“It’s one thing to get start-up money from a VC, another to get working capital from a bank and even another to get 50 percent down for a bond,” LeBlanc said, adding that the way to solve the issue was to find bonding companies that are knowledgeable and comfortable with a company’s technology. SkyFuel signed a deal with German re-insurance company Munich Re to insure SkyFuel’s warranty, on an 80/20 payout basis. Munich Re got comfortable with the risks after spending a year researching SkyFuel’s technology and operations.
So creative financial engineering, backed by technology, or at least the insurer’s comfort with SkyFuel’s technology, was part of the solution to the financial problem. Can technology solve the industry’s other problems? LeBlanc said it has to in order for the industry to survive.
“If you have a better widget, the real issue is can you get the cost down comparable to grid parity,” LeBlanc said. “If technology makes you somewhat independent, where it’s not tied to the cost of silicon or glass or precious metals, fluctuations in commodities markets are not that important.
A lot of technologies say that if oil is more than $75 a barrel, we’re good. If it dropped, we’re in trouble. If you drive down the cost of your technology to where your threshold is $50 a barrel, most of us would bet that oil would be over $50 for a while.”
LeBlanc said that the survival of solar is a pure cost issue, “because nobody really cares about environmentalism and climate change. If they did, everyone would be driving a Volt or a Prius. I may sound like a skeptic, but many people are environmentalists as long as they don’t have to pay any kind of premium for it.”
Technology versus Profitability
What does the future of photovoltaic technology hold and where is the profitability? Solar panels are widely viewed as a commodity product that competes primarily based on cost. Since 2009, the average selling price (ASP) per watt of solar has decreased by approximately 65 percent. While this sort of trend can be beneficial for the consumers such as project developers, panel manufacturers need to differentiate their products in order to avoid competing on price alone. Another alternative is to find other revenue sources in order to differentiate and protect against the volatility in ASP’s
Ascent Solar Technologies manufactures CIGS solar panels on a flexible substrate, which results in a more lightweight solar panel in comparison to traditional glass panels. Showing its market agility, in March 2011, Ascent decided to focus on emerging and specialty markets as opposed to building integrated photovoltaic (BIPV). While the company is still in the BIPV market, they are looking at markets that place a high premium on weight.
First Solar, a manufacturer of CdTe panels, recently released second quarter 2012 results. Despite restructuring charges which affected their bottom line, First Solar increased revenue from $1.1 billion for the six months ended June 30, 2011 to $1.45 billion for the six months ended June 30, 2012.
Possibly due to the downward module pricing trend, First Solar shifted its solar development business from module sales to development sales. For clarification of their growth, we need to go all the way back to Note 21 of their 10-Q titled Segment Reporting. According to the note, First Solar operates in two segments: (1) the components segment, which is the design, manufacture and sale of solar modules, and (2) the systems segment which provides a complete PV solar system, including project development, engineering, procurement and construction products, operations and maintenance and project finance. The revenue breakdown by segment for the six months ended June 30, 2012 for components was $456 million and for systems was $1 billion, and for the six months ended June 30, 2011, components was $1 billion and systems $76 million. While operating at a significantly thinner gross margin, the company has been able to control its revenue growth and profitability through diversification.
Solar companies have to be in tune with the demands of the marketplace and position themselves accordingly in order to survive. Not only do technology and adapting business offerings have to be part of the answer for renewable energy companies, they also must be willing to re-engineer financial solutions as well.
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