Greentech Media: Headlines

5 Ways to Win Small Business Energy Management

Katherine Tweed — 2013-06-18T20:58:59+00:00

Small and medium-sized businesses are the redheaded stepchildren of energy management. There’s a bottomless pool of companies vying for homeowners' attention, and a slew of professional services for the large commercial and industrial energy customers.

Stuck in the middle, and often forgotten, is the small and medium-sized business (SMB) market. Utilities and other energy management providers want to address SMBs, but because the SMB market is fragmented, many don’t know where to start.

In recent years, however, there is increasing chatter about serving this substantial market. To answer some basic questions, Accenture launched its first global snapshot of the sector. In the report, New Energy Consumer Handbook, Accenture surveyed businesses with one to 500 employees across nine countries.

At first glance, it seems as though SMBs are pretty happy with the status quo. But dig a little deeper and it seems that’s hardly the case. “When you dig around, they’re much more price-sensitive, much more likely to switch, and becoming much more organized than we thought,” said Greg Guthridge, global managing director for Retail and Business Services for Utilities at Accenture.

The churn rate for SMBs is high, the study found, with about 35 percent of participants saying they’re considering switching energy providers. The opportunity to get, and keep, the energy management business for small business is going to be huge in coming years -- and not limited to utilities.

1.Tailor the Experience. A total of 87 percent of small and medium-sized businesses want targeted solutions for their business needs. Nearly half of the companies don’t even care if those are specific to their industry, as long as they’re designed specifically for SMBs.

Guthridge suggests there are two actions utilities can take that don’t require a significant investment. The first is to create a call center within a call center just for the SMB segment. The other is to bring in a few extra people that can serve as industry representatives. The reps should know the business cycles of specific industries, such as retail, and be able to talk with both accounts payable and business owners about managing energy and taking part in energy efficiency programs.

2. Design Specific Rate Plans. There is a notion in the industry that the small business owner doesn’t have the time or inclination to sign up for variable rate plans. But Accenture found that more than half of survey participants would opt for a variable rate plan if it saved them money.

3. Offer Value-Added Services. Many services that are popular with residential customers are also sought after by SMBs, including bill alerts and plans that make bills more predictable. More than half of SMBs say they have already had energy audits or are interested in them, and another 41 percent are interested in devices to help manage energy use (automated lighting or HVAC with remote controls). Even more, 74 percent, were somewhat or very interested in generating their own electricity. Not only are business owners interested in tailored services, but over half even said they’d be willing to pay more for them.

4. Know the Business Cycle. A bill insert might not be the best way to engage the small business community. Instead, SMBs would prefer to address energy-related products when they’re budgeting for the following year or renewing a contract with an energy supplier.

5. Know the Competition. Many small businesses had a hard enough time weathering the recession, so anywhere they can save money, they will. While SMBs generally trust their utility, they would happily take energy management services from other providers, including retailers, energy brokers or phone or cable providers, according to Accenture’s findings. Guthridge also noted a “very strong trend” of aggregation, whereby small businesses are banding together to pool their purchasing power.

Wireless EV Charging Ready for Leaf, Volt Owners

Earthtechling, Nino Marchetti — 2013-06-18T20:41:38+00:00

Nissan Leaf and Chevy Volt owners, are you ready for wireless charging of your electric vehicles? If so, Bosch and Evatran are ready for you. The two have inked an agreement to bring the Plugless Level 2 Electric Vehicle Charging System to consumers.

Evatran developed the wireless charging technology and Bosch will take care of installation. It won’t be a cheap offering when it becomes available next month, with starting prices around $3,000 (this does not include applicable taxes, shipping, or installation of the parking pad and control panel, but it does include basic installation of the vehicle adapter).

In exchange for the convenience of not needing to physically plug in every night, this hefty price tag might be worth it for some. Bosch said it is offering up some financing options to help those who don’t have that kind of money sitting around, including a $0-down, five-year, 2.99-percent-interest loan on charging stations for installations totaling $3,500 and above.

The installation process is a two-part affair. A Bosch-certified electrician will install the home infrastructure portion of the system, and Bosch Car Service centers will install the on-vehicle components. The company will coordinate the entire process and provide any necessary post-installation support.

