Tag Archives: SolarCity

How New Business Models Get Past Early Adopters and Into the Majority

New technology is usually too expensive for the masses to afford. Take Tesla for example, which makes the world’s only truly compelling electric vehicles: With an average purchase price close to $100,000, these vehicles would break the budget for the average consumer. More broadly, even mainstream innovations like consumer electronics, renewable energy, and advanced healthcare remain out of reach for many, especially for cash-poor customers – both individuals and businesses. This is a serious problem, for a number of reasons. First, it denies life-enhancing innovations to a massive subset of the population. Second, it harms all, including the wealthy, as fast-growing economies will be leading contributors to global challenges like climate change where advanced technologies can help. But beyond these big-picture problems, a cash barrier to new technology adoption is simply bad for business, because it causes technology developers to miss a revenue growth opportunity.

But these issues can be solved. To show how, take energy, which presents a good case study for how to better target cash-poor customers. The energy industry is rich with such business models because energy decisions tend to be economically-motivated but may take several years to pay off. To explore this further, consider how energy developers use two broad strategies to sell technology upgrades to retail businesses:

  • Transforming a capital expense into an operating expense, with immediate payback: Third-party ownership models have been tremendously successful with solar developers like SolarCity, which will offer our grocery store a no-money-down solar system paid back with a fixed or per-usage fee that immediately lowers its monthly energy bill. To avoid oversizing its solar system, a customer may also seek out an energy efficiency upgrade. These frequently employ a similar pay-for-performance model, in which the monthly fee is calculated as a portion of the cost savings it sees from the upgrade, creating an immediate payback and reducing the risk to the customer. SolarCity started with solar panels only, but it is now owned by Tesla – so expect batteries and other technologies to benefit from this business model soon.
  • Sharing the upfront cost with another party, when both can benefit from the purchase: Cost-sharing models reduce the payback period of an investment by exploiting every possible value stream. Sharing the cost of an electric vehicle charging station with Tesla brings a better cost-benefit ratio than purchasing a station outright, and each party benefits: Tesla’s customers are happier since they have more places to recharge (addressing range anxiety), and the retailer boosts its revenue thanks to increased traffic as customers wait for their vehicle to charge. In a similar relationship, a store might work with a microgrid developer like Enchanted Rock (client registration required), sharing the upfront cost of a reliability-enhancing microgrid with the developer, which recovers its investment by selling the microgrid’s capacity when the store does not need it.

Cash-poor customers are not just an issue in energy, though, and these same structures can be found in other industries as well: For example, car-sharing programs like Zipcar and Car2Go have in effect transformed a capital expense into an operating expense in the automotive world, allowing customers to pay for each use of a vehicle – a model that Elon Musk has even alluded to as a way to improve consumer access to Tesla’s vehicles in the future. In consumer electronics, Amazon has famously engaged in cost-sharing by offering a discount on ad-laced electronics (such as smartphones and its Kindle e-reader), covering a portion of the upfront cost, and in exchange, getting value from the device as an advertising channel. In some cases, offering these pricing models requires a cash-rich (or debt-heavy) developer that can carry the upfront cost in place of the customer. However, when designed well, these business models can speed-up adoption of early stage technology and open up new customer segments.

 

For more information contact Katrina Westerhof at Katrina.Westerhof@luxresearchinc.com or Cosmin Laslau at Cosmin.Laslau@luxresearchinc.com.

Does Tesla’s Proposed Acquisition of SolarCity Make Sense?

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Electric vehicle and battery manufacturer Tesla announced a bid to acquire solar leader SolarCity for $2.8 billion, and has clearly stated its motivation behind the deal: reduce the cost of solar plus storage through vertical integration and be more of an energy company than just an automotive one. The immediate benefits of the union are unclear, the strongest potential impact lies in long-term dominance in the incipient solar-plus-storage business. Continue reading

Opportunities in the Massive and Emerging Distributed Generation Space Ride on Effective Partnerships

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The traditional power industry – underpinned by large, distant, fuel-burning plants and transmission over long distances to reach end users – is on the cusp of serious disruption from distributed generation (DG). However, what type of entity or partnership will emerge to really challenge utilities and other incumbents remains unclear for many. Using a new methodology to evaluate emerging DG players using both technical value and business execution criteria, a specific set of installers and developers of renewables are well placed to succeed, along with a handful of large industrial conglomerates. In most of these cases, select partnerships to bolster technical breadth are key, with startup partnerships being pivotal for any entity aspiring to be the best of the best.

