JLT Re

JLT Re and kWh Analytics Announce Partnership

Originally posted on JLT Re.

  • JLT Re continues to build leading reputation in Insurtech sector
  • Partnership will offer new product to the emerging solar industry

SAN FRANCISCO (September 20, 2017) – JLT Re, the global provider of reinsurance broking and consultancy, has partnered with kWh Analytics, the leading data repository and risk management provider in the solar industry, to create a risk transfer product insuring solar energy output.  Leveraging their industry-leading database, kWh reduces the overall cost of financing by providing a Solar Revenue Put that reduces the risk of loss for lenders, thereby enabling lenders to reduce debt service coverage ratios for asset owners.

San Francisco-based kWh Analytics worked with JLT Re to secure a preferential relationship with a global, investment grade insurance company to offer a product insuring $100 million of coverage. The relationship will bring liquidity to the growing solar energy industry, which is currently estimated at $500 billion with another $500 billion slated to be completed in the next few years – creating the next $1 trillion asset class.

“kWh Analytics is extremely pleased to bring this unique product to the market and to tie the financial strength of the global insurance industry into the solar asset class.  Kudos, our Solar Revenue Put, improves lender terms and reduces the cost of capital for asset owners by guaranteeing up to 95% of solar production with investment-grade balance sheets,” said Richard Matsui, CEO, kWh Analytics. “JLT Re was instrumental in bringing this solution to market, helping kWh Analytics from the beginning of the process through to completion.”

“We are delighted to represent the foremost company in the solar field, especially in an industry that benefits our broader society”, said Ed Hochberg, CEO of JLT Re (North America) Inc.

“kWh Analytics is at the forefront of a wide-ranging trend we see in Insurtech, wherein data companies apply best-in-class data repositories to transform unquantified uncertainty into quantified risk that the insurance industry can then efficiently price,” said Gregg Holtmeier, JLT Re Insurtech Leader.

JLT Re continues to build their leading reputation in Insurtech with this insightful solution. Read JLT Re’s Insurtech Report here.

 

ENQUIRIES:

Isabella Gaster
Tel: (+44) 20 7558 3387
Email: Isabella.Gaster@JLTRe.com

Elizabeth Miller
Tel: +1 215 309 4590
Email: Elizabeth.Miller@JLTRe.com

NOTES TO EDITORS:

About kWh Analytics

kWh Analytics is the market leader in solar risk management. Founded in 2012, kWh Analytics has built the industry’s largest data repository of solar asset performance, with over 100,000 operating systems, representing nearly 20% of the U.S. market.

HelioStats, kWh’s risk management software, helps solar investors deploy more capital more intelligently by providing data warehousing, analytics, and benchmarking for distributed solar portfolios. Kudos, kWh’s Revenue Put, improves lender terms and reduces the cost of capital for asset owners by guaranteeing up to 95% of the solar production.

Customers such as Google (the world’s largest non-utility investor in renewable energy) and PNC Bank (America’s 5th largest bank) rely on software and insurance solutions from kWh Analytics to enhance their investment returns.

kWh Analytics is backed by private venture capital and the US Department of Energy.

About JLT Re

JLT Re’s trusted team of 700 colleagues worldwide combines market leading expertise and proprietary analytical tools with the freedom to challenge conventions.

Deep specialist knowledge and extensive experience of both the reinsurance market and clients’ own industries and sectors enables JLT Re to ask smarter questions, innovate and deliver better results tailored to meet client needs.

JLT Re is a trading name and logo of various JLT reinsurance broking entities and divisions globally and any services provided to clients by JLT Re may be through one or more of JLT’s regulated businesses.

JLT Re is part of the Jardine Lloyd Thompson Group plc.

www.JLTRe.com

About Jardine Lloyd Thompson

Jardine Lloyd Thompson is one of the world’s leading providers of insurance, reinsurance and employee benefits related advice, brokerage and associated services. JLT’s client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.

JLT is quoted on the London Stock Exchange and owns offices in 40 territories with more than 10,600 employees. Supported by the JLT International Network, it offers risk management and employee benefit solutions in 135 countries.

For further information about JLT, please visit our website www.jlt.com.

HelioStats 3.0 & ‘Best Practices for Solar Risk Management’ Released Today

solar risk management (sō-lər \ risk \ ma-nij-mənt ) noun 1. The practice of managing and measuring risk within a solar investment portfolio; a term of art directed at financial investors with exposure to operating solar projects in the form of structured investment vehicles, and in particular investors providing various forms of debt, tax equity, or cash equity.

Greetings,

Two big updates on the next era of solar risk management:

1) Today SEIA and kWh Analytics released ‘Best Practices for Solar Risk Management.’

SEIA_Logo_4c_TransparentDATA–Orange-Button-fb

 

 

 

 

 

In collaboration with SEIA and the US Department of Energy’s Orange Button program, we are proud to publish the first definitive guide to help solar financiers successfully navigate investment, compliance, and risk management.

“This guide will serve as a valuable tool to both experienced investors looking to grow their businesses, as well as newer investors unsure of how to review the relevant risk factors,” said Mike Mendelsohn, SEIA’s Senior Director of Project Finance and Capital Markets.

With over 10GW and 100,000 systems under management, more than five years of experience building the industry’s leading risk management tools, and the privilege of working with top solar investors, here’s what we’ve learned: Download the report.

Learn more by attending an upcoming webinar with KWH’s Jason Kaminsky and SEIA’s Mike Mendelsohn, facilitated by Keith Martin (Norton Rose Fulbright). E-mail us if you’d like to join.

2) HelioStats 3.0 is now live!

Your portfolio is growing, but so are your team’s questions about risk and compliance. Enter HelioStats, the only platform designed specifically for the needs of financial institutions. HelioStats provides:

  • Data Integration – Collection, cleaning, and transformation of financial and production data from over 100,000 systems to generate insights.
  • Portfolio Analysis – Simple analysis of production and financial risks.
  • Benchmarking – Easy comparison to industry performance and indices.
  • Reporting – Reports on the entire portfolio of multiple developers and funds.

Reach out for a preview of how SEIA’s Best Practices are being implemented by industry leaders like Google and PNC Bank. Schedule a demo by e-mailing us at contact@kwhanalytics.com.

Welcome to the next era of solar risk management.

 

Regards,
Richard Matsui
Founder & CEO

SEIA and kWh Analytics Release the Best Practices for Solar Risk Management

Originally posted on SEIA’s latest news.

WASHINGTON, D.C. – In an effort to simplify the complex world of tax equity and debt investment, the Solar Energy Industries Association (SEIA) and kWh Analytics released today the industry guide on the Best Practices for Solar Risk Management.

Informed by some of the largest financial institutions investing in U.S. solar assets, SEIA’s Solar Energy Finance Advisory Council (SEFAC), and the U.S. Department of Energy’s Orange Button program, this guide is designed to help financiers of solar projects and portfolios successfully navigate their solar investments from start to finish.

“Our goal is to facilitate new sources of investment capital for solar projects across America by communicating and leveraging the standards and practices the industry has already developed to measure and manage risk,” said Mike Mendelsohn, SEIA’s senior director of project finance and capital markets. “This guide will serve as a valuable tool to both experienced investors looking to grow their businesses, as well as newer investors unsure of how to review the relevant risk factors.”

Featuring a risk management checklist, the analysis outlines current industry standards and benchmarks, alongside the solar industry’s robust compliance infrastructure.

