewables
in 2013. It owns 313 MW of mostly utility scale solar, and
101 MW of wind farms, and has a $2.09 billion market
capitalization. Hence each $6.67 invested in NRG Yield funds
1 watt of utility scale solar and 1/3 of a watt of wind.
If you always wanted to own a solar system, but lack a suitable
roof, a large and rapidly growing number of investments are now
available. If your primary goal is attractive financial
returns, the best investments are Solar Mosaic (4.4% to 7% yield)
and Hannon Armstrong (6.6%.)
Solar Mosaic investments have a number of downsides, such as the
limited number of available projects, restriction to accredited
investors and residents of New York and California, and the
requirement that you hold your investments to maturity.
While most of the money invested in Hannon Armstrong goes to
fund types of sustainable infrastructure other than solar, each
dollar funds approximately as much solar as a dollar invested in
SolarCity, but also includes much larger investments in other
types of clean energy and in energy efficiency.
At $6.67 per solar watt, NRG Yield is the cheapest way to fund
solar with a stock market investment, but this company includes
considerable fossil generation and has a much lower yield (3.1%)
than Hannon Armstrong.
While none of these investments is perfect in its ability to
replicate the economics and climate impact of putting solar on
your home, the number of options is rapidly increasing. If
you live in one
of seven states (MA,CO, ME, RI, VT, WA,DE, OH) you may be
able to invest in a solar garden. Until then, my top pick
combining high climate impact with high yield and ease of
investment is Hannon Armstrong Sustainable infrastructure.
This article was first
published on the author's blog, Green Stocks
on April 21st.
DISCLAIMER: Past performance is
not a guarantee or a reliable indicator of future results.
This article contains the current opinions of the author and
such opinions are subject to change without notice. This
article has been distributed for informational purposes only.
Forecasts, estimates, and certain information contained herein
should not be considered as investment advice or a
recommendation of any particular security, strategy or
investment product. Information contained herein has been
obtained from sources believed to be reliable, but not
Posted by Tom Konrad at 08:55 AM | Permalink
| Comments (0)
May 01, 2014
Mantra Energy: The Future of Portable Fuel Cell Technology?
by Lee Shane
When one thinks of fuel cells and fuel cell
technology some names immediately come to mind. Ballard Power (BLDP)
went public in 1993 and was listed on NASDAQ in 1995. A company that made its debut
in 1997 was Plug Power (PLUG),
a joint venture between DTE Energy and Mechanical Technology Inc. Hydrogenics (HYGS)
is a company that has been around for 60 years, but more recently
has gotten investor attention for their fuel cell technology.
Most of the technology produced by well-known
fuel cell companies share common features鈥
They are based on fuel
cell technology that requires hydrogen gas or a reformer that
makes H2 out of the fossil fuel feed. They use a very expensive,
very rare catalyst, Platinum.
Portable fuel
cells are based on fuel cell technology that requires a PEM,
Proton Exchange polymer Membrane
They have all enjoyed
various levels of success, but the existing technology appears
to be limited to heavy vehicles (buses / forklifts) and backup
power systems for specific applications.
The reality is that most of the existing fuel
cell technology has never really reached the level of portability
once imagined for fuel cells.
However one new entrant in the fuel cell sector
may be capable of regenerating some of the early initial
excitement. They have
eliminated the Achilles heel, the PEM membrane, the bipolar
plates, and the platinum catalyst鈥
That company is Mantra Energy Alternatives (MVTG)
based out of British Columbia.
Recently MVTG has revealed their patented MRFC
fuel cell. It is a
"membrane-less" and "platinum-free" ultra-low cost fuel cell that
appears to be totally unique in the market. As mentioned previously, the
PEM membrane, the bi-polar plates, and the precious metals
catalyst are among the most expensive and heavy parts of any fuel
cell. The PEM Membrane is also one of the degrading components of
PEM fuel cells, so the MVTG MRFC fuel cell is expected to have a
much longer operating life, because there is no membrane to
degrade. MVTG claims to have eliminated about 2/3rds of the cost
of a typical PEM style fuel cell.
We know the significant infrastructure
challenges hydrogen gas still presents for widespread commercial
deployment. It was
recently reported that even now there may be less than 15
commercially accessible hydrogen fueling stations available in the
U.S. But the
MVTG-MRFC fuel cell does not require hydrogen gas. MVTG has eliminated the need
for H2 gas feed in their MRFC fuel cells, and instead uses
non-flamable liquid formates and formic acid as fuel. It is the H proton
bonded to the back bone of a CO2-molecule (which is formic acid)
that is the hydrogen fuel that the MVTG-MRFC fuel cell uses, and
in that state, formate-formic acid, it is non-flammable, and is
stored at ambient pressure and temperature. The MVTG fuel cell also
does not require an expensive, energy consuming, bulky, and heavy
reformer like other fuel cells use to handle direct fossil fuel
The technology is the result of an impressive
R amp;D collaboration from multiple Universities located in
Canada, Japan, and the U.S.
The potential of this new fuel cell technology makes it
worthy of acknowledgment.
Lee Shane
works in information technology for a Fortune 500 company, and
is an individual investor with over 20 years experience.
His focus is on small to mid size technology companies that
have the potential to be disruptive, or offer benefits to the
sectors they are targeting that legacy technology may not
currently provide. He has a strong interest in green
building concepts and alternative energy and looks for
hands-on opportunities in those areas
Posted by Guest Contributor at 09:25 AM | Mantra Energy: The Future of Portable Fuel Cell Technology?
| Comments (0)
April 30, 2014
Beijing Taking Hands-Off Approach To Solar Recovery
by Doug Young
China sent an important message to the struggling solar panel
sector last week when one of the country鈥檚 major manufacturers was
forced to turn to global capital markets to raise new funds,
hinting that it couldn鈥檛 receive the money from state-backed
domestic sources. The move sparked a sell-off for New York-listed
shares of Yingli Green Energy (NYSE: YGE),
as its request for funds met with a frosty response on Wall
The fact that Yingli had to seek funding from commercial-oriented
western investors indicates Beijing is taking a hands-off approach
to financing for this important but embattled industry as it tries
to emerge from a 3 year slump. Chinese leaders should continue to
send similar signals not only for the solar sector but also other
key industries, in a broader effort to wean them from state
support and create sustainable companies that can become global
Yingli hasn鈥檛 posted a profit for more than 2 years, and reported
a net loss of $128 million in its most recent reporting quarter.