DG brings new opportunities – but also new challenges – to the energy sector. Power generation and integration at or near the location of use leads the DG revolution. Falling capital costs – particularly for solar and wind power – along with favorable policies and third-party ownership models are making for an attractive value proposition for DG, spurring rapid adoption in recent years. DG also brings a new value chain to the power sector, which exists in parallel with the incumbent power delivery value chain and creates opportunities for new entrants. How and where the two intersect is an evolving topic, connected by technologies like distributed energy resource management systems and virtual power plants. In order to make money at a DG systems level, aggregation of technical competencies is critical as the distributed grid of the future builds on four key technology segments: distributed renewables, energy storage, integration hardware, and integration software. Together, they can present a robust and increasingly attractive alternative to the conventional grid, but getting all the pieces right can be difficult for a single company.

Looking at the future intersection of the incumbent grid and the DG version of the grid, we find that some well-positioned players and partnerships are already solidifying into place. Continue reading

The Blinding Glare of SolarCity: Seeing Through the Efficiency Record to Its Integrated Strength

What They Said

SolarCity (client registration required) announced it achieved a world-record efficiency from a module off of its manufacturing line. The Renewable Energy Test Center measured SolarCity’s panel with a conversion efficiency of 22.04% using Silevo’s (client registration required) tunneling oxide and thin-film passivation cell architecture. SolarCity also claimed that the bifacial module is able to produce 30% to 40% more electricity than a similarly sized, standard monocrystalline silicon (c-Si) panel.

What We Think

The technology SolarCity acquired through Silevo (client registration required) will be SolarCity’s first move into module manufacturing. SolarCity’s world-record module foreshadows the potential of a gigafactory – the 1 GW module manufacturing plant that is set to produce these modules at full capacity by 2017 in the U.S. Whereas SolarCity has gone through the standard process of getting world-record status for the module, it is very possible that other high-efficiency manufacturers are currently producing modules at or above SolarCity’s reported efficiency. SunPower’s (client registration required) X-Series modules were rated with an efficiency of 21.5% when they began production in 2013, but it is likely the company is now producing modules at higher efficiency due to process improvements since the product’s certification.

In a world where a tenth of a percentage point absolute gain in efficiency can deliver the new record-holder, there is no clear manufacturer at the head of the pack. Panasonic, Trina Solar (client registration required) SunPower, and now SolarCity, will all be jostling to lead. Indeed, Panasonic has already announced that it will demonstrate a panel with an efficiency of 22.5%. A greater determinant of the winner in the market will be production costs, where SolarCity is positioned well.

In ramping up production at its 1 GW plant, SolarCity is expecting to achieve costs in the range of $0.50/W to $0.55/W by 2017. If that cost target is hit, SolarCity’s panels will be highly competitive with other high-efficiency modules, with modules currently produced at $1.00/W to $1.50/W (client registration required). Another differentiator is its gain in electricity generation. The company’s claimed 30% to 40% boost is likely from an unfair comparison of its bifacial module with a standard, lower-efficiency unifacial c-Si module. Nonetheless, the low temperature coefficient of Silevo’s technology can result in a 5% to 10% gain in generation in hot climates, such as Mexico (client registration required). SolarCity’s modules will not directly compete with others as they will primarily be used in the company’s pipeline.

