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by Stephen Lacey
April 21, 2017

Welcome to the Solar Lead, your rundown of an industry causing "acute and chronic problems" for the power sector, according to Rick Perry.

The solar industry's own acute and chronic problems were on full display this week. And they could come full circle, right back to the president's desk. 

The first word: WWIII won't be over North Korea nukes; it'll be over solar

In his meeting with Chinese President Xi Jinping last week, President Trump abruptly changed course on forcing China to discipline North Korea. “After listening for 10 minutes, I realized it’s not so easy,” he told The Wall Street Journal.

He may find that further disciplining China on solar trade practices also may not be so easy. But he could get a shot at it -- and soon.

Suniva, the Georgia-based crystalline-silicon solar producer, finally filed for bankruptcy protection this week. It didn't come as a great surprise, given the current pricing environment. Last year alone, global module prices declined by 38 percent. And although domestic solar production doubled from 2012 to 2016 after tariffs on Chinese and Taiwanese products were established, imports from other regions surged -- and the American market share continues to fall. 

Suniva blamed Chinese producers for setting up shop in other Asian countries not covered by the tariffs: "These tariffs have not been effective in preventing dumping of Chinese solar products into the United States."

But China-bashing is old news. The important thing is what Suniva wants to do about it. The company plans to lobby the International Trade Commission under Section 201 of the 1974 Trade Act -- basically arguing that solar imports (not just Chinese imports, but imports in general) have caused "serious injury." If the ITC considers the petition, it could make a decision within 120 days and then send it to the president's desk. 

If this complaint actually gets filed as Suniva plans, it's a really big deal. And not just for the solar industry -- for President Trump's trade agenda generally.

Trump has made it clear he wants to protect American industry. (His campaign actually mentioned Section 201 as a way to help domestic manufacturers.) And if the trade commission agrees with Suniva's argument about "serious injury" due to imports, the president could issue tariffs against any country of his choosing. This isn't just a China issue. This is a global imports issue. The ITC and the president could slap new tariffs, import limits or minimum prices from solar products anywhere in the world. 

Suniva is majority-owned by a Chinese company, Shunfeng. If this petition moves forward, it could make for some awkward boardroom conversations.

Let's remember, the petition hasn't been filed yet. But our team of solar analysts at GTM Research put together a comprehensive note on the implications of a Section 201 case. (If you're an auditory learner, listen to me and Shayle Kann talk about the case in the first half of this week's Interchange podcast.)

A couple of things stand out. First, financial struggles aren't confined to Suniva. The list of problems in the American solar manufacturing space since 2016 is quite long:

  • Suniva: 230 layoffs between Georgia and Michigan as of Chapter 11 filing in April 2017, with an additional 24 layoffs planned. “Temporary shutdown” of production facilities in Michigan and Georgia in Q1 2017.
  • Mission Solar Energy: 170 layoffs in March 2017, and plans to reduce its Texas manufacturing capacity from 200 MW to 48 MW.
  • Tesla/SolarCity/Silevo: Tesla noted in its annual 10k filing that Silevo will not achieve its volume production targets and essentially signaled an abandonment of the Silevo technology. Instead, Tesla will partner with Panasonic, with the 1 GW Buffalo, New York facility expected to start production in summer 2017 and to be ramped to full capacity in 2019 -- a delay from earlier targets.
  • First Solar: 450 layoffs for Perrysburg, Ohio production facility in November 2016 as part of strategic shift and retooling for Series 6 thin-film module. Roughly 1,000 employees remain on staff at facility, according to The Toledo Blade.
  • Panasonic: 50 layoffs in Salem, Oregon in February 2016 while production volume winds down.

American manufacturers are running in place. Suniva ramped up its U.S. manufacturing just as global pricing took a nosedive. And even with tariffs in place, America's share of global manufacturing has indeed dropped, as GTM Research illustrates in the following chart.

...or maybe it'll be a war over baseload

Energy Secretary Rick Perry is directing his agency to review the impact of renewable energy subsidies on baseload power supplies. His assumption: that a shift to distributed energy will skew markets and destroy baseload power plants. There's no question that the surge in distributed resources is starting to transform wholesale and retail markets. It'll be interesting to see what DOE researchers assume about subsidies (will they compare subsidies for both renewables and conventional power?), integration costs (which market operators have generally found are low), and the need for baseload power (which is not a well-defined concept).

Luckily, we do have plenty of research on grid integration costs and reliability. Below are just a few recent findings.

  • In March, PJM issued a study looking at whether closing nuke and coal plants, and adding lots of wind and solar, would hurt the stability of the regional grid. Its near-term upper limit was about 20 percent variable renewables. “Nevertheless, PJM could maintain reliability with unprecedented levels of wind and solar resources, assuming a portfolio of other resources that provides a sufficient amount of reliability services,” the study noted.
  • In Perry's home state of Texas, The Brattle Group found that the costs of integrating wind and solar were much lower than expected (although the transmission lines connecting big wind farms are already getting overloaded -- presenting challenges to further growth).
  • A National Renewable Energy Lab study on the Western grid found that a 35 percent penetration of wind and solar could actually reduce utility operating costs by 14 percent.

