Amidst all the dour news for so many years about economic growth, debt and deficits, climate woes and so much more, it would be pretty good news if some incredible contender could add tens of thousands of jobs, contribute tens of billions of dollars in growth, create real, generational wealth and foster a greener environment for communities across our nation. In fact, more than 1,000 leaders have gathered this week for CGI America 2014 in search of ways to make the U.S. economy more prosperous and sustainable.
Fortunately, this job-generating, carbon-reducing contender is real: All eyes should be on solar.
That’s the good news. The bad news is that solar energy still faces extraordinary external obstacles from conventional, centralized, incumbent power generation and the companies and interests that oppose it. This good thing faces even more friction from within due in part to its youth and immaturity, and the lack of adopted standards and widespread use of common financial technology.
Saying it bluntly: today, solar power generation in the US remains a bit player compared to coal, gas and nuclear, representing only a tiny fraction of our total electricity mix, and barely one percent of all power generation in the country. Investments in solar barely draw the attention of our public capital markets, with less than $20 billion per year going into building this new asset class.
But from these newcomer numbers, reasons to be optimistic have emerged. Last year, solar accounted for 21 percent of all new power capacity additions in the US. And in Q1 of this year, solar added 74 percent of all new electricity generation. Looking globally, the world installed nearly 40 nuclear power plants worth of solar last year, while nuclear generation actually declined. More surprisingly, nuclear capacity in the world totals about 372 Gigawatts according to the IAEA after decades of investments; meanwhile, solar generation is expected to reach nearly 200 Gigawatts by the end of 2015, after just a few years of deployments.
Impressive numbers for a lightweight contender punching above its weight-class. And still, solar has some fierce training, weight gaining, and maturing to go before it can hold its own among heavyweights. Solar has been on a good run, but sustaining and extending the record faces challenges. In short, it needs a program, a plan, a framework if the industry wants to win and hold the world title as the leading new energy generation source. The industry needs standards. To enjoy the true promise of solar, we have to move away from a patchwork of different alliances to a more unified standard embraced by most or all of the industry.
When you stop and think about it for a moment, creating rules or standards for an industry, any industry, is kind of a crazy thought – at least insomuch as that job falls upon you. It may be natural and Darwinian in the sense that it eventually happens. All industries figure out their rules for the road that help them obtain efficiencies and achieve real scale. But in any young industry, and especially one that is such a roller-coaster ride, so widely confederated and so full of cowboys like solar, presuming to impose structure and order can be a fool’s game, a misadventure. It makes for a long walk off a short pier if you get it wrong. And, there’s no immediate satisfaction from pursuing it. Trying to set standards in solar is akin to all of this on a good day, and much harder on the bad ones. Nevertheless, the reward for accomplishing it is worth the attempt. Industry-wide standards are always what make billion-dollar markets trillion-dollar markets. There’s no getting from here to there without them.
Standards – whether public or de facto commercial – only establish themselves once or twice in any industry, sometimes at more than one part of the value-chain. truSolar is working through CGI America to provide solar energy with a system it can rely on — like LEED for green buildings, NABCEP to certify engineers, and CDMA to unite the mobility industry. Such standards will help stakeholders overcome the most intractable problems in solar today – including high soft costs, transaction inefficiencies, dealing with small investments in commercial, and financing unrated credits. We aim to help buyers and sellers of solar projects do more projects more quickly, more cost-effectively and more reliably, and to support these goals through an independent, non-profit accreditation body.
Best practices for solar deployment exist, but as the provinces of a few large solar companies, leaving smaller players out. That’s why it’s important that my company and others work to democratize that know-how, making it accessible to thousands of companies working in the industry. truSolar is doing our part by helping developers and investors speak a common language through common practice – for example, placing a FICO-like score on solar assets and affixing a Carfax-like record to solar generating facilities. Standards empower smaller companies to compete on a level playing field with larger businesses – not just solar versus coal or gas, but small solar versus big solar.
There’s an easy way to understand this democratizing effect. Today, only a few solar companies enjoy the advantages of securitization, where they obtain advantage by taking primary investments to the secondary markets at lower capital costs – reselling asset cash flows and unlocking liquidity to build more solar or build it more cheaply. However, in the residential mortgage backed securities market, an individual person or company can build just one home and realize the full benefits of these market economies. We must do the same for solar, allowing mom-and-pops to compete with the big solar companies of the world.
With standards taking shape, solar is positioned to shake off its title of “alternative energy” and take its place as the inevitable frontrunner of our electricity mix. America’s search for a financially and environmentally sustainable contender should be leading us away from outdated energy sources and straight toward the sun.
Chase Weir is CEO of Distributed Sun, majority owner of the beEdison company and platform, founder of the truSolar® initiative and owner-operator of solar facilities in 7 US states.