Even if SolarCity no longer maintains its efficiency lead by 2017, benefits from vertical integration and technology performance will contribute to the evolution of the attractive financing options that have led to SolarCity’s dominance in the residential sector. SolarCity’s development of bifacial modules indicates that it is maneuvering to become a bigger player in the commercial sector, the application where bifacial modules are most advantageous. Clients should carefully monitor changes in the high-efficiency market as manufacturers continue to refine their production processes to incrementally boost efficiency, but vertical integration will be the determining factor of dominance in developed markets. The addition of scaled module manufacturing capabilities will allow SolarCity to reduce installed costs; the addition of a top-performing module will allow SolarCity to increase the value of its installations by increasing generation. Competitors will be hard-pressed to keep up with SolarCity’s continued innovation in technology, financing, and software.

Vivint Solar Expects to Outshine SolarCity’s IPO

What They Said

Recently, Blackstone-backed Vivint Solar (client registration required) announced that they expect their upcoming IPO to raise over $300 million at a share price of $16-$18. As one of the larger distributed solar installers and financiers in the U.S., Vivint’s announcement draws obvious parallels to the 2012 public offering of their major competitor SolarCity (client registration required). Since being launched by home-security company Vivint Inc. in 2011, Vivint Solar has achieved a customer base of almost 22,000 homeowners in seven states. Because Vivint Solar utilizes the door-to-door sales model of their parent company, expansion and new market penetration has been limited, and growth has been greatest in the northeast where sales teams are larger and more established. The majority of Vivint Solar’s revenue is generated by solar panel leases and 20-year power purchase agreements. To maintain margins and simplify the sales process, they do not offer loan options for solar installations.

Compared to Vivint Solar’s anticipated $300 million IPO, SolarCity had hoped to raise $151 million, but investor interest was lower than expected and the company only raised $92 million with an offering price of $8 a share. Some of the investors’ hesitation was due to SolarCity’s nearly $80 million net losses in their annual report prior to going public. In the recent IPO filing, Vivint also stated net losses over $70 million. At the time of their IPO, SolarCity claimed 200MW and Vivint Solar currently is reporting 129.7MW. However, at their respective IPO filings, SolarCity had over $70 million in revenue compared to Vivint’s $10 million.

What We Think

Following their 2012 IPO, SolarCity looked to extend control of their value chain. SolarCity acquired (client registration required) Zep Solar in October 2013. Zep Solar is a manufacturer of a rail free mounting system for solar modules that reduces installation time. SolarCity’s Zep Solar acquisition forced Vivint Solar to discontinue use of the Zep Solar mounting system according to Vivint. SolarCity moved further toward vertical integration with the acquisition of cell and module manufacturer Silevo in June 2014. Since SolarCity’s IPO in 2012 the cost of silicon panels has greatly fallen, the number of residential PV installations has significantly increased, and now SolarCity currently trades near $70.

Vivint Solar has been following SolarCity’s lead with regards to greater control of value-added technology. Earlier this year, Vivint Solar completed a strategic acquisition of Solmetric – a developer of software tools for PV installers. Solmetric is the creator of the SunEye hand-held shade analysis tool that reduces planning time and optimizes solar installations. In August, Vivint Solar reached a three-year supply agreement with microinverter company Enphase Energy that extended an existing relationship. Currently Vivint Solar uses common Tier-1 Chinese suppliers for its modules, raising the question of if Vivint will also look to acquire a technology provider like Silevo, however unlikely.

Compared to SolarCity’s IPO in 2012, Vivint Solar is not as established in the market and only has a fraction of SolarCity’s revenue at its IPO. However, Vivint is still in a position for a strong launch into the public market because it can leverage the success of SolarCity. ​It is probable that other residential PV companies like Vivint Solar will follow SolarCity and VIvint’s examples and go public, however SolarCity will continue its advantages as the first entrant. It is unlikely that any company goes to the extent of SolarCity as far as acquiring a module manufacturer, but that does not mean Vivint Solar’s IPO will not be successful. Vivint has established its place in the market, and if SolarCity is any indication, there will be plenty of investor appetite for residential solar installers and financiers.

Barclays Downgrades Entire Electricity Sector in the face of Solar Competition

Roughly one year ago, Goldman Sachs made a big bet on solar (client registration required) – investing in a $500 million project financing fund through SolarCity, and another half billion in a fund for solar and wind projects in Japan. This week, another bank has taken notice of growth in the solar industry.

