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Coal Down, Renewables Up, India on the Rise in 2035 Energy Outlook

April 27, 2017

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Global energy demand will keep rising through 2035, but the nature of the mix and the key players will change significantly.

That's the takeaway from the analysts at Wood Mackenzie, who surveyed global energy markets from the ground up and compiled their findings in a new comprehensive report.

The maturation of China's economy has slowed growth in conventional energy demand, but India and South Asia are picking up the slack. Renewables continue to register more on the global energy share, stealing thunder from coal. Natural gas has a particularly rosy path ahead of it, seeing substantial growth throughout the world.

Here are five key charts to help breakdown the changing face of international energy consumption.

China demand fades, India grabs the baton

China has led global energy demand for the last 15 years as it fueled massive economic development. That process reoriented the economy around the service sector, which requires less energy than heavy industry. As a result, demand growth there has fallen faster than previously expected.

China will remain the number one energy consumer in 2035. The transport sector will sustain oil demand growth and China will still be the world's second largest consumer of oil, after the US, in 2035. Its rate of demand growth, though, is slowing, while others speed up.

India has the fastest growing energy demand, increasing at an annual average of 3 percent from now to 2035, by which time the country's population will outpace even China's. Renewables will surge from 22 percent to 54 percent of total installed capacity, while oil consumption rises 80 percent.

Coal's role in China's fuel mix peaked in 2013 and will continue to decline as the government pursues efforts to clean up the air and reduce contributions to climate change. India, though, will increase coal consumption as a way to power more economic activity, while mitigating exposure to oil price shocks.

Gas expands to fill the space

The award for most improved market share in absolute terms goes to gas. While oil and coal will see a small bump, global gas gas demand will grow 41 percent and claim coal's trophy for second most popular energy source.

Much of that success derives from the expanding role for gas in the power sector. In the U.S., gas in the power generation mix will grow 60 percent for that period, working alongside renewables to outcompete coal. Chinese gas demand for power is expected to grow 366 percent by 2035, and India's by 156 percent. The Middle East will also be turning more to gas for electricity in an effort to conserve oil for exports. 

On home soil, the American fracking boom will lead to some striking geopolitical implications.

For one thing, Wood Mackenzie expects the U.S. will ride the wave of cheap gas to become a net energy exporter by 2021, achieving the elusive dream of energy independence pursued by many a president. "Although vocal, the effect of the Trump administration on the markets may be negligible. The markets are ultimately controlled by demand and price," the analysts note. 

The interconnectedness of global energy markets nullifies much of what it means to be "independent," but the reduced reliance on overseas imports and the enhanced ability to export could change the way America conducts foreign policy.

More than half of U.S. LNG exports will go to Europe, supplying a fifth of Europe's gas need by 2035. Currently, Russia supplies 35 percent of Europe's gas. Russia is unlikely to sit idly by as the U.S. challenges a key source of leverage over its neighbors.

Renewables rising faster

Wind and solar are beating all of the other fuels on speed of entry into the energy mix, but starting from a much smaller base.

Wind will grow 7 percent a year on average, and solar will rise 11 percent. That still only gets them to 13 percent of electricity generation in 2035, up from 4.5 percent in 2015, according to Wood Mackenzie's analytics. The authors note that clean energy technology has already beat expectations several times, though, and this trend could continue.

"Technology is continually improving and is tending to push renewables from their previous role of more expensive green options requiring important government subsidies, to one of serious competitors," the report states. "Renewables are in a strong position to force the market to reshape."

The report also identifies grid-scale energy storage as a "significant risk to our outlook." If the storage industry delivers on its promise of cheap, widely deployed storage in the next few decades, it could boost the renewables market share by making wind and solar power dispatchable and by displacing natural gas for peaking capacity.

That's salient, because 13 percent market share for wind and solar would make achieving the carbon reduction goals of the Paris treaty nearly impossible. A recent report from the Energy Transitions Commission called for wind and solar to power 45 percent of the world's electricity by 2040 to avoid catastrophic temperature rise.

EVs slowly enter the fleet

The electrification of transport is also relevant to decarbonization. The report predicts a cumulative electric vehicle deployment of almost 100 million by 2035, displacing 1 to 2 million barrels a day of oil demand.

Faster-than-anticipated battery improvements have helped EV sales grow exponentially, outpacing expectations. "But given the average lifespan of a car is over 10 years, it will take decades for EVs to significantly penetrate the global car fleet," the report states. EVs currently account for 1 percent of the worldwide vehicle fleet. By 2035, Wood Mackenzie projects EVs could grow to 9 percent of all vehicles. 

The level of EV penetration will ultimately depend on additional technology advancements and government policies, since vehicle sales and infrastructure still rely heavily on subsidies.

Overall, these changing dynamics in the global energy landscape show carbon emissions on the decline.

"Globally, carbon and energy intensity have peaked and will trend downwards towards 2035," the Wood Mackenzie report states. "Even fast-developing, emerging economies such as India show a reduction of greater than 30 percent in both energy and carbon intensity over the forecast."

The trends are moving in the right direction for the international climate change goals. But given the relatively modest pace of clean energy adoption, the current trajectory may not be sufficient to meet them.

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IEA: Global Installed PV Capacity Leaps to 303GW

April 27, 2017

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A tariff-induced U.S. solar industry assault notwithstanding, there's some good news in solar this week.