Bosch will also offer guidance for those who are considering a purchase, as well as offering help to those wanting to find and file qualifying rebates from utility companies, government agencies, or vehicle manufacturers in order to help take some of the sting out of the high price tag.

Components of the Plugless Level 2 Electric Vehicle Charging System include a vehicle adapter which goes on the undercarriage of the user’s EV; a control-panel-like, wall-mounted enclosure that provides alignment guidance and diagnostic information, in addition to traditional charging station functions; and a floor-mounted wireless charging transmitter.

As for charging times, the companies claim that these devices charge as fast as a conventional plug-in charger. This means users can expect to charge their Leaf or Volt in about half the time it would take to charge if plugged into a normal 120-volt outlet (the wireless charger requires 240 volts, and users need to drive over the system’s floor-mounted parking pad to begin the charging).

As for support of other electric vehicles besides offerings those from Nissan or Ford, Bosch told PlugInCars that they are “in development,” but it couldn’t offer specific availability dates as of yet.

***

Editor's note: This article is reposted in its original form from EarthTechling. Author credit goes to Nino Marchetti.

Lists: The 12-Step Program for Solar Interconnection

Herman K. Trabish — 2013-06-18T16:45:51+00:00

As renewables rise to double-digit proportions of U.S. electricity and to fulfilling half the electricity demand in some nations abroad, new ways to handle the tensions between threatened utilities and ambitious renewables developers are emerging.

The first thing is to understand what the utilities’ concerns are, according to Michael Coddington, a National Renewable Energy Labs grid integration researcher.

After doing extended interviews with utilities from HECO to LIPA and including PG&E, Austin Energy, Nashville Electric and Central Hudson, Coddington said during a talk at the 39th IEEE Photovoltaic Specialists Conference in Tampa, Florida that he found a list from Southern California Edison (NYSE:EI) that represents utility concerns well.

Utilities’ Top Eight Concerns With Distributed Generation

Voltage control: Solar can take voltage too high; wind can bring it too low
Protection: Utilities need to protect personnel, equipment and the system
Systems operation: Managing the many new sources requires new organizational tools
Power quality: Utilities need to see capable inverters, transformers, and power electronics
Feeder loading criteria: Substations can only do what they can do
Equipment specifications: Which new technologies will survive?
Application review: Developers need to know how to tell utilities what they are doing
Clarification of responsibilities: There should be a clear line between utilities and developers

The first source of confusion has to do with regulatory authority. Six organizations may govern interconnection to the bulk power system:

Institute of Electrical and Electronics Engineers (IEEE)
North American Electric Reliability Corporation (NERC)
Federal Energy Regulatory Commission (FERC)
American National Standards Institute (ANSI)
International Electrotechnical Commission (IEC)
National Electrical Safety Code (NESC)

Five authorities govern the distribution system:

IEEE
The relevant public utilities commission
IEC
ANSI
National Electrical Code (NEC)

IEEE’s 1547 standard, published in 2003, is the key uniform standard for the interconnection of distributed generation with electric power systems. It provides requirements for performance, operation, testing, safety, and maintenance. The first amendment, 1547a, addressed voltage and frequency regulation.

Coddington described three specific combinations of factors that impact PV projects’ risk.

Size and distance: The closer the project and the smaller the project, the easier it is for a grid system to integrate it

Impedance and voltage: The lower the impedance and the more stable the voltage from a project, the easier it is for a grid system to integrate it

Size and distance from substation: The smaller the project and the bigger the substation which it interconnects to, the easier it is for a grid system to integrate it

The first seven factors that determine a grid’s PV hosting potential are:

The heat limits of the wires
The size of each PV system
The location of each PV system
Cloud variability
Location of capacitor banks
Line regulation configuration
The amount of DG and loads on the system

Coddington and NREL are working on a list of interconnection best practices. As of now, it includes twelve steps:

Online applications and guidelines
Options to path of impact study
Low-cost/no-cost application
Uniform state rules for all utilities
Standard approach to evaluating applications
Reasonable screenings and supplemental screening options
Standardized distribution modeling platform
Good communication/online tracking system
Standard impact studies (when required)
Cost-effective mitigation strategies
A “partner” attitude between utilities and developers
Supportive regulators

The Origins of Solar Reliability

Herman K. Trabish — 2013-06-18T15:00:44+00:00

As the solar industry wrestles with issues of quality and reliability that may be its biggest challenges, an engineer looked back four decades to the first reliability standards and discovered a crucial lesson the industry still has not learned.