Barclays has downgraded the entire electricity sector of the U.S. high-grade corporate bond market, citing a lack of acknowledgement of the risk posed by solar – specifically, distributed solar and small-scale energy storage. The report says: “Valuations suggest credit investors are depending on the ‘regulatory compact’…to give sufficient protection from industry changes. While the regulator/utility construct has usually resulted in low-risk returns to credit in the past, technological change creates precisely the environment where slower-moving incumbents and their regulators can fall behind the curve…”

In other words, the threat posed by the solar industry to the traditional utility business model (and bottom line) is too big for investors to ignore.

The sentiment that solar is a threat to utilities isn’t a new one – nor are all utilities facing the same level of risk. Many utilities and independent power producers (IPPs), like Edison and NRG, have significant stakes in the solar industry. Those investments serve as a hedge against losses from traditional power sources. However, many other utilities, depending on their business models, have struggled (or simply declined) to invest in distributed assets of any kind.

In a recent conversation with Arno Harris, CEO of Recurrent Energy, he told us that the future business model for utilities is uncertain, particularly on the distribution end. He added that customers are bound to utilities, but as customers transition to becoming both producers and consumers (rather than just consumers), utilities need to be mindful of other services that they can put in play, as well as whether or not they should (or can) own distributed assets. He said that utilities are “financially broken,” and that they “have to play a role as enablers of a service economy on the distributed generation side.”

What’s often lost in the conversation is that utilities won’t be eliminated, or rendered obsolete – there will always be the need for a grid in developed markets, to provide backup at the very least. But the distributed generation (DG) industry’s quest to poach utilities’ share of electricity sales is clearly working. The DG industry can never provide the holistic, grid management services (that sustain the “distributed generation economy”) that Arno mentioned, because DG suppliers work on a customer-by-customer basis; that is, an area that smart utilities will pursue quickly. As the industry continues to progress, clients can be sure that resistance will increase along with it – and U.S. utilities are applying ever more pressure both on national and local levels. However, the net result thus far has continually been growth for the industry – even despite a debilitating price crash, and major international trade uncertainty. That the solar industry has weathered major problems, and continues to gain influence and exposure, is a solid indicator of progress in becoming a mainstream source of electricity.

U.S. EPA Announces Rules on Carbon Emissions: But the Real Payoff is in Spurring Technology Development and Deployment, Not a Binding Global Climate Deal

On Monday, U.S. Environmental Protection Agency (EPA) administrator Gina McCarthy revealed a “Clean Power Plan” to implement Obama administration’s proposal for reducing CO2 emissions from existing power plants down 30% from 2005 levels by 2030. The President had laid out the broad brushstrokes of the proposed regulations in his weekly address on Sunday. EPA’s announcement yesterday underscored that the rules are enforceable with specific targets for each state ranging from lower targets for coal-dominant states, like Kentucky at 23%, and for states with a cleaner energy mix, such as New York at 44%. The EPA rules are not prescriptive for specific technologies, but allow for flexibility by individual states in how they choose to achieve their targets. They can institute Renewable Portfolio Standards (RPS) like much of the Northeast, or set up carbon trading markets, including broad regional ones. Any such plan will include more renewables, both utility-scale and distributed. For some states, the targets may not be a heavy lift: For instance, analysis from the World Resources Institute indicates Minnesota can achieve a 31% reduction by continuing its existing RPS, increasing the use of combined cycle natural gas (currently operating at 11% capacity), and enforcing existing energy efficiency standards.

The EPA will enforce the new rules under section 111-d of the Clean Air Act, but is bound to face many legal challenges prior to that. However, if the U.S. Supreme Court acts on its own precedents set in Massachusetts vs EPA in 2007, the new rules will withstand the legal challenges. More serious challenges may be in the offing on the political front, particularly if a Republican takes the White House in the 2016 presidential election.

