Posted on July 24th, 2013 by Mercatus
Published on Solar Novus Today
Last week marked the fifth Intersolar in San Francisco. And, despite the fact that I spent much of the week in meetings instead of on the show floor, the news that seemed to linger in the air everywhere I went were the epic fails of Gehrlicher and Conergy. For those of us that work closely with European developers, the news was a sharp reminder that even the most experienced players can be brought to theirs knees by a flawed entrance strategy.
So what happened?
Posted on July 18th, 2013 by Mercatus
25+ meetings later at REFF 2013 and everyone is asking the same two questions:
First, “how do I survive and thrive in the market consolidation phase” and second, “can you help me source good projects or partnerships in a effort to find good projects?”
On the survival front, two things are changing. Market consolidation is happening much more rapidly than we all anticipated and market segments are evolving. Utility grade projects are a dying breed and companies that have traditionally been focused on that segment have demonstrated a wide variety of reactions to this news. Some panic. Some are adjusting, and others are just deer caught in the headlight.
These two changes will have a major impact on the industry. There will be winners; there will be losers. As the Darwinian rule goes, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
Posted on June 19th, 2013 by Mercatus
Published on Greentechsolar
The shift from the centralized utility model is forcing utilities—for the first time in their existence—to figure out how to compete.
For years we’ve likened the energy sector to the computing world, holding up Moore’s law as a guiding example proving that renewables will achieve grid parity.
Today, as panel costs have dropped 90 percent and adoption is at an all-time high, the analogy between the two seems even more fitting. Just like the massive mainframe disruption spawned by personal computing, distributed generation has already begun to challenge the centralized solar model favored by utilities, with no end in sight.
At an industry level, the evidence of a new distributed era is all around us. Fuel cells like Bloom Energy’s are enabling the C&I transformation to self-made energy. Combined natural gas power plants are on the rise, and microgrids are popping up in states across the nation.
Posted on May 9th, 2013 by Haresh Patel
On Friday, I attended the first inaugural New Sunshine Bond Conference. Over 200 attendees participated representing some of the top investors, developers and service providers. (Pretty impressive considering the declining attendance at other conferences in an over supply of clean tech conferences.) Solar City’s recent IPO, ABB’s 57% premium on its PowerOne acquisition, and solar stocks rebounding in the last couple of week definitely provided some much needed “New Sunshine” and positive energy.
And there’s even more good news for the downstream, according to Bank of America’s Head of Energy and Power. He expects the US residential and commercial and industrial segment to install 2GW in 2013 resulting in $8B in new capital structures and concluded that ”the demise of upstream players and the ensuing drop in cost of installation is creating a downstream installation and financing boom, creating very attractive returns for capital structures.”
I was honored to be a panelist with the 3 top rating agencies (Kroll, S&P and Moody’s) Since the conference theme was solving for securitization, this panel session was the most anticipated of the conference and attracted a standing room audience.
Posted on April 11th, 2013 by Haresh Patel
A few weeks ago, the Climate Policy Initiative (CPI) released a fairly pivotal white paper highlighting the key pain points preventing investors from deploying capital into renewable energy projects.
Reading through my notes again, it occurs to me that just as everyone in the industry shares the sentiment that our industry needs standardization of renewable energy projects, we also understand that the move towards it is a means to an (incredibly profitable) end. As the CPI paper states:“ The big prize is institutional investors — pension funds, insurance companies, and other long-term investors — whose $71 trillion in assets form one of the largest pools of private capital in the world”
As an industry we need to work collectively to unlock the $71T and have it flow to the renewable energy asset class. Current deal templates are stressed or broken and the historic 2/20 fund structures that have long been the industry standard are in danger of becoming just that–history. Funds are still only trickling into solar project finance and the dam must be broken.
The paper can be found here, but here are a few of the quotes that spoke to me:
Posted on March 28th, 2013 by Mercatus
We attended the Solar Finance Summit last week in San Diego; again this year the conference was well attended and brought together over 650 investors, developers, energy executives, service providers and decision makers from across the solar industry. One session on the first day titled “What’s New?” set the tone for me; remarks by K. Martin, Chadbourne & Park LLP, highlighted uncertainty downsides in the tax world as well as some muted upside trends in the slow road to securitization:
- The 8.7% Treasury haircut on the Cash Grant funds due to sequestration and uncertainty in the use of Cash Grant carry over.