The International Energy Agency's Photovoltaic Power System Programme's latest report (Snapshot of Global Photovoltaic Markets 2016, PDF) found that 75 gigawatts of solar were installed globally in 2016 -- bringing the installed global photovoltaic capacity to at least 303 gigawatts. 

That equates to producing 375 billion kilowatt-hours of solar power each year, which represents 1.8 percent of the electricity demand of the planet.

The 75 gigawatts added in 2016 was a record. As we've reported, worldwide installed capacity was 51 gigawatts in 2015, up from around 40 gigawatts in the two preceding years. In 2015, there were at least 227 gigawatts of PV cumulatively installed around the world, making up more than 1.2 percent of global electricity demand. 

Allow GTM to put that into perspective for you. If we rewind to seventeen years ago -- the total amount of PV installed in the year 2000 was 170 megawatts. That's megawatts, folks.

Here's the scorecard today.   

In 2010, we crossed the threshold of 10 gigawatts of PV solar installed globally in a single year. (We invited industry luminaries to reflect and celebrate in these pages at the time.)

PV module pricing has made radical progress as well, moving from $300 per watt in 1956, to $50 per watt in the 1970s, to $10 per watt in the 1990s, to $0.40 per watt today. It's not exactly Moore's law, but it's that drop in pricing -- the result of a chicken-or-egg debate between policy and technology -- that's driving this industry.

However, that downward cost decline could be reversed by potential import tariff pressure on Chinese solar modules by the Trump administration and its efforts to save Germany's SolarWorld and China's Suniva.

The IEA report notes that the market was driven by growth in China, America and India, while Japan and Europe contributed less than in 2015. "In other words, the global PV market outside of China grew by 5 gigawatts to 40 gigawatts, while China drove the global numbers up to at least 75 gigawatts." The report concludes, "Once driven by financial incentives in developed countries, PV has started to progress in developing countries, answering to a crucial need for electricity."

Still, the new potential tariff on Chinese solar modules could hobble the U.S. solar industry if costs get increased to 2015 levels. The solar industry has coped with setbacks like this in the past. But it might mean that breaching the 1-terawatt threshold of global installed solar will be delayed by a few years.

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Solar Block-and-Index Contracts: A New Market for Utility-Scale Solar?

April 27, 2017

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The search for funding has led the solar industry down many roads, from the mainstay of state renewable portfolio standard procurements, to the rising driver of voluntary retail customer procurements, to projects enabled through federal PURPA regulations. 7X Energy wants to add a new category -- solar block-and-index contracts. 

This week, the Texas-based utility-scale developer unveiled a concept for SolarBlocks, which entails bundling solar projects within the standard retail energy deals available in competitive markets. Built to ensure “additionality,” they're a new way for corporate customers to invest in solar for its energy and regulatory benefits, while keeping their energy bills the same or lower than they are today. 

7X’s SolarBlocks will soon be available via yet-to-be-named retail energy partners, CEO Clay Butler said in an interview. Butler is the former head of Texas energy consultancy The Butler Group, and he co-founded 7X in April 2016. Since then, the company has lined up about 4,200 megawatts in its development pipeline, with between 1,000 and 2,000 megawatts set to be in construction next year, he said. 

While also engaging in more traditional projects, 7X's new block and index product is a first for the industry, as far as he knows. But the concept behind it -- contracts for energy purchased at fixed “blocks” of time and price, with gaps filled in by “index” purchasing at wholesale market prices -- has been one way that corporate customers have been buying energy for decades now in markets that allow it, he said. The concept just hasn’t been applied to solar until now. 

“Up to date, solar developers have been asking customers to do direct PPAs with them, or to do aggregated PPAs,” he said. “Now we can aggregate behind the retailer.”

“The first proof of concept was getting a couple of national retailers to buy in,” he said. “It turns out that lots of their customers are looking for longer-term contracts with renewables to fit them in -- and a lot of them are also looking for additionality.” This refers to solar that wouldn’t otherwise be built, if not for the investment being enabled by the structure in question, and it’s critical for winning the renewable energy credits (RECs) that corporate customers are after, he explained. 

Retail energy providers compete in the roughly one-third of the country where there are competitive energy markets, with Texas, Illinois, the mid-Atlantic and the Northeast being the biggest. Many are also connected to generation companies that hold solar and wind farms among their assets, and all are looking at energy markets facing an influx of cost-competitive renewable power. 

Solar PV in particular provides its generation over a nicely shaped curve from mid-morning to late afternoon, which happens to fit heat and air conditioner-driven demand spikes and high energy prices in most competitive states. Here’s a chart from 7X showing what that might look like on a typical warm, sunny day.

We’ve covered how companies like Texas-based MP2 Energy use the value of solar’s “shape” to enable its rooftop PV offering with companies like SolarCity. But this is "an industry first, in terms of working with retailers on additionality,” Butler said. That key move opens up these solar megawatts for RECs, while also taking advantage of the solar’s value from the energy retailer's perspective as a hedge against market risk, he said. 

It also differentiates its SolarBlocks from other similar-sounding offerings, such as the PowerBloks offered by Energy Edison’s Altenex, which essentially slice up solar PPAs into smaller contracts to meet a broader range of customer demand. 

Working with retailer energy providers has also forced 7X to design structures that aren’t too much longer than the 3- to 5-year contracts typical in the industry, he said. That means that SolarBlocks-based contracts will be available for as few as 8 years in duration -- unheard of in the solar PPA world, where most contracts are for 20 years, and “nobody’s gotten below ten,” he said. 