The new rules represent the most significant action taken by the U.S. government to address climate change to date, given that existing power plants account for 38% of the country’s carbon emissions, and complement the expected reductions in the transportation sector generated by the EPA’s increased fuel economy standards for automobiles, released in July 2011. This action has raised the hopes of international agencies like the United Nations Framework Convention on Climate Change (UNFCC) regarding a global climate deal in 2015.

These new rules, however impactful for the U.S. emissions, on their own are unlikely to have a dramatic impact on the global climate, given that almost all future growth in carbon emissions will come from developing and underdeveloped countries – most notably China, which became the largest carbon emitter in 2007. Hence much of the debate about the rules has centered on how likely they are to help induce China and other nations to agree to binding targets of their own. However, much of the discussion misses a critical point: Whatever their political importance, the rules will accelerate technology development and deploymentmaking it more practical and affordable for nations everywhere to reduce emissions. While their success is far from certain, their influence on innovation is where they will need to have the biggest impact for the world to achieve its CO2 reduction goals.

We predict four major technology sectors to get a boost:

  • Combined cycle gas turbines (CCGT) will gain greater ground

States will continue to look for decarbonizing fossil fuel power plants first, to ensure supply security and to use infrastructure the utilities have already invested in. The administrations’ earlier announced rules regulating CO2 from new power plants have already had some impact, contributing to the coal-to-gas switch for electricity generation. Firms like Platt are already predicting a significant rise in gas prices as a result of the new EPA rules. In this environment, expect that combined cycle gas turbines, which use energy from natural gas burning as well as steam generated from the hot exhaust gas, will rise in demand, given their higher efficiency at 50%, relative to 40% for regular thermal power plants. We anticipate CCGT giants like General Electric to benefit from this rise in demand.

  • Commercial- and utility-scale solar demand will rise in unexpected places

Subsidized internal rates of return (IRRs) are already high for commercial and utility solar installations in states like California and Massachusetts, ranging from 10% to 15% (see Lux Solar Demand Tracker — client registration required). However, the new carbon emissions rules will likely open up hitherto unattractive markets due to the lack of significant subsidies, such as Georgia and South Carolina, where we project IRRs between 2% and 5%. As the IRRs rise in the Southeast, expect a greater flow of debt capital and competing business models, such as leasing from SolarCity and solar loans from Sungage, to make their presence felt. Provided the states comply, the new rules will also make it more difficult for utilities to raise legal objections to increasing use of renewables in the energy mix (client registration required).

  • Negawatts will prove to be the cheapest compliance option for states and utilities

Saving electricity is considerably cheaper for a utility than producing it. A recent study (client registration required) from the American Council for Energy Efficient Economy (ACEEE) shows that the average cost of saving electricity across all the utility energy efficiency programs in the 20 U.S. states is 2.8 cents/kwh, two times cheaper than even coal power generation. The new rules will make the trade-off even more attractive by raising the cost of generation in coal-dominated states like Kentucky, Ohio, and Wyoming. Expect the utilities dominant in these regions, such as American Electric Power (AEP), to expand their residential energy efficiency programs, leading to the adoption of air barrier materials, light-emitting diode (LED) lights, and double-pane, low-e coated windows.

  • Carbon capture and sequestration (CCS) will get a new lease on life

Current costs of CCS using the incumbent integrated gasification combined cycle (IGCC) technology are an astounding $60/ton, according to the U.S. Department of Energy. Therefore, demonstration projects have been few and far between – and even when they do get commissioned, the capital costs are out of control: A case in point being the 582 MW Kemper CCS plant in Mississippi, where the capital costs now stand at an estimated $5.5 billion, compared to $2.4 billion originally budgeted. The new rules will likely accelerate the development of game-changer second- and third-generation CCS, such as use of metal organic frameworks (MOF), which have the potential to get the costs down to $20/ton.

The increased deployment of the above technologies will have an impact beyond the U.S. As CCGT and CCS technologies scale, expect developers like GE, Toshiba, Siemens, and Alstom to expand their footprint in India, China, South Africa, and Vietnam. Leading CCS research institutes in China, such as Huazhong University of Science and Technology, will partner with companies like the Sinopec group to commercialize the second- and third-generation technologies. A greater diversity of financing models will migrate to countries with attractive rates of return for solar projects, such as India. Utilities plagued with energy security issues (client registration required), such as Korea Electric Corporation (KEPCO), are already engaged in smart grid pilot projects and will likely start launching building energy conservation programs.

