PROJECT EASY GREEN

The U.S. Army has gone socialist.

Secretary of the Army John McHugh today announced the Energy Initiatives Office to help the massive government agency centrally plan and deploy renewable energy projects. In all, the Army wants to get 25 percent of its power from renewable sources by 2025. The scale of the project will likely require investment of $7.1 billion over the next ten years alone. The power plants purchased with that investment will generate 2.1 million megawatt hours.

Ideally, the EIO will help streamline purchasing, help various divisions and bases qualify for volume discounts and allow the Army to develop expertise in erecting and managing power plants.

The federal government consumes 2 percent of all the energy in the U.S., and the Department of Defense accounts for 90 percent of that total. Thus, renewable investments by any branch of the service could mean a big boost for the industry.  Department of Defense has played a critical role in the development of other markets. The DoD commissioned ENIAC, the first U.S. supercomputer, and became one of the primary customers for the first several years of the market. It also helped semiconductors get off the ground. The early investment paved the way for the high tech industry.

Military spending isn't perfect. The bloated nature of many plane and missile projects prove that. But government investment into infrastructure–railroads, public libraries, freeways, national parks, bridges–certainly has paid dividends in the past. 

Ray Mabus, the Secretary of the Navy, has also been a strong proponent of renewables. In speeches, he's noted that one of the larger jobs for the Navy at the moment is protecting convoys for oil and gas into Afghanistan. Lives are being put at risk to protect fuel lines. Seventy percent of the world's population lives within 100 miles of an ocean coastline, so rising sea levels caused by global warming will create international security hazards that the Navy and its personnel will have to counter. The Navy has set a goal of making half of its bases net zero energy facilities in about ten years. It has also invested in hybrid ships and biofuels.

ARPA-E and the DoD are investing in energy storage as well. Forward bases need to remain energy independent.

Critics will trot out the usual charges. Solar is too expensive. Global warming is a myth. Government purchasing will distort the market. We should use the secret fusion cubes found at Area 51 instead. Iraq wasn't about oil. Etc.

I'm not going to answer those questions. I'm just going to say, if you like fossil fuels that much, then you go defend the supply lines.

Regional markets were, as usual, one of the bigger topics at Intersolar earlier this month in San Francisco. Germany remains in the lead, with 28 times more solar installations than the U.S.; the country is still improving its already-successful photovoltaic (PV) policy. Here is an overview of some of the observations gleaned from around the globe at the conference.

Since the year 2000, renewable energy (RE) in Germany increased 11% and reached a 17% market share last year. “The share increased to 75% compared to last year,” explained Katharina Reiche, German parliamentary state secretary.

She added that 19.5 billion euros were invested in the global market and that more than 8,000 jobs were created in the solar market alone last year. Renewable energy expansion was enabled by the feed-in tariffs (FIT): “Support is given every four years, depending on a market situation, which offers investment and planning opportunities for the next 20 years.”

Germany decreased feed-in tariffs over the course of just two years from 46 euro cents per kWh to 26 euro cents per kWh. The country also developed a long-term energy plan: by 2050, renewable energy would represent 60 percent of total energy consumption. This will help reduce CO2 emissions by 40 percent by 2020 and by 80 percent by 2050.

Despite Germany’s leading position in the solar market, Reiche admits Germany is still discussing how to modernize solutions for transport, energy transmission, intelligent grid systems and management.

“To solve the problem, one must first understand it,” says Reiche, adding that Germany also owes its PV success also to the country's companies, which are committed to investing in green energy.

Like Germany, California has idle land available for solar projects, as well as other valuable energy resources. The state has been the hotbed of the U.S. solar market since 2006.

“The California Energy Commission licensed 4,000 MW of concentrated solar power (CSP) in 2010 and the U.S. goal is to install 833 MW by 2015, 1,666 MW by 2018 and 2,500 MW by 2030,” said John Geesman, the former co-chairman of the American Council on Renewable Energy (ACORE).

Rhone Resch, CEO and president of the Solar Energy Industry Association, agrees that the solar market is big in California, though the solar market is developing in all 50 U.S. states.

“Opportunities for the solar market are great. In Q1 2011, PV demand grew 66% over the first quarter of 2010,” said Resch. Cumulatively, more than 10,000 megawatts of solar have been planted in the U.S. More than 50,000 systems are installed annually throughout the U.S.

