April 27 2015
Benjamin Hulac and ClimateWire
Wind, solar and other forms of renewable energy could be the fastest growing power sources over the next few decades
Credit: petter palander/Flickr
In its forward-looking report for the year, the U.S. Energy Information Administration forecasts renewable energy will be the fastest-growing power source through 2040.
New investments in renewable energy rose from $9 billion in the first quarter of 2004 to $50 billion for 2015’s first quarter, according to Bloomberg New Energy Finance, and the volume of installed photovoltaic systems in the United States has grown every year since 2000.
The story that renewable energy advocates often share of how their favorite power sources have grown so rapidly over recent years belies the reality that those industries have expanded from small market shares to start.
Yet with increasing interest, investors are targeting renewables as strong assets, not dodgy options, David Milner, chief executive of NuGen Capital, a private equity firm, said Friday at the Atlantic Council.
In 2011, construction began on the Desert Sunlight solar plant—a 550-megawatt farm in Southern California. But that project was only possible with loan guarantees from the Department of Energy, Milner said. Now, he added, investors can often plunge ahead on renewable energy projects without government help.
Years later, MidAmerican Energy—a subsidiary of an energy holding company majority controlled by Berkshire Hathaway Inc., the conglomerate run by business magnate Warren Buffett, whose name connotes value investing—has put more than $15 billion into renewable energy projects, largely without loan guarantees.
“My view is that the human race is going to start thinking less about burning things for energy,” Milner said.
A competition with ‘winners and losers’
SolarCity Corp. went public in late 2012, trading at around $10 a share. It’s now worth about $60 a share. Several other solar firms are in the final stages of their own initial public offerings, trying to cash in on a growing equity market.
SolarEdge Technologies, an Israeli company, said in March that it hopes to raise a little more than $100 million in its initial public offering. Sunrun, a San Francisco-based operation with a focus on home installations, is working with banks including Goldman Sachs and Credit Suisse on an IPO. And Sky Solar, a foreign organization, went public in U.S. markets in November.
Also, “yieldcos”—public companies designed specifically to purchase renewable energy assets with lengthy contracts—have begun to play a larger role.
Though yieldcos are still a minute slice of American business, their number doubled to six from 2013 to 2014, according to a recent report from Deloitte that projects they will continue to grow (EnergyWire, April 21).
“There will be winners and losers in this environment. That’s a fact,” said Ross Chanin, a visiting scholar at Stanford University, on Friday. “It’s a yield business if anything.”
Across the landscape of U.S. utilities, different companies are responding to competition from renewables and U.S. EPA’s Clean Power Plan with varying speed.
“Massive investments in capital from the utilities are going into solar,” Milner said. “So they’re hedging.”
Battery storage key to solar’s future
Last May, a handful of financial powerhouses and investment banks—Morgan Stanley, Barclays, UBS, Citigroup, Bank of America and Goldman Sachs—downgraded or analyzed the country’s utility sector. In a research note from Barclays at the time, analysts said emission regulations were a short-term risk and the combination of solar power and battery storage posed a long-term existential threat.
The “scariest thing” to the established U.S. utilities, said Milner, as Chanin nodded in agreement, is an efficient, low-cost system in which solar power can be easily stored in an electric battery, at home or otherwise.
That system, Milner said, “can be better than the grid.”
“I think at scale, we’re pretty far off,” he added, but said, “in pockets,” the market is getting close.
“We are going to unveil the Tesla home battery, the consumer battery that would be for use in people’s houses or businesses, fairly soon,” said Elon Musk, chairman and CEO of Tesla Motors Inc., in a February earnings call.
The company will unveil a new product line other than a car Thursday, Musk said via Twitter in March, and industry analysts suspect the news will relate to battery storage.
“That’s the direction we’re heading, and there’s nothing to stop it,” said Peter Dean, the third speaker at the panel last week and a sustainability and architecture expert at the Rhode Island School of Design, referencing a shift to transportation and electricity generated by renewables.
The EIA said two weeks ago that economic growth and emissions—which traditionally move roughly in tandem—began to separate in 2013 (Greenwire, April 20).
Carbon emissions jumped 0.7 percent last year over 2013; however, the U.S. economy chugged along faster, growing 2.7 percent year to year, according to EIA.