Butler declined to get into details about what solar prices enable its SolarBlocks offering in different markets. According to GTM Research's Utility PV Market Tracker, 2016 power-purchase agreements are being signed at values between $35 and $60 per megawatt-hour in a diversified demand landscape. 

“There isn’t going to be any markup on the SolarBlocks piece -- we’re offering wholesale pricing. The whole idea is that it has to be competitive. We’re trying to keep the customers’ bill as low or lower.”

The solar blocks concept opens another emerging opportunity in a U.S. solar market, increasingly being driven by alternatives to traditional state RPS-driven procurements. GTM Research found that more than 50 percent of the 2016 project pipeline came from non-RPS drivers, namely: voluntary utility procurement outside of RPS obligations; qualified facility development enabled through the federal Public Utility Regulatory Policies Act (PURPA); and retail customer procurement.

Butler estimated that 7X block and index contracts could open up a significant new market in the form of companies that aren’t quite big enough for their own PPAs, but still have an appetite for solar’s value. “The overall market is much bigger than what we’re talking about today in terms of corporate demand,” he said. “Obviously we’re limited to offering this in retail markets. But in those states like Ohio and Texas, with a liquid retail market, we’re talking like a 4x or 5x factor” in additional opportunity -- a goal that almost meet’s the company’s name. 

Join GTM for the 10th Annual Solar Summit & 2nd Annual S3 Solar Software Summit in Arizona May 16-18. We’ve got the biggest names in the solar industry confirmed to attend and speak. And we've got a packed agenda of topics including solar software, energy storage, finance, community solar, corporate procurement, balance of systems, and much more. Check out the event site here.

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Burning Questions for the Brooklyn-Queens Demand Management Program

April 27, 2017

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Back in January, Con Edison quietly reported some new load forecasts. It turns out the cutting-edge Brooklyn-Queens demand management program -- which has been furiously installing energy-efficient light bulbs and coordinating demand reduction commitments to relieve overloads on the local electric system -- is no longer necessary at all.

Since its 2014 launch, the Brooklyn-Queens Neighborhood Program (commonly referred to as BQDM) has been touted by state regulators, the governor’s office, the news media, environmental groups and policy experts as the highlight of New York electric utility reform. Supposedly foregoing an unimaginative, expensive substation quoted at $1 billion to $1.2 billion for a mere $200 million in distributed energy and novel utility solutions, the program was hailed to have enormous value and international significance.

That value is now far less obvious -- though you wouldn’t know it from recent press coverage or policy briefs. When it comes to the unanswered questions underlying Brooklyn-Queens, nobody seems to be paying attention.

The “a couple hundred million dollars rather than $1.2 billion” is simply not the deal New York regulators approved. Per detailed (if arcane) cost-benefit calculations -- made public some eight months after program approval -- Con Ed projects the substation would cost $877 million to build today. The price to defer it 10 years stands at $855 million, which includes $385 million in “traditional costs,” $300 million in additional “escalation” on traditional costs, and the much-celebrated $200 million (recently cut to $170 million) in innovative solutions. Plus there's the eventual cost of the substation a decade down the line. 

So far from saving $1 billion, Brooklyn-Queens hooks New Yorkers for almost $1 billion in additional costs -- most of it conventional utility investment. Technically, the program would save New Yorkers money for about 10 years. Then rates would skyrocket. By Con Ed’s numbers, the company will effectively lend us those savings at a compound annual interest rate north of 11 percent, while market interest rates scrape historic lows.

Neither the public availability of these egregious economics, nor the program’s newfound redundancy has noticeably affected the key stakeholders’ enthusiastic support. In response to the new load forecast, Con Edison asked to extend the program’s timeline in perpetuity, and this month announced a whole new batch of non-wires alternatives in the mold of Brooklyn-Queens.

Summarizing its extension request, Con Ed flatly declares, “[Brooklyn-Queens] demonstrates the benefits of non-wires alternatives.” I would humbly suggest it raises a number of questions. Here are three.

What are we really saving?

If Brooklyn-Queens’ economics fail a common-sense test (and I believe borrowing utility bill savings at 11 percent interest does), how come nobody’s raising a stink?

Once we get through the pervasive “$200 million versus $1 billion” line, a common apology for the dismal terms is that additional non-wires projects may defer that substation even further into the future. Hey, maybe it never gets built at all.

This could very well be the plan: at least one of Con Ed’s new non-wires projects may focus on the Glendale substation, the site of the major conventional stopgap for Brooklyn-Queens. A recently approved “Demonstration Project” will also provide a heavily subsidized (if not free) 4-megawatt-hour battery-on-wheels initially targeting Glendale.

If we can prop up our non-wires alternatives (and their conventional stopgaps) with additional non-wires alternatives, perhaps we can push the major costs out indefinitely. But this strategy sounds risky -- something like borrowing to gamble your way out of the hole. 

Why not limit the knock-on hazards of a series of non-wires projects, and revise borrowing rates closer to the expectations of everyday citizens, say 2 percent to 5 percent? For that, someone probably should raise a stink.

Too small to be effective?

Let’s assume non-wires projects pencil out financially: do they make operational sense? Is Brooklyn-Queens’ newfound redundancy a fluke?

The program’s 52 megawatts of innovative solutions were intended to relieve about 6 percent of the area’s 2018 critical peak load. Weather alone varies a given year’s peak load by more than 6 percent with some regularity for the state as a whole -- and that’s a lot more portfolio diversity than two adjacent boroughs. The evident vagaries of forecasting load years into the future multiply the uncertainty.