The company and most of its peers have been losing money since
2011, when the industry tumbled into the red due to overcapacity.
The downturn caused many firms to go bankrupt, with former giants
Suntech (OTC: STPFQ)
and LDK Solar (OTC: LDKSY)
as the 2 most prominent examples in China. In the meantime, the
financial position of surviving players like Yingli remains weak
as prices finally start to rebound. To shore up its position,
Yingli turned to Wall Street last week to raise a relatively
modest $83 million through the issue of new American Depositary
Shares (ADSs) in New York where its stock is currently traded.
The company ultimately sold the shares for $3.50 each, or more
than 20 percent below its stock price when it first announced the
plan. (company announcement) The need for such a
big discount reflected ongoing investor concern about both Yingli
and broader prospects for the solar sector鈥檚 recovery.
Announcement of the discount sparked a sell-off in Yingli鈥檚
shares, which tumbled 18 percent in the 3 trading days after the
plan was first announced, wiping out around $100 million in
shareholder value.
Yingli鈥檚 decision to tap western markets for its fund raising
followed two similar earlier developments that showed Beijing was
taking a more hands-off approach to the solar panel sector in the
uphill climb from its downturn.
The first of those came in February, when Canadian Solar
(Nasdaq: CSIQ)
announced plans to issue new stock and bonds to raise $200
million. That announcement sparked a smaller 8 percent sell-off in
Canadian Solar鈥檚 shares as investors also greeted the plan with
limited enthusiasm, even though the company is one of the few to
recently return to profitability.
The second sign of Beijing鈥檚 laissez faire approach came last
month when mid-sized panel maker Chaori Solar
(shenzhen: 002506) missed an interest payment on some of it
domestic bonds, becoming the first default on such domestic
corporate debt in modern Chinese history. Many viewed that move as
a sign that China was preparing to allow similar defaults on
corporate debt, and abandon its past practice of sending in
state-run entities to rescue such companies.
In all 3 cases, it would have been quite easy for Beijing or
local governments to come to the assistance of Canadian Solar,
Chaori and Yingli. Officials could have provided critical
assistance in a number of ways, such as ordering local state-run
banks to make low-interest loans or calling on other state-run
entities to provide funding.
But in each instance, the government has shown a determination to
let market forces dictate developments, even if that meant wiping
out millions of dollars in investor value or shaking the domestic
corporate bond market by signaling the potential for more
defaults. Such actions may cause some pain in the short term for
companies, their investors and local economies, but will help to
create a profitable, sector that can be commercially viable over
the longer term.
Beijing should extend this market-oriented approach to other
sectors that are also struggling with overcapacity, such as steel
and aluminum, which would help to build commercially viable
industries over the longer term. In place of direct financing, it
could gradually introduce less aggressive, more western-style
incentives like tax breaks to foster growth in sectors it wants to
Such an approach will inevitably create some pain for the
affected sectors, forcing plant closures and lost investment
dollars. But over the long run it will put China鈥檚 economy on a
sounder footing to ensure healthy sustainable growth.
Bottom line: Yingli鈥檚 move to raise capital in
New York signals Beijing will take a laissez faire approach to the
solar sector as it claws its way back to health.Doug Young has
lived and worked in China for 15 years, much of that as a
journalist for Reuters writing about Chinese companies. He
currently lives in Shanghai where he teaches financial
journalism at Fudan University. He writes daily on his blog, Young麓s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and
Hong Kong. He is also author of a new book about the media in
China, The
Line: How The Media Dictates Public Opinion in Modern China.
Posted by Doug Young at 09:11 AM | Beijing Taking Hands-Off Approach To Solar Recovery
| Comments (0)
April 29, 2014
Kandi: The World's Greatest Non-Candy Company
Ed. Note: This article was first published as an instablog by
Investments' on Seeking Alpha, and was intended as an
April Fool's joke post. I found it very funny. Kandi
advocates may not.
Wouldn't it be nice to invest in the best business in the world?
Now, I don't want to hyperbolize, but I believe I have uncovered
the greatest investment opportunity in the history of the
universe. This perfect company goes by the sweet name of Kandi
Technologies (KNDI). Now, I know what
you're probably thinking: "Mmm, candy..."
If this is the case, you're either A) Homer Simpson, or B)
Hungry. Why are you still reading this? Go fix yourself a snack or
grab some actual candy, because it's going to take a while to
describe just how incredible this company is.
Are you back? Good. Anyway, contrary to what you were probably
thinking when on your candy break, the company Kandi is actually a
manufacturer of Electric Vehicles in China. Now, wait just a
minute, you ask out loud, causing your spouse, dog, or coworkers
to look at you like a crazy person, "Isn't China irredeemably
The answer, of course, is yes. But it's only their politicians.
Oh, and some of their CEOs. So basically it's exactly the same as
here in the good old US of A, except slightly less socialist. The
main difference is that they have a much larger population than
us, the US. Wikipedia, the main source of information for lazy
writers like yours truly, estimates that they have over 1.3
billion people. That's billion, with a B. Or whatever letter of
the alphabet that "billion" starts with in Chinese.