“From our experience serving multiple investors, we have a privileged vantage point to help our industry codify best practices and ensure healthy industry growth,” said Jason Kaminsky, COO of kWh Analytics. “We are pleased to have been invited by SEIA to co-author the industry guide that enables investors, large and small, to manage the unique risks posed by the solar asset class.”

SEIA will routinely update the document as needed as part of its ongoing industry coordination efforts to streamline project development, open new sectors for solar deployment, and open new sources of low-cost capital.

To download the complete guide, go to https://www.seia.org/research-resources/best-practices-solar-risk-management.

###

About SEIA®:

Celebrating its 43rd anniversary in 2017, the Solar Energy Industries Association® is the national trade association of the U.S. solar energy industry, which now employs more than 260,000 Americans. Through advocacy and education, SEIA® is building a strong solar industry to power America. SEIA works with its 1,000 member companies to build jobs and diversity, champion the use of cost-competitive solar in America, remove market barriers and educate the public on the benefits of solar energy. Visit SEIA online at www.seia.org.

About kWh Analytics:

kWh Analytics is the market leader in solar risk management. Founded in 2012, kWh Analytics has built the industry’s largest repository of solar asset performance data, with over 100,000 operating systems, representing between 10-20% of the U.S. market.

Customers such as Google (the world’s largest non-utility investor in renewable energy) and PNC Bank (America’s 5th largest bank) rely on software and insurance solutions from kWh Analytics to enhance their investment returns. kWh Analytics is backed by private venture capital and the US Department of Energy.

Media Contacts:

Alex Hobson, SEIA Senior Communications Manager, ahobson@seia.org (202) 556-2886
Sarah Matsui, kWh Analytics Senior Communications Manager, contact@kwhanalytics.com (415) 891-9601

Announcing DealFlow from kWh Analytics

Greetings,

We can talk about data all day long, though there’s another topic that solar financiers love even more: Deals.

Because we are in the business of helping sponsors to achieve greater leverage (and to help lenders safely deploy more capital) with our Revenue Put, we see a number of deals that seek debt financing.

We also collaborate with sponsors and lenders to compile an index of prevailing debt terms in the market.

We’ve formalized this knowledge into DealFlow. In this first newsletter, you’ll find:
– Two featured deals seeking debt financing
– The market summary of indexed deal terms that lenders offered in 2017
– An overview of recent transactions that have closed in the market

Please send us your deal info if you’d like your deal to be included next time (no, we don’t charge anything); we are at dealflow@kwhanalytics.com.

PDF Available Here: http://www.kwhanalytics.com/DealFlow-Fall2017

Deal Flow 2

Regards,

Richard Matsui
Founder & CEO kWh Analytics

#Solar100 Nancy Pfund

#Solar 100’s Nancy Pfund: The Queen Midas of Cleantech

Originally posted on pv magazine USA.

The original VC behind SolarCity talks about what the next challenger to SolarCity will look like. As the third interview in the #Solar100 Thought Leaders series, kWh Analytics Founder Richard Matsui speaks with Founder and Managing Partner of DBL Partners, Nancy Pfund.

In Greek mythology, King Midas was known for his “golden touch”—things he touched would turn to gold.

In the cleantech industry, Nancy Pfund has the singular best claim to that title, with early investments in Tesla, SolarCity, NEXTracker, and Powerlight. Nancy is arguably cleantech’s most successful investor.

Equally impressive, her venture capital firm is not only known for its financial successes—‘DBL’ stands for ‘double bottom line.’ Bucking conventional wisdom, especially in 2008 when DBL was founded, Nancy’s firm advocates a second bottom line of social, environmental and economic improvement.

In the theme of moving against the status quo, she is also a strong advocate for gender equity in the VC world. According to a survey conducted by the National Venture Capital Association in 2016, women represent only 11 percent of investment partners or equivalent on venture investment teams. Not only does Nancy lead a successful VC career, but she recognizes the support she’s received along the way and “feels it’s a matter of responsibility” to work to help others and increase access to opportunity.

Nancy has established herself as an advocate for gender equity, a #Solar100 thought leader, and we think she’s the Queen Midas of Cleantech.

The Second Bottom Line

Richard Matsui: I wanted to start off by talking about DBL’s second bottom line. I recently listened to an episode on Charlie Rose, in which investor Jeremy Grantham said something like, “When managing money for others, we have no right to impose our personal values on them. They should make up their own mind where the lines are that they would draw in the sand. It’s not for us to do that. It’s for us to listen to what they want and then make as much money as we possibly can for that.”

That line stuck out to me because Grantham’s opinion does seem to represent the status quo—that there’s only one bottom line (to make money), and that it would almost be wrong to acknowledge any other. My questions for you: What did you experience as the status quo when you first started out as an investor? And what has shaped and solidified your commitment to make DBL have a second bottom line?

Nancy Pfund: About 15 years ago, the status quo was to separate the two goals of financial return and social return. There were biases, but that’s what they were—they were biases.

Those conventional beliefs weren’t based on specific portfolios that had been designed to accomplish a double bottom-line impact. That’s what had been missing from the dialogue: actual results.

We started DBL with the premise that we don’t have to sacrifice financial returns in order to have positive social impact—Tesla, SolarCity, NEXTracker, PowerLight, and other grand slams in our portfolio prove that. DBL really started out to prove that it’s pretty old-fashioned to believe that you can’t do good and do well at the same time.

Today, none of the people that come and want to invest with us have those reservations, because this is a growing worldwide field and proof-points are being established.

RM: Is it accurate to say that DBL was the first to be able to demonstrate that there’s not necessarily that trade off that many others assume?

NP: I don’t know of all the funds out there, but I can say it was certainly one of the first, and one of the largest, to have demonstrated that.

After Paris: The Role of Climate Innovation

RM: In your Forbes interview last year, you talked about the role of innovation taking center stage at the Paris talks. Now that Trump has withdrawn the U.S. from the Paris climate accord, what do you see as the role of innovation—and of startups in particular—given this current political context?

NP: To start, the fact that the Trump administration has bowed out of Paris does not negate the value of Paris. There are plenty of other countries that are doubling down, many Americans support the Paris goals, and, as you know, most solar, cleantech, and electric car companies are global in nature. It does not cramp anyone’s style in terms of bringing more innovation to bear to address climate change.

That said, I think that the role of innovation is more important than ever as we break down some of these hard barriers, like storage costs, solar panel costs, and electric vehicle costs. Cost are all coming down at very attractive rates, allowing for a whole new generation of innovative business approaches like yours at kWh Analytics.

Innovation continues to play a critical role in transforming many 19th and 20th century business models in energy, agriculture, transportation, and other sectors. The world requires new business models that address 21st century challenges and opportunities—not 20th and 19th century ones.

Advice for Solar Entrepreneurs

RM: As arguably the most successful cleantech investor—I mean, you can count Tesla, SolarCity, NEXTracker, and PowerLight among your cleantech investments—what advice do you have for solar entrepreneurs?

NP: There is an enormous opportunity for solar entrepreneurs to jump in and ride the growth wave of cost reductions, storage innovations, international opportunity, and so forth. While the market is growing quickly, we are still at very low levels of solar penetration globally. Both locally and internationally, there are incredible opportunities ranging from novel financing approaches to next-generation software and hardware. I also think that there’s an opportunity for a “next generation” of SolarCity or Sunrun.

RM: That’s interesting. What will differentiate a “challenger” SolarCity from SolarCity itself?  Will it be a product company, rather than a service company?