During the oil crises of the 1970s, the Department of Energy funded a proposal to transform solar technologies developed to power early space exploration. “It was the beginning of the terrestrial PV program,” explained Ronald Ross, who was the NASA-Jet Propulsion Laboratory (JPL) Flat Plate Solar Arrays Engineering and Reliability Manager from 1975 to 1990, speaking at the 39th IEEE Photovoltaic Specialists Conference in Tampa, Florida. “We had to figure out how to get from a few small-scale applications to large-scale future applications for high-voltage central utilities.”

They used the protocols and organizational procedures from an aerospace industry that had just conquered the moon.

The program covered everything from sand for silicon to module reliability, Ross said. “I was in charge of things like failure analysis, specifications and accelerated life and field testing. A critical part was reliability.”

Manufacturers like Bechtel and GE (NYSE:GE) were selected to take on module design, prototype production and quality testing, and large-scale production, Ross said. The Department of Energy fielded the program in multiple applications around the country through its labs.

“It was a closed-loop process,” Ross explained. “When the field data came in, we went to work to understand the underlying physics of the issues we saw. Then we came up with a test that would identify and prevent the failures.”

Two key observations Ross made in those early evaluation processes are still used today.

First, Ross noted that system operating voltage was the first cause of failure because it leads to cell and module issues. That meant the use of solar modules in high-voltage, utility-scale systems would be especially challenging.

Second, although reliability issues were accelerated by a factor of two for every ten degrees centigrade of temperature, they were accelerated by a factor of ten for every ten points of humidity. “In an 85 degrees, 85 percent humidity test chamber,” Ross said, “a module only needs to be tested for a few days to simulate Phoenix, but it has to be tested for 45 days to simulate Miami.”

By the early 1980s, Ross said, the JPL specifications were producing modules with twenty-year life expectancies.

“But DOE wanted a 30-year life, because the present value for arrays was substantially greater for 30 years than it was for twenty years,” Ross said. “But we couldn’t make a module that had a 100 percent, 30-year life.” The solution, Ross explained, was designing modules that would last upwards of 35 years, which gave them “the same economic value as a 30-year, 100 percent life.”

It is crucial to note, Ross said, that allowable levels of failure for a 30-year life were extremely stringent. Examples were:

One cracked or open circuit cell per 20,000 per year
An almost immeasurable 0.2 percent per year power degradation from cell-related issues
One module failure per 1,000 per year

His point, Ross said, is that the only way such failure rates could be observed was through large and complete field data sets collected in the program’s closed-loop system.

“The overall closed-loop process is critical to reliability,” Ross reiterated. “The problem today is the solar community isn’t under one organizational structure. Somebody needs to gather and assess a large and complete data set.”

Quality control for the 1 million Barbie dolls produced every day at Mattel (NASDAQ:MAT) comes from the company's careful and thorough assessment of the Barbie doll returns to Wal-Mart, its biggest customer, Ross said. “That data flows back to Mattel manufacturing officers so they can know what they need to be working on. That is what the PV community needs to do to correct its manufacturing processes.”

Corning Leads $60M VC Round for Windows With Tint Control

Eric Wesoff — 2013-06-18T11:30:55+00:00

Has View Inc. and its electrochromic window glass solved the cost challenge that has long stymied this innovative building efficiency technology?

Corning (NYSE: GLW), the 160-year-old glass giant, must believe it has -- as it just led a $60 million funding round in the startup. Other investors in the round include Khosla Ventures, General Electric, Sigma Partners, and NanoDimension. Previous investors include DBL Ventures, The Westly Group, Reinet Investments, and GE Energy Financial Services. The firm has raised a total of $176.5 million in venture capital and debt as well as a $40 million loan and $4 million grant from the state of Mississippi.

