Why solar is down, but not nearly out

In CNBC’s recent special report on “Green Winners and Losers,” I had the good fortune to write about three winners: recycling, energy efficiency and electric vehicles.

In the same report, CNBC also defined solar as a loser.

On the surface, that might be hard to argue. But a look at numbers shows something different.

Yes, as the network points out, 2011 was an awful year for solar in the U.S. The Solyndra debacle, Evergreen’s movement of manufacturing to China, First Solar’s abrupt management change and “airball” earnings miss didn’t make the sector shine.

But talking to some solar industry execs, there’re more boom than gloom.

Small-scale solar benefited from dropping technology prices and rising utility-generated power prices.

“So much of the general public does not realize that the (technology) price reductions that caused companies like Solyndra to fail now make solar affordable,” said Edward Fenster, CEO of SunRun, a rooftop solar financing firm.

Fenster said his firm has grown ten-fold in the past two years—from around 2,000 customers in 2010 to 20,000 by the first quarter of 2012, and has quadrupled its workforce to nearly 140 employees in that time.

According the trade group Solar Energy Industries Association, the cost of well-establish solar PV technology dropped 30 percent since 2010, due to increased efficiency of the technology itself as well as cheaper manufacturing costs.

That makes it tough for new solar technologies, like Solyndra’s, to gain traction.

But as with other consumer goods, Solyndra’s loss is the buyer’s gain, Garvin Jabusch, CIO of Green Alpha Advisors, told us.

“The steep fall in PV module prices is also proving attractive,” he said. “I've seen trailing 12-month estimates for US small-scale installations with everywhere from 70 percent to 125 percent (increases). Even the low end of that (range) shows falling prices are encouraging rapid uptake.”

“We’re still trying to figure out the best metaphor to make it more clear,” said Nat Kreamer, CEO of Clean Power Finance (CPF), another firm that finances and facilitates rooftop solar PV installations.

“Believing Solyndra’s demise would at all impact CPF would be like believing the demise of a commercial truck manufacturer would impact GE Capital’s [GE] auto financing business,” he said. “It’s just not relevant to what we do.”

Kreamer’s firm recently partnered with Google [GOOG], which put $75 million into a fund to finance rooftop solar installations.

The search giant also put $280 million into a similar fund this summer with solar panel installer and financier, SolarCity.

The employment numbers are also in solar’s favor. While the US Bureau of Labor Statistics (BLS) doesn’t yet break out the solar industry separately, other industry estimates show the sector employing around 100,000, from engineers, to developers to financiers to installers.

Compare that to coal, which BLS credits with around 60,000 employees in 2010, with the downward trend line expected in a mature business.

Jabusch added that for long-term investors, it may be instructive to look at the disruption cell phone companies caused to old landline phone companies.

“A lot has been written about the developing world getting on the electric grid for the first time ever via solar, skipping right over coal and going from zero to the sun, like how they skipped landlines and went right to mobiles,” he said.

And utilities will be feeling that heat, since the real cost comparison battle for solar is not the cost of solar panels versus the price of coal, it’s the price of financing an installed rooftop system versus the size of your monthly power bill.

Jabusch pointed out solar is winning that battle in many regions, adding that traditional power companies “don't like it, and to greater or lesser degrees, are trying to slow the growth of a 'million rooftops' (power) grid.”

For intermediaries like SunRun and CPF, and for the industry as a whole, boosting this year’s boom could be pretty easy.

CPF’s Kreamer said “it’s important to note that we see residential solar growing steadily with or without ‘breakthroughs’” of the kind promised by Solyndra.

Focusing on better communication of existing solar incentives would help, as well as incremental technological improvements, he added.

SunRun’s Fenster said simpler permitting processes would help reduce installation costs and hassles.

“The biggest barrier to mainstream solar deployment is not technology, but red tape caused by local permitting issues,” he said, adding it equals “$2,000 of valueless costs per installation—an unnecessary $1 billion across the industry nationally.”

“Countries such as Germany have simpler processes that keep solar installation costs 40 percent lower than in the United States,” he pointed out.

But even if these issues remain, Green Alpha’s Jabusch argued that momentum points to “dramatic growth (that) has already begun.”

“Solar is arguably the fastest, and certainly among the fastest, growing industries on earth right now,” he said.

He says that while policies could always be tweaked, and there could always still be disruptive technology working its way through a lab somewhere, it’s critical to realize “solar at scale can compete right now.”

“(Policy and new technology) could keep their growth on the rapid boil, but probably is not required absolutely for their success,” he said.


Kachan & Co.'s Trevor Curwin has been an alternative investments analyst for over 10 years, with a focus on cleantech and renewable energy investment opportunities since 2007. As an investment consultant, Trevor has helped several cleantech startups with market research and positioning, especially on utility-scale renewables. Prior to this, he worked on strategic marketing and capital formation in alternative assets for Bank of America. He is a frequent contributor on cleantech for CNBC.com and other NBC Universal outlets. He has a journalism degree from the University of Kings College and an MBA from Saint Mary’s University.