Solar is a desirable alternative energy source, since it will help reduce CO2 emissions and at the same time is considered ‘green.’ But Craig Lewis, executive director of the Clean Coalition, said that in California, though the state is leading the way in solar business in the U.S., 79% of planned projects ultimately fail and won’t ever come online.

Experience enables systems to be installed more rapidly, cheaply, and easily. Why can't the market fully exploit its potential? Maybe the reason is to be found in the diversified U.S. market, which can be confusing to investors, unlike the situation that exists in Europe.

O Canada

“Canada is not just a land of oil and water. The sun shines there as well,” said Elizabeth McDonald, president of Canadian Solar Industries Association, adding that though Canada was not a strong player in the green energy market, things are changing.

The country has more solar than, for example, San Francisco: “Toronto is the leader and is way ahead of Berlin, Tokyo, Paris or any other [major world] city. The solar panels are also efficient in the shade, so they work even in winter.” Canada’s PV market offers other advantages, as well. Job creation is a main influence in times of crisis. According to McDonald, 50,000 green jobs have been created there so far.

Large-Scale Solar Risks

Despite the modest investments in the second half of 2010, many analysts believe that 2011 will be a strong year for solar, with 21.2 GW installed.

Seven markets will account for the bulk of installations, among them Germany (6.5 GW) and Italy (5 GW), stressed Mike Sheppard of IHS iSuppli. Despite the investments in the solar market, the panelists agreed on the dip expected in 2012. Though, as noted by Thomasz Slusarz, Chief Executive Officer at Belgian Solar PV Consulting, until 2007 the markets in the new member states were slow; growth was only seen beginning in 2009. 

The goal of the Czech Republic to install more solar in 2011 failed. “As of this year, only 7 MW were installed." According to Slusarz, the Czech Republic’s goal was to have 90% of renewable energy in 2010 and an additional 76% in 2011.

“This means that the market will collapse, unfortunately,” warned Slusarz, adding that, for example, the Slovenian market is growing in a stable way, which is why Slovenia is interesting at the moment, also due to its interesting FIT system.

Slow progress is seen in Bulgaria, which pays €.31 per kWh. Hungary has a FIT but is not successful in implementing the policies; Latvia’s market is too small despite the FIT system and Poland has a big nuclear lobby, therefore there’s no support for solar energy. All EU countries have targets for 2020; Czechs have already reached the goal, Slovakia over-reached it and Slovenia is nearly reaching its targets.

Italy Rising

The Italian government's policy is embodied in the 4^th Contod’Eergia. Its main components are: unlimited funding, large power plants connected before September 2011 do not have to register, though from September on, large ground installations have to pre-register with the GSE. Investment conditions in Italy are still offering attractive IRR/ROI and Italian PV market investors benefit from the country's FIT, which enables Italy to approach its goal of 3.5 GW solar by 2015.

Still, solar companies have already been impacted. SunPower blamed a second quarter shortfall on the slowdown in Italy.

Japan Returns

Besides European markets, where PV is expected to increase from over 28 GW in 2010 to nearly 100 GW by 2015, Asian countries are boosting their PV markets and solar installations, according to panelists who spoke recently at Intersolar.

After the tsunami in Japan in March 2011, Japan started to revive its renewable policy. Prime Minister Kan made a sudden request to shut down the Hamaoka nuclear power plant as soon as possible, due to the risk of a potential earthquake with a probability of 87% in the next 30 years. A nation in which, before March 11, most of the power came from oil and 54 nuclear power plants, and renewable energies (RE) accounted only for 2.8%, Japan set an ambitious new RE target: the country will aim to get 10% of its primary energy supply from renewables by 2020.

“The government is starting discussions right now. About 53 GW of solar should be installed by 2020,” said Hiroshi Matsukawa, manager of research at Japanese RTS Corporation.

The government took action immediately after the tsunami: large customers whose contracts demand 500kW or more must reduce their maximum electricity usage between 9 AM and 8 PM by 15% relative to that of the last summer. The penalty for non-compliance is up to one million yen per hour. To achieve a stable energy supply, Japan started investing in PV, and the Diet is discussing the new feed-in tariff system. “The demand for residential PV is rising,” said Matsukawa, adding that the new FIT will start in 2012 with 1 GW of solar power installed by the end of this year.

Masayoshi Son, the brash investor that helped deregulate telecommunications in that country, also recently announced that he wants to build solar power plants.