The startup, founded in 2007 with roots in technology developed at Lawrence Berkeley National Laboratory, employs a ceramic coating applied to glass via physical vapor deposition and a second glass pane. View's (formerly Soladigm) electrochromic glass changes its opacity under different electrical conditions, allowing control over hot afternoon glare or the ability to let warming winter sun in. Corning and View also announced a strategic development agreement to advance View’s dynamic glass technology.

The firm claims that In a typical commercial installation, annual HVAC and lighting energy consumption is reduced by 20 percent, while HVAC peak load is reduced by 25 percent.

Dr. Rao Mulpuri, CEO of View, told GTM on Monday that in addition to saving energy and money, the glass "fundamentally enhances user experience in buildings." According to the CEO, benefits include uninterrupted views, natural light, occupant comfort, and intelligent control.

The product is sold through downstream glass channels. Mulpuri said, "Architects specify; glaziers install." The CEO also suggested that "in many cases, the reduced HVAC capex and elimination of blinds, etc., pay off the incremental cost."

The windows are wired to each other and connect to a central panel with control via Wi-Fi and through the building management system. Target customers include owner-occupied buildings: corporate healthcare, education, hospitality, and government, according to the CEO.

“While dynamic glass has been in development for decades, we believe View’s unique approach will finally bring this technology into the mainstream. We believe the precise surface attainable through our fusion glass process, combined with View’s leading expertise in dynamic glass technology, will help us develop an innovative glass that will make dynamic windows a bigger part of exterior architectural applications," said Martin J. Curran, EVP at Corning, in a release.

The company has 5-foot-by-10-foot windows in production at its Olive Branch, Mississippi factory, according to the CEO.

View had also partnered with glass giant Guardian Industries. Partnership is key in the building material market -- one of View's competitors, VC-funded Sage Electrochromics, was acquired by French glass giant Saint-Gobain for an undisclosed sum last year.

View's dynamic glass competes against advanced passive window coatings and doing nothing -- so the economics have to be real in terms of payback.

Reliability, complexity, and cost have held back electrochromics in the past. If View's glass truly addresses those concerns, architects could start to channel this glass into the potentially enormous market for building facades and skylights.

The cleantech sector may never see investment intensity like it did in 2008 ($7.5 billion in 350 deals), but there's still activity -- as well as changing VC investment models. Take a look at Greentech Media's Next Wave VC investment event and let us hear from you if you'd like to participate or attend.

Solar PV Module Costs to Fall to 36 Cents per Watt by 2017

Nicholas Rinaldi — 2013-06-18T04:01:35+00:00

Production costs for industry-leading Chinese crystalline-silicon (c-Si) PV module manufacturers -- such as Jinko Solar, Renesola, Trina Solar and Yingli Green Energy -- will fall from 50 cents per watt in the fourth quarter of 2012 to 36 cents per watt by the end of 2017, according to a new report from GTM Research. The report, PV Technology and Cost Outlook, 2013-2017, predicts that the majority of these cost declines will derive from technology innovations such as diamond wire sawing for PV wafers, advanced metallization solutions, and increased automation in place of manual labor.

While precipitous cost declines of roughly 70 cents per watt from 2010 to 2012 were made possible by cutthroat pricing and margin erosion in the polysilicon and PV materials markets, the report sees cost reduction drivers migrating in-house for wafer, cell, and module suppliers, as adoption of advanced technology platforms and manufacturing automation will account for 80 percent of the forecasted declines.

Contribution of Key Drivers Toward All-In Module Cost Reduction, Best-in-Class China Producer, Q4 2012-Q4 2017E

Source: PV Technology and Cost Outlook, 2013-2017

“Yesterday’s PV cost reduction roadmaps are no longer relevant today,” said Shyam Mehta, Senior Analyst at GTM Research and the report’s author. “Three or four years ago, the industry was targeting one-dollar-per-watt costs in 2013; today, we are at 50 cents per watt, and there is currently little consensus on what is a realistic goal for the module supply chain to set for itself over the next three to five years. This is important not only for these manufacturers and their investors, but also for installers and project developers across the globe.”

This 112-page report on the latest in c-Si PV wafer, cell, module, and materials technology is the most recent analysis from GTM Research's flagship supply-side practice, and aims to provide a competitive outlook on the leading technology and cost trends through 2017 across the global PV supply chain. The report explores existing and innovative technology advancements in ingot growth, wafer slicing, cell processing, and module assembly, as well as their impacts on conversion efficiency and manufacturing costs.