NP: I think it will look very similar in many respects—the challenger will have to take care of both the product and the service elements, including financing, customer acquisition, and everything else. It will need to go beyond just selling solar or storage hardware and be a “full-stack” company. I think the challengers will need to differentiate by offering holistic solutions, and reimagining the home as a virtual power plant, along the lines of the innovation we are currently seeing from companies like DBL’s Advanced Microgrid Solutions at the commercial and utility levels. Focusing on this vertical – which is huge – will be an advantage as other market participants have many more legacy markets and customers that may take priority.

For this reason, emerging world markets like Africa and India are also ripe for entrepreneurial clean energy approaches like Off-Grid Electric (a DBL portfolio company) and M-Kopa. Much of the world’s population growth over the next few decades will occur on these continents, and it’s an open clean energy territory that has the potential to bring climate, economic, and job creation benefits to a whole new level.

Women : Venture Capital :: Renewable Energy : U.S. Energy Supply

RM: I thought your 2012 Forbes opinion piece was incredibly insightful—the one in which you drew a comparison between women in venture capital and renewable energy relative to the U.S. energy supply. You made a compelling case, listing that both were the exception to the rule, and both were subjected to double standards and an unlevel playing field. Five years later, what is still the same and what is different about the double standards?

NP: There’s good news and bad news for renewable energy.

Unfortunately, there is a federal push to develop fossil fuels on public lands. There was also an attempt to remove methane regulations, which was ultimately unsuccessful. We face a political climate where there is clearly more interest in furthering the progress of some of the past century’s fossil industries. That’s the bad news.

The good news is that because renewables score so high on economics and in public opinion, renewables are making progress despite this shift in sentiment from the federal administration. As usual, the economics weigh in very heavily even in a climate where yesterday morning included a New York Times story on ‘Under Trump, Coal Mining Gets New Life on U.S. Lands.’ That may be a good sound bite for the Trump base, but when you unpack that, even setting aside all the environmental and climate issues, that is still very hard to justify because the cost trajectory of the 20th century fossil approach is just not sustainable.

And meanwhile, renewables and electric vehicles are only becoming more and more attractive from an investment point of view. I think that the reality is not as bad as one might assume from hearing only the sound bites.

As for double standards that women face, I would say that since I wrote that opinion piece five years ago, I have been heartened by how much more public dialogue there has been about the need for increased diversity in industry and politics, and that includes the solar industry and policy circles.

There are also more opportunities now, including women in solar groups, C3E that works to close the gender gap in cleantech, and The Hawthorn Club for professional women in energy. There is a lot more collective activity, measurement, and celebration of progress while still recognizing that we still have a ways to go.

But, you know, I always say, if you look at the solar industry’s numbers, yes, we could have more women. Yes, we could have minorities. But for context, we in solar have a lot more women and minorities than a lot of the industries we are replacing, and even more than the tech industry.

As we continually work to improve—because we can always improve—I do think that shining a light on the issue, building awareness, and organizing networking activities, all of that is making a big difference.

RM: I hadn’t heard that point before on comparing solar to the industries that we are replacing or to the other intersecting industries. At first glance, it doesn’t take a statistician to look around SPI and realize, “Oh wow, there are a lot of men at this conference.” But solar also overlaps with finance and construction, which are both male-dominated industries.

NP: Yes, we have written about that, and the Solar Foundation has as well.

RM: On this topic, female friends have commented on how difficult it can be for women to get into VC. Where did your commitment to pushing for more women in leadership roles, particularly on the VC side, come from?

NP: Having been in venture capital for over two decades, I’ve been very fortunate to have the support of men and women throughout my career, and I know firsthand how important it is to have that senior advisor and mentorship. So, when I think about what I was able to achieve with the help of others, I just feel that it’s a matter of responsibility to make sure that I help others do the same. And it’s also fun! I mean, it’s great for me to meet all these accomplished women, and it’s a wonderful recruiting opportunity as I’m constantly looking for people on behalf of my companies. The more I can tap into women in solar and women in cleantech networks, the easier my job is.

Call to Action

RM: Several leading solar companies have declared bankruptcy this year, and my perception is that people in the industry are feeling quite down right now, even though our numbers on solar deployment and cost have never looked better. What would be your call to action for people in the solar industry?

NP: Sure. This is an industry that is no stranger to ups and downs. Every time we had to go through the ITC renewal or another net metering dialogue state by state, you know, it can feel like we’re always on call for fighting the good fight, and that does get tiring.

But rather than get frustrated by that, we need to remember that this is what happens when innovation comes to disrupt centuries-old models. That’s very difficult, and it does not happen overnight. We all need to work together and understand that there are going to be times when things don’t go right, but then there is also a lot of good progress to report. For example, I think people were disappointed with the outcome regarding Nevada a few years ago, and now, that has largely turned around. I think we have proven to ourselves that when we work together, when we build bonds with a variety of stakeholders, that “Americans heart solar,” and increasingly, the world does as well.

This is more than a traditional corporate challenge. This is a challenge for our generation.

And we have an answer that is broadly appealing. It’s not just the archetypal California tree-huggers who are invested in solar. It’s people of all political persuasions—red, blue, purple. It’s people of all income levels. It’s people of all ethnic diversities. And it’s people from all over the country, and all over the world. So, I think we must do a better job of getting outside of our own comfort zone. I live in California, so that’s my world, but I and others have been looking at Florida for years. Florida is very interesting. In those moments when you feel that you are constantly battling this or that, and there’s the role of utilities, the role of regulators, the role of the public, the role of the feds, just remember that a state like Florida that is the third-largest state in the country where solar was not happening at any significant level, is now beginning to be open to solar.

And so, when you start to build momentum in these states—Nevada is incredibly important because of the high level of solar penetration—but when you also have momentum with these large states like California, Texas, and Florida, you know, suddenly you’re talking about a very significant percentage of Americans. When you add the international opportunity as whole new continents largely skip the centralized fossil grid and go straight to solar, it is clear that much of solar’s history has yet to be written.

 

 

Paul Young SPI Poster

Addressing Solar’s Growing Pains with Data Standards & Analytics

Originally posted on pv magazine USA. Written by Data Engineer Paul Young.

It is hard to fathom just how much solar has been installed in the last few years—over 1.3 million systems added 36GW of capacity to the grid.  As the industry catches up to this rapid growth, it is important to take stock of some of the challenges that lie ahead.  While solar has been around for over forty years, 90% of solar systems are less than five years old.  Only a handful of industry players have experience managing, monitoring, and maintaining large distributed fleets, and fewer still have done so with fleets of any significant vintage.

At kWh Analytics, we have aggregated the solar asset performance data of nearly 20% of the U.S. market, allowing us to study the challenges that these organizations face as they grow and mature.

Challenge No. 1: Scaling data management practices.

Processes that worked while managing hundreds of systems start to break down when managing thousands of systems.  Building out databases and servers, handling multiple monitoring systems, and setting up robust quality control processes and pipelines require good planning and timely execution.  Fast growth can wreak havoc on these processes, as teams will often find themselves continuously struggling to scale up their data management tools in order to keep up with the company’s growth.  In the software engineering world, we refer to this problem as ‘technical debt.’

