An Open Letter to Big Oil

Dear sirs:

With all the recent news about the oil slump, it’s OK to admit times are tough. The biggest immediate challenge is the price per barrel is down – here in California, gasoline costs as much today as it did when I first started driving. I recently filled up at Costco for an unprecedented $1.85 per gallon!

But oil faces much more long-term challenges as well, that don’t just affect the US markets. There’s been an increasing movement to evaluate your industry against the backdrop of climate change. The Church of England and New York’s state pension fund, who collectively own $1bn of Exxon stock, pushed through a shareholder resolution to assess the impact of climate change policy on your business. The New York attorney general has launched investigation into Exxon Mobil about hiding climate change science. The Paris Climate Change agreement, COP21, is being signed today, on Earth Day 2016.

Times are tough in solar, too. Our solar stocks are getting hammered. SunEdison just filed for bankruptcy. The Guggenheim Solar ETF is down 20% year-to-date. But the fundamentals of solar are strong – perhaps stronger than they’ve ever been – with the extension of the Investment Tax Credit and our industry’s continued ability to drive costs out of the system. Our stocks are down because we got a little overzealous with our financial structuring: just like the oil business, cheap capital is our lifeblood and the difference between success and failure, and we are learning the hard way that YieldCos may not be the solution for which we hoped. SunEdison simply overextended themselves and layered on too much debt. It wasn’t financially sustainable, and the market responded.

Unfortunately, the oil industry isn’t financially sustainable either. Citibank estimates that up to $52 trillion worth of oil and gas may be ‘carbon stranded’ through 2050, meaning that the oil and gas must be left in the ground to meet our climate goals – a material risk to an industry whose main business is to find, extract, refine, ship, and sell oil and gas. And the market is responding to these facts, too: it’s hard to miss the $3.4 trillion dollars that is being divested from fossil fuel stocks.

We often lash out at each other, pointing fingers at who gets more subsidies than the other, but I think that we actually need each other. Our solar industry is going through growing pains, with high levels of volatility, too-cute financial structures, and heady management teams. We’re still defining our market and how we fit into the existing utility ecosystem. Your stocks are up this year, but are facing long-term headwinds, climate change being first and foremost. We’re dealing with short-term pain while you are facing long-term threats.

Our worlds are quite similar: we both build long-term power assets, have to navigate the power markets, need large amounts of cheap capital, require innovation, and operate globally. The customers of our product are converging — in both the power plant business and within our transportation infrastructure.

Shell, BP, Exxon — it’s your innovation that helped get the solar industry off the ground in the first place, including some of the first solar modules (such as in the photo above). You all but divested of the business, but I think it’s time to reconsider. You desperately need to diversify your business, tell a positive climate change story to your investors, and hedge against stranded assets. More than half of the new power capacity added to the US last year were from renewables. Imagine how much influence you could have if you sat with us at the table when negotiating against utilities on net-metering policy or worked with Congress on a comprehensive energy strategy.

On the other hand, we need cheap capital, huge amounts of tax-equity, and experienced management teams. We envy your 2.7% debt rates and billions in tax payments each year. Your global operational expertise and long-term business planning would be an asset to us.

My belief is that the challenge is more one of culture than logic. In my brief stint as an employee at Chevron, I was told that working in the renewables division was a “CLM” – a “career limiting move” – since the management team consisted purely of oil and gas executives. Culture can be changed, and it starts at the top.

So, what to make of all of this? Well, the fundamentals are better than ever, but our stocks are down. Solar assets are cheap out of bankruptcy, after all. You have billions on the balance sheet and a need to rebrand your business. Now is the time for you to get back into solar and invest now in a hedge to your oil and gas business.

As such, we call on each oil major to appoint a Head of Renewable Energy that reports to the CEO and commit 10% of their capital expenditures budget to renewables in 2017. For the top three oil companies (Exxon, Chevron and Valero), that’s roughly $5 billion for 2017, a meaningful contributor to the renewables project finance market.

kWh Selected for Department of Energy’s Orange Button℠ Initiative

We are honored to announce that kWh Analytics has been selected by the U.S. Department of Energy SunShot Initiative to participate in the Orange Button℠ initiative. This industry-led collaboration is aligned with kWh’s broader mission to establish clear data standards, provide transparency for the solar industry, and broaden access to renewable energy. A portion of Orange Button’s $4 million grant will help kWh Analytics implement data driven solutions and boost solar bankability. Other Orange Button grant recipients include the SunSpec Alliance, SGIP, and the National Renewable Energy Laboratory (NREL).

Similar to how the “Green Button” initiative reduced costs by standardizing data from electric utilities, the Orange Button initiative seeks to reduce solar costs by improving access to and quality of data across the project life cycle. By establishing standards in which rapid data exchange can move across the value chain, leading energy companies can drive out inefficiencies in the market, establish greater transparency, and support stakeholders in making smarter investment decisions.

The U.S. Department of Energy SunShot Initiative has supported and launched these “Button” initiatives to establish a collaborative national effort, under a unified brand, to drive innovation and cost-competitiveness within the solar market. Orange Button aims to accomplish these initiatives through engagement, standards development, and data exchanges. To support this effort, kWh Analytics is bridging the gap between solar firms by developing the critical infrastructure needed to facilitate transmission of solar-related data between developers, investors, and other key stakeholders.

Founded in 2012 by longtime solar veteran Richard Matsui, kWh Analytics seeks to support the growth of solar utilization through increased transparency and reduction of soft financing costs. “Lack of data standards has been a key factor in holding the industry back from its true potential,” said Matsui, CEO of kWh Analytics. “At kWh Analytics, we are proud to be part of a team that is leading the industry towards greater efficiency. This initiative is an extension of our company’s core vision of bringing down the cost of capital for solar assets and establishing greater cost-competitiveness throughout the industry.” Emphasizing the need for data-driven transparency in unveiling the true performance of solar assets, kWh serves to transform the ways in which investors identify opportunities and accurately price risk in this exciting new asset class.

About kWh Analytics

kWh Analytics is the industry leader in risk management software for solar energy investments. Their flagship software product, HelioStats, manages project-level data from more than 50,000 solar power projects in the United States, creating the industry’s largest independent database of solar asset performance.  kWh Analytics strengthens the solar industry by increasing transparency, improving investment decision-making, and enabling efficient risk management.

About the SunShot Initiative

The U.S. Department of Energy SunShot Initiative is a collaborative national effort that aggressively drives innovation to make solar energy fully cost-competitive with traditional energy sources before the end of the decade. Through SunShot, the Energy Department supports efforts by private companies, universities, and national laboratories to drive down the cost of solar electricity to $0.06 per kilowatt-hour. Learn more at energy.gov/sunshot.