In addition, the report is packaged with GTM Research's proprietary PV module manufacturing cost model for China-based producers from 2011 through 2017. This 844-row workbook contains assumptions and results for key manufacturing cost drivers, including: capital equipment costs, polysilicon pricing, consumables pricing, material utilization, manufacturing yield, technology parameters, labor rates/intensity, and utility rates/consumption.

For more information on PV Technology and Cost Outlook, 2013-2017, visit www.greentechmedia.com/research/report/pv-technology-and-cost-outlook-2013-2017.

High-Speed Test Drive of Tesla Model S

Eric Wesoff — 2013-06-17T21:17:38+00:00

This is not entirely a true story.

***

Greentech Media was invited by Tesla Motors to pilot a test drive in the new Model S beta at its Palo Alto, California facility.

The beta is the phase of vehicle development before it reaches full production.

I arrived, sporting my flame-retardant one-piece test suit and helmet, only to be informed by the Tesla public relations person that I was not going to actually drive the vehicle. Instead, a Tesla driver was going to chauffeur me around Palo Alto for a few minutes. Elon Musk, Tesla CEO, and a number of executives and board members were in attendance at the morning's event.

This was unacceptable. I don't get up this early, wear pants, and miss my anger-management class to be ferried around Palo Alto by public relations people.

So while Musk was pointing out the roominess of the front cargo area, I caught him off-guard and coaxed his surprisingly large and wiry frame into the "frunk." It closed cleanly and the seal felt airtight. Fit and finish, even on the beta, seemed top-shelf.

The test drive was on.

The car is plush, elegant, and starts with a push-button. Seats were vegetable-tanned leather. Acceleration out of the parking lot was motorcycle-fast once I brushed past a small crowd of terrified onlookers.

There are wood accents on the dash and an expansive panoramic moon-roof.

Rather than brave the police presence on Highway 280 while performing top-speed tests, I pointed the car up Page Mill Road to gauge the handling. The car is surprisingly roomy inside and beautifully appointed with an in-dashboard, 17-inch touch screen for navigation and controls. Upon entering the cabin, the car had paired with my mobile phone and displayed my settings on the screen.

As befits an electric vehicle, the car was amazingly quiet, except for the muted screams and banging emanating from the front storage area. Tesla has worked hard to minimize NVH (that's noise, vibration and harshness).

I tested the brakes. Hard. The car just scrubbed off the speed smoothly and evenly.

The brake-test also seemed to quiet the noise, except for the occasional moan from Musk in the frunk.

Page Mill Road up toward Skyline Boulevard is a series of s-curves and tight compound turns on a poorly maintained macadam. Those used to the weight imbalance of a front- or rear-mounted internal combustion engine will be unaccustomed to the sheer kinetic symmetry of the car-length battery pack, its distributed feel and low center of gravity. It feels considerably lighter than its 4200-pound curb weight. There were one or two instances where, at 90 mph, the car lost its grip on gravel-covered back roads, but a different set of tires, more attuned to my driving style, would change that.

The glorious Ninth by Ludwig van was blasting on the sound system when the music went silent as the phone rang.

It was Elon. Calling from the frunk.

Musk used some truly foul language that I will not print here. I ended the call. The music resumed.

The CEO then texted me, with the text appearing on the beautiful in-dash screen.

He demanded that I release him. He said I could keep the car.

As he was in no position to negotiate, I suggested that the next time he designs a car, he should include an inside-the-frunk release mechanism.

At this point, police sirens were approaching from the east and west as well as from the chopper above. In one last test, I took the car off-road into the wilds of the Montebello Open Space Preserve. The car performed poorly off-road.

With good behavior, in three to five years I will report on the high-speed performance of Tesla's Model X.

A photo of my Roadster test drive from last year is shown below:

The Model S, a four-door, sportback sedan with room for five adults does 0 to 60 in less than 6 seconds and can charge from any conventional 120-volt or 240-volt outlet. The vehicle comes with three range options: 160 miles, 230 miles and 300 miles.