But, no matter how you ignorantly translate it, this is a fairly
large addressable market. If every man, woman, and child in China
were to buy an electric vehicle, this could help solve global
warming, assuming it is not a myth. An affordable electric
vehicle, that is, not global warming, which is clearly a
scientific theory, like Intelligent Design. All of these (except
ID, which, unlike here, their backward education system doesn't
allow them to teach) Kandi can help solve, perhaps mainly by
causing a bit of a traffic jam, as many urban Chinese are not used
to driving, especially the aforementioned children.
But, no matter, Kandi has a solution to this problem as well,
which will probably allow them to gain considerable market share
in China, as well as in other progressive countries like
California. This is a revolutionary CarShare program, where the
vehicles are sold not directly to consumers, but rather to cities,
which will then rent them out of high tech garages to make them
more accessible to the masses. Especially the aforementioned
children, who will probably be the only ones capable of operating
such an advanced technological system. Now, if you'll excuse me
for a sec, I have to go ask my 6 year old nephew to show me how to
cut and paste an image of the car sharing garage into this
Ah, there we go. Wait a minute, buddy, how do I make it larger? I
can't read it without my glasses! Come back here! Ah, never mind,
it'll have to do, with the added benefit that the image of the car
in the photo is now shown at actual size. What, you were expecting
some big honking road hog like we drive here in the States to
compensate for our physical and fiscal insecurity?
No, the Kandi electric vehicle is perfectly sized for the Chinese
market. Not because the people there are small, that would be
presumptuous to presume, as well as possibly racist even though
perhaps factually true. Except for Yao Ming, obviously, he
probably wouldn't even be able to stand up in the garage, much
less fit into the actual car.
But anyway, to arrive at my point in a roundabout way, street
smart pun intended, the space saving design of both the garage and
car is perfect for China's crowded cities, where space is at a
premium. Also, fresh air is at a premium as well, with smog
approaching pea soup thickness in some cities. Or to use a more
appropriate culinary analogy, egg drop soup thickness. Or egg drop
soup with peas thickness, although I hate when restaurants ruin
perfectly good egg drop soup with vegetables!
Regardless, air/soup quality is a major problem that Kandi's
product can help solve. Well, not the soup problem, as the
electric motor on these cars is not quite powerful enough to run a
blender at a high enough speed to get the right consistency in a
soup. But it does power these cars at speeds up to 30 mph, which
is even faster when translated into kilometers per hour, or
whatever unit of time the Chinese use. I believe it is the yuan,
since after all, time is money in any language.
So, assuming the exchange rate stays constant, you can cruise
along in your Kandi EV at up to 48 km/yuan, which may or may not
be the speed limit in China, but I'm too lazy to even bother
looking it up on wikipedia. But won't driving at such a high speed
drain the battery, leading to performance anxiety? Did I say
performance anxiety? Sorry, Freudian slip, I meant range anxiety.
Range anxiety, of course, is the fear that your battery might not
have the juice to go all night long. Or day, if you're driving in
the daytime, which come to think of it is probably much more
likely and less of a double pun-tendre.
But, having beaten around the bush long enough before reaching my
climactic point (I've found the trick is to think about baseball),
I will now reveal that Kandi's solution to this problem is a
battery exchange system, shown as follows:
This QBEX system, short for Quick Battery Exchange Xstem, quickly
and easily swaps out a flaccid battery for a fully charged one,
like electric Viagra. If this system looks familiar, it's probably
because Tesla (TSLA) blatantly ripped it off for their
own battery swap system. This is
no surprise, given Elon Musk's history of stealing great ideas,
for as everyone knows the Winklevoss twins really invented the
Model S. But I wouldn't trust Tesla's Supercharger, a grandiosely
named but clearly cheap knockoff product, since have you ever
tried generic versions of Viagra? No, of course not, me neither.
It was a rhetorical question, what are you implying?
However, even though Kandi has had to put up with the corporate
espionage of lesser electric vehicle manufacturers, they have
managed to keep research and development spending in check. In
fact, since completely overhauling their product lineup from their
legacy ATV and go-cart business to become a global electric
vehicle powerhouse, they have only spent several million dollars
per year on R amp;D. Contrast this with the irresponsible wasting
of several hundred million taxpayer dollars per year, which Tesla
has dumped into boondoggles like R amp;D with not much to show for
it, other than the greatest car of all time.
But this is nothing compared to what Kandi has been able to
achieve, not only an impressive lineup of small
appliances/vehicles, but also all the impressive infrastructure to
support them like smart parking garages and battery exchange
systems. To imagine that Kandi has developed all this on a mere
hundredth of the R amp;D spending, fills my mind with wonder until
it strains the credulity of my tiny brain. But of course this can
be easily explained when you consider that unlike me, Kandi's
founder and CEO, Xiaoming Hu, is a certified genius. Yes, he
literally has a certificate, as you apparently can get any sort of
official document drawn up in China for the right price.
But, all kidding aside, which would have made this article quite
a bit shorter and probably saved some eInk and eIQ points, the man
must be brilliant to have built such an incredible company with so
many innovative products on such low R amp;D spending. Apparently
he retained some patents from his illustrious career as a
government scientist, which he donated to Kandi pro-bono, which is
Latin for "in exchange for a majority stake". These decades old
patents laid the foundation for Kandi's impressive lineup of EVs,
which may be why most of them look somewhat like a Yugo from the
early '90s.
But say what you will about aesthetic styling, Hu was ahead of
his time. You might say he was first, well ahead of when Tesla got
into the game. Hu was first, and with his design, the battery
responds with power in a second. I'm not sure even Tesla can match
that acceleration, and I can't even name the third place finisher
in this contest. So to recap: Hu's on first. Watts are second. I
Don't Know's in third.
So in conclusion, Kandi Technologies has developed a cutting edge
product for a huge market at a very low cost, which is the holy
grail of business. And you can buy a share of this company and own
100% of Continental Development Limited, which owns 100% of
Zhejiang Kandi Vehicles, which owns 30% of Jinhua Three Parties
New Energy Vehicle Services Company and 50% of Zhejiang Kandi
Electric Vehicles, which owns 100% of Kandi Electric Vehicles and
19% of Zhejiang ZouZhongYou Electric Vehicle Service, where
Zhejiang Kandi Vehicles owns 100% of Yongkang Scrou Electric, 90%
of Kandi Electric Vehicles and 50% of Jinhua Kandi New Energy
Vehicles, which also owns 10% of Kandi Electric Vehicles.