Above what operational scale do targeted distributed energy deployments mitigate this ambient forecast variability -- and when are they a waste of time?

Despite institutionalizing non-wires projects across the state, New York regulators appear to have punted on this basic question. Utility-determined project suitability criteria are presently limited to implementation time and minimum cost (although, as discussed, the costs aren’t exactly clear).

Can we count on alternatives to perform?

Let’s say the project pencils and the load forecast ends up spot-on. Can we count on those distributed energy resources at the critical hour?

Brooklyn-Queens’ biggest distributed energy resource is commercial demand response, procured through a highly acclaimed auction. Con Ed ordered some 17 megawatts of the stuff for the program’s critical 2018 peak -- more than three times its original estimate -- and maintains this figure as evidence of successfully hitting (indeed, exceeding) its procurement targets.

State Energy Czar Richard Kauffman hails such “animated markets” for distributed energy as the core of the governor’s vision for the utility of the future. 

But these 17 megawatts look suspect. Last month, the auction’s largest awardee filed an SEC report not only implying cancelation of its entire 4-megawatt 2017 award, but also declaring the foundational partnership for fulfilling its commitments terminated. Even committed resources seem less than reliable: the 1.6 megawatts enrolled in the comparable demand response window last summer produced just 60 kilowatts (less than 4 percent) of relief.

Brooklyn-Queens’ bright spot is old-fashioned upfront energy-efficiency incentives. Eighty-six percent of its currently operational distributed energy resources are free light bulbs, installed door-to-door for local businesses. And, unlike demand response, energy efficiency’s benefits are much likelier to stick around after the program has ended. 

As a crucial aside, state-administered upfront energy-efficiency incentives will basically end in 2018, and have been only partially replaced by utility programs.

The emerging results of Brooklyn-Queens’ innovative procurements caution against ramping down conventional energy efficiency programs and counting “animated market” chickens before they’ve hatched. Yet policymakers have not indicated they’ll delve further into these issues, which are so philosophically vital to state utility reforms.

Full disclosure

I’ve spent the better part of a decade working to develop and finance distributed energy projects. More non-wires projects might be good for business. But collectively glossing over Brooklyn-Queens’ inconvenient realities seems bound to backfire. 

Why squander finite time and capital -- sorely needed to build a sustainable energy system -- on programs promising higher long-term utility rates and little else?

As I argued in regulatory comments earlier this month, policymakers must stop and troubleshoot these issues before expanding non-wires programs.

New Yorkers deserve some answers.

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Benjamin Pickard is Principal at Peak Power LLC, an independent consultancy providing market analysis, policy advocacy, project structuring, and strategy for integrating renewable and distributed energy with our existing electric infrastructure. 

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Why It’s a Critical Time to Be at the Forefront of Solar Software

April 26, 2017

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As technology evolves, new players emerge and cost cuts remain a priority, solar industry leaders must look to the latest software solutions in order to stay competitive, according to Paul Grana, co-founder of Folsom Labs.

On May 16, GTM and Folsom Labs are hosting the second-ever S3 Solar Software Summit, which is the industry’s first dedicated event covering the growing solar software ecosystem. The one-day event kicks of the 10th Annual Solar Summit, GTM’s flagship solar conference, that will be chalk full of market intelligence, engaging panel sessions and networking opportunities.

We recently spoke with Grana about why the software summit matters and some of the topics that will be discussed.

Why is this a crucial time to be delving into the solar software sector?

Grana: The industry used to be able to count on hardware cost reductions (modules, inverters) to bring down system costs and keep the growth coming. But as hardware costs level off, installers must focus on “operational scaling” to grow, while reducing costs. This means smarter processes, smarter team structures, and smarter software tools.

The solar software sector is also reaching its first level of maturity, with a number of products on the market that have compelling features and functionality, and application program interface (API) tie-ins so that users can link the products with each other to get the best combination of features and functionality. So between deeper feature sets within each of the products, and an increasing number of configurations, it is important for installers to use S3 to ensure they’re using best-in-class tools.

What are some of the important industry problems solar-specific software has already addressed?

Grana: Software solutions have proven to help the industry in both direct and indirect ways. In the first case, software can automate the permitting process for inspectors or assist with financial calculations. Enabling remote site assessment is another example of a direct impact, where software tools can conduct a state-of-the-art shade analysis that avoids the need to send a team to the roof. That’s a very straightforward way to cut down on the number of person-hours required to deliver a system.

The indirect, or second order benefits of software emerge over time as solar companies use the tools. That includes things like the ability to take customer feedback in real-time and edit a system design on the fly, which improves the overall quality of the sales process. We’ve heard from developers that are using software tools to tailor a solar system for a potential customer in real time, right on their doorstep, based on the potential customer’s values -- be it cost, or buy American. And it significantly improves the developer’s close rate. We didn’t build software around that specific goal, but you put software in the hands of creative, smart and motivated installers and they’ll figure out how to change processes and team structure to improve performance.

What’s one of the most significant problems remaining that software can help solve?

Grana: Databases remain a huge problem area and driver of cost. We don’t have a good permit database across the U.S. Utility rates, incentives, module databases and inverter databases are all very inconsistently kept across the U.S. This results in a significant duplication of work across the industry. Hopefully some company will eventually build APIs that make the data available to whoever needs it, but many of these databases haven’t been built yet.