According to the firm, in the U.S., the Model S starts at $57,400, or $49,900 after the U.S. federal tax credit. The 230-mile Model S starts at about $10,000 more and the 300-mile Model S starts at about $20,000 more than the base price.

Optimum Energy Raises $12.2M for HVAC Energy Management

Katherine Tweed — 2013-06-17T19:39:06+00:00

Building energy management is all about systems. But systems-level thinking is not necessarily the same as building-level thinking.

One example is Optimum Energy, which just raised $12.2 million in an equity sale.

Optimum is zeroed in on the largest energy hog in most commercial facilities, the HVAC system. The platform provides real-time dynamic commissioning for large, commercial systems, from the chillers to tower fans to pumps and valves. The algorithms regulate airflow while using less of everything, from fan power and chilled water to heating energy.

The market for energy-efficient HVAC systems will be more than $33 billion by 2020, according to Navigant Research, with the strongest growth coming in the Asia-Pacific region.

“There are several vendors in the marketplace offering information to energy managers and building operators to help guide their decisions,” said Jonathan Shaw, senior marketing manager at Optimum Energy. “We take a different approach: channeling information directly to heating and cooling systems to enable maximum energy efficiency.”

Greentech Media first profiled Optimum Energy about four years ago, when it was already working with well-known companies such as Adobe. While most buildings might need 1 to 1.4 kilowatts of energy to chill a ton of water for air conditioning, Optimum told Greentech Media in 2009 it can get that down to about 0.5 kilowatts. HVAC systems represent nearly half of all energy consumed in U.S. buildings, according to the Department of Energy.

“Optimum Energy is actively leading the creation of the industrial internet by bringing cloud connectivity, data analytics and domain expertise to our enterprise customers who want to optimize their HVAC systems,” Matthew Frey, president and CEO of Optimum Energy, said in a statement. “We’re putting control of the energy budget in the hands of the CFO by re-engineering facilities services to run more efficiently and predictably -- while saving energy and substantially reducing operational costs.”

The Seattle-based company says it can reduce operational costs by up to 50 percent. Unlike other control systems for water chillers, Optimum’s software-as-a-service doesn’t just keep the water at steady temperature. It also continuously calculates the most efficient sequence for cooling and heating, which is always shifting based on factors such as weather and building occupancy.

Optimum will use the new money to expand research and development in machine learning, according to Shaw. The data science team has already found additional energy efficiency gains and the investment will allow the company to expand its data science team.

Optimum makes about 1.5 billion calculations annually across more than 65 million square feet of commercial space to continuously optimize HVAC. The software has saved Optimum’s clients 135 million kilowatt-hours a year.

Constant commissioning has become an increasingly important part of energy efficiency offerings, with large companies like EnerNOC increasingly focusing on their commissioning services. While energy efficiency can save money, intelligent systems, such as a finely tuned HVAC that can respond to changing conditions, can offer far more than just a pure-play energy savings. System-level efficiency will also become increasingly important, as individual devices have already become so efficient that additional gains are minimal.

Optimum Energy began working with Johnson Controls in 2011 with two products that offer energy management for central chilled water plants that are used to cool water for air conditioning systems in skyscrapers.

The latest funding comes from new investor Navitas Capital, backed by a VC advisory relationship with Johnson Controls and existing investor Columbia Pacific Advisors.

Greentech Media Conference Explores the Reinvigoration of Greentech Investing

Staff — 2013-06-17T19:09:59+00:00

Read the full press release here.

Greentech Media, together with Black Coral Capital, announces a new conference that will bring together investors, limited partners, entrepreneurs, and service providers to reimagine the greentech startup sector: “NextWave Greentech Investing.” This one-day event is curated by Greentech Media CEO Scott Clavenna along with Black Coral Capital Partner Rob Day, and will take place at the SRI International Headquarters in Menlo Park, CA on September 12, 2013.

"At a time when many mainstream investors and members of the press have written off the greentech sector, an emerging group of innovative investors and entrepreneurs are developing new models and showing early good results,” said Event Chair Rob Day. “This event will bring together leading members of the limited partner, family office, corporate and entrepreneurial communities to have a conversation about this next phase: how we're going to see strong returns from the biggest market disruption opportunity the world has ever seen.”