Obviously, this labyrinthine corporate structure is for the
benefit of shareholders, to get around Chinese ownership laws,
allow them to more easily form lucrative joint ventures, and/or to
save on taxes, or something similar that sounds good in SEC
filings, when they actually bother to disclose relevant things
like that in them.
But hey, that's just a minor issue when you own the greatest
company in the world. I'm sure their impending massive profits
will eventually find their way back into your pocket. After all,
you're certainly not a fool for reading this story today and
wanting to buy the stock, so the joke's on those who merely laugh
at this article and miss out on these April showers of profits.
Disclosure: I have no positions in
any stocks mentioned, and no plans to initiate any positions
within the next 72 hours.
Posted by Guest Contributor at 11:33 AM | Kandi: The World's Greatest Non-Candy Company
| Comments (0)
April 27, 2014
BYD Runs On Government Support
Doug Young
I gave quite a bit of
attention a few days ago to US electric vehicle (EV)
sensation Tesla (Nasdaq: TSLA),
so it鈥檚 only fair that I follow up by writing about China鈥檚
homegrown EV superstar BYD (OTC: BYDDF;
HKEx: 1211; Shenzhen: 002594), which has just released quarterly
results that look quite disappointing. The only things that look
slightly encouraging in this latest report are the fact that
billionaire investor Warren Buffett continues to hold onto his 10
percent stake in the company, which he bought in 2008, and that BYD
remains profitable. But even the profits are due to strong support
from Beijing, under its program to encourage clean-energy vehicle
If I had to describe BYD鈥檚 recent performance in a single
thought, I would say that this company is quite good at setting up
pilot programs for its EVs but has difficulty translating those
programs into big business. Over the last 3 years, BYD has
announced a steady string of such pilot programs in a wide range
of markets, from Western Europe to the US and Latin America, as
well as in its home China market. But with only a few rare
exceptions, we have yet to see any of these programs turn into the
large orders that BYD will need to make its EV program viable over
the longer term.
All that said, let鈥檚 look more closely at BYD鈥檚 latest quarterly
results that show its profit largely evaporated in the first 3
months of the year. The company reported a first-quarter net
profit of about 12 million yuan, or just about $2 million, which
was down 90 percent from a year earlier. (company
announcement) That鈥檚 quite a tiny figure for a company whose
revenue totaled nearly 12 billion yuan for the quarter, which also
was down by a more modest 9 percent.
BYD reported it received 98 million yuan in government grants
during the quarter, meaning it almost certainly would have lost
money without that support. Obviously we can鈥檛 directly subtract
this amount from its total profit, but I do think it鈥檚 fair to say
the company would have reported a loss of 50 million yuan or more
without this government assistance.
BYD鈥檚 Hong Kong-traded shares fell 2.8 percent before the report
came out, though they regained some of that ground in the latest
trading session on Friday. The stock has actually rallied quite a
bit over the last year and a half, more than tripling since
October 2012 on enthusiasm over the EV program. But I suspect this
latest disappointing result could force investors to realize the
company鈥檚 electric dreams aren鈥檛 materializing as hoped, and could
mark the beginning of a broader sell-off that could see the stock
fall by a third or more over the next few months.
BYD is in the difficult position of waiting for its EV business
to start bearing fruit, as its older battery and traditional
gas-powered car businesses show signs of aging. BYD has previously
said it will leave the gas-powered car business altogether by
2015, as it sees the future in electric vehicles. In a bid to
shore up its cash position, the company announced a major plan a
year ago to raise up to $500 million by issuing new shares. (previous post)
I鈥檝e mostly written enthusiastically about BYD each time it
announced a new EV pilot program, as such programs are a necessary
first step for customers to test out the technology before placing
bigger orders. But the fact that we鈥檙e seeing few major orders
being placed up to 3 years later probably means that many of these
pilot programs weren鈥檛 as smooth as BYD had hoped and perhaps the
buyers didn鈥檛 like the technology. That certainly doesn鈥檛 bode
well for the company鈥檚 future, meaning BYD could be dependent on
government assistance to support its bottom line for the rest of
this year and quite possibly into 2015.
Bottom line: BYD鈥檚 latest results show its EV
sales aren鈥檛 accelerating as quickly as planned, and it will
remain dependent on government subsidies to support its bottom
line for the rest of this year.
Doug Young has lived and worked in China for 15 years, much of
that as a journalist for Reuters writing about Chinese companies.
He currently lives in Shanghai where he teaches financial
journalism at Fudan University. He writes daily on his blog, Young麓s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China, The
Line: How The Media Dictates Public Opinion in Modern China.
Posted by Doug Young at 06:08 PM | BYD Runs On Government Support
| Comments (0)
April 26, 2014
Unlocking Solar Energy's Value as an Asset Class
James Montgomery
2014 is predicted to be a breakout year for solar financing, as
the industry eagerly pursues finance innovations. Many of these
methods aren't really new to other industries, but they are
potentially game-changing when applied in the solar industry.
Not all options are ready to step into the spotlight, though.
