Let the Sun Shine in for Solar Cities, let’s get FIT!

Solar companies are warning about the potential for a significant hit to demand for solar and falling prices due to Europe government subsidy cuts. It is unlikely that growing demand from other countries and markets can absorb industry-wide module supply. There will be significant inventory build-up & price reductions.
Polysilicon, the main raw material in solar panels, has plunged more than 33 percent in the spot market to $22/lb. during the second quarter, lowering production costs in the $35 billion global market for the photovoltaic devices.

The price for polysilicon, also used in semiconductors, peaked at about $182 a pound during the boom in the Spanish market in 2008 before collapsing. “People are getting rid of stock that’s been on the floor, in some cases actually below cost,” Andrew Lee, head of international sales at Sharp Corp.’s European solar division, said in an interview from Wrexham, Wales.

Profit margins will be squeezed at all polysilicon makers, though it may benefit the newest competitors, such as Hong Kong- based GCL-Poly Energy Holdings Inc. and Korea’s OCI Co., Jefferies’ Xu said in a phone interview from New York.

In recent months the Czech Republic, Germany (moderated growth), France, UK, Italy and Spain have all severely cut subsidies for solar photovoltaic after a boom in projects started to strain public budgets. Europe accounts for 80% of solar demand, the cuts will have a big impact, particularly if the US, China and India don’t pick up demand. The likely result = loads of capacity and few attractive markets. Silicon prices have plummeted. Enter….smart USA cities. Construct a reasonable (read economic) feed in tariff regime and you will light your cities with the sun at a fraction of the cost it ran to illuminate European grids.

Falls in solar panel prices may flatten by 2013-2014, said Steven Chan, president of Suntech America, the North American unit of Chinese panel maker Suntech, who cited studies suggesting widespread grid parity with retail power prices by 2015.

Trina Solar, China's largest solar panel maker by value, was shipping modules at $1.50-1.55 now, down nearly 10 percent from a year ago, and expected prices at $1.40-$1.45 by year-end.

For example Los Angeles County/City

Los Angeles gets 40% of its electricity from coal fired power from Arizona and Utah. Combined, these plants emit nearly 36 million tons of climate-disrupting pollution every year - as much as roughly 6 million cars. These plants are also significant sources of mercury, ozone, and other hazardous air pollutants. In fact, the Navajo Generating Station in Arizona has ranked as high as third in the nation in ozone pollution in recent years.

Enter LA Solar

- Nearly 1.5 million rooftops throughout Los Angeles County could be used as solar power generators.

- On the whole, there’s currently enough potential roof space to create 19,000 MW from rooftop solar.

- The total rooftop solar potential for the city of Los Angeles is over 5,500 MW, which could power the city on most days. (The highest-ever peak in Los Angeles was 6,177.) Of course, the city must have more power capacity than is needed at peak times.

In addition the County could install 19,113 MW over 1.4 million land parcels (parking lots and empty land).

So what would solar capacity cost without subsidies? About $0.16 / kWh v about $0.08 / kWh for conventional. However, the $0.08 kWh is a fiction…it doesn’t include environmental emissions & health costs. If we factor those in then we get – in Los Angeles – to a cost of about $0.12 / kWh. Almost grid parity. With dropping silicon prices and increased efficiencies – we might very well be at grid parity in the next 12 months. Now consider feedstock volatility, for example, natural gas has varied from $3 mmbtu to $17 mmbtu over the trailing decade whereas the price of sunlight has remained a constant zero. I will predict the price of sunlight for the next 20 years will remain zero!

A well-designed Feed-in-Tariff (FIT), 20 year contracts with a fixed price providing 5-7% unlevered return on investment and guaranteed connection to the grid, could create a minimum of 600 MW of solar projects per annum which would provide 3% of Los Angeles city’s energy needs today and in a decade the city would be 30% solar powered. The merit to slow penetration is it allows for deployment of best of breed technology over the investment period.

This investment program would create at least 11,000 jobs.

Next Steps for Los Angeles

LADWP is currently developing a dynamic Local Renewable Energy Program (LREP), also known as a Feed-in Tariff, to encourage renewable energy development within the Los Angeles Basin and to help meet the 33% Renewable Portfolio Standard Goal by 2020. The LREP will allow LADWP to partner with program participants to purchase, through a standard power purchase contract, electricity generated from a participant’s renewable energy plant. These plants will be located within our service territory and connected to our electrical distribution system.

The LREP will be a separate program from the existing the Solar Incentive Program (SIP). The renewable generator under the LREP program will not be able to participate in SIP.

Program Schedule

• March 2011: Conduct workshops to solicit public comments on the principles and design considerations for the program

• June-July 2011: Draft Guidelines and Standard Offer Power Purchase Agreement will be available for public review
Conduct workshops on the Draft Guidelines and Standard Offer Power Purchase Agreement

• August 2011: Present the program to the Board of Water and Power Commissioners for approval

• September 2011: Conduct educational workshops for potential participants to review the program guidelines and the administrative and technical processes

• October 2011: Program launch*

Also if you follow tortoises… UCLA’s Luskin Center reports that rooftop solar in Los Angeles can generate more than five times the output of the desert-destroying 9,500-acre Blythe Solar Millennium project. Save a tortoise!

Luskin Center report: Los Angeles is a Rooftop Solar Hotspot

http://164.67.121.27/files/Downloads/luskincenter/SolarAtlas/LosAngelesSolarAtlas(hi-res).pdf
Companies that might be shorts: WFR, STP and FSLR (margin squeeze as it uses cadmium telluride); to a lesser extent JASO -- of course if they are smart and they are; they will be at the urban workshops pushing for speedy legislation to firm up demand.

A good buy: TSL