Lincoln Renewable Energy (LRE) is a utility solar project developer with founders who hail from the wind industry. A few months ago, the firm won $14 million in venture capital funding from Austin Ventures, a VC and growth equity firm with $3.9 billion under management.
I spoke with Declan Flanagan, the CEO, to check in on the company's progress.
Lincoln, with 16 employees, 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. 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.
But the project that's closest to construction is a 10-megawatt (AC) project on "scrub land" in Cumberland County, New Jersey. A PPA is signed and Macquarie Energy has signed on as the off-taker for the power, as well as the Renewable Energy Credits (RECs). Macquarie is also the provider of the construction finance and the term financing. Quanta Services is the EPC and will also provide O&M.
This 10-megawatt Oak Solar project is to be the largest non-utility-owned solar project east of the Mississippi. LRE will be the long-term owner of the facility. The project will consist of about 55,000 solar panels on a 100-acre site and will connect to Atlantic City Electric’s distribution system.
Project construction is due to start next month and the company expects the installation to be providing commercial power in December of this year. The project went from site identification to commencement of construction in 18 months.
LRE has another 10 megawatt project in New Jersey in the works, hoping to get in under the current grant window for a total of 20 megawatts in 2011. The year 2012 holds the prospect of 30 megawatts in total projects with the hope of 60 megawatts to 80 megawatts per year in the coming years.
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 notes that in the solar business, "The ratio of announced to actual construction is pretty high, higher than wind."
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.
Other 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 24 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.