Whatever the assumption -- that solar is either good or bad for the grid -- the changes to wholesale markets will most certainly impact the value of solar itself. So Perry's goal of understanding the structural challenges to U.S. wholesale markets could bring additional clarity to the industry.

Shayle Kann and Varun Sivaram wrote a piece last spring on the value-deflation effect caused by dropping wholesale prices: "Cost-competitiveness for solar is a moving target. As solar’s share of the electricity mix increases, the cost of each new solar project must fall to compete. This ‘value deflation’ effect of solar at higher penetrations is a well-known theoretical concept but is rarely discussed as a matter of practice in the solar industry," they wrote.

Two other things could come from the DOE study that Secretary Perry ordered. It may offer the White House ammunition for repealing tax subsidies for renewables as part of a tax reform package (although this is unlikely).

More likely, it will offer up some policy proposals for valuing baseload power. Perry hinted at this in his memo, when he pondered "whether wholesale energy and capacity markets are adequately compensating attributes such as on-site fuel supply and other factors that strengthen grid resilience and, if not, the extent to which this could affect grid reliability and resilience in the future."

Again, if you prefer audio, we talk about this in great detail in the second section of this week's Energy Gang podcast. (Jigar Shah and Katherine Hamilton both think the DOE study could be a good thing -- since it may expose how hard it will be to bring back coal in today's market.)

Data dive: Solar in coal country; the high cost of national solar installers; global growth

Two bits of coal news recently took the internet by storm. A coal history museum in a small Kentucky town is going solar in order to save up to $10,000 in electricity costs per year. And another coal strip mine is considering a PV project of up to 100 megawatts -- both as a way to put the land to use and to put coal miners back to work. 

Is this a sign that Kentucky is on the verge of becoming a real market? Not quite yet. But large solar projects are on the rise in the state, which is still 97 percent coal-powered. Here's a little insight from our utility-scale analyst, Colin Smith: "Kentucky has 17.5 MWdc of utility solar operating, as well as 3.6 MWdc of additional utility solar in development and a 9.8 MWdc community solar project. I expect we will see utility PV grow in Kentucky over the next several years. We have already seen several Kentucky utilities build a handful of pilot solar plants across the state. As the cost of utility PV continues to decline, solar will become even more economically competitive with coal over the next several years and spur further development, even in the most ardent of coal states."

That coal museum may be getting a good deal on solar. But if homeowners don't shop around, they may find themselves getting a raw deal. That brings us to our next data point.

A recent NREL study showed that big installers (deploying 1,000 or more rooftop systems) are quoting customers $0.37 more than smaller installers on average. You can read all the details here, but the chart below tells a pretty powerful story.

Wood Mackenzie is out with a new outlook for the global energy market by 2035. It's pretty bullish on growth prospects for solar -- with America and China dominating over the next two decades. 

It's still somewhat conservative. The study predicts that solar and wind will make up only 13 percent of global generation by 2035.

Back in 2014, the International Energy Agency predicted that solar PV alone could account for 16 percent of electricity generation, with an additional 11 percent coming from concentrating solar power. The IEA's high-growth scenario basically mirrors what we're seeing in terms of global growth trends today. 

Even under Wood Mackenzie's more conservative scenario, it's worth noting that 13 percent wind and solar generation surpasses nuclear generation, which currently accounts for 11 percent of electricity supply globally.

Deals worth watching

Sungevity (Spectrum?): It has been a tough few months for Sungevity. The company was finally sold off for $50 million to a private equity group, but not before laying off even more of its remaining staff -- and failing to give them severance packages. The new company will be called Solar Spectrum, and will presumably focus solely on lead generation through software.

Spruce Finance: The residential solar financier is reportedly up for sale. And more executive departures may be coming. Watch to see if the firm can raise more money: "We’re constantly exploring innovative financing structures to lower the cost of capital for residential solar and home efficiency financing," a Spruce spokesperson told Eric Wesoff.

Lightsource Energy: Keep your eyes on this team of veteran solar and storage developers, formed to help a leading U.K. developer expand into the U.S. They're looking at some novel projects, including dispatchable solar-plus-storage to backstop coal and provide grid services. The executive team hails from SunEdison and Advanced Microgrid Solutions, where they've built an impressive portfolio over their careers.

ForeFront Power: This company was formed after the Japanese industrial conglomerate Mistui bought up SunEdison's C&I development team in February. It already closed a 7.5-megawatt project. Can ForeFront now live up to its goal of layering energy services on top of that solar? 

Your to-do list

Get your travel plans together for our upcoming Solar Summit in Arizona. Seriously. It's our 10th anniversary, and this event gets better and better every year. We've got a software summit on the first day, too. Plus, you'll hear me, Jigar and Katherine argue on stage as part of a live taping of The Energy Gang podcast.

Next week, Shayle Kann will be speaking at SEPA's annual utility conference. He'll be dropping some knowledge on the latest trends in solar and distributed resource deployment.

If you're in Chicago in early May, come to the Clean Energy Trust Challenge. I'll be interviewing Green Mountain Power CEO Mary Powell, and we'll also get to hear from a bunch of cleantech startups competing for prize money. 

Finally, read the new analysis from Shayle Kann and PowerScout's Attila Toth on the income distribution of homeowners with solar, and listen to the supplementary Interchange podcast, too.