Why is solar-specific software a viable business? Aren't you afraid Google, Salesforce and others are going to step in and beat all of the software startups once the industry is big enough?

Grana: There is an entire class of companies that are focusing on specific industries, and beating the global incumbents. For example, Veeva Systems makes customer relationship management (CRM) software for biotech companies, and went public at a $6 billion valuation -- and have beaten Salesforce consistently head to head. This is because they understand their customer in a way that Salesforce never will, and are able to build a product that is ten times better. Solar software companies have the same opportunity. Once the big guys (Salesforce, Oracle, SAP, Autodesk) realize that the solar software industry is big enough, I think they’ll find the ‘buy’ (i.e. acquire) option will be far better than the ‘build’ option -- if solar software companies prove successful.

Why should someone in the solar industry attend Solar Software Summit?

Grana: S3 provides the next level of depth for people working at the forefront of software -- for the head of sales or engineering. It’s a chance for industry experts to come together and compare notes, to talk about what they do and how software tools enable them to do it. Really, it’s about making sure developers don’t fall behind. If there’s a new product competitors are adopting, this is about making sure developers see it at the same time. Solar Software Summit is for decision makers to make sure they’re using the best-in-class software products, because every year the best in class changes.

***

Join GTM for the 10th Annual Solar Summit & 2nd Annual S3 Solar Software Summit in Arizona May 16-18. We’ve got the biggest names in the solar industry confirmed to attend and speak. And we've got a packed agenda of topics including solar software, energy storage, finance, community solar, corporate procurement, balance of systems, and much more. Check out the event site here.

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A Guide to the Latest Solar Trade Dispute: How Suniva’s Petition Could Impact the US Solar Industry

April 26, 2017

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America just took a step closer to another solar trade war. But not just with China. With the rest of the world. 

Today, Suniva filed a petition with U.S. International Trade Commission calling for new tariffs on solar cells and minimum prices for solar modules imported from around the globe. 

The company is asking for duties of 40 cents per watt on imported cells and a floor price of 78 cents per watt on modules. If implemented, those prices would make America the highest-priced solar country.

The solar industry has been waiting for this filing since last week, when Suniva hinted in a Chapter 11 bankruptcy declaration that it would seek to open up another trade case. The process is now underway.

The context

Suniva, a manufacturer based in Georgia, declared bankruptcy last Monday. The company built manufacturing operations for high-efficiency silicon cells and modules in Georgia (450 megawatts of cell capacity) and Michigan (200 megawatts of module capacity). But it lost more than $50 million since 2015 as global module oversupply pushed prices to record lows.

Suniva couldn't compete with module prices at 35 cents per watt. It blamed China and other Asian countries for "flooding the U.S. market" with modules below cost.

Now Suniva is looking for relief. And it's doing so in a unique way. The company filed a Section 201 petition under the 1974 Trade Act -- a tool that could allow the president to implement tariffs, minimum prices or quotas on solar products from anywhere in the world if "serious injury" is proven. It was last used by the steel industry in 2002, which resulted in a three-year tariff schedule on steel products from a number of countries.

If anti-dumping and countervailing duties investigations at the Commerce Department are a scalpel, then Section 201 is a hammer. It is a comparatively swift, blunt instrument. After a petition is filed, the U.S. International Trade Commission has 120 days to review. And if it decides that the industry is facing serious injury, it has another month or two to issue recommendations. The president then has the authority to follow the recommendations -- or potentially act on his own.

Trump's camp specifically cited Section 201 on the campaign trail. Although solar doesn't seem to be on the president's mind, this could be a potential win for his trade agenda. Suniva has done a lot of the leg work for the administration.  

The ask

Suniva is making a big ask. It wants to nearly double the price of imported solar modules.

"Thus, petitioner seeks a recommendation to the President of four years of relief of an initial duty rate on cells of $0.40/watt, along with an initial floor price on modules of $0.78/watt. Petitioner also seeks other equitable remedies that will effectively assist the domestic industry to make a positive adjustment to import competition. Finally, petitioner seeks a recommendation from the Commission to the President that the United States negotiate with trading partners to address the global supply imbalance and overcapacity in CSPV cells and modules."

The tariffs would be implemented on a four-year schedule. Suniva's suggested tariff schedule for crystalline-silicon PV looks like this:

  • $0.37/watt per CSPV cell, with a minimum floor price of $0.72/watt per module (year two);
  • $0.34/watt per CSPV cell, with a minimum floor price of $0.69/watt per module (year three);
  • $0.33/watt per CSPV cell, with a minimum floor price of $0.68/watt per module (year four)

The company says the proposed four-year tariff schedule will "allow the domestic industry to survive long enough that it can benefit from actions of the U.S. government, and foreign governments and producers to address the massive excess global capacity that has depressed global CSPV cells and modules prices to unsustainable levels."

The potential impact

If the International Trade Commission and President Trump agree with Suniva's case, the downstream pricing environment could change dramatically -- particularly for utility-scale solar developers. 

Ben Gallagher, a solar analyst with GTM Research, described the impact to utility-scale projects: "Those prices increase current U.S. utility single-axis tracking system pricing from $1.08/Wdc to $1.56/Wdc -- which is...more or less 2015 system pricing."

Jade Jones, a senior solar analyst with GTM Research, explained the impact on module pricing: "That would bring us to module price levels seen in the last oversupply cycle. So similar to prices in 2012. That would also make the U.S. the highest priced market in the world, with module prices more than double other regions."