In short, the impact of the new EPA rules will neither come via a global binding climate deal nor from an absolute reduction in U.S. emissions, but from catalyzing technology development and deployment. Clients engaged in developing CCGT, CCS, solar, wind, and building energy efficiency solutions should take note and use the opportunity to deploy their technologies aggressively.

Tubular! Tech Billionaire Musk Proposes Hyperloop, a Radical New Transport System for California

Earlier this week, technology billionaire Elon Musk revealed his ideas for “hyperloop,” a speculative new mode of high-speed transportation. The system would propel car-sized compartments through low-pressure tubes (like pneumatic tubes once used to move mail through office buildings) at 1,000 km/h. Musk says that connecting San Francisco and Los Angeles (through a proposed $20-fare, 35-minute ride) with the system would cost about $7 billion, or a tenth of the projected cost of California’s beleaguered high-speed rail system meant to connect those cities – and could be built in less than a decade.

Naturally, such a bold idea immediately attracted criticism, such as a USA Today article listing mundane reasons it won’t work like “you’d have to slow down for turns” and “the towers would have to be made safe.” Of course, others fell over themselves praising the plan, reasoning that Musk’s vision is so awesome that even if it doesn’t quite turn out as planned, it would still be great, anyway. While it’s easy to get overly excited or overly skeptical about the concept, a dose of datapoints is useful:

  • If Musk hadn’t proposed it, it wouldn’t be worth attention. Musk is a singularly successful entrepreneur, having quickly turned equally-futuristic ideas into successful businesses several times: electronic money (PayPal moves $150 billion a year), electric vehicles (Tesla is profitable (client registration required) and the cars, though expensive, are critically acclaimed), solar energy (SolarCity gets Lux’s much-coveted “Strong Positive” — client registration required), spaceflight (SpaceX, which developed a national-grade space program in seven years and makes a profit). Musk’s solid record lends credibility to an otherwise fanciful idea (client registration required).
  • The system requires no exotic new materials, properties of matter, or unproven technologies. Musk’s 57-page detailed explanation of the idea explains how the system might work using relatively off-the-shelf technologies. It acknowledges that there are many engineering problems to be solved, and offers the concept as an open-source blueprint – a starting point for something actually workable. As such, the many solid criticisms of the plan actually move it forward.
  • Musk’s announcement should be seen as political commentary wrapped in an engineering design. The white paper opens not with a visionary problem statement, but by stating, “When the California ‘high speed’ rail was approved, I was quite disappointed, as I know many others were too. How could it be that the home of Silicon Valley and (NASA’s Jet Propulsion Laboratory) – doing incredible things like indexing all the world’s knowledge and putting rovers on Mars – would build a bullet train that is both one of the most expensive per mile and one of the slowest in the world?” Like many California taxpayers, Musk is frustrated by the cost overruns, delays, and mediocre performance of the state’s high-speed rail program, and the political problem is arguably the one Musk aims to solve.

Of course, a tech entrepreneur’s political commentary isn’t newsworthy either, and there has been rampant speculation as to whether Musk – or anyone – could successfully build the contraption. Pneumatic transportation is not novel, and similar – if much slower – versions of pneumatically-propelled people pushers have been envisioned, and even deployed, long ago. Paris and New York had air-powered public transit in the 1870s. The vacuum-tube variation Musk is currently proposing has recently been explored in China and in Switzerland. So how does the concept stand up to technical scrutiny?