The conference will provide a forum to discuss the opportunities around greentech market reinvention and sustained returns to an investor community looking for the right time to put money back to work in this critical sector. It will also feature presentations from industry experts such as Dan Reicher, Executive Director at the Steyer-Taylor Center for Energy Policy and Finance at Stanford University, and Raj Atluru, Managing Director at Silver Lake Kraftwerk.

Panels will include a discussion exclusively among limited partners, corporate strategic investors discussing NextWave investments, and a presentation on the cleanweb market.

Participating speakers include experts from organizations including: AlphaJet, BMW i Ventures, Broadscale, Generation Investment Management, Greenstart, FINSix, Lux Capital, Noesis, Venrock, SRI International, and more.

Registration for this unique event is now open. To register, please go to: http://www.cvent.com/d/gcq5bh/4W.

Opportunities to participate in the conference are still available, including speaking, sponsorships, and partnerships. More information on those opportunities and conference registration are available here: http://www.greentechmedia.com/events/live/nextwave-greentech-investing.

Utility Solar Is Dead; Long Live Distributed Generation

Haresh Patel — 2013-06-17T16:50:10+00:00

For years we’ve likened the energy sector to the computing world, holding up Moore’s law as a guiding example proving that renewables will achieve grid parity.

Today, as panel costs have dropped 90 percent and adoption is at an all-time high, the analogy between the two seems even more fitting. Just like the massive mainframe disruption spawned by personal computing, distributed generation has already begun to challenge the centralized solar model favored by utilities, with no end in sight.

At an industry level, the evidence of a new distributed era is all around us. Fuel cells like Bloom Energy’s are enabling the C&I transformation to self-made energy. Combined natural gas power plants are on the rise, and microgrids are popping up in states across the nation.

The change may feel sudden, but for most of us, it’s been a long time coming. 2009 marked the beginning of utility-scale’s heyday. Investors interested in deploying capital looked at smaller 1-megawatt to 3-megawatt projects and realized that utility-scale solar had the same diligence cost. Investors promptly abandoned the C&I segment in favor of big projects. Though a good decision at the time, the situation has changed. The number of utility projects have dwindled and the shift from the centralized utility model has taken root and is forcing utilities -- for the first time in their existence -- to figure out how to compete.

There’s no doubt now that utilities will ultimately have to change their business models. In a recent discussion with a well-known utility, top executives admitted that not only had solar utility segment plateaued, but that “utility is dead.” It sounded dramatic, but the sentiment has been the topic of discussion for the last twelve months, both in the media and in more hushed tones in closed meetings. So, how will utilities adapt?

A handful of the most progressive utilities -- Sempra, Duke, PGE, SMUD, Integrys -- are already embracing the change and finding ways to make a profit from generating their own electricity through their unregulated subsidiaries. No longer mandated passive players, solar gives them chance to compete. Those utilities, unfortunately, are the anomaly. The majority of utilities we’ve spoken with seem to be in denial, akin to deer caught in the headlights.

While distributed solar generation brings lucrative benefits, adapting to new business models is only the first step. The big solar business process templates of old relied on large teams with unlimited resources, budgets -- and status-quo business processes. Now, with the shift to small to mid-sized projects, the high cost of diligence and lack of standardization is quite literally killing projects.

Recognizing the shift from utility to DG, we now see companies like NextEra acquiring Smart Energies to penetrate the segment. A smart first step, but acquisition alone does not solve the cost of diligence, project acquisition and financing. New business models require different templates.

The good news is that new templates not only exist, but they’re also gaining incredible adoption rates. Take a look at what’s happened with distributed residential projects.

Once in the shadow of big centralized projects, investors have recognized the potential of these projects and how to package and pool them to meet the $150 million to $250 million minimum of the banks. New templates, created by Clean Power Finance, SolarCity and Sunrun centered around FICO scores, were the lynchpin. Now, new financial products from Morgan Stanley and Mainstreet Power are addressing the next rung of lower credit in residential. Platforms with innovative business processes to lower diligence and acquisition cost for C&I are not far behind to facilitate the DG segment as the next big frontier in solar.

***
Haresh Patel is the CEO of Mercatus and has held senior roles at Agilent, Texas Instruments and PMC Sierra.