Overcapacity in China

In light of the 12^th Five Year PV market plan, 49 companies invested 10 billion euros ($14 billion U.S.) in Beijing’s solar sector. They did it despite the overcapacity that currently exists, as stressed by Frank Haugwitz of Solar Promotion International GmbH in China.

“China has massive production capacity, orders are still coming in, and access to funding is almost unlimited. The four biggest banks are willing to lend the money to the Chinese PV industry,” said Haugwitz.

Most of the solar industry is concentrated in eastern China, though the sector is moving west. China changed the trend five years ago with a new energy plan to use locally available energy sources. The new target requires 15% of final energy from non-fossil fuels sources by 2020, whereas last year, this target was only 8%. Mandated market share (MMS) requires local power utilities to have 3% and 8% power-generation capacity of non-hydro RE sources by 2010 and 2020, respectively. However, as stressed by Haugwitz, the introduction of the nationwide FIT-based support scheme has been postponed because:

      -    High generation cost are politically not justifiable

-          They represent an insignificant contribution to the overall energy mix

-          Over the past five years, PV installed capacity was a few megawatts. The export-driven Chinese PV industry generates decent profits.

-          The Chinese PV industry is mainly privately owned.

-          Determination of an acceptable FIT level is difficult.

-          There are more than 400 manufacturers in the country.

-          Players and regulators want to avoid overheating the market.

“The Chinese government favors controlled markets. The guiding principle is slow but steady progress, which is believed to be a proven tool to determine a low FIT. A subsidy of up to $2.2 to $2.9 per kW is given. Priorities are rooftops with a minimum capacity 50 kWp,” Haugwitz said.

He added that China, in light of events in Spain, changed its provincial policy and decided to help out selected companies. Jiangsu should install 400 MW by 2011, Zhejiang decided in 2009 to install 50 MW by 2012, and Shandong aims at 150 MW by next year.

In March 2011, the State Council announced a 5 GW national target by 2015 and possible long-term target of 20-30 GW by 2020. The country's renewables development plan stipulates a target of 10 GW by 2015 and 50 GW by 2020. For the time being, not much is happening in Beijing.

Taiwan: From Chips to Green

Taiwan’s chip industry has been ramping up in solar for years, and local consumption policies have been established to soak up output.

“The goal is 12% to 15 % of the total power capacity from renewable energy by 2030,” said L.J. Chen, CEO and president of Taiwan’s AUO, an offshoot of computer conglomerate Acer.

 The Taiwanese Bureau of Energy plans to install 70 MW of PV systems in 2011 and have 2,500 MW by 2030 with a FIT system in place. The scheme should encourage investments in rooftops and other small solar systems. “Subsidies for the installations between 1 kW and 10 kW will be given on the principle of ‘first come, first served’ — other types require bidding processes before being installed,” explained Chen.

We've been actively covering the vexing issue of solar permitting and solar's "soft costs" in recent weeks. We looked at the progress Vermont is making here. We covered the issue of customer acquisition here. Solartech's efforts to lower solar installation costs was covered here, and the prospect of trimming solar bureaucracy was covered here. Plus, we've covered how all of this fits into the DOE's SunShot program of getting the cost of installed solar down to $1 per watt.

A recent report to the DOE from solar leasing firm SunRun claims that installation costs can be reduced by 50 cents per watt simply by harmonizing the solar permitting process from town to town. The report claims that inconsistencies in permitting can cost consumers up to $2,500 on a 5-kilowatt rooftop solar system. This cry for improved permitting has been put forth by Solartech, Vote Solar and other organizations and firms.

Germany has simpler processes that keep solar installation costs up to 40 percent lower than in the United States.  Germany reports about one million new home solar power installations in the past two years alone, while the total number of homes ever to go solar in the United States has just broken a meager 120,000.

Now the U.S. Department of Energy is getting into the act.

As part of the Obama Administration's SunShot Initiative to make solar energy cost-competitive with fossil fuels within the decade, DOE Secretary Steven Chu just announced the availability of more than $27 million in new funding to go toward reducing the non-hardware costs of solar energy projects.

The DOE is not a legislative body — so they can't dictate that "this is the form and process that will be used nationwide." So they have to be clever and issue a challenge.

