CONTENTS PAGE
FEATURES
SUN DIAL
How Structural Guidelines For Low-Slope PV Arrays Affect Mounting System Design
Manufacturers Will Slowly Switch To Diamond Wire
Past, Present And Future Of Solar Interconnection: A Crucial Project Process
New Research Examines How Solar Arrays Affect Firefighter Operations
For PV Module Assembly, Factory Geography Plays Increasingly Important Role
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What Lies Ahead
For California Solar?

California’s solar market - the U.S.’ largest - now stands at the edge of a new era. Although the PV portion of the California Solar Initiative (CSI) - the state’s primary incentive program for customer-sited solar generation - has all but wound down, industry advocates are optimistic that other drivers, including the state’s aggressive renewable portfolio standard, will help keep the market moving forward.

The end of the $2.2 billion CSI program “marks a new phase of solar market maturity, with low- and middle-­income households now driving solar energy’s growth in California,” wrote the advocacy group Vote Solar in a recent press release.

With nearly all rebate money now exhausted, the CSI has grown the solar market in California by leaps and bounds. According to Vote Solar, Californians have installed more than 140,000 solar projects - totaling nearly 1.5 GW - to date.

Equally important, the average pre-incentive price for a CSI-­assisted solar array has dropped from $9.48/W at its most expensive point to $6.10/W today - a reduction of more than 35%.

“The wind-down of the CSI is demonstrating the great success of policy design in that costs have come down so much that installations are being done now with zero subsidy,” Ted Ko, associate executive director of the Clean Coalition, tells Solar Industry.

But in the midst of these accomplishments, more work remains to be done. “The future of customer-sited solar will depend on how fast we can craft the successor to net metering,” Ko says.

The Clean Coalition is advocating for a revamped version of a wholesale distributed-generation (DG) model, where the “full costs and value of DG are considered and the consumption of electricity is clearly separated from the production,” he explains.

 

An energy blueprint

Ko and his colleagues at the Clean Coalition, a Palo Alto, Calif.-based group focused on fostering a transition to local energy systems, were among the stakeholders that presented their views to the California Energy Commission (CEC) as part of the CEC’s preparation of its 2012 Integrated Energy Policy Report (IEPR).

The final IEPR, which was released in February, incorporated nearly all of the Clean Coalition’s recommendations, Ko says. Although the ultimate role and importance of the IEPR varies depending on the views of the state’s government and energy regulators, it can serve as a powerful policy-guiding tool.

Fortunately, Gov. Jerry Brown, D-Calif., who has historically pushed for pro-solar policies, was “highly engaged” in the IEPR preparation process and is likely to hold the final document in high regard, Ko notes.

The IEPR incorporates full forecasts of energy supply and demand, as well as discussion of the state’s most crucial energy issues, including renewable energy integration. “These forecasts and assessments form the basis for long-range energy policies and planning to guide the future of California’s energy system,” the CEC explains in the IEPR.

Covering many energy issues, from natural gas pipeline safety to electrical infrastructure needs to nuclear capacity replacements, the document gives supportive - but realistic - treatment to California’s ongoing renewable energy transition, outlining both problems and solutions.

Overall, the goal is to “advance a renewable-centric generating portfolio that minimizes cost and risk while maximizing economic, social and environmental benefits,” the report says.

The CEC’s recommendations for achieving this delicate balance, described in depth in Chapter 5, titled “Renewable Action Plan,” include five key strategies:

Given California’s budgetary constraints and the overall state of the U.S. economy, finding funding for all of these initiatives can be a tricky process.

“The reality is that California’s public sector alone cannot provide enough funding for the long-term investments needed to reach the state’s renewable energy goals for 2020 and beyond,” the report notes.

The benefits of deploying increased amounts of solar and other forms of renewable energy are nonetheless expected to outweigh the costs. Quantifying some of these benefits can be difficult, but “decision makers should not delay moving forward with clean energy policies because benefits and costs aren’t fully quantified,” the report stresses. “The focus should be on quantifying renewable benefits that have limited uncertainty.”

Ko also believes the state will be well served by transitioning to an electric grid characterized by clean local energy and smart grid technologies.

“We strongly urge all of the California agencies and the legislature to heed the IEPR’s call for more proactive long-term planning - setting policy and making decisions today that don’t lock us in to an outdated centralized generation model,” he says. - Jessica Lillian

 

PV Demand In APAC
Expected To Soar

Solar photovoltaic demand from the Asia Pacific (APAC) region is forecast to grow to 13.5 GW in 2013, growing 50% year-over-year, according to a new report from NPD Solarbuzz.