While there are no precise definitions of technical debt, here is the general concept: A debt is created when engineering teams sacrifice quality for speed.  This concept originated in the software engineering world, but it is very applicable to data management and warehousing projects.  While some technical debt is normal, if teams let it build up too much, it can create problems.  Quality control issues, software bugs, and long execution times are all symptoms of excessive technical debt.  Good software teams will plan regular cycles of code refactoring and maintenance in order to ‘pay’ down their debt, but this is difficult in a fast-growing environment.  As new solar systems come online and more data sources get added to the pipeline, data teams find themselves overwhelmed. Carving out the time to step back and properly build out the necessary infrastructure becomes increasingly difficult, if not impossible.

Challenge No. 2: Finding cost-effective ways to diagnose O&M issues across large fleets.

This challenge will become more pronounced over the next few years. The vast majority of installed capacity is relatively new, so there is limited data available on how well current modeling techniques predict the performance of aging fleets.  Revenue models usually account for module degradation, defaults, and O&M costs.  But residential O&M presents unique challenges due to the distributed nature of the systems.  Smaller O&M issues (I like to call them micro O&M), like moderate soiling and gradual increases in shading, can be hard to detect because the signal-to-noise ratio can be too small.  And even if we could reliably detect these micro O&M issues, sending maintenance crews out to fix these problems would be cost prohibitive.  But spread across a large fleet, these micro O&M issues could add up to real revenue loss.

Data analytics can be a valuable tool to assist fleet managers in distributed O&M efforts by allowing them to remotely diagnose problems and prioritize their O&M efforts in order to maximize ROI.  Analytics allow us to accurately identify underperforming PV systems and to diagnose the specific problems associated with those systems.

However, in order to implement these tools, you need good data.  And one of the lessons that we have learned at kWh Analytics is that data availability and data quality varies greatly across the industry. Data rarely lives in a single silo.  Equipment manufacturers, installers, monitoring companies, developers, and financial institutions are all generating, sharing, and consuming data.  This has resulted in a byzantine landscape of nomenclature, data quality, and data formats.

Where do we go from here?

As solar scales, data standards and analytics become more important than ever before. Making smart investments in data infrastructure can pay dividends on many fronts:

On an organizational level, investing in data enables teams to better prepare for growth and allows for smoother scaling of operations.  And as the organization grows, data becomes increasingly useful for business intelligence and analytics driving further efficiencies.

On an industry level, creating unified data standards can help the solar industry reduce market inefficiencies and lower costs for consumers. To move our industry forward, Orange Button, a program of the U.S. Department of Energy SunShot Initiative, has organized the creation and adoption of industry-led open data standards.  As a part of Orange Button, kWh Analytics is creating a new data translation tool that will ease the solar industry’s transition to a unified solar dataset by translating original data formats to consistent data standards. This technology is currently being developed with lessons learned from the development of our HelioStats platform, which is capable of synthesizing thousands of data points on project payment and performance. Leading solar companies now implementing Orange Button include Wells Fargo, Sunnova, and Sunrun.

If you would like get involved with the Orange Button initiative, visit the Orange Button website or come meet with Orange Button participants at SPI.

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Solar Hedge Opens Door to Greater Leverage, Says Analytics Firm

By Richard Metcalf, originally posted on Power Finance & Risk.

A solar analytics firm called kWh Analytics is marketing a production hedge product that it claims will allow sponsors to raise more debt on contracted solar projects in the U.S.

The product, called a solar revenue put, could allow sponsors to reduce the debt service coverage ratio for their projects from the existing market standard, which is between 1.3 times and 1.35 times, to 1.1 times, according to Richard Matsui, CEO and Co-founder of kWh Analytics.

“The value of that debt is greater than the cost of the insurance product,” he told PFR on Tuesday in New York, where he was meeting bankers to discuss the application of the hedge.

The San Francisco-based firm has so far provided quotes for $450 million of projects, and has discussed the solar revenue put with about 30 lenders.

Two project finance deals involving the hedge are under scrutiny by commercial banks’ credit committees, says Matsui.

“Getting this through credit committees is going to be really hard,” he concedes. “But something we’re seeing in the market is that there is just a ton of capital out there, and there’s a lot of lenders chasing few deals, so this is a way lenders can differentiate themselves.”

Bankers say the solar revenue put has the potential to be a useful innovation, so long as it is priced appropriately, but add that it will be up to sponsors to take the lead.

“It’s certainly a product that needs to be initiated by the borrower-sponsor,” says a project finance banker in New York who has discussed the hedge with Matsui. “In theory it could bring them more debt… then it comes down to a cost-benefit analysis.”

“Like any insurance product, it’s useful to the degree it’s priced efficiently,” says PJ Deschenes, a partner at boutique investment bank Greentech Capital Advisors in New York. “It could allow you to finance something you wouldn’t be able to come up with your equity check for otherwise, but the question is what are you giving away to realize that?”

While kWh Analytics underwrites and distributes the solar revenue put through its own licensed insurance brokerage subsidiary, Kudos Insurance Services, investment grade insurance carriers provide the necessary balance sheet support.

The solar revenue put is not a replacement for title insurance and does not cover curtailment risk or loss of revenue due to operations and maintenance contractors failing to carry out their duties.

While traditional insurance companies have made attempts to provide solar production guarantees in the past, their policies were either too expensive or worded in such a way that the coverage was not comprehensive, says Matsui.

Unlike the conventional insurers, kWh Analytics is able to leverage a large database of U.S. solar projects, which it has obtained as a result of selling its risk management software to tax equity investors.

The firm works with more than half of the tax equity investors in the market, including PNC Bank and Google, says Matsui. “What that means is we have data on 10% to 20% of all operating solar plants in the U.S.”

“That’s huge, to have that quality and quantity of data and that vote of confidence from these players,” says Richard Dovere, CEO of solar project sponsor C2 Energy in New York. “There’s definitely going to be a place in the market for this.”

“It’ll be another tool within the market,” says Conor McKenna, M.D. at CohnReznick Capital in New York. “Whenever you gain data in a market where there is a lack of clarity or the lack of an aggregation set there is value.”

varum_sivaram_wordpress_header

#Solar100’s Varun Sivaram: The Hamilton of the Solar Industry

Originally posted on pv magazine USA.

As the second interview in the #Solar100 Thought Leaders series, Richard Matsui, Founder of kWh Analytics, speaks with Varun Sivaram, the Philip D. Reed Fellow for Science and Technology at the Council on Foreign Relations and a professor at Georgetown University.

Even before his meteoric jump within weeks, starting at #40 and peaking at #3 on the #Solar100, we knew we wanted to catch up with Varun Sivaram.

Varun reminds us of the solar industry’s very own early Alexander Hamilton. Bold claim, we know. But hear us out:

  • Both are polymaths. Hamilton studied math, medicine, and law at King’s College (now Columbia University). Varun studied international relations in college, and finished a PhD in condensed matter physics in two years on a Rhodes Scholarship to Oxford University.
  • Both started careers as advisors: Hamilton held his first important public office as a colonel on George Washington’s staff when he was only twenty years old. Within the first decade of his career, Varun’s managed to hold a position as a Georgetown professor, as a senior advisor to the Mayor of Los Angeles and the Governor of New York, and as a McKinsey consultant advising C-level executives.
  • Both have big ideas and are compellingly articulate about those big ideas: Hamilton for the American Revolution, and Varun for the ‘Solar Revolution.’
  • Both are prolific writers. Hamilton is credited with most of the Federalist Papers. Varun publishes regular op-eds on clean energy, and he also has a forthcoming book with MIT University Press.
  • Both are not afraid of going against the grain, and maybe even enjoy it. Hamilton was based in New York, the hub of loyalists, and still regularly and loudly challenged conventional thinking. Varun was recently cited in a NYT article titled, “Fisticuffs Over the Route to a Clean-Energy Future.”
  • Both are influential spokespeople for their groups. Hamilton became the leading spokesperson for the Federalist Party. It is not difficult to imagine that Varun will represent a set of thoughts and people in the future of the solar industry.

