Despite the sustained and nearly unprecedented growth in solar installations in recent years, current news surrounding SunEdison’s bankruptcy and other underperforming public companies, combined with the state-level utility/solar squabbles over net-metering, has some potential customers nervous about investing in solar.
I’m here to tell fretful customers not to worry: Solar is here to stay, and the “bad” news surrounding certain industry players is just the result of natural consolidation that all maturing markets experience in our free-market system. And the solar industry is not only stronger than it has ever been, it will weather the turbulence to be even stronger at the end.
Why going public doesn’t always work
When early solar companies went public, the financial wizards in New York went wild. The stock of some of the well-known names—SunEdison, for example—skyrocketed upward and paid incredible returns to investors who got in on the ground floor.
So what happened? Unrealistic pressure to perform led upper management of some companies to make riskier investments, which they hoped would help them meet the financial markets’ quarterly projections. When those risks didn’t pay off, the rocket on which the company’s shares hitched a ride came crashing spectacularly back to earth.
I’m confident the initial gold-rush phase of solar initial public offerings (IPOs) is over, and that more traditional capital stacks will become the financing mechanisms of choice in the future—offering more stability and easier understanding than the byzantine structures some public companies were prone to use.
The ongoing battles over net-metering
The thorniest problem facing the US industry right now is a lack of stable state-level solar policies (now that the national investment tax credit (ITC) has been extended for seven years). Most commonly, the battle is between the solar industry and its utility partners over the issue of net-metering.
Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. Solar advocates believe its customers should be reimbursed at the full value of the excess electricity solar consumers are exporting to the grid. Some utilities, on the other hand, believe solar users are freeloaders who are using grid-based electricity when the sun isn’t shining—without paying for its upkeep.
Let’s face it: Solar incursion into the utilities’ traditional monopoly was bound to cause some executives to quiver and quake in their boots. It’s a new phenomenon for them, and it’s going to take time for them to realize their customers want choices and, when that happens, they will change their business models to reflect this new reality.
What confounds most utilities is the question of how to value solar appropriately. They only focus on their lost revenues and forget that increased solar penetration provides two important benefits:
- It shaves peak load by providing excess electricity to the utilities to prevent outages during high-use times of day; and
- Because much of the power produced by solar installations is used on-site, it relieves the stress on an antiquated and outdated grid system, meaning the utilities spend less on maintenance and save costly cash outlays that can be invested elsewhere in their businesses.
But the net-metering debates roiling statehouses across the country will die down as more utilities embrace their solar futures — and we installers, through education and dialogue, will help them get there more quickly.
The future of solar Is bright
When people look closely at the underlying solar fundamentals, there is a far more positive story to tell than not. Consumers clearly want more solar, and installers, integrators and investors that don’t give customers what they want will unwisely put their own businesses in jeopardy.
Written by Scott Wiater is President of Standard Solar
Photo by Dominion Power