China, Japan, India and Australia remain dominant for PV demand in the APAC region and will account for 90% of APAC demand in 2013. However, discrete end-market demand environments are now evolving in each of these countries.

As a result, PV suppliers and technologies are being selected in each territory based upon factors such as domestic manufacturing, policies, import duties and customer preferences.

“Having a single go-to-market strategy to meet growing PV demand across the entire APAC region is no longer viable,” says Chris Sunsong, an analyst at NPD Solarbuzz. “Leading APAC countries are now evolving into micro-climates that create customized supply channels.

“Suppliers are being forced to pick and choose the countries and application segments that overlap with their product portfolios and corporate strategies,” he continues. “Quarterly cycles also continue to define PV demand, reflecting the effects of policy deadlines and weather-related seasonality.”

In Australia, the elimination of the Solar Credit Multiplier, along with incentive reductions in Victoria and Queensland, will slow PV growth this year, according to the report. In Japan, demand will peak during the first quarter, ahead of scheduled tariff reductions in April.

The Chinese government will likely readjust the goals of its 12th Five-Year Solar Development Plan, and the country will see over 75% of its 7 GW demand in 2013 occur in the second half of the year. However, it is crucial that any changes to the feed-in-tariff rates drive PV developers to complete their projects earlier in the year, thus avoiding the dramatic year-end demand swings experienced in the past, NPD Solarbuzz adds.

In India, the final version of Phase II of the National Solar Mission program is still pending. The country could see a capacity increase from 3.7 GW to 9 GW, with an increased focus on the off-grid and rooftop sectors.

The threat of further trade wars involving APAC countries, along with other import restrictions, is segmenting the APAC region into country- and application-specific markets. Domestic content restrictions on imported modules into India may strongly affect crystalline silicon (c-Si) supply from China or any thin-film imports to India.

The APAC region is also becoming more selective about technologies, according to the report. In Japan, high-efficiency modules have become the preferred technology for locations with constrained space. In China, domestically manufactured multi c-Si modules are satisfying ground-mounted requirements.

In India, 1 GW of new demand will come from rooftop projects under Phase II of the National Solar Mission, which could further shrink this key market for thin-film suppliers.

“There are various factors driving overall PV demand across the APAC region, but each country is still subject to a number of risk factors,” says Sunsong. “For example, the Chinese and Indian markets are constrained by bank financing and grid accessibility, and Australia remains vulnerable to future policy shocks.”

 

New Initiative Designed
To Cut Paperwork

As module prices fall, the PV industry faces increasing pressure to reduce the so-called soft costs of solar installations in parallel. In the U.S., however, complicated permitting procedures and mountains of required paperwork continue to hold back such efforts and, according to many installers, threaten to curtail overall industry growth.

Now, a new organization featuring some familiar industry figures claims it has a plan to cut the price of installed rooftop PV by 50%. Solar Freedom Now (SFN), co-founded by Barry Cinnamon and Ron Kenedi, aims not to streamline or digitize the solar installation paperwork required by local authorities, but to cut it completely.

“We recommend the implementation of a single national policy that would grant homeowners the right to install a standardized, under 10 kW system using UL-listed components, following National Electrical Code standards, installed by qualified contractors and subject to a local inspection,” SFN writes in a recent white paper.

This policy goal may sound familiar to globally minded solar professionals. Single-page paperwork is the norm in Germany, where an average rooftop PV array can be safely installed for approximately $10,000 - half the price of the average small installation in the U.S., according to SFN’s white paper.

The subject of German PV costs versus U.S. PV costs has long captured the interest of many industry stakeholders. Last month, for instance, Rocky Mountain Institute (RMI) and Georgia Tech Research Institute (GTRI) announced a new partnership in order to explore the cost divide between the prices of residential solar PV systems in the two countries. RMI and GTRI plan to use Lean and Six Sigma process strategies to analyze U.S. and German system processes and make recommendations.

SFN points to the U.S.’ myriad local jurisdictions - each with their own rules and ever-evolving procedures - as one of the primary obstacles to inexpensively installed solar. In all, 18,443 cities and 3,273 utilities in the 50 states currently have jurisdiction over rooftop solar systems, the organization notes in its white paper.