While Varun is early in his career, having only finished his Oxford PhD from 2011-2013, he is undeniably scrappy and hungry, and he is already establishing himself as a thought leader in our industry.

A Happenstance Beginning

Richard Matsui: Your educational background is in International Relations and Condensed Matter Physics. What drew you to working specifically in solar?

Varun Sivaram: You know, it was initially a little bit of happenstance. Right out of high school I got a job working for Nanosolar, a CIGS company that went on to raise half a billion dollars. Nanosolar was the first company I had ever worked for, and it was infectiously optimistic. I learned everything I knew about solar power from Nanosolar—which was a very skewed way to learn about solar. I learned that today’s solar panels are obsolete, that the future will look flexible and lightweight, that silicon will be replaced by necessarily superior materials, and that the Silicon Valley model of disruption is going to work great for this entire industry. It turned out many of those things would be wrong, at least for the next decade. But I stuck with solar.

At Stanford, I studied Physics because I was interested in solar, as well as International Relations because I had always been interested in policy. And at Oxford, I applied to study under a scientist, Henry Snaith, who just so happened to be on the cusp of discovering perovskite photovoltaics, a technology that has rocketed to over 22 percent efficiency in just five years. I was so lucky—it felt like the most exciting place to be in all of academia. And I was the only person in the lab who had startup experience. It was an interesting perspective, having been at Nanosolar, and while I was doing my PhD I was watching Nanosolar explode.

And it hit me that even though everybody in academia thinks that perovskite’s going to be the next big thing, it probably is not going to work in this environment, because there are various external factors that make it really hard for innovative solar companies to go to market. And I thought, “You know, even though I’m likely in the best position possible from a science perspective, I need to go out and solve this problem another way,” and that’s why I eventually made my way into policy.

Controversial Bylines & Technology Lock-In

RM: Speaking of policy, of the thought pieces you’ve written for local papers, journals, or CFR, which, if any, do you think have been the most controversial?

VS: I think there are two pieces in particular that have been controversial. The first piece is a report I co-authored through the MIT Energy Initiative called, “Venture Capital and Cleantech: The Wrong Model of Clean Energy Innovation.” The Greentech Media guys just skewered us for that one because they basically asked, “How can this be true? We see cleantech is having all kinds of successes—look at all these software companies.” And we should have been more careful in choosing the title. Our title should have specified hard Cleantech—materials, chemicals and processes—those are the wrong kinds of companies for VCs to invest in.

The other controversial piece was an article I wrote for Issues in Science and Technology titled, “Unlocking Clean Energy.” It’s about technology lock-in, and here’s the situation: There are first generation clean technologies—silicon for solar PV, compact fluorescent lights for efficient lighting, light water reactors for nuclear, and corn ethanol for biofuels. And many of these first generation technologies make it really hard for the next generation to take their place. When that happens, I argue we get stuck in what’s called technology lock-in.

Some fields have managed to beat technology lock-in. For example, LEDs have beaten CFLs, and so efficient lighting is not a victim of technology lock-in. But other fields—nuclear is the best known example—have gotten stuck in technology lock-in because people were not forward-looking enough to invest in innovation. And as a result, nuclear’s share of world electricity peaked in the 1990s and has declined ever since.

I fear that we in solar are approaching technology lock-in. I also suspect that technology lock-in could take hold for lithium ion batteries. These incumbent technologies are getting so entrenched, and their costs are declining as a function of scale, that new technologies just won’t be able to break in.

The conclusion is that it is really difficult to get around lock-in. Some public policies can worsen the situation by entrenching the incumbent, such as the renewable fuels standard or indiscriminate tax credits. But other public policies on support for R&D and public procurement of emerging technologies can also help; for example, by procuring emerging flexible PV technologies for use in battlefield, the military could encourage technological succession.

That’s the article. People hate it, obviously, because it basically takes everybody to task. It says existing policies are often ineffective at countering lock-in, and that today’s solar industry—though it’s come a remarkably long way—is in need of disruption and technological change.

Why Write a Book?

RM: You’re the author of the forthcoming book, Taming the Sun. The back story for you personally is fascinating, and I’m curious— why did you write a book and what  are you looking to add to the discourse?

VS: I wrote the book because I feel like I’ve been very fortunate to see solar from different perspectives: from science, from startups, from the McKinsey experience of analyzing utilities, and from making and assessing public policy at the state, national, and international levels.

Each of these different perspectives has an incomplete view of what solar will need. The scientists think that obviously the next theoretically superior material is going to win. The business people understand the business constraints best and so are understandably biased toward minimizing risk. For example, I’ve heard utility executives caution that, “Changing the grid’s clean energy make-up is like switching out the engine of a 747 in flight, so why would you go and add technology risk?”

These different perspectives mean that everybody comes to solar with their own siloed views. And there are also a lot of unbalanced headlines that pose an additional challenge for folks interested in learning about the field. Some argue that we already have all the tools we need for a 100 percent renewable energy future; others slam subsidies for solar as wasteful handouts. Folks don’t have a single one-stop place to go to get an even-handed story. That’s what I was trying to create. The book aims to present an authoritative, even-handed view of solar’s coming of age, including both the terrific progress that’s been made and the innovation that’s still needed to harness the full potential of solar energy: creative financing, revolutionary technologies, and flexible energy systems.

Solar’s Biggest Challenges

RM: On the topic of what needs to change, what do you think are the top three challenges coming up for the solar industry?

VS: When I think about the rise of solar over the next few decades, without three kinds of innovation—financial, technological, and systemic—solar could hit a wall. That would be catastrophic, because we need solar to anchor the transition to a nearly completely decarbonized power sector. Fundamentally, solar’s rise could stall because the cost of solar power, although it’s declining, could get undercut by its sharply falling value.

The three kinds of innovation collectively work together to ensure that solar’s value stays above its cost, so that it stays economically competitive:

First, financial innovation is needed to massively increase capital flows into the sector, continue solar’s near-term growth, and continue to drive down costs as the industry gains experience with producing and deploying solar PV. I know I’m preaching to the choir here, but the world’s biggest investors have overlooked solar so far, and for solar to continue its growth will require trillions of dollars in capital that existing sources are not going to be able to supply.

The industry faces the challenge of attracting institutional investors with appetites for long-dated, yield-oriented investment opportunities—solar lines up with this perfectly, but they just need a way to invest in it. In the developing world, however, oftentimes solar’s great advantages are overshadowed by country-specific challenges: political risk, currency risk, offtaker risk, credit risk, etc. Policymakers need to improve the investment environment to make solar’s inherently low risk and stable cash flows shine for large investors.

In summary, I think that solar needs financial innovation to help the industry access public capital markets, for example through securitization and maybe even the next generation of YieldCos. Data will be crucial to drive down the cost of capital, and firms such as kWh Analytics can enable investors to prudently invest in solar.

Second, technological innovation is also needed to bring down the cost of solar even faster. Let me use a figure from my upcoming book to explain why [figure appears below]:

Panel 1, on the left, plots the global average cost and value of the next unit of electricity from solar panels as the total installed solar capacity increases. Thanks to financial innovation, more and more solar panels get produced and installed, and the red curve shows costs declining steadily as a result (both axes are logarithmic).

