Lincoln Renewable Energy (LRE) is a utility solar project developer with founders who hail from the wind industry. The firm has a few announced projects in New Jersey and other early-stage projects although they don't have any Power Purchase Agreements yet.
But they have enough traction to have won $14 million in venture capital funding from Austin Ventures, a VC and growth equity firm with $3.9 billion under management. That $14 million is operating capital, not project finance -- it's money that will allow LRE to do the permitting, siting, and interconnection designs that allow a developer to put a project together.
Lincoln is developing solar projects in multiple East Coast and West Coast markets, managed from offices in Chicago, Denver and New Jersey. Recently, the company announced site-plan approval for a $60 million solar farm in Salem County, N.J. It accompanies another 10-megawatt project in neighboring Cumberland County, N.J. In early 2010, the company received a building permit for a 39-megawatt solar farm in southern Colorado's Alamosa County. LRE is also developing a 50-megawatt Homestead Solar project located on private land in Clark County, Nev., as well as projects in New Mexico and Texas.
I spoke with Declan Flanagan, the chief executive officer of Lincoln Renewable Energy.
Flanagan was formerly with wind power developers Airtricity and E.ON, and brings with him some hard-earned lessons from the wind developer industry that should apply to the solar market. One of his points was, "Although the solar project development market is dominated by technology guys, in the long run it will end up with developers." He saw this happen in wind and expects it to happen in solar.
He also observes that "[t]rying to invest in the next, best solar panel is extraordinarily expensive. We have solar panels that work just fine. It's a long road to build new PV technology."
He observes that just as wind farms have an optimum size, solar farms do as well, with a "sweet spot" in the 10 megawatt to 50 megawatt range -- tending towards the lower end of the range on the East Coast and the higher end on the West Coast.
I also spoke with Clark Jernigan, venture partner at Austin Ventures, now an LRE board member, about the investment. Jernigan is on the board of AstroWatt, a startup developing very thin (25 micron) crystalline silicon technology, and Solar Power Technologies, a utility-scale solar monitoring and optimization firm.
"We are strong believers in the growth prospects of utility-scale PV solar development in the U.S.," said Jernigan, adding, "We really like the team and the strategy."
LRE is in the same league as relatively small pure-play solar developers like Axio Power, American Capital Energy, Clear Peak Energy, Sustainable Energy Capital Partners, Foresight Renewables, Agile Energy, and Silverado Power (see Anatomy of a 50 MW Solar Project). These firms could be acquisition targets for upstream solar players that have yet to integrate downstream. Until recently, the most established pure-play developers would have been Recurrent Energy, SunEdison, and Nextlight Renewable Power, but all three of those firms were acquired in the past 18 months.
Still, it's First Solar and SunPower that dominate the utility PV market in the U.S. today; one of those two companies has been involved in every one of the 11 largest operating projects in the country. Although they dominate the monster-size projects, there is a very long tail. In fact, there is an oversupply of project developers -- 55 different project developers have at least one signed utility PPA, with at least 25 more that have not yet signed any off-take agreements.
Utility-scale PV developers face a lot of challenges, both regulatory and financial. Expect to see consolidation via acquisition and attrition in this market.
And small developers like LRE will need some differentiation in their business strategy or team in order to survive the shake-out.
More details on the U.S. utility market can be found in the Greentech Research report, The U.S. Utility PV Market: Demand, Players, Strategy and Project Economics Through 2015.