The sheer amount of required paperwork also piles on costs and off-the-roof labor for solar installers. For the “simple” residential rooftop PV array in Northern California that SFN cites as an example, 95 pages of incentive application forms, interconnection submissions, business documentation and more are required.

Automating that paperwork - a strategy sometimes suggested as a means of reducing the administrative burden - is not the answer, according to SFN.

“The value of the time savings from automating paperwork is often less than the additional costs for the software license, maintenance and training,” SFN notes. “Not surprisingly, automating solar processes potentially increases rather than reduces costs.”

Instead, the organization says, the only real answer lies in national standardization and elimination of superfluous inspections.

Co-founder Cinnamon tells Solar Industry that while the group’s formal proposal and outreach efforts are new, several authorities having jurisdiction over solar installations, as well as municipal utilities, have expressed their support of such an idea over the years.

“Small building departments like the concept,” he says. “Larger building departments want to make sure their specific requirements are considered. Here, a top-down national approach will provide the leverage for consistency.”

Investor-owned utilities, on the other hand, may prove to be resistant to the proposal. Although reducing paperwork is in their best interest, they “still have strong motivation to delay the revenue loss from solar,” Cinnamon says, adding that a national outreach approach is required.

“It’s tough to get utilities on board, since to them, cheap distributed-­generation solar is a sinking ship - sort of like asking saddlemakers and stablehands to help build roads for cars in 1900,” he points out.

The U.S. Department of Energy’s SunShot Initiative, launched in 2011, represents the country’s most large-scale effort to bring down solar power’s soft costs. But according to Cinnamon, SFN can attack the problem from an area where SunShot, by nature of being a government-backed program, is restricted.

“What is very clear is that it is challenging for SunShot - which focuses on technology solutions - to fix what we believe is primarily a policy problem,” he explains.

“I would love to see some federal government efforts focused on these policies,” he adds. “However, government agencies are prohibited from supporting policy advocacy efforts. In other words, SunShot cannot give a grant to an entity that is trying to influence the government to eliminate solar paperwork.”

One key group that can directly boost SFN’s private-sector efforts is the solar market itself. In fact, Cinnamon says, communicating the magnitude of the solar paperwork problem to the industry represents SFN’s first goal. - Jessica Lillian

 

Fitch Updates Criteria
For Solar Projects

Fitch Ratings has published an update of its official rating criteria for solar projects. The document describes the analytical framework that the rating agency applies to evaluate debt issued for a broad range of utility-­scale PV, concentrating PV and concentrating solar power projects.

The solar projects discussed in the report are financed as stand-alone assets or portfolios with no formal guarantee of debt service from the sponsors (nonrecourse). This report replaces the existing criteria without modifying Fitch’s analytical approach.

The report includes further clarification of Fitch’s assessment of solar power projects in operation compared to projects under construction. No changes to the ratings of existing transactions are anticipated as a result of the application of the updated rating criteria. The report also provides a summary of the broad attributes that support the ratings for solar power projects by highlighting the six key rating drivers that Fitch evaluates when rating debt issued for solar power projects. The rating drivers are as follows:

 

EU Investigating
Solar Glass

The European Commission has kicked off an anti-dumping investigation into imports of solar glass from China. The initiation is based on a complaint filed by EU ProSun Glass, which claims solar glass from China is being dumped in the European Union (EU) at prices below market value, causing material injury to the EU solar glass industry.

According to the commission, the investigation could take up to 15 months, although, under trade defense rules, the EU could impose provisional anti-dumping duties within nine months if it considers these necessary.

The EU solar glass market is valued at less than 200 million euros, the commission says. EU ProSun Glass represents substantially more than 25% of EU glass production, thus meeting one of the legal requirements for the investigation to commence.

The commission will now send out questionnaires to various interested parties, such as exporting producers, EU producers, importers and associations. It will ask for information relating to the exports, production, sales and imports of solar glass.

On the basis of the information it has collected, the commission will establish if dumping has taken place and whether the injury claimed is a result of the dumped imports. This examination will also include other possible factors that might have contributed to the injury.

In addition, the commission will carry out the so-called Union interest test, which will consider whether the potential imposition of measures would be more costly to the EU economy as a whole than the benefit of the measures would be to the complainants.

 

Could YieldCos Supply
Solar Project Capital?

Inevitably, forward outlooks for renewable energy have been based on the question: How will the industry compete in an era of tax-credit uncertainty? For an industry focused on long-lived assets plagued by short-term tax policies, this has been a sensible question to ask. The uncertainty resulting from tax policy remains today.