But the blue curve shows how much a marginal kWh is actually worth, and that figure declines steeply as more solar power comes online in each region of the world. That effect, known as value deflation, occurs because solar starts to oversupply the grid in the middle of the day. We’ve already seen value deflation in a place like Chile. We had a bunch of solar on merchant contracts and then suddenly solar, in the middle of the day, started to get a price of zero dollars per megawatt-hour. And this is a problem that afflicts solar more than, say, a natural gas generator, because natural gas is dispatchable, whereas all the solar kilowatt-hours come at the same time. So, supply and demand tell you that with an oversupply of solar kilowatt-hours, you’ll have a mismatch in low prices with demand. A lot of people say, “Hey, solar won’t have this problem because it’s contracted on long term PPAs.” Those PPAs are basically masking the fundamental issue, which is value deflation. It doesn’t matter how you’ve done the contracting; if solar’s economic value is falling, you’ve got a problem.

Pretty soon, when solar produces 10 or 20 percent of the total electricity (kWhs) on the system, the value plunges below the cost. But with technological innovation, you can delay that point. Panel 2 shows the red curve falling more steeply, as new PV technologies, such as perovskites, enable dirt-cheap solar that falls in cost way faster than waiting for silicon PV to ride down the experience curve. New materials enable these cost reductions not just because they use cheap materials, but because they can be highly efficient, slashing balance-of-system costs. Still, I said that technological innovation only delays the point where solar value dips below cost. To prevent that from happening, we’ll need a third kind of innovation.

Third, systemic innovation is needed to prevent solar’s value from dropping so quickly, enabling it to remain above solar’s cost and making solar economically attractive. Systemic innovation entails reimagining energy systems, starting with the power system. A power system that can better match up solar supply with customer demand will mitigate value deflation by using every marginal kilowatt-hour of solar more effectively when demand is high. So in Panel 3, you can see that by adding systemic innovation, the blue curve becomes less steep—i.e., the value of solar drops less rapidly as more solar is installed. As a result, the blue curve always stays above the red curve, driving ever more solar deployment.

Systemic innovation encompasses modernizing the electricity grid, to make it bigger and also smarter. Connecting a diverse range of resources—from load-following nuclear plants to concentrated solar power plants with thermal storage to batteries to demand-side management tools—also helps to accommodate a high penetration of volatile solar PV on the grid. Another example of systemic innovation will be via sectoral linkage. For example, if you link the transportation sector by intelligently charging electric vehicles whenever there’s a surfeit of solar energy on the grid, or the heat sector by using electric heat pumps to track solar output, or even the water sector by modulating the operation of desalination plants, you’re basically making new ways to store intermittent solar power. This sectoral linkage reduces value deflation, because we will have many more valuable uses of solar power, no matter when it’s generated. And by keeping solar’s cost below its value, it can break through the ceiling that its penetration would otherwise hit.

RM: I hear you. My favorite iteration of that idea is that at some point, someone is going to realize that solar’s so cheap that you should hook up a Bitcoin mining machine to a solar panel. That could be a great way to make money from solar. Some day.

VS: Wait, hang on, that’s so interesting—Bitcoin is acting as a battery.

RM: Right. The same way that you’re describing desalination, it’s the idea of storing the value of energy not as energy but as something else that’s valuable.

VS: I love that idea. Has anybody written anything on this?

RM: No, it was my idea, but you should feel free to take it. You had already come up with the broad idea, I just said that specific iteration of it.

Data & Resource Based Financing

RM: As a data company, we think about data a lot. Are there areas for which you think data is uniquely positioned to cause systemic change?

VS: There’s a paper out from David Sandalow and colleagues from Columbia University called, “Financing Solar and Wind Power: Insights from Oil and Gas.” It’s interesting. They basically pick three different financing options from the oil and gas industry and ask, “Could we use this for solar and wind?” Data would help enable these options.

For example, in resource based financing, oil and gas companies get to basically take out loans in advance based on the value of the proven reserves, and they also get financing based on promising a cut of every barrel of oil they sell.

You can imagine a solar company could do the same with good data. Right now, banks think solar is too uncertain, and as a result it is hard for solar to get debt. A solar company with a parcel of land, plus good data on how much their projects produce in this particular area, plus an analytic model on how much money it will make—it would be a game changer if investors would look at that land that’s prime for solar development and value it for its solar potential, the same way that investors look at land with oil under it, and value the land for its oil reserves.

Call to Action

RM: It’s August 2017, and in the past few months, Trump announced that he’s pulling the U.S. out of the Paris Climate Agreement, some leading solar companies, such as Sungevity, have declared bankruptcy—my perception is that people in the industry are feeling quite down right now, even though our numbers on solar deployment and cost have actually never looked better. What would be your call to action or your parting thought for the people and the policy makers in the solar industry?

VS: I am infuriated with the Trump administration’s policy because first, I think the Paris Agreement is important for political and diplomatic reasons. And second, I think funding energy innovation through Trump’s budget proposal and supporting it through initiatives like Mission Innovation are really important, but he’s stepping away from both. He wants to slash energy innovation funding by half and cut support within the Department of Energy. I think that’s terrible.

Also, I think that profit compression in the solar industry, which we’re seeing both upstream and downstream, is an inevitable byproduct of a lack of innovation. If you’re making commodity profits and everybody’s trying to do the same, obviously you’ll have profit compression. The lack of innovation is what’s causing this compression. Given a commodity with no differentiation, no one makes any money. The fact that the value of solar is falling faster than the cost of solar—value deflation—is a critical problem for our industry’s future.

What is my call to action? Innovation funding in this country has stagnated for two decades. We certainly can’t afford for it to fall now. We instead need to strengthen it. We are not paying enough attention to this problem. Innovation is important both because it brings down the cost of solar to outrun value deflation, and also because it makes some producers more competitive than others, thereby enabling there to be profits in the industry. Innovation enables American companies to make money, as long as we’re the ones investing in innovation.

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"Small businesses can be agents of change, and entrepreneurs are the classic ‘won’t take no for an answer’ activists, really. They just use business tools rather than community organizing."

#Solar100’s Danny Kennedy: The Most Interesting Man in Solar

Originally posted on pv magazine USA.

As the first interview in the #Solar100 Thought Leaders series, kWh Analytics Founder Richard Matsui speaks with Sungevity co-Founder and Managing Director of the California Clean Energy Fund Danny Kennedy.

It seems fitting for our inaugural monthly #Solar100 interview to be with activist turned entrepreneur turned fund director, but ever the solar advocate, Danny Kennedy.

Kennedy believes the different roles are not at odds, noting, “Entrepreneurs are the classic ‘won’t take no for an answer’ activists, really. They just use business tools rather than community organizing.”

Though the tools may change across roles, Kennedy’s means and ends—his theory of change and his ultimate vision—are decidedly centered on people. He believes people will drive the necessary changes towards clean energy, and that changes towards clean energy are necessary to protect Earth and its people.

It is striking how easily Kennedy uses a broad “we” and “us” in the place of “solar”; or how quickly he can name examples of off-the-radar startups and activist campaigns that are contributing to the revolution for clean energy; or outside of this interview, how often we hear Kennedy’s name cited among solar groups just getting their start.