GTM Research put together an analysis of the consequences. You can find it here.

Demand destruction in the utility-scale sector "could be quite significant," said former SEIA President and CEO Rhone Resch, speaking on a briefing call organized by Roth Capital Partners. "You're going to double your PPA prices. You will have several gigawatts of potential demand erosion."

The upstream impact is less clear. It would make U.S. manufacturers more competitive -- but in a smaller downstream market.

Resch said the tariffs could get more companies to "re-look at the United States" for expansion.

But it's unclear how much capacity would move to America. "A lot of that capacity is in the process of being built. It probably would not be easily shifted to the U.S.," said Phil Shen, a senior research analyst at Roth Capital Partners, speaking on the briefing call.

According to Suniva, failure to implement widespread tariffs would prevent any expansion of the U.S. solar manufacturing sector: "Without global relief, the domestic industry will be playing 'whack-a-mole' against CSPV cells and modules from particular countries."

There are also geopolitical implications. These actions could apply to every country. At a time when the Trump administration is considering breaking America's commitment to the Paris climate agreement, this could create another diplomatic sticking point.

What are the chances of action?

"Over 50 percent," said John Gurley, a trade lawyer and partner at Arent Fox LLP, during the briefing call. "Like every lawyer, I speak with triple caveats. One never knows where this will go. History tells us it's more likely we'll get a remedy than not."

A final review could come by August. If the government finds injury, it could recommend action by September. If the president agrees, he could make a final decision by October or November. "There's going to be a lack of clarity for several months. It makes it very difficult to predict," said Gurley.

The reaction

SolarWorld, the German manufacturer that led the original trade case against Chinese imports, issued a muted reaction to Suniva's filing.

"SolarWorld -- as the largest U.S. crystalline-silicon solar manufacturer, with more than 40 years of U.S. manufacturing experience -- will assess the case brought by Suniva but prefers that any action to be taken against unfair trade shall consider all parts of the U.S. solar value chain. We're committed to helping to find a way that also considers the interests of other parties playing fair in the U.S. solar market," said Juergen Stein, the company's U.S. president, in a prepared statement.

Abigail Ross Hopper, the new president and CEO of the Solar Energy Industries Association, came out in opposition. The organization speaks for thousands of developers and installers, who will likely be opposed to any new trade actions.

"We strongly urge the federal government to find a resolution that bolsters the competitiveness of American solar cell and panel manufacturing, which employs approximately 2,000 people in the U.S., without erecting new trade barriers. SEIA opposes any resolution that restricts fairly-traded imports of solar equipment through new tariffs or other barriers that endanger the livelihoods of the 260,000 American solar workers and their families living in every state in the Union," said Hopper in a statement.

UBS equities analysts suggested the impact would be a net-negative for America's solar industry.

"This appears substantially more negative than positive for the U.S. solar industry, though ASP-challenged SPWR and FSLR could see a benefit for utilizing domestic manufacturing (only FSLR currently has any substantial running lines in Ohio, SPWR could plausibly bring P series technology in). As the vast majority of U.S. solar jobs are non-manufacturing (installation, sales, technician) in nature, a substantial ramp in ASPs would threaten the economics of incremental installations (including developers with bids assuming cost declines) and adds risk to our input cost decline thesis for RUN and other resi/developer peers. While we emphasize that panels are currently no more than ~10% of the install cost for resi, 10-30/W cent increase in panel prices would prove quite disruptive and substantially problematic for the lower cost/w C&I and utility-scale markets, particularly for development contracts without firm panel delivery."

The reality

Meanwhile, the bloodbath in solar manufacturing continues. GTM Research compiled the latest U.S. layoffs

  • Suniva: 230 layoffs between Georgia and Michigan as of Chapter 11 filing in April 2017, with an additional 24 layoffs planned. “Temporary shutdown” of production facilities in Michigan and Georgia in Q1 2017.
  • Mission Solar Energy: 170 layoffs in March 2017, and plans to reduce its Texas manufacturing capacity from 200 MW to 48 MW.
  • Tesla/SolarCity/Silevo: Tesla noted in its annual 10k filing that Silevo will not achieve its volume production targets and essentially signaled an abandonment of the Silevo technology. Instead, Tesla will partner with Panasonic, with the 1 GW Buffalo, New York facility expected to start production in summer 2017 and to be ramped to full capacity in 2019 -- a delay from earlier targets.
  • First Solar: 450 layoffs for Perrysburg, Ohio production facility in November 2016 as part of strategic shift and retooling for Series 6 thin-film module. Roughly 1,000 employees remain on staff at facility, according to The Toledo Blade.
  • Panasonic: 50 layoffs in Salem, Oregon in February 2016 while production volume winds down.

And while America now hosts 1,600 megawatts of solar module manufacturing capacity, the country's share of the global market continues to drop.

Suniva believes its petition is the last line of defense against this trend.

"The evidence clearly indicates that, given the response of the largest global manufacturers, such a 'targeted-country' strategy is set up for failure. The global industry has proven, to the sum of billions of dollars of investment, that it will go to exceptional lengths to avoid investment in the United States, and that given any loophole, will prosecute against that loophole vigorously. It is for these reasons, that this action, with its request to add tariffs to subject goods made anywhere outside the United States, is the sole effective cure," wrote the company in its petition.

In a bizarre twist, Suniva is majority-owned by Shunfeng International Clean Energy, a Chinese company.