While not diminishing these concerns, however, this article is centered on a different question: How do renewable projects compete, long term, in an era of low power prices and reduced demand for electricity?

If we accept the premise that tax credits will not be available as a long-term incentive and that a material decline in the price of equipment is unlikely, the future growth of the industry will require a new catalyst. It is our view that the key to growth in the industry is to unlock a cheaper source of capital. This new capital will come from the public equity markets, which are materially cheaper than today’s alternatives.

Before looking too far ahead into the future, it is helpful to step back and take a broader look at the U.S. electric power industry. As a whole, the U.S. power market has not experienced meaningful growth in recent years. From 2008 to 2011, the power market has experienced a 1% compounded annual increase in installed capacity. Electricity sales statistics have been flat over the same period, which suggests that declining reserve margins will not result in a construction boom, although declining reserve margins may spur construction in certain regions of the country.

By contrast, wind installations have increased by 21%, and solar installations have increased by 73% over the same time frame. This is despite the fact that the levelized cost of energy (inclusive of tax benefits) for renewable technologies is dramatically above that of conventional combined-cycle natural gas plants. In July 2012, the U.S. Energy Information Administration estimated the levelized cost of a conventional combined cycle at $66.10/MWh, wind at $96.00/MWh and solar photovoltaics at $152.70/MWh.

The current state of power markets is not any more encouraging. In 2012, average wholesale prices at PJM West were $40.18/MWh, a decrease of 22% from 2011. The situation in other pricing hubs in the country was not much better:

This decline in prices is highly correlated to declining natural gas prices, due to the shale gas phenomenon. In 2011, the average Henry Hub was $4.02/MMBtu, while in 2012, it was $2.75/MMBtu, a decline of 31.5%.

These statistics raise an obvious question: What has been driving the development of renewable generation? There have been two primary drivers. The first drivers are state renewable portfolio standards (RPS). According to SNL Financial, the average 2012 RPS target of the 31 states with RPS was 7.6%. As of November 2012, these RPS targets had been met, with 8.0% of eligible generation being renewable. In contrast to the broader market fundamentals, these standards should continue to be a driver of growth, as the 2015 average target is 10.6%, and the 2020 average target is 16.4%.

The second driver is the success of the U.S. Department of the Treasury’s cash-grant program, which as of Dec. 5, 2012, had disbursed approximately $16 billion in proceeds. It will be interesting to see whether the traditional tax equity market can absorb the expected increase in demand this year, as this program is not available to projects that entered commercial operations after Dec. 31, 2012.

Taking these issues as a whole, the question remains: In an era of marginal increases in required capacity, with the price of wholesale power across the country declining, when tax equity is increasingly constrained, how can the renewable energy industry sustain its growth?

We believe the key lies in unlocking a cheaper source of equity. Fortunately, there is a large source of capital that is currently untapped. For more than a decade, the public equity markets have been a tremendous source of capital for master limited partnerships (MLPs) and real estate investment trusts (REITs). MLPs and REITs are established, tax-advantaged holding companies for long-lived, capital-intensive, hard assets. These assets typically generate significant cashflow from long-term revenue contracts. MLPs and REITs pay the majority of this cashflow out to investors as dividends.

Investors have flocked to MLPs and REITs in recent years for two key reasons: dividend sustainability and dividend growth. Since 2008, MLP and REIT stocks have dramatically outperformed the broader market. Compared to other yield investments, MLPs and REITs are generally simple to understand, making dividend sustainability and growth easier to predict. Investors place serious value on these characteristics. Based on current market yields, public equity investors value these assets at a 7% to 8% distributable cashflow yield, which is the equivalent of a levered equity discount rate.

Renewable power assets are not only similar to the long-lived, capital-­intensive assets owned by MLPs and REITs; they are, in many ways, higher quality. The majority of commercial real estate assets typically have leases of 10 years or less with non-investment-grade tenants. Commercial real estate also tends to be moderately to highly cyclical in nature, adding risk to long-term dividend sustainability.

Renewable assets, by contrast, are non-cyclical and typically have revenue contracts of 15 to 20 years with investment-grade counterparties. If investors value MLP and REIT assets at a 7% to 8% distributable cashflow yield, there is good reason to believe they will value renewable assets at similar, if not lower, yields. As the low- to mid-teen returns required by most renewable developers are becoming increasingly unattainable at today’s power prices (even with outstanding RPS in many states), the public markets represent a game-changing opportunity to drive industry growth.