Kennedy speaks like an activist, builds community buy-in like a grassroots organizer, can leverage financial tools like a capitalist, and at kWh Analytics, we think he’s the most interesting man in solar.

Solar’s Biggest Challenges

Richard Matsui: In Rooftop Revolution, you identified the challenge of building a movement for solar amidst the many marketing campaigns started by solar’s opponents—that it is expensive, inefficient, subsidy-driven, that it can’t be scaled, that it takes away jobs, etc. As you look at the landscape five years later, what are the top 3 challenges you see in solar now?

Danny Kennedy: There’s an irony in how things have progressed since 2012 when I wrote that book—then, we were “too small to be significant” for everyone—from Bill Gates to Donald Trump. And now, we’re becoming “too dominant.” It’s a complete turnaround that we’re now being depicted as a problem in the grid because we produce too much free electricity. I find it stunning that regardless of how many anti-solar marketing myths are refuted or how much progress is made, certain people will create excuses in attempts to stop solar.

I would say the three biggest obstacles are:

1) Fossil fuel interests trying to protect themselves. The only way coal survives is a political choice for it to survive. There is no economic or social rationale otherwise. But we’ve seen that political choice being made by governments from America to Australia: subsidies being crafted, policies being set up to literally overturn the outcome. Fossil fuel interests will obfuscate, make up crap, and create crazy stories to defend coal and gas. That’s the number one obstacle: political power of the vested interests.

2) Sustaining popular commitment to the cause against fatigue. We cannot relent. We have been driving fast to get from one to three to maybe ten percent of the electricity supply in some states, and we’ve done really well. But we’re still a fraction of the supply and have to continue doubling. That demands consumers and citizens and activists all carry on building the market—movements make markets as much as businesses do, and we cannot forget that.

3) Technical. I think getting to 50% renewables is relatively easy; getting from 50% to 100% will present some new technological challenges. And so as solar grows towards dominance in the grid, there will be some new technical challenges, which are not insurmountable, but which will still need to be addressed.

RM: When we have this conversation in five years’ time, what do you think will be solar’s top three challenges then?

DK: A lot does depend on what happens in the next four years. Politics can get uglier still. People ask me what can slow down the inevitable rise of renewables, and I think war could do that. The world could fall apart like a pig in a blender, go back to its corners, do what it knows and not be advanced, adventurous, or push the boundaries of technology and good things. And I think war is very possible. That’s the big one that risks all the progress we’ve made. Other than that, in 2022 the main obstacle and question will be: How fast can we make the change to solar?

RM: Can you talk about an off-the-radar startup that’s tackling one of these big issues?

DK: When it comes to building the buy-in and commitment of a community to solar, my favorite right now is called Solar Ear. They are working to make hearing aids available to the hundreds of millions of humans who can’t get them because batteries are expensive and hard to get into remote and emerging markets. Solar Ear’s solution: a solar-powered hearing aid, which effectively recharges the battery rather than disposes of it, making it more advanced than the current crop of hearing aid technologies, as well as much more affordable and available. And their business model is really cool—it’s driven by deaf people doing this work in these countries for deaf people.

And I love it because it doesn’t sound like a direct response to any of the obstacles I just listed, but the political will and cultural commitment to the transition we were talking about has to happen most in emerging markets. The billion plus people under 30 in Asia and Africa that are looking at the world and wondering what their future is need to be engaged by this to carry it forward. That’s where electrification is going to happen. America’s an interesting, small portion of the movement in terms of the Gigawatt capacity that will be built in America, so building movements worldwide and empowering people literally and figuratively with solar products is really important. In terms of demonstrating how solar can have a really meaningful impact in peoples’ lives, that’s one company that touches me.

Activism, Entrepreneurialism, & Building the Movement for Solar

RM: As a leader in solar, you have a particularly unique background as an activist in Greenpeace. In your 2013 TEDxSydney talk, you mentioned the profit motive as a driver for change, and this line made me chuckle: “Capitalists are coming for your rooftops. It means the solution will come.” I think it’s fair to say that you are now a capitalist, although perhaps a conscious capitalist. What sparked that change for you?

DK: First, a lot of Greenpeace’s successes over the years and strategies are capitalist. I don’t think the two are mutually exclusive. To give an example, I ran a lot of forestry campaigns trying to save forests in places like Papua New Guinea. It’s often the case that you can use market forces to make change as an activist, such as forcing good wood procurement practices as a way of protecting ancient forests. That’s been the strategy for the climate and clean energy case for a long time, as in adding cost to carbon. Small businesses can be agents of change, and entrepreneurs are the classic ‘won’t take no for an answer’ activists, really. They just use business tools rather than community organizing.

Second, that doesn’t mean that I’m not also a socialist. My personal thinking is that capitalism has its uses, but it’s pretty simplistic to just stick with one or other of the -isms. We have to find the blend that makes sense for the 21st century. Capitalism has had its use in unleashing the energy innovation that we’ve seen in the last decade, but there was also chronic market failure before it—capitalism had failed for most of the 20th century in creating any innovation. That’s the hundred years prior to the California Solar Initiative, which was kind of a socialist model, and certainly up to Germany’s Energiewiende, wherein the market was somewhat constrained by strong industrial policy. Prior to those the energy industry had been failed by monopoly capitalism. For me, market force is a means to an ends—market force works, but that doesn’t mean it excuses us from the bigger conversation of what capital is for and what market force should lead to. I believe in a guided market, at the very least.

RM: I like that point you’re making—this idea that market forces are very capable of doing certain tasks, but maybe not great at all tasks. The forestry example is new to me, but I think you were working with Jeremy Leggett on the divestment movement to put financial pressure on institutions to do more. Is there another big campaign that you’re working on?

DK: I think the focus on stranded assets is really important. There is a phenomenal amount of money that is being wasted by the fossil fuel and nuclear industry as they enter their dying days, with examples like Adani’s Carmichael coal mine in Australia or the gas pipelines from Texas to Mexico. In Australia, $1 billion tax dollars are being used to subsidize a coal mine that should not be opened in in a region that represents 2% of allowable carbon pollution left for the atmosphere. It’s just wrong. In Mexico, they’re spending billions this year on natural gas pipelines from Texas, which is going to lock them into debt payments on those pipes whether or not the gas price stays low, whether or not they decide to make the transition to wind and solar, which is much cheaper than gas already in Mexico’s reverse auctions, to electrify vehicles, etc.

The stranded assets campaign is really about avoiding “locking in” communities to uncompetitive infrastructure. Remember when Shell went up to the Arctic from Portland? The drilling rig was blockaded by canoeists and people like those I used to work with for a while, but the rig got out. And then they failed to find anything worth developing, which was predictable. It forced Shell to report a write-down of $7b dollars within about six months. The Arctic exploration effort of the oil majors generally has led to tens of billions of dollars of write-downs by those companies. There’s no accountability and instead there’s still support from government. There’s a huge contrast between the waste of money on the dirty side of the ledger versus the amounts we’re profitably deploying on the clean side of the ledger. There’s a capital market campaign I would love to run against the stranding of further assets in light of climate change. And maybe I will.

RM: Given that you’ve gone from activist to solar entrepreneur to clean energy investor, how are you liking this new role, and how is it different?