Join GTM for the 10th Annual Solar Summit & 2nd Annual S3 Solar Software Summit in Arizona May 16-18. We’ve got the biggest names in the solar industry confirmed to attend and speak. And we've got a packed agenda of topics including solar software, energy storage, finance, community solar, corporate procurement, balance of systems, and much more. Check out the event site here.

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Clean Energy Investment Fell by 17% in 2016. Here’s Why That’s Fine

April 26, 2017

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Last year, Michael Liebreich, founder and chairman of the advisory board for Bloomberg New Energy Finance, stood in front of a packed room at BNEF ‘s Future of Energy Global Summit and spoke about the record investment in clean energy in 2015.

The streak would not last. Global investment in clean energy in 2016 was down 17 percent overall, according to BNEF, driven by the slowdown of the Chinese economy and technology cost reductions.

Despite the global downturn of cleantech investment in 2016 and concerns about changing political winds in the U.S., decarbonization is happening and momentum is accelerating on various fronts, according to Liebreich and others at this year's Future of Energy summit.

This decidedly upbeat outlook was driven by the economics of renewables. Cost considerations by both utilities and customers are driving adoption of clean energy all over the world. Renewable energy installations are up in 2016 overall and investment in renewables out-invests fossil fuels by two to one. “This is not alternative energy,” said Liebreich.

Green bonds, a market nonexistent about a decade ago, will be $123 billion this year according to BNEF, and could reach $150 billion, according to the Climate Bonds Initiative.

Last November, Bank of America launched a single $1 billion green bond, nearly double the size of its previous bond of $600 million in 2015, and it underwrites scores of others. “We practice what we preach,” said Raymond Wood, managing director and global head of power, utilities and renewables at Bank of America.

Beyond investment, the decoupling of the American economy from energy use also means that the U.S. is halfway to meeting its near-term Paris climate goals, according to Liebreich. As the U.S. has decarbonized, electricity and gas prices are down 20 percent in the past eight years, he noted.

Liebreich wasn’t the only one with a positive view. “Maybe we should approach this and say the glass is half full,” said Michael Bloomberg, billionaire and former New York mayor, of action on climate change while pitching his new book, Climate of Hope, co-written with former Sierra Club executive director Carl Pope.

The next four to eight years will provide “an age of plenty on steroids,” Liebreich said of the energy landscape. Cheap wind, solar, gas, coal and oil are a reality across much of the globe and energy storage costs are falling. Simply put: energy efficiency technologies and falling costs of renewables can drive decarbonization based on economics, and changes at the federal level in the U.S. will have limited impact, many at the summit argued.  

But cheap everything can also complicate the ability to radically decarbonize growing global economies. “It doesn’t matter how much you turn up the renewables knob; it’s very difficult to remove the last fossil fuels,” said Liebreich. That is particularly true in some developing nations where coal is still coming on-line at an impressive clip. Even so, in India, for example, some solar projects are coming in with prices cheaper than coal already.

In developed nations, the key will be turning electricity capacity markets into demand-led flexibility markets, asserts Liebreich. The problem with capacity markets, as most are structured, is that they can lead to over-provisioning with inflexible load and are not incentivized to reduce peak demand. The conversation on energy market reform is already happening in some places, but there is still a long way to go.

“We need to work harder on the markets and then let the markets do the work,” said Auke Lont, CEO of Statnett, Norway’s grid operator.

Even with the monumental challenge of electricity market reform worldwide, significantly decarbonizing the electricity sector is probably the easy part. To meet Paris climate goals, everything else -- and transportation in particular -- needs to decarbonize.

On the personal transportation front, Liebreich is also upbeat, though. “We’re very bullish,” he said. In particular, he said that once the sticker price of an electric vehicle is the same as an internal combustion engine vehicle, EVs and plug-in hybrids could meet 40 percent market share of new vehicles within five years. BNEF estimates that happening between 2025 and 2030. “This stuff can change fast,” he said.

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Oil and Gas Heavyweights Back a Roadmap for Deep Decarbonization

April 26, 2017

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We've entered a topsy-turvy moment in energy where coal supporters want solar power and oil execs have endorsed cutting fossil fuel use.

The latter appeared in a new decarbonization roadmap from the Energy Transitions Commission, an all-star working group charting the energy future that includes the chairman of Royal Dutch Shell, the head of sustainability at massive mining company BHP Billiton, the CEO of General Electric Oil and Gas, as well as leaders from prominent global banks, development organizations and climate-oriented NGOs.

The terminology in "Better Energy, Greater Prosperity" will be familiar to anyone following the Paris climate agreement and subsequent mobilization, but the cast of characters here differs in a crucial way. Each commission member might not agree with every detail, the report notes, but they collectively "endorse the general thrust of the arguments." 

That means some of the world's most powerful fossil fuel providers and financial lenders have publicly affirmed the need to sharply cut oil, gas and coal usage and switch to clean sources. And they believe this can be done without macroeconomic disruption, but rather with a net welfare gain for society.

The commissioners set out to balance two highly complex goals: to drastically slash carbon emissions, as dictated by the Paris Agreement, while increasing energy access to hundreds of millions of people who lack the electricity needed for a modern standard of living. Framed differently, the world must increase the economic benefit per unit of energy consumed, while increasing the share of zero-carbon energy.

"Despite the scale of the challenge, the Energy Transitions Commission is confident that this transition is technically and economically possible, and that it would deliver important additional social benefits," the report states. Those benefits include drastically improved air quality and new economic opportunities.