Master limited partnerships (MLP) and real estate investment
trusts (REIT) promise more attractive tax treatment than
securitizations or yieldcos, but they require some heavy lifting
and difficult decisions at the highest levels: MLPs need an act of
Congress even for an infinitesimal language tweak to remove a
legislative exclusion to solar and wind, while REITs involve a
touchy reclassification of assets from the IRS that could have
broader and undesirable tax consequences. Yet another model
gaining traction is a more institutionalized version of
crowdfunding, led by Mosaic (technically they call it
"crowdsourcing"), but crowdfunding is awaiting more clarity from
the Securities and Exchange Commission about what rules must
And so, while patiently waiting for Paleozoic movement out of
Washington, the industry is turning its attention and anticipation
toward ushering in two other new financing models: securitizations
(converting an asset into something that is tradable, i.e., a
security) and 鈥測ieldcos" (publicly traded companies created
specifically around energy operating assets to produce cash flow
and income). Their build-up actually began last year: in the fall
SolarCity (SCTY)
finally launched the first securitization of
distributed-generation solar energy assets, with a pledge to do more and significantly larger ones in the
coming quarters, and throughout 2013 several companies (NRG,
Pattern, Transalta, Hannon Armstrong) spun off yieldcos with
varying levels of renewable energy assets in their
portfolios. These were NRG Yield (NYLD),
Pattern Energy Group (PEGI),
TransAlta Renewables (RNW.TO),
and Hannon Armstrong Sustainable Infrastructure (HASI).
Just weeks into 2014 we're already seeing an uptick in activity.
While the industry awaits SolarCity's next securitization move, in
the meantime the company has acquired Common Assets, which had
been building up a Web-based platform for managing financial
products (most especially renewable energy investments) for
individual and institutional investors; the first SolarCity-backed
products are expected to start rolling out by this summer. We're
also hearing rumors of up to half a dozen other securitization
deals working through the pipeline, referencing unidentified large
players with long histories of building out projects 鈥 some names
frequently invoked as potentially fitting those criteria include
familiar residential-solar companies such as Vivint, Sunrun,
Sungevity, and several others.
On the yieldco front, in mid-February SunEdison announced plans for its own "yieldco" IPO
aimed at unlocking more value within its solar energy assets.
Pricing wasn't announced at press time, but earlier reports suggested it could generate a $300 million payday. SunPower also recently
has been talking about doing a yieldco in a 2015
timeframe, likely to feature its 135-MW Quinto project and
possibly its 120-MW Henrietta project. Others reportedly eyeing
the yieldco model include Canadian Solar, Jinko Solar, and First
What Capital Markets Can Do For Solar Companies
What's coming together to bring these two financial innovations
into the arena right now? Put simply, it's the confluence of
plunging PV prices and blistering installation growth which are
achieving a scale and maturity that outstrips the capacity of
traditional tax-equity sources -- but it also means they can now
entertain large-scale financial instruments, explains Joshua M.
Pearce, Associate Professor at the Michigan Technological
University's Open Sustainability Technology Lab, who
recently published a study of solar securitizations. Look at it
from a macro level: even conservative growth estimates for U.S.
solar energy capacity additions point to 20 GW coming online by
the time the investment tax credit (ITC) is planned to run out in
2017, notes NREL energy analyst Travis Lowder, author of another recent report. At an average of $3/W
that's $60 billion in assets, of which a third or even half could
generate securitizable cash streams for solar developers. Spin
that equation around: a single $100 million securitization deal
could support 72 MW of residential solar assets, 100 MW of small
commercial solar, or 133 MW of larger commercial/industrial
Number of PV Systems (by Market Sector) Potentially
Financeable Through a Single Securitization Transaction. Credit:
What does that mean for individual companies? In its 3Q13 financial results SunEdison calculated
its current business model of building and selling solar projects
yields about $0.74/Watt, but those assets' true value could jump
as high as $1.97/W if the company could find ways to lower its
cost of capital, apply various underwriting assumptions, and
factor in residual value in power purchase agreements. That's a
startling 2.6x increase in potential value creation that SunEdison
thinks it can unlock, by choosing to hang onto its projects vs.
simply selling them off. In its mid-February quarterly financial
update the company revealed more value-creation calculations: it
captured an additional $158 million during 4Q13 through those
retained assets, with a resulting metric of "retained value per
watt" at $2.02/W. By applying most of the 127-MW on its balance
sheet with an estimated $257 million in "retained value" to its
proposed yieldco, the company says, it now has sufficient scale to
unlock the true value of those solar assets.
The ability to lower the cost of capital deserves extra emphasis.
SolarCity's securitization last fall had a 4.8 percent yield, only
slightly higher than a 30-year fixed mortgage and with twice the
payout on current 10-year treasury bonds, which is great for
investors 鈥 but for the company it represented roughly half the
cost of capital vs. what can be obtained currently for distributed
solar PV financing, noted Rocky Mountain Institute's James Mandel.
"This trend is transformative for the solar industry" because of
how it can unlock so much more value and generate more returns,
explained Patrick Jobin, Clean Technology Equity Research analyst
with Credit Suisse. (Disclosure: SunEdison is one of his top picks
specifically for that reason.) "We're probably in the first or
second inning of the public capital markets appreciating what this
does for the industry."
Securitization vs. Yieldco: The Good, Bad, And Unknown
Both securitization and yieldcos increase access to lower-cost
financing by pooling solar assets into an investment vehicle,
separating the more reassuring elements of them (payments from
operating energy assets under a power contract) from the riskier
ones (project development). Both of them promise returns, though
yieldcos come as dividends that vary with the company's
performance while securitizations are fixed-income meaning
investors get locked-in payments for a set period. And most
importantly to the solar industry, they offer a lower
cost-of-capital compared to the usual funding sources: debt, tax
equity, and sponsor equity.