DK: It’s different in that I get to play with a lot of entrepreneurs instead of just a couple companies, like Sungevity, Mosaic, and others that I helped get going. The job is working more on the system than in the system, in the entrepreneurial ecosystem itself. It’s a different layer of responsibility. I really like our work, both because managing other peoples’ money effectively is important and challenging, but also because it’s about open-sourcing a lot of the lessons we’ve picked up over the last decade in California. The solar coaster, as we call it, has been tumultuous—plenty of lessons for future entrepreneurs that we hope to make transparent and share with the world. California’s like the lab for the world—we actually should get to 100% renewable energy by 2030 if we can. The main focus now for me is not California, as important as it is—it’s on continuing this work in Africa and Asia, otherwise we don’t turn the carbon dial.

RM: Fascinating. Given that you’re looking at this ecosystem more holistically now, are there gaps you perceive in the ecosystem that others can help supplement?

DK: Oh, god yeah. There’s this wrong belief that now that clean energy’s got some poster children that have been successful and have made it public and disrupted some categories like private vehicles that it’s inevitable that we will succeed in time. But that’s not true at all. We’re talking about a trillion dollar value creation story annually for the next 20 years. We need hundreds and thousands of highly successful companies, from entrepreneurs working in niche segments to entrepreneurs working on broad electrification. 100% renewable energy is not going to be done by a couple businesses out of California that expand their models to Africa. It’s going to be carried forward by African entrepreneurs. The future of the energy demand in the massive new urban realities in Asia—these mega-cities in India, China, Indonesia, and elsewhere—how will their needs be met in a uniquely local and specific way? Leveraging learnings and technologies from afar no doubt, but the distributed nature of renewable energy suggests that it’s going to be accomplished through a combination of ideas, and those are going to come not just from people in Palo Alto. We need to find and fund many more entrepreneurs.

There are big human capital gaps, as well as massive financial capital gaps. Emerging markets get no joy, even though that’s where the work is. Early stage gets very little investment these days, as you know, because investors prefer to do project finance now that they’ve kind of got their heads around wind and solar farms. We still need to do a lot more in different segments, whether that be community solar in America or off-grid in developing countries. Or diesel displacement, which can be very lucrative and great investments, but for other reasons people don’t want to make them, like presumptions or prejudices they have about those markets. There are also major policy gaps, which is why I’ve joined the board of Power For All, a campaign to bring distributed renewables to the 25 countries in the world with the least electricity by 2025.

Lessons Learned & Advice for Entrepreneurs

RM: What advice would you give to an entrepreneur? Given that you witnessed and helped drive the founding of the first generation of solar startups, at least in the states, what is the one thing that you take from that experience that you think is broadly applicable to other founders?

DK: The one thing? Oh, I’ve got lots of lessons. If just one, I would say pick your investors carefully so you can control your own destiny. That’s one of many, if I had to choose just one for other founders. Another is plan for the long haul. Beware this is going to go all kinds of crazy…

RM:  Has your time in CalCEF working more broadly on the clean energy ecosystem, instead of just residential solar, lent additional perspective on the solar industry? For instance, at kWh we look at CoreLogic and say, “Ah, that’s how mortgages are financed, therefore solar must eventually look more like this, and this is how we should think about the data infrastructure for our industry.”

DK: Yes, because so much of solar is about the financing of solar—which now involves a lot of your data and statistical insights—I think the microfinance experience is very relevant to the solar industry as it goes forward, again, in the emerging markets. It sounds obvious, but it has not happened yet.

RM: That’s surprising. What’s the gap there? I would assume if you’re doing microfinance, I would assume you could make the argument very easily for why solar-powered light allows someone in the BOP (“Bottom Of Pyramid”) to be more productive in the evening, which would enable loan repayment.

DK: I just don’t think we’ve gotten there yet. We’re talking about hundreds of millions of people who lack basic services like electric lighting. So, those entrepreneurs that are there are still using the most expensive type of money there is—equity, like we did for early establishment of US residential solar—to do solar as a service. Mainstream microfinance reaches hundreds of millions of people today, which required a system of controls to be built at the village-level. I think solar will follow this path, to create a de-centralized market of electricity of the future.

Call to Action

RM: Everything I’ve ever read or heard you say points to an underlying theme of people as entrepreneurs, as agents of change. You identified entrepreneurs as activists and talk of social movements that are leading the solar revolution. This hopeful picture stands in stark contrast to the brutal “solar coaster” we live on. I think the people in our industry are actually feeling quite depressed right now, even though our numbers on deployment and costs have never been better. What would you want to say to the people working in solar?

DK: I think you’re right on. Solar has been so wildly successful on important measures like $/kWh—but this is not the same as profitability. I would say my recommendation is people should take care of one another. And particularly, to bring up leaders to step into our shoes, follow in our footsteps. This is a long haul. And I think you’re right—at Sungevity, we were one of the vanguards to modernize solar, rode the wave as it crested. Kind of like Netscape for the internet. [Laughter] It was a necessary precedent to Google Chrome, Mozilla’s Firefox, and all sorts of newer and better ways of doing it. And those people doing that work needed to be supported by the people before them. Leadership development, mentoring, investing in young upstarts. And diversifying that leadership. Because if our movement is not inclusive of women and minorities locally and internationally, and if we just become tech bros, we don’t go global and we don’t achieve the climate justice that we’re meant to be about.

 

kWh Analytics Data Scientist Adam Shinn presenting, “Cross-Sector Opportunities to Improve Solar Data Analysis and Capabilities” at Bay Area Photovoltaic Consortium (BAPVC) Meeting & DuraMAT Workshop, hosted at Stanford University. May 23, 2017.

kWh Analytics Presents on Opportunities to Improve Solar Data Using DOE’s Orange Button

Originally posted on Solar Power World.

At a Stanford University solar conference focused on bringing together universities, industry, and the U.S. government, kWh Analytics Data Scientist Adam Shinn introduced upcoming industry-wide advances made possible through cross-sector collaborations.

“One of the biggest challenges facing our industry right now is the soft cost of solar,” said Shinn, pointing to a graph from the 2016 report by the Lawrence Berkeley National Laboratory. “The decreases in hardware costs over the years are represented in a significantly reduced cost of solar. Now soft costs—including installation, maintenance, overhead, and financing—comprise the majority of the total installed price of solar.” The problem of solar’s disproportionately high soft costs stems from an industry-wide problem: the absence of quality, standardized, aggregated data.

Enter Orange Button, a program of the U.S. Department of Energy SunShot Initiative. Orange Button supports the creation and adoption of industry-led open data standards for seamless data exchange across the solar value chain. The Orange Button project is an ideal example of collaboration across multiple segments: government agencies, the private sector, non-profits, and industry consortia.

Orange Button awardees and DuraMAT Workshop presenters SunSpec Alliance, kWh Analytics, and the National Renewable Energy Laboratory (NREL) are each contributing their particular strengths towards this shared goal of standardizing the way solar data is collected and exchanged.

SunSpec Alliance, a trade alliance of more than 100 solar and storage distributed energy industry participants, is taking the lead on formulating the data taxonomies. kWh Analytics, a solar data analytics company with the industry’s largest independent database on solar asset performance, is supporting the adoption of the data standards through development of a data format translation software tool. NREL, the only federal laboratory dedicated to renewable energy and energy efficiency research and development, is developing tools to establish a marketplace for standardized solar datasets.

Two major solar industry associations—the Solar Energy Industries Association and the Smart Electric Power Alliance—are also active Orange Button participants.

If the solar industry adopts a unified data standard, it would revolutionize the way solar is financed, reduce market inefficiencies, and lower soft costs and the overall cost of solar for consumers. As the industry matures and the problems become