  • Hyperloop’s cost-per-kilometer would be as revolutionary as its speed. California high-speed rail’s high cost per kilometer is as much a consequence of political and environmental issues as the technology, and those concerns would likely dog Hyperloop, too. Musk proposes an elevated, high-technology solution that would indeed address issues like land use, but such systems are if anything even more expensive: the Shanghai Pudong monorail cost $1.3 billion to build and is 30 km long ($40 million/km), while the Airtrain monorail in NYC cost $1.2 billion for just 12 km of track ($100 million/km). One way to defray the cost might be co-locating the route with other state-spanning infrastructure. Using the same right-of-way for a natural gas pipeline or energy transmission lines with PG&E, fiber-optic cable (which are routinely co-located inside city sewers) or water could be part of the calculus (client registration required).
  • The passenger pod’s cousin, Tesla, could supply on-board power technology. On-board batteries are not a technological hurdle, because the initial acceleration (and subsequent boosts) needs would be met by external, stationary linear electric motors and their energy sources (client registration required). The on-board batteries would then be used primarily for powering a large electric compressor fan at the front of the Hyperloop. The resulting battery would likely be on the order of 200 kWh – about three Tesla Model S’s worth of energy storage capacity, which can be engineered using today’s battery technology. Moreover, these batteries would contribute only a sliver – less than 0.1% – to the overall cost of the Hyperloop, being dwarfed by infrastructure like pylon construction and land permits.
  • Even in sunny California, the solar-powered system would need backup storage. While Musk’s plan assumes the energy requirements of the system could be met by solar energy – perhaps he is hoping that SolarCity will get the installation contract – solar panels would need grid storage to operate at the expected utilization rate. So while solar power will help, the larger energy storage opportunity would be in the stationary batteries required to operate the Hyperloop’s linear electric motors at night or in poor weather.
  • The open-source model is an open invitation to rail system manufacturers like Bombardier, Siemens, and ABB. Siemens test-drove crowdsourcing by opening up its engineering software to the Local Motors crowd, with the now-available Rally Fighter vehicle a testimony to its success. As with other “big innovations,” the spinoffs of R&D on Hyperloop would benefit adjacent technologies, and advance the process of collaborative design. Manufacturers of other high-performance transport vehicles, such as automotive, aircraft, and spacecraft – like Musk’s SpaceX or the NewSpace community (client registration required) – should join the Hyperloop crowd.

Gearing up for 2011, solar installers migrate east

Installers have been busy over the past two months. In addition to SolarCity’s acquisition of Clean Currents Solar and groSolar’s residential business, a number of notable installers and a solar leasing firm raised venture funding:

  • Sungevity raised $15 million in December from investors, including Greener Capital, Firelake Capital, and Brightpath Capital Partners
  • Solar Universe raised $7 million in January in a round led by RockPort Capital
  • Verengo Solar Plus raised $9.7 million in January from the Angeleno Group
  • Solar Power Partners raised $3 million in debt and securities in January. The firm had raised $132 million since 2008, led by Globespan Capital Partners and Silicon Valley Bank
  • SolarCity itself announced a $40 million fundraise from Citi to finance residential projects

Aside from Sungevity – a solar financing start-up – the three other funding recipients are installers that also offer financing plans.

The widespread funding in the U.S. solar installer space is a solid indication that these players are gearing up for strong domestic demand in 2011, on the back of the ITC cash grant renewal (see the December 16, 2010 LRSJ*) and recent U.S. Department of Energy (DOE) loan guarantees (see the February 1, 2011 LRAFJ*). Further, as the German market ticks down in 2011 and Asian players continue to ramp manufacturing capacity, prices are likely to continue dropping – thereby improving the economics of U.S. installations. The recent funding will provide installers the added capability to provide financing and leases for customers to satisfy demand and push the module supply into the field.

In a specific case illustrating another trend, SolarCity’s two acquisitions also give it grounding on the U.S. east coast. As vertically integrated Asian players continue buying up U.S. demand in light of European subsidy cuts (see the January 20, 2011 LRSSJ*), California-based installers – like those listed above – will need to follow SolarCity’s example of expanding cross-country. Though most installers outside of California to date have been small, local operations, expect bigger firms to move east and challenge them with powerful financing options and low-cost systems – though the lack of generous incentives on par with those in California will surely dampen enthusiasm and hinder east coast success for some large firms.