Comedy moments are hard to come by at trade shows. But the Second City comedy group took to the stage today at Solar Power International and gave it a damn good try. The sketch involved a couple (who work in solar, presumably some time in the future) waiting for their son to arrive with his new girlfriend. When they discover that this new girlfriend works for a utility, they gasp in horror as if she worked for the KKK.

"I want to assure you that I want what works for all parties," the girlfriend spouts. "We're not the bad guy. I'm just as interested in alternative energy as you are."

"OK, let's get it all out on the table, let's talk about feed-in tariffs," responds the mother.

"If she wants to ground-mount me or roof-mount me, that's none of your business," says the son.

Eventually, they overcome their differences but only to find that the girlfriend is a Packers Fan in a house of Chicago Bears fans.

So go these visceral differences of opinion based on bias rather than logic and that message was carried into the panel session that followed.

The Solar Energy Industries Association’s chief executive Rhone Resch and SEPA's Julia Hamm attempted to bring a spirit of collaboration between utilities such as Pacific Gas & Electric, regulators such as the Federal Energy Regulatory Commission (FERC) and solar companies such as Clean Power Finance. If it wasn't exactly a meeting of minds, it was at least a switching of caps, quite literally. Participants wore their caps lettered with U, R and S and then exchanged them with fellow panelists part way through to talk about issues from the other side.

Antagonism between utilities and solar companies quite often flares in public at events such as these as a way of grabbing headlines and attention for issues such as net energy metering.

The exchanges for the most part were good-natured. Jon Wellinghof, the outgoing FERC chairman, said that market structures could support solar.

"I'm excited about solar. From FERC's perspective, we are now looking to incorporate solar into wholesale markets where you can bid in the capacity value of solar. It provides an additional value stream for solar developer and owner that was not there before.

"We do have to get the rate structures right. The structures for charging at the retail level will have to be set in such a way that utilities can recover costs that are necessary to continue their business model on the one hand, but we have to have assurances that there are fair returns and recognition of the full benefits of these assets."

Steve Malnight of PG&E, while wearing his utility cap, was the first to mention the report from the California Public Utilities Commission on the costs and benefits of solar.

"It's about solar and grid and no one is out to kill solar," he said. "We've spent a lot of time going back and forth on what is the cost shift, and there is a cost shift. The [report found a] cost shift of over US$1 billion by 2020 that comes about for many reasons but it has to be fixed."

The session finished with an amenable atmosphere. But the jocular atmosphere masks the real battle raging on NEM. Fresh from the main podium, Resch addressed investors at the Roth Capital symposium, with a warning about threats to NEM.

"Arizona Public Services instituted an initiative where they asked the Arizona Corporation Commission for a fixed charge of nearly US$100 a month for every home that installs solar. That destroys the economics. These are the kinds of things utilities are trying to institute around the country," he said.

Resch added that SEIA was working on its post-2016 strategy and a ‘commence construction’ provision so that projects that break ground before the end of 2016 still qualify for the 30% Investment Tax Credit. Resch said he was confident that the provision would pass some time next year.

But NEM is not the only frontline for solar at the moment.

The China solution

Below the radar, SEIA has proposed an alternative to the Obama administration's plans to impose a price floor and maximum price import restriction similar to that in the European Union. It would be at US$1 per watt at a fixed capacity of 1GW to 1.5GW.

"Clearly it's unacceptable in our minds as free marketers that you would have a price floor; it starts to distort the market," said Resch. "We've rejected that outright, we've been very clear with the administration that's going to go no place."

To get around the US trade tariffs, Chinese manufacturers are buying cells from Taiwan, assembling them into modules in China and exporting them to the United States.

"They are then tariff compliant at that point, but they pay a premium for those Taiwanese cells," he said.

SEIA's proposal analyses the price differential between cells made in China and Taiwan, which is about 8c per watt. That would then be split between a five-year fund to encourage US manufacturers.

"There may be a rebate that goes to cell manufacturers and if a Chinese company wants to open up a cell plant in the US, fantastic, there would be some form of a rebate – it could be 2c/3c per watt – that would go back out to cell manufacturers. Encouraging US manufacturing is part of the deal."

The other half would go towards market development in a way that is similar to the US$150 million US cotton growers, who were caught dumping in Brazil, give to cotton growers in that country.

"It's a different way of getting around these trade cases. Either the Chinese government or Chinese companies put money into a fund to help grow and support the growth of the market here in the US.

"Ultimately that creates an opportunity for Chinese manufacturers to bring every single product into the US, especially their very high-performance products, it allows them to increase their cell lines production in China rather than having them in other locations and ultimately be a much more significant player in the US market."

SEIA is travelling to China to "hammer out the deal" in the next few weeks, said Resch.

"It's a good deal and it's probably one of the few things that saves the line for SolarWorld's line in Hillsboro," he added, in reference to the company that has been instrumental in fomenting the China trade cases in the US and Europe over the past two years.

Investor buoyancy

Meanwhile Jesse Pichel, managing director at Roth Capital Partners, and his symposium featuring module and inverter manufacturers, developers and investors brought a brighter note to the chilly autumn day in Chicago.

Between them ReneSola, Verengo, Canadian Solar, Vivint Solar, Real Goods Solar, Clean Power Finance, Enphase, Jinko, Amtech, SolarEdge, JA Solar, LightBeam Electric Company and Hannon Armstrong, gave the most comprehensive a picture of the industry now and where it's headed that you're likely to find at SPI.

A representative from Renesola said it had 300MW of backlog contracts next year and it has just signed a big shipment to Japan, which has not yet been formally announced.

Canadian Solar is on full steam right now in the Japanese market with a 10% share of a 5-7GW this year.

On its project development side, its pipeline in Canada would bring cash revenues of US$1.5 billion dollars over the next 15 months. With a 20% margin and US$400-500 million left over, the company plans to reinvest

Canadian Solar invested US$1 million in the Trans Canada project and made US$15 million profit from its sale.

"We expect the margins to be at least as good as the Canadian," said Michael Potter, chief financial officer at Canadian Solar. "At the end of Q2 we had 166MW in our pipeline and we're looking at another 450MW. We've got at least three years of good margin on projects."

China, meanwhile, was looking more promising for project development given the recent guarantee and funding for its feed-in tariff.

Pichel said there were three takeaways from the sessions. First, all of the module companies that presented are at maximum capacity. Second, demand drivers are improving in the US, Japan and especially China. Third, very few companies are spending anything on capacity expansion.

"Strong growth of demand and rationalised capacity makes for a much healthier equipment industry," he said. "We need healthy equipment companies to drive overall sentiment in solar. When we looked at the Solyndra problems in the US it created a negative sentiment around solar from consumers."

Installers said that the sentiment on solar is starting to improve for homeowners because of solar stocks going up, even for module makers and not just at SolarCity.

"You almost need a healthy set of equipment stocks to drive better sentiment in solar," he said. "Most of the increase in stock prices so far has been from retail investors.

"There's very little negative. Years ago when the market was really booming, it was Germany, Italy and Spain. Today, it's the US, Japan and China. That is an order of magnitude better. At the same time, companies have been taken out and there hasn't been any capacity expansion. We don't see any new capacity expansion but we hear from some of the equipment companies today, no we're not seeing any pick-up yet but we think it will come."

Investors are mostly interested in the downstream, he said. But that is a very hard segment to play in when SolarCity and Sunrun have turned their third-party ownership business model into the dominant model.

"Very few of the investors attending the conference own the sector which is an incredibly bullish indicator," said Pichel. "This was the seventh year that I hosted this event and it's the best institutional investor turnout in several years."

Comments