Generalized solar securitization transaction. Credit: NREL
One key difference: yieldcos own both the energy producing assets
and the contracts, which means they can monetize federal
investment tax credits. An equity owner can't use power-purchase
agreements to create a securitization and also take the tax
benefits. The real challenge, says Yuri Horwitz, CEO of boutique
financial services firm Sol Systems, will be building a yieldco
that has income-producing assets that create tax liability,
coupled with solar projects that have tax benefits. NRG's yieldco
last year did that, and he thinks they have a leg up because of
it. Moreover, yieldcos will go out into the market to compete
aggressively with other options such as specialty financing that
offer similar returns. The hope is that as yieldcos mature and
more operating assets are added in their competitiveness will
Defining what assets are best securitized and best spun out into
yieldcos exposes a gap that neither properly addresses. Larger
projects are good candidates for yieldcos; securitizations
typically involve residential solar assets. (An exception:
MidAmerican used debt securities/project bonds for its 550-MW
Topaz solar farm, as did NextEra (NEE)
for its two 20-MW St. Clair solar projects in Canada.) In between
is the commercial/industrial segment which presents a more
complicated financing challenge. "[Securitizations and yieldcos]
don't really work in the center," Horwitz said. A different class
of securitizations, "collateralized loan obligations," are more
applicable to the commercial sector where less diversity in assets
means more risk in making ensuring offtakers' credit-worthiness,
suggests NREL's Lowder.
Something else that successful securitizations and yieldcos have
in common: the more scale and diversity the better. But that's
also a limiting factor: not everyone can pool a wide distributed
portfolio of solar assets to mitigate risk, or a smaller portfolio
of larger ones. And the more diverse it is, the harder it is to
evaluate them as a whole, value them, and get underwritten.
By definition, they require someone who can offer up a large pool
of assets as de-risked and diversified as possible, and backed by
a brand-name sponsor, pointed out Tim Short, VP of investment
management at Capital Dynamics. "There's plenty in the wings that
will never make it," he said. "There's not a whole lot of people
to bring all the ingredients together."
One other factor to account for in any solar-backed financial
models is the externality of policy changes. While investors
appreciate the value in a solar offtake contract, but they need to
factor in potential risk of any retroactive policy changes, such
as is on the table in the net metering debates raging in several
states. If net metering policies end up being reduced or even
repealed, "solar contracts may default and reducing predicted
income streams," Pearce said. "Ensuring policy stability and
communicating that stability to investors will be key to the
on-going attractiveness of solar assets."
The Need to Standardize
What will be critically important as more of these financing
innovations emerge, and more solar companies try to take advantage
of their promise, is pinpointing ways to standardize how the
process works, in specific areas and as a whole. "The number-one
priority is standardization, especially moving forward with vastly
more distributed-generation assets coming online, said Haresh
Patel, CEO of Mercatus. That's the glue that will hold these
offerings together with both developers and investors 鈥 and it
needs to be embedded in developers' DNA from the very beginning,
so their solar assets can be evaluated and bundled repeatedly and
Addressing the databasing of solar asset performance metrics are
NREL and SunSpec with their open-source OSPARC database. One "Gordian
knot" issue: who owns the data and are they willing to share it?
That pathway of data ownership can get muddled because not all
issuers outright own their systems, and it gets worse by adding a
tax equity layer. Figuring out that chain of data ownership
protection and security is hugely important., notes Mike
Mendelsohn, senior financial analyst at NREL. That's part of
OSPARC: anonymizing and rolling up data into a friendly fashion so
it's easy for solar companies to present to investors, and for
them to digest. "We need to build confidence that those issues are
adhered to," he said.
Startup kWh Analytics is similarly targeting aggregation and
benchmarking of information about solar asset performance, which
is crucial because it tells institutional investors about the
soundness of the collateral (the system and the leasee). What are
individual PV panels and inverters doing compared with other
options; are the customers with FICO scores in the 650-700 range
paying off their bills? Developers also want to know how their
chosen systems are performing comparatively 鈥 and increasingly so
with the emergence of these new investment vehicles, where the
developer retains those assets as a financing tool.
Mercatus, meanwhile, wants to address the whole package,
assessing everything from system components to permitting. "What
entities look for is consistency for which they can reduce risk,"
said Haresh Patel, CEO of Mercatus, which is tackling that problem
with its own platform: quickly process and synthesize projects'
data so they can be more easily pooled for investors -- and in the
same language project after project, especially as new assets come
into the pool. Establishing a mechanism to organize this on a
repeatable basis is "the biggest friction point," he said.
Project summary view inside Mercatus' 2.0 鈥淕olden
Gate" platform. Credit: Mercatus
Standardizing offtake contracts "is the best place to start as
this problem impacts every step in the process," Pearce suggested.
"Uniform contracts facilitate comparison, reducing asset
evaluation costs and promotes pooling. They also simplify
data collection and analysis. Uniform contracts will better
facilitate data collection and analysis, asset comparisons and
pooling, all of which means reducing costs.
As part of SolarCity's securitization last fall, Standard amp;
Poors (which rated it BBB+) revealed some interesting background
info about the assets being offered, including an impressively
high FICO score for residential system owners (and strong mostly
investment-grade ratings for the nonresidential ones). There is no
solar version of FICO scores, which took decades to become the
standard for credit ratings and lending. Addressing this
particular pain point is the truSolar Working Group, formed a year
ago by 15 solar companies and organizations, trying to develop
uniform standards similar to a credit score for measuring the
risks associated with financing solar projects, explained Billy
Parish, founder/president of Mosaic and a truSolar founding
"Standardization will happen much sooner than people think,"
Patel said. "Standards drive velocity." He invoked the efforts of
the DoE-NREL multi-year project Solar Access to Public Capital (SAPC), which
folds in well over a hundred organizations with activities from
standardized PPAs to installation techniques, "mock pools" of
solar assets to rating agencies, and collecting performance involving groups with touchpoints all along the solar
energy chain from panel suppliers to banks.
Message to the Masses
As solar companies come around to how much extra value they can
unlock, part of that process is coming up with new metrics to
calculate that value potential, such as "net present value per
watt" or "retained value per watt," and then educating investors
who might persistently adhere to the traditional metrics like
earnings per share. Issuers including SolarCity and SunEdison and
the investment banks go out and do their part with investor
roadshows, but also out in the field helping educate about solar
asset-backed investments is SAPC is out pounding the pavement too,
engaging both sell-side investment banks and buy-side capital
market managers to get everyone more comfortable with how these
vehicles will work.