The funding will support a $12.5 million challenge to encourage cities and counties to compete to streamline and digitize permitting processes, as well as $15 million that will be made available to advance innovations in information technology systems, local zoning and building codes and regulations. 

Under the Rooftop Solar Challenge, local and regional government teams can compete for funds to help eliminate administrative barriers to residential and small commercial PV solar installations and improve the availability of financing for solar projects.

An additional $15 million in funding will create tools that local governments can use to streamline and expedite the process of installing solar energy. DOE will fund one or more recipients under each of the following topic areas:

• Codes, Standards and Processes. Projects in this topic area will work to improve existing codes, standards, and permitting processes; train code officials on new codes; and develop best practices and model codes that can be used in communities nationwide.
• Software Design Tools and Databases. Projects in this topic area will develop a range of IT systems and databases, including a utility-scale planning tool that identifies sites available for solar project development, IT tools to help installers and local governments prepare and process permit applications, and a database of local permitting processes nationwide.
• Regulatory and Utility Solutions. Projects in this topic area will provide technical support for utilities to better integrate solar energy into utility operations. Projects will also provide support for states as they develop or improve the regulatory frameworks necessary to sustain a growing solar market.

Doug Payne of SolarTech had this to say: "From SolarTech's perspective, we see the DOE's $27 million investment to catalyze PV soft cost reduction as a critical step in dealing with the one of the last frontiers for accelerating solar markets across the U.S."

Payne continues, "Our industry has three main pillars: policy, products, and process. We are just now coming to grips with the importance of overall process efficiency, speed, and scale in the same vein as the semiconductor or auto industries. The challenge with the energy industry in general, and solar in particular, is the diversity of private, public, and NGO actors. This added complexity, and varying degrees of institutionalized lack of speed, scale, and process efficiency is the root of the structural problems the DOE investments are seeking to unwind. We're excited that our message, along with the message of thousands industry players the past few years, has been received."

"However, this funding translates to only $1,500 per city across the U.S. when we look long-term at the total addressable U.S. solar market across 18,000 jurisdictions. Clearly, the DOE has a catalytic role to play, but we shouldn't expect federal funding forever. So the point is, where do we go from here?"

Payne concludes, "This 'Process Signal' should show local governments, industry, and utilities the message has been delivered. It's now all about execution, leadership, and commitment to process innovation for the 21st century at local levels. The White House Office of Science and Technology Policy working with the U.S. Department of Energy have given us a signal. We now need to carry the ball, execute, and add market-based solutions to the mix to scale these efforts, building on this announcement, over the next three to five years."

Lowe's, the home improvement giant that uses Gene Hackman for radio voice-overs, has taken an equity stake in Sungevity and will sell Sungevity's services through its stores.

For Sungevity, it's a big deal. The company emerged in 2007 with the first tool for estimating residential solar systems online. Traditionally, installers had to come out to your house and climb around before they could provide an estimate. By using satellite imagery from Microsoft and its own know-how, Sungevity managed to come up with a way that would be 95 plus percent as accurate as a manual install but cut the total cost of a solar system by 5 percent or more. (Cate Blanchett is an investor. Oi!) Once an estimate is complete, Sungevity then signs the contracts via the internet, and schedules and performs the installation, generally through a subcontractor.

Through the Lowe's deal, Sungevity can reach more customers in its existing territories and start serving customers on a nationwide basis. (Sungevity right now operates in eight states.) Roughly 15 million people traipse through Lowe's every week. And someone that gets lost looking for 5/8ths of an inch self-tapping wood screws or the Genisys gas grill is a prime candidate for solar. The partnership begins this summer.

Beats buying panels off Amazon or at Costco.

Sungevity has a dual personality of sorts. It develops software, but also serves as a general contractor/installer. Being an installer and a software developer presents potential problems, particularly as a company grows. Approximately 30 percent of Sungevity's employees are "project managers," i.e., people who thumb through reams of material to make sure that a given solar installation complies with local codes, qualifies for local rebates, etc. Sungevity installs a megawatt of solar some months. As it gets bigger, one could see the temptation to focus more on software than actual installation. On the other hand, the bulk of the revenue comes in installation. How the business operates and where it focuses will be one of those issues it will likely have to hone in the future. Who knows — Lowe's could even become a prime subcontractor for Sungevity.

Lowe's also works with Recurve, which produces software for retrofits (Lowe's invested in Recurve), and Westinghouse Solar.