Intersolar NA 2013: Governor Brown brings the sun and the fight to California

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Governor Jerry Brown was in a pugnacious mood last night as he opened the Intersolar North America conference in San Francisco. In his keynote speech, the energetic 75-year-old said he would remove anything and anyone that got in the way of the growth of solar in California.

“We have 130,000 solar installations – we're going to get several hundreds of thousands more. And as governor of California I guarantee we're going to get there because I am going to move aside all the obstacles, whoever and whatever they are. Get out of the way, the sun is shining brightly in the state of California!”

If anyone in the packed ballroom at San Francisco's Intercontinental Hotel (particularly the German InterSolar cohort) were in any doubt as to Brown's position on the need for solar, he added that he was going to return to the roots of his great, great grandfather in Germany next week.

“I'm going to reconnect with my inner Prussian because you need an indomitable will to overcome all the inertia, the blindness and silliness that stands in the way from our obvious destiny and future which is a renewable, sustainable solar America and solar world.”

Brown's credentials as the godfather of renewables earned him his place on the podium as the key keynote speaker. Without Brown's (slightly crazy) 55% tax credit for solar installations introduced in 1975 during his first tenure as governor, who knows where the industry would be right now?

But his excoriating attack on those who stand idle in the face of climate change would be enough to raise a blush from the staunchest tree hugger.

“The response is feeble compared to the challenge and we've got to wake up to it,” he said. “One of the challenges is that climate change is not news because it's too slow … climate change happens gradually over time.

“I'm not saying you shouldn't get excited about a lot of trivial things, why not? It can distract you from other trivia that may be more irritating, but … it's not just [about] fun and toys and entertainment and shopping.”

Even if the floodwaters lap around the porch and wild fires continue to destroy homes, it's not a message that always survives very far outside rooms like this in the US.

Within the last two months California had recorded over 2GW of solar energy on the grid, which is more than the shuttered San Onofre, one of the state's only two nuclear generating stations. But it was no good just burning less coal in the US while it was being shipped off to China and India.

“We've got market forces and against that we have to marshal intelligence and collaboration and political response because [climate change] is serious and the fact that people don't worry about it and don't talk about it doesn't mean it isn't serious and that's the insidious character of this challenge,” he said.

But no one should underestimate the septuagenarian who is likely to seek another term before a well-earned retirement.

“That's the context I believe in which you come together – you're focusing on solar energy. That's a big piece. There's plenty of sun out there,” he said.

“But just in California you have some cities that charge 1800 bucks for somebody to put solar on the roof, that's absurd. So we'll fight that, because there are soft costs, from the small incremental step to the long march to getting it done.”

Earlier in the day, the keynotes began in a lighter mood but still raised a call to arms.

Stephan Heck, director at McKinsey & Company, opened the conference with a presentation that characterised the solar industry as a dark place that was “in deep trouble”.

“We're facing pretty dire times,” he said. “We have overcapacity, prices have declined way ahead of costs and many of the companies have either been sold or gone bankrupt altogether.

“There is 50% overcapacity in the market, so we think there's two more years of bloodbath while there's oversupply. So hang on for a tough ride.”

He said that there would continue to be massive restructuring upstream. Of around 1200 companies, only “just north” of 100 would survive.

But he said he was optimistic about the industry.

“Nonetheless, this really is a story about the fact that the sunrise is already here and we're beginning to see the effects of it although it hasn't hit the popular press yet.

“Why am I optimistic after all that darkness and bad news? Fundamentally, the real motor of solar is alive and kicking and actually going faster than anybody has been predicting. I went back to McKinsey's first solar forecast made in 1990 and it said that next year we would be at 9c kWh for energy delivered – so a little bit optimistic, but given that this was 23 years ago not too bad; pretty much within the margin of error that I would expect for that length of time.”

McKinsey's most recent forecast conservatively predicted that solar (presumably installed costs for residential) would drop to $1/W by the end of the decade.

“I call this our conservative worst-case scenario because this is just industrialisation number. Through our operational works in solar production fabs and with installers we catalogued 280 levers to reduce the cost. Most of these levers individually are small but their combined effect gets you to about a 60% reduction by the end of the decade.”

McKinsey also forecasts that by 2020, 500GW of solar will be “in the money”, ie economically viable without subsidies, although not necessarily built out.

In the US, the economic potential for solar was already more than 10GW and could be 260GW by 2020, he said. To add to the joy, Heck also said that the economics of solar would be so competitive by 2016 that the expiration of the Investment Tax Credit would not make much difference and that natural gas would have little impact going forward.

“Don't tell the regulators yet but that's good news; real economics can actually sustain this industry if we get through that time period,” he said.

However, Heck did warn against utility pushback as they attempt to avoid a “death spiral” of dwindling returns as solar chomps through their traditional growth rates.

A fixed interconnection charge for transmission and distribution could be one line of attack, he said.

“[But even] if that battle takes five to six years solar is basically in the money enough that it won't make a difference. So, ready for that battle for the next five years.”

But the prize for the most bouyant mood must go to Jimmy Chuang, chief structured finance officer at SolarCity.

Chuang calculated that the addressable residential market in the US was around US$90 billion across at least 3 million homes.

SolarCity has now installed 550MW for 60,000 customers. But installations keep doubling each year, he said.

“Within five years we are very confident we can get to 6GW and 1 million customers, but even with that, that's only a 2.5% penetration rate. That's 1GW a year, the equivalent of a nuclear power plant.

“[Today] our penetration rate is so low for the industry in the DG [distributed generation] space, roughly around .05%, so there's huge growth for the existing market. But people didn't quite realise how big the additional market is. Every new home available in the US is roughly 300,000 to 400,000 homes.

“That's more than the industry can address every year, multiple times. Just with the existing and additional markets we can never catch up – so in our lifetime the growth is infinite.”

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