"We are now in a positive feedback loop," said Michigan's Pearce.
"By successfully accessing lower-cost capital, the solar industry
can fund high rates of growth in the future, continuing the
current momentum of eliminating antiquated and polluting
conventional electricity suppliers."
Jim Montgomery is Associate Editor for,
covering the solar and wind beats. He previously was news editor
for Solid State Technology and Photovoltaics World, and has
covered semiconductor manufacturing and related industries,
renewable energy and industrial lasers since 2003. His work has
earned both internal awards and an Azbee Award from the American
Society of Business Press Editors. Jim has 15 years of experience
in producing websites and e-Newsletters in various technology.
This article was
first published on, and is
reprinted with permission.
Posted by Guest Contributor at 09:23 AM | Unlocking Solar Energy's Value as an Asset Class
| Comments (0)
April 25, 2014
Tribulations of a Meter Reader
by Debra Fiakas CFA
Last week Badger Meter (BMI:
NYSE) joined a building fraternity: companies reporting strong
year-over-year sales growth, but delivering weaker than expected
earnings. However, the Badger Meter actually increased
earnings by a greater magnitude than it grew sales. The
Company reported $83.5 million in net sales, representing 16.3%
growth over the same quarter last year. Net income grew by
59.3% year-over-year to $4.6 million or $0.32 per share. As
impressive as these results appear to be, the consensus had been for
earnings per share of $0.41. The stock declined sharply as
investor registered their displeasure with the short-fall.
Badger Meter supplies flow measurement and control technologies
products to industrial, commercial and utility customers around the
world. The company is so much more than a simple meter reader
supplier. Anybody who has a system through which fluids flow
can benefit from Badger鈥檚 wide range of flow control and metering
products. The company is included in our Mothers
of Invention Index of developers of energy efficiency and
conservation technologies. The alternative energy and water
industries are key beneficiaries of Badger鈥檚 products.
Like its peers in the water metering industry the Badger Meter
struggled during the recent recession, but has managed to
recover. In 2013, the Company reported record sales of $334
million, on which it earned $24.6 million in net income.
Importantly, operations generated $34.8 million in cash. That
represents a sales-to-cash conversion rate of 10.4% that helps
support future growth and dividends for shareholders.
BMI has been a part of the Crystal Equity Research coverage universe
for some months. In our view, the sell-off of the stock was
unjustified given the Company鈥檚 actual performance. However,
it is also the responsibility of management to provide sufficient
guidance to publishing analysts so as to avoid egregiously high
A new and clearly bearish sentiment began building in the shares
several days before the earnings announcement. Most likely
this bearish sentiment is company-specific and beyond the weakness
observed in the broader U.S. equity market in recent weeks. A
review of recent trading patterns in BMI reveals a so-called 鈥渄ouble
bottom breakdown鈥 that occurred the week of April 14th. This
chart pattern portends future weakness in the stock and investors
should be concerned that stock could fall even further.
Earlier this week we warned our research subscribers that although
we were maintaining our Hold rating on BMI shares, even though the
stock has declined into the a range in our trading guide where we
would be whipping up new positions. Indeed, the stock appears
to be oversold at the current price level. However, we noted
that it would be a more prudent trading strategy to wait for
some recovery in upward momentum before adding to positions.
Unfortunately, our analysis suggests investors might have to wait a
bit. One very helpful indicator is Moving Average
Convergence/Divergence (MACD), which at this time suggests the stock
could continue its march southward for several more trading
Debra Fiakas is the Managing Director of Crystal Equity
Research, an alternative
research resource on small capitalization companies in selected
Neither the author of the Small Cap
Strategist web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.
Posted by Debra Fiakas at 08:57 AM | Tribulations of a Meter Reader
| Comments (0)
April 24, 2014
Tesla CEO Makes Smooth Drive Into China
Doug Young
Tesla cruises into China
I have to give my congratulations to new energy car maker Tesla
(Nasdaq: TSLA)
for creating the kind of buzz and excitement this week that only
names like Apple (Nasdaq: AAPL) and smartphone
sensation Xiaomi have typically been able to
muster. In the last 2 days, the company and its charismatic
founder Elon Musk were all over the Chinese headlines as Tesla
delivered its first electric vehicles (EVs) in China on the
sidelines of the nation鈥檚 biggest annual auto show happening this
week in Beijing. Musk seems to have done interviews with nearly
all of the major publications I regularly read, leading me to
wonder if the man ever sleeps.
But all joking aside, Tesla really has done an incredible job of
launching its first vehicle sales in China. I honestly haven鈥檛
seen this kind of media frenzy and hype surrounding a product
launch for at least a year or two, back when Apple was still at
the height of coolness in China. Tesla has also made all the right
moves in terms of associations, getting its name connected with a
number of big-name companies, projects and people as Musk hinted
his company could consider building a plant in China.
All this buzz comes after a rocky start in China for the company,
following a tussle
with a trademark squatter and some initially difficulties
getting its first shop set up in Beijing. What鈥檚 more, the company
is at a slight disadvantage to domestic rivals like BYD
(HKEx: 1211; Shenzhen: 002594; OTC:BYDDF)
and Chery because its cars don鈥檛 quality for the
generous subsidies being offered by Beijing to jump-start electric
car sales. And yet despite all that, Tesla has managed to generate
lots of buzz these last few months and has set an aggressive
target of selling as many as 8,000 cars in China this year.
It officially delivered the first of those this week, as it
handed over the keys to 8 of its Model S electric cars to an
A-list of high-profile buyers that included the president of the
Lifan soccer team and the founder of Autohome
(NYSE: ATHM), the nation鈥檚 leading car information website. (English article)
Musk has also managed to get his company鈥檚 name associated with a
number of major Chinese companies as he tries to send the message
that Tesla will support clean energy as it helps to build the
necessary charging infrastructure to support EV development.