Due to current Internal Revenue Service rules, renewable assets are not eligible for the tax-advantaged status enjoyed by MLPs and REITs. The intent of this outlook is not to make a case for renewable energy assets to be REIT- or MLP-eligible. While this could provide for a potential long-term solution, the legislative path to achieve that status is, at best, uncertain. Regardless of future legislative changes, we believe a vehicle for accessing this low-cost equity capital exists today. Our company calls this vehicle a “YieldCo.”

A YieldCo is simply a C corporation that acts as a holding company for renewable assets. Due to the myriad of tax benefits available to renewable energy assets - such as bonus or MACRS depreciation, investment tax credits and production tax credits - the YieldCo vehicle can carry forward net operating losses and shield taxes for extended periods of time. As additional assets are developed and/or acquired, the tax shield period is extended even further.

We believe that 2013 will be the year of the YieldCo. Based on the fundamentals outlined above, it is difficult to make the case that the status quo will be sufficient to maintain the renewable industry’s outperformance in the power sector. While RPS will provide some growth prospects, power market fundamentals are not conducive to robust growth unless the cost of capital decreases. By allowing renewable energy projects to access mid- to high-single-digit costs of capital, YieldCos can enable the renewable energy industry to sustain the momentum it has been building.

- Andrew Redinger & Daniel Brown

Andrew Redinger is managing director and group head and Daniel Brown is vice president of KeyBanc Capital Markets’ utility, power and renewable energy group. Redinger can be reached at aredinger@key.com, and Brown can be reached at daniel.brown@key.com. The authors wish to add the following note: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC and KeyBank National Association (KeyBank N.A.), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A.

 

Polysilicon Market
Nears Bottom

Activity has plunged in the global photovoltaic polysilicon spot market - one of many hopeful signs suggesting that prices for the key solar raw material will soon bottom out as supply comes into better alignment with demand.

The spot market in December 2012 accounted for 20% of total polysilicon sales, down dramatically from its peak of 47% in May, according to information and analytics provider IHS.

The high level of spot market volume in mid-2012 indicated that polysilicon was in an acute state of oversupply, the company explains. Producers were dumping excess stockpiles on the spot market, driving down prices to bargain levels that lured buyers away from long-term contract agreements.

This trend was associated with a major, sustained plunge in polysilicon prices, with the polysilicon price per kilogram falling to an average of $20/kg at the end of 2012, down from $31/kg in February of last year.

However, the fact that spot market volumes have fallen by more than half indicates that suppliers have reduced production to accommodate demand, suggesting that pricing is approaching the bottom.

“As IHS predicted in November, solar polysilicon pricing in early 2013 is nearing the end of its long, 24-month decline,” says Dr. Henning Wicht, director and principal analyst for photovoltaics at IHS. “The drop in spot market volume, along with a range of other indicators, suggest that the price plunge that hamstrung polysilicon supplier profits throughout 2012 will soon come to an end.”

Tier-one suppliers are leading the way in reducing production, following IHS’ advisory issued in September 2012. These companies are attempting to avoid a replay of 2012’s miserable conditions by controlling volumes and not inflating the spot market, IHS says.

The top suppliers also have experienced erosion in their profit margins. Even the most competitive suppliers are now warning investors that they cannot afford to continue lowering prices to gain market share.

With their factory utilization reduced, these leading companies are now incurring higher unit costs per part manufactured. This trend also will compel the top-tier suppliers to cease reducing prices, according to the report.

IHS forecasts that tier-two and tier-three suppliers are likely to play a reduced role in the market for several months. It will take prices higher than $25/kg to stimulate the ramping-­up of the idled factories.

 

SEMI Offers Remedies
For Trade Wars

In a new white paper, industry organization SEMI calls for constructive action for ongoing solar trade disputes. SEMI recommends the following approach:

“The solar energy sector is a $100-billion-plus and growing global business characterized by fierce international competition,” says William Morin, senior director of government affairs at Applied Materials and one of the white paper’s lead authors. “So it was probably inevitable that trade conflicts would arise.

“What should not be inevitable, however, is that these tensions continue to define the global solar landscape,” he adds. “The current path ultimately means the industry, consumers and the environment all lose. With leadership and long-term vision, we can turn this around.” R

New & Noteworthy

What Lies Ahead For California Solar?

 

 

 

 

 

 

 

 

 

 

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