Solar Financing and Jobs Creation
October 27, 2011, International Solar Energy Technology Conference, Santa Clara, CA—Eric Wesoff from Greentech Media introduced the topic and made some comments before leaving for a meeting. Pallab Chatterjee acted as back-up moderator for the panel. The panel members included Don Danh from East-West Bank, Kevin Gao from CA Solar, and Sandeep Sharma from Sandview Development.
Although the emerging trade war with China is capturing most of the headlines today, the real competitors for solar are the fossil fuels, coal and natural gas for peak power generation. In 2000, the US had 175 MW of solar capacity. Now this is about 18 GW, or the equivalent of about 10 nuclear reactors. Nevertheless, this quantity is only a small percentage of the power of the US daily requirements during the day according to Sharma.
The solar industry employs about 100K people and is growing. In reality, we have a positive trade balance in solar with China due to the mix of products we sell versus what we buy. We produce and sell the processing equipment and buy modules. The greatest challenge for the industry is the need to efficiency adjusted in terms of dollars per watt.
Danh described the basics for his bank and gave the primary considerations for funding projects. They try for a mix of sponsored projects at 15-35 percent, loans at 30-50 percent, and tax equity at 35-40 percent. The loans are for 1.5 to 20 MW projects and they are starting to move into loans for residential systems.
One consideration is the site suitability. Lenders have a challenge due to liability issues if the site has toxic contamination, so loans get structured differently for known liability issues. These issues can impact the jobs, for maintenance, construction, etc.
Sharma contrasted the US and China PV markets. The prices and costs for panels have dropped by half in the last year. The main component, crystalline silicon, has gone from several dollars to under $1. In China, the silicon contributes the most to the total cost. Cells used to cost $1.60 and the balance of the panels cost $0.40. Now, the cells cost $0.60 and the other costs have dropped $0.05.
Market forecasts predict PV will become competitive and need to approach $0.10 per Watt. The markets are growing at a compound annual growth rate of 60-80 percent and are expected to continue this growth, averaging 50 percent over the next five years. European companies are starting to show a presence in the US. There are 25 GW in the development pipeline compared to the 1.8 GW for this year. By ’13, solar will be approaching parity with all other sources if the growth rates hold.
All of the other costs including financing, licenses, and maintenance have to be in line with other sources of energy. China is investing $Bs in loan guarantees for PV systems and is supporting the manufacturing sector with loans, technical support, and tax incentives. The current pipeline has 25 GW for China alone.
Gao looked at various funding alternatives. The drivers are distributed generation and the emerging smart grid. These developments are driving technology changes and creating jobs. In California, over 25 thousand jobs are in the PV industry and the US has over 100 thousand. These jobs are in direct manufacturing, installation, sales, marketing, and engineering. There are also other indirect jobs the industry has created.
Funding sources for solar have to focus on innovation, loans and funding for manufacturing, and feed-in tariffs. To grow, the industry needs uniform feed-in tariffs and some combination of tax benefits and loan guarantees to crate the new technologies for solar.
Solyndra versus China, US industries get $Bs in subsidies and credits. Independent and fragmented infrastructure versus China?
Danh opined that Solyndra has to take half of the blame. The investors and technologists went overboard after the loan guarantees. The IP is safe. The industry needs a lot of financing and lots of competition to drive innovation and costs. The sector is very cost sensitive, so the industry needs some type of long-term lock-in to manage the high risk. The press is unfair to the industry and politics get in the way.
Sharma suggested that this is a case of innovation versus mass production.
Danh questonsed if the technology is proprietary, how does one replace components in 3-5 years. Standard form factors allow alternate sourcing.
Gao noted as costs drop, China will have to give more subsidies. There are various benefits to this happening. Imports are good for everyone, consumers and manufacturers who can generate economies of scale. The spending will protect the middle-cost pipeline.
Danh probably best to try to develop the technology here as a part of the semiconductor business, then outsource manufacturing. This is a different business model.
Where are the jobs? The markets are in residential, offices and new plants?
Danh noted this is an area ripe with opportunities for services like energy audits. Corporations can invest in social responsibilities through solar projects.
Sharma objected that the CFOs are not interested.
Danh replied that CFOs would become more interested if they looked at the many financial details. There are lots of areas of return, including taxes, investment credits, and reduced energy bills.
Are the utilities allies?
Gao responded that they are not allies , but they are not road blocks either.
Jobs in Silicon Valley?
Sharma answered there are over 200 startups in the valley since ’09
Danh added that innovation requires a change in mindset. People have to focus on just on the concepts, create free trade zones, and just do the final assembly here. Clean technology needs large capital investments, and the customers don’t like proprietary solutions.
Gao continued that IP needs more collaboration. Solyndra should not have been a place for manufacturing.. instead they should have tried to traded the technology for funding and manufacturing.