According to the various reports, Tesla鈥檚 list of potential
corporate partners runs the range from Sinopec
(HKEx: 386; Shanghai: 600028), one of China鈥檚 top oil refiners; to
State Grid, operator of China鈥檚 national electric
grid; to JA Solar (Nasdaq: JASO),
one of the nation鈥檚 leading makers of solar panels.
Tesla discussed its potential local partnerships as it also
revealed it is preparing to spend hundreds of millions of dollars
to help to build charging stations to make electric vehicles
practical in China. (English
article) But perhaps most tantalizing to officials in
Beijing was Musk鈥檚 hints that he could consider building an EV
manufacturing plant in China, which could become the company鈥檚
biggest global market as soon as next year.
Clearly Musk has done his homework and is hitting on all the
right notes in China to create a well-oiled campaign as he enters
the market. Of course it also doesn鈥檛 hurt that Tesla has a very
good product to sell, and that it has cultivated an image as a
very environmentally friendly status symbol in this very
status-conscious country. If it continues to play its cards right,
which looks likely, the company could stand a very strong chance
of selling at least 4,000 or 5,000 cars this year in China, making
it one of the company鈥檚 top global markets.
Bottom line: Tesla鈥檚 China launch, accompanied
by a well-crafted publicity blitz, could help the company sell up
to 5,000 cars in the market this year.
Doug Young has lived and worked in China for 15 years, much of
that as a journalist for Reuters writing about Chinese companies.
He currently lives in Shanghai where he teaches financial
journalism at Fudan University. He writes daily on his blog, Young麓s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China, The
Line: How The Media Dictates Public Opinion in Modern China.
Posted by Doug Young at 04:41 PM | Tesla CEO Makes Smooth Drive Into China
| Comments (0)
April 21, 2014
Don't Bet Against SolarCity
By Jeff Siegel
It wasn't an April Fool's Day gag when
I said it was time to buy SolarCity Corp. (NASDAQ: SCTY)
at the beginning of the month.
After a brief standstill, the company's battery-backed solar
projects have begun to move forward again.
The State of California Public Utilities Commission has added an
important item to its May 15 agenda that will make a huge
difference for SolarCity. Utility companies may finally be blocked
from imposing big fees on battery-backed solar systems.
For more than a year, California's largest utilities companies
demanded that battery-solar systems undergo costly and
time-consuming inspections to prevent them from 鈥渓aundering鈥 power
they pulled off the grid.
Non-battery solar systems were not a concern for the utility
companies, because that energy could be unquestionably verified as
solar in origin as it was fed back into the grid. Battery systems
did not provide an equal degree of certainty.
Each new battery-backed PV user had to submit an application to
connect to the grid that cost $800 and required additional meters
and hardware that cost as much as $3,700. Only a dozen of
SolarCity's customers completed the application and approval
process out of the more than 500 customers who had signed up.
In March, SolarCity had had enough. It halted its applications
for interconnections to Southern California Edison, Pacific Gas
and Electric, and San Diego Gas and Electric.
Now, the Public Utilities Commission seeks to exempt battery
solar installations from these huge fees, so these customers can
get their systems. SolarCity has resumed filing applications.
The Threat to Utilities
Energy companies expressed concern that solar batteries could
store power from the grid rather than from solar panels, and feed
it back into the grid for net metering billing reductions.
Net metering is a system that allows residential solar users to
send their unused solar energy back into the grid and roll their
traditional electric bills backwards. With this type of system in
place, people can install solar panels on their home and not
really rely on them to power anything except the grid.
Since solar batteries allow customers to store the power they
generate, this means they can save their energy to use on
themselves and not even have to participate in net metering if
they don't want to.
It essentially rearranges residential power priorities into a
pyramid with solar on the top, solar battery as the backup, and
traditional grid as the backup to the backup.
Solar battery systems, therefore, threaten to slash customer
reliance upon local power monopolies.
SolarCity, however, isn't positioning itself as a threat. It
wants to work with the power companies.
In a blog posting entitled 鈥淧ut Battery Storage in the Hands of
Grid Operators,鈥 SolarCity Co-founder and CTO Peter Rive said:
鈥淲hile cutting the cord enables one household to be 100% renewable
and self-sufficient, it limits what these technologies can do. In
short, the grid is a network, and where there are networks, there
are network effects. When batteries are optimized across the grid,
they can direct clean solar electricity where (and when) it is
needed most, lowering costs for utilities and for all ratepayers.
This is true of homeowners鈥 behind-the-meter storage units, and
it鈥檚 also true of larger commercial and utility-scale units.鈥
Despite SolarCity's apparent goodwill toward power companies, the
threat this technology poses to power companies is still strong.
All in the Family
SolarCity was co-founded by brothers Peter and Lyndon Rive, and
they have a very important cousin: Elon Musk, CEO of Tesla Motors
Together, the family is pushing for a battery-powered future.
In the automotive sector, batteries mean drivers do not have to
rely upon costly gasoline to get around, and in the residential
power sector, it means users don't have to rely upon energy
The combined effect of two battery-crazy companies in different
sectors is a massive economy of scale.
Tesla's so-called 鈥済igafactory鈥 is going to produce enough
lithium-ion batteries at such a high volume that prices will drop.
Both Tesla and SolarCity will reap the rewards.
The Gigafactory is not expected to be built until early 2017, and
production ramping will not begin until 2020. It may be a long way
off, but think of what can be done in the meantime.
SolarCity has only existed for eight years, and it has grown in
explosions. In the third quarter of 2013, it grabbed a 32 percent
share of the solar installation market, and it expected to grow
its number of installations by more than 80 percent in 2014. This
means it could deploy upwards of 525 Megawatts of photovoltaic
cells this year alone.
Jeff Siegel is Editor of Energy and Capital, where this article was first published.
Posted by Jeff Siegel at 12:45 PM | Don't Bet Against SolarCity
| Comments (0)
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