- IRS tax equity uncertainty – these topics ranged from general tax reform risk, recapture risk, and attack by IRS on tax equity “partners”. It remains to be seen how much these will impact investors, but it is clear they will have some affect.
- The first solar REIT may be near as Hannon Armstrong converts into a REIT but the IRS ruling is still secret.
- MLP legislation is in the offing but stuck behind tax reform and “YieldCo’s” may lead to some fast track securitization.
During the rest of the conference, four common threads continued to weave in and out of the conversations, all highlighting problems in achieving deal velocity and growth:
- The need for standardization to drive cost down (probably the most repeated topic).
- OpEx is too high; financiers are buckling under the weight of diligence and deal friction.
- Most Projects are still one-off’s and result in “recreating the wheel”. Many teams lack the resources, best practices and domain expertise to make fast decisions.
- Not Enough Transparency: To increase velocity, solar project buyers and sellers need more effective communications on “haves”, “needs”; “gives and gets”.
Tim Buchner, COO of SCS Renewables, spoke on a panel titled: “Alternative Financing Models and Platforms”. Specifically, the panel topic was: “what is new in finance and platforms; can these approaches speed up solar deployment while driving down cost?” The answers from the panel were encouraging with solutions ranging from crowd funding, credit standardization, and of course the Mercatus solar origination management platform. Takeaways by Tim: - Solar investors will continue to struggle with current cost structures that are too high to scale and maintain profits. - Investors that focus on business processes optimization through a platform like Mercatus, can move faster, continue to harvest more deals while maintaining or even lowering OpEx. - The Mercatus standard deal appraisal provides a “single point of truth” or unified view of each project’s risk and reward profile, enabling cross-organizational teams to drive clear and swift investment decisions and aggregate assets. I am obviously partial to these views, but nonetheless, I was encouraged by the shared sentiment felt throughout the conference regarding what issues need to be addressed as the solar industry continues forward. I left the conference with a determined hope that there is a unified way with new platforms to go forward in solar finance by improving deal velocity, driving standards, and scaling market growth.
by TJ Keating
Posted on October 15th, 2012 by Haresh Patel
FISM is stands for Focus, Innovate, Simplify, and Monetize. My next four blogs will cover each of those pillars.
Today I want to feature the pillar “Focus.”
“Henry Ford never diversified, Bill Gates didn’t diversify. The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket”
2009 Newsweek by Jim Roger
It’s all about focus. Every successful company that stays focused and does it better than anyone else wins the market share, profitability and market cap battle.
Posted on September 8th, 2012 by Haresh Patel
Denver Colorado, September 5, 2012
Yesterday, I had a chance to attend the MEF Conference held in Denver Colorado. I thought I would share my take-aways; the conference brings together innovate modern energy players (Cleantech, Renewable, Green tech companies) and investors.
The featured speaker was Ron Binz; (rbinz.com) the talk was titled – “Presidential Politics and Energy: Which Policy?”
Pretty timely considering the Democratic and Republican conventions are in full gear and we are getting our heads around on whom to vote for.
Binz did a excellent job presenting an objective side by side view on both Mitt Romney and Barack Obama’s positions on Energy.
Posted on August 2nd, 2012 by Haresh Patel
Why are less than 5% percent of all potential financiers/banks investing in renewable energy projects? Is it the need for a secondary market, securitization, insurance products, credible rating systems, actuary data, standard contracts, competitive pricing to fossil fuels, current assets unencumbered by tax incentives, etc.…the list can go on.
The answer: All of the above + Integrity!
This morning I was reading the daily news on solar. First headline.
PV giant Suntech ‘may be fraud victim’ over $687m bond
Over the last few years, we have heard from a great number of customers, financiers, and players throughout the value chain of countless stories dealing with challenges in doing business with each other in our new emerging industry. We all joke with each other about our industry, commonly quoting the phrase “It’s a wild wild west”.
Posted on July 7th, 2012 by Haresh Patel
The other day my youngest daughter was reading a book that I read when I was her age titled.. “Are You my Mother?”
I’m sure most of you have read it but for those that have not, the story is about a small bird born while his mother is out hunting for food. The little bird falls out of it’s nest. Never having seen it’s mother, the bird asks anyone and everyone it meets the question ”Are you my mother?” Like every children’s book it has a happy ending including a reunion with his mother.
The story reminds me of my journey. Like many people in solar, I am reinventing my career after working 25 years in the semiconductor business. With great passion I joined the gold rush in renewable energy and have been living in the “Wild Wild West” of solar.