Recently in Renewable Portfolio Standards Category

Which solar business models unlock value of solar PV energy as it grows?

With solar electricity generating more than one terawatt-hour (one billion kilowatt hours) of electricity in the United States in 2010 and continuing to expand rapidly, the key question is, "How can companies best capture value as the industry grows?", said Michael Rogol, global PV analyst and CEO of Boston-based PHOTON Consulting.

Solar business  opportunities in installation, financing and related services

"The U.S. solar power sector is very profitable, but value is migrating from companies that manufacture toward companies that provide installation, financing and other services. As profit migrates, solar companies and utilities have at least seven models to capture value," said Rogol, during his presentation at the 2010 Solar Terawatt-hours Conference Series  in San Francisco.

Models to capture value in Solar Business Opportunities

• Solar equipment and software engineering and manufacturing
• Related equipment manufacturing such as sensors, monitors and regulators
• Installation and maintenance of installed systems
  
• Regulatory auditing - zoning, codes, renewable credits, etc .
  
• Renewable Energy Credits
  
• Equity investment opportunities
  
• Sales, marketing and outreach about solar energy
• Research, management and strategic consulting services
• Financing of solar systems (residential, commercial and generation)
• Tax incentives and rebates can add to bottom line profitability
  

Value Creation with Solar Energy

Strong value creation, including being low cost suppliers, agile traders, value-added service providers, system developers and bundlers of solar power with other technologies. For traditional electricity companies, the biggest challenge, Rogol noted, is to adjust their traditional businesses to create value from solar electricity.

Rogol showed how Solar Business Opportunities focusing on lower module prices are enabling swift growth in the North American solar market and how, as this occurs, profit within the sector is shifting downstream. The key to success, according to Rogol, is a strong, profitable business model capable of "unlocking value." He provided several key examples of strategies for strong value creation, including being

• low-cost suppliers,
  
• agile traders,
  
• value-added service providers,
  
• system developers and
  
• bundlers of solar power with other technologies.
  

For traditional electricity companies, the biggest challenge, he noted, is to adjust their traditional businesses to create value from solar electricity.

Solar consultants model company, geographic and industry projections from the outside-in, cross checking company announcements with providers and buyers. Photon PV data consists of historical and five-year forward projections for price, volume, revenue, cost, operating profit, operating margin and demand for c-Si and thin film technologies.

"This is not the dot-com boom with easy access to capital. Alternative energy companies need to build profitable businesses largely on their own. To do this requires detailed understanding of changing solar power market dynamics and how the electricity sector is evolving across North America," said Rogol.

Electricity is becoming the energy source of choice for a greener economy because it is possible to generate and transport electricity without the greenhouse gas residuals of petroleum and coal based generation feedstocks.

To support companies as they assess strategic moves in solar power, PHOTON Consulting publishes three in-depth business research reports each year focused on

• company risks,
  
• market risks and
  
• sector risks.
  

PHOTON Consulting's research reports provide solar companies at every step of the supply chain with the tools to make fact-based decisions in terms of price, volume and strategy. 

PHOTON Consulting is the largest dedicated solar energy research consultancy and is a leading supplier of in-depth research, management and strategic consulting services specific to the PV sector. With the deepest, broadest integrated coverage, PHOTON Consulting tracks the solar energy sector from feedstock to factory gate to end customer in every active and emerging market.

PHOTON Consulting is a robust source for research and analysis in solar power based on extensive research and data in the sector. For more information on PHOTON Consulting, visit the Company's website: http://www.photonconsulting.com.

The IREC participates in state and municipal level workshops, proceedings, and rulemakings focused on net metering, interconnection, and financing of distributed renewable energy technologies.

Net Metering

Twenty-two states and DC changed or adopted net metering laws/regulations in 2009.

New in 2009?  Kansas and Nebraska established new net-metering policies, raising the national state total to 42.

Old news? Many states have seriously flawed rules that inhibit market growth.

According to the IREC, changes implemented in the other states address increasingly complex policy issues, including

• the treatment of net excess generation
• renewable energy credit (REC) ownership
• community-owned systems
• third-party ownership

Net metering rules by state, using the grades applied in Freeing the Grid 2009, are available at
www.newenergychoices.org.

"Super-sized" net metering (i.e., a 1-MW or greater individual systems capacity limit for at least one customer type) now exists in 20 states.

The most important issue for net metering continues to be the treatment of energy delivered to the electric grid.

The touchstone of the debate centers invariably on concerns over the potential for inter-class subsidies when implementing or expanding net metering programs. This issue was front and center in several states including California due to legislative efforts to expand the aggregate program cap for net-metered systems and the California commission's consideration and ultimate adoption of a cost-benefit methodology for assessing the costs and benefits of distributed generation including net metered systems.

Utilities typically view any framework which values net metered excess generation above avoided costs rates as an undue subsidy to customer-generators from non-participating ratepayers.

Many utilities continue to hold this view despite the ever mounting research finding that the benefits of renewable distributed generation justify valuing net metered excess generation from renewable resources well above a utility's typical avoided cost of generation.

Concerns over the potential for inter-class subsidies underpin many decisions legislatures or state utility commissions make in placing arbitrary caps on the aggregate capacity of net metered systems allowed to participate in state net metering programs.
 

Interconnection Standards

Interconnection standards continue to serve as an essential component of state renewable energy policy. Seven states and Puerto Rico improved interconnection standards over the last year.

For a comprehensive description of IREC's positions on net metering and interconnection issues, see IREC's newly revised model procedures and other documents on IREC's website. For a thorough analysis of the procedures developed in the states in which IREC was active in the past year, see www.dsireusa.org.

Prior to 2008, Pennsylvania was the only state to permit "alternative energy" types of resources
to qualify for a standard or as a separate tier exclusive of a standard.

Alternative Resources

But, in 2008, Massachusetts, Ohio and Michigan adopted policies permitting the inclusion of alternative resources (in some capacity). In 2009, West Virginia adopted an alternative and renewable energy standard, with no minimum renewables requirement, and Illinois adopted a "clean coal" standard separate from its existing RPS.

SOURCE:  IREC 2009 Annual Report