The success of this project requires a massive reorientation of global investments in energy infrastructure, particularly a shift from the kind of assets that have formed the backbone of several commission members' businesses.

The outlook calls for wind and solar power to rise to 45 percent of the global power mix by 2040, with non-intermittent, zero-carbon sources accounting for 35 percent and fossil fuels reduced to 20 percent. By expanding electrification to other sectors, the roadmap's conservative scenario suggests that 10-20 percent of all fossil fuels use could be eliminated by 2040, with the greatest opportunities in transportation, industry and buildings.

Together, this first wave of decarbonization would get us 48 percent of the way to the level of emissions deemed safe to keep global temperature rise well below 2 degrees Celsius.

That's both a huge lift and the low-hanging fruit -- to actually keep temperatures in a safe range requires also decarbonizing the hard-to-replace fossil fuel activities (15 percent of desired reductions), improving energy productivity by 3 percent per year (30 percent of goal) and optimizing unavoidable fossil fuel use, with shifts like phasing out gas flaring (7 percent).

Such massive changes aren't going to happen on their own, so here are just a few policies proposed in the document that you might not expect from a typical oil magnate:

  • Carbon pricing
  • Tighter energy efficiency standards
  • Dense urban design (rather than sprawling car-centric design, for instance)
  • A sharing economy that offers "more efficient ownership models of assets such as vehicles"
  • Treating fossil fuels like a scarce resource
  • An immediate decline in coal use
  • Holding gas production to 2 percent above today's levels in 2040
  • Drastically reducing methane leakage
  • Cutting oil use 30 percent by 2040

This consensus of global power players looks a lot like a climate hawk's dream. Perhaps a bit more fossil fuel presence in the long term, and more hope held out for carbon capture and sequestration, but the vision of bold public policy to forcefully shift the trajectory of the global economy shines through.

It's unclear what role the oil and gas supermajors would play in this transition. Perhaps Shell will sign up as the first to convert to a renewable power supermajor, and stun its peers with a swiftly adopted new business model. Indeed, today's supermajors could play a leading role in the $300 billion annual investment in clean energy infrastructure called for by 2030.

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Cleantech Patents Are Lagging—That’s a Big Problem

April 26, 2017

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The number of U.S. patents granted for clean energy technologies has dropped over the past couple of years, after more than a decade of growth.

Those findings come from a new report by The Brookings Institution. According to the think tank, while the total number of cleantech patents granted by the U.S. Patent and Trademark Office doubled between 2001 and 2014, growing at a rate of 7 percent annually, the number of U.S. cleantech patents granted between 2014 and 2016 actually declined by 9 percent each year.

Over the same period, the number of U.S. cleantech patents owned by foreign companies grew. Japanese, South Korean, and German companies dominated patenting for certain cleantech categories, like transportation and energy storage, between 2011 and 2016.

It’s too early to tell whether these trends are temporary or are actually here to stay. But the data “raises concerns about the long-term competitiveness of the U.S. cleantech sector,” said Devashree Saha, senior policy associate for Brookings' Metropolitan Policy Program. Saha worked on the report.

“This is a picture of momentum that has begun to potentially drift. We’re not ready to say the sector has lost its mojo, but there are now questions about it,” said Mark Muro, senior fellow and policy director for Brookings' Metropolitan Policy Program, who also worked on the report.

The trend could be a result of funding declines in the wake of the stimulus, which saw the Obama administration invest tens of billions of dollars into clean energy infrastructure projects and R&D between 2009 and 2014.

At the same time, many venture capitalists who invested in cleantech startups in the early and mid-2000s lost money and ultimately pulled back from the sector. There are a few cleantech investors still around (and even some new ones), but not anywhere close to the amount a decade ago. That could account for a smaller portion of the drop in patents from cleantech startups and entrepreneurs.

Now the Trump administration wants to slash budgets for clean energy. A drastic change to federal funding “could make this flattening a more permanent downward trend in the next few years,” Saha said.

Trump’s “skinny” budget proposal would eliminate ARPA-E, the federal government’s energy innovation arm. “There are critical [federal] programs that have major impacts on these industries and ecosystems,” said Muro. "There’s a clear need to sustain the surge” in cleantech innovation.  

“In the last decade the country has developed a pretty solid, effective platform for supporting clean and low-carbon technology development, so it would be a shame to lose that momentum,” said Muro.

States and the private sector could pick up some of the slack. But many agree that fundamental energy research and development is best done by the federal government.

The Brookings report lays out a few recommendations for Congress. They include continued support for the Department of Energy’s Lab to Market initiative and the ARPA-E program, as well as the 17 national laboratories in the U.S.

“Congress has the opportunity now to come together around a short list of minimum viable supports for cleantech innovation and growth," the report concludes.

Muro said there’s also a need for the private sector to argue more forcefully in favor of government research and development in order to provide a funnel of innovation for groups like Breakthrough Energy Ventures, founded by Bill Gates.

At Bloomberg’s global energy summit in New York this week, Michael Liebreich noted that global clean energy investing across the board (including project finance and tech investing) was down 17 percent compared to last year. That’s partly because of lower prices for solar and wind.

But outside of the U.S., many countries continue to invest heavily in energy research, development and deployment. China invested $17.9 billion into clean energy in the first quarter of 2017, while the U.S. invested $9.4 billion.

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You Don’t Have to Be Rich to Go Solar [GTM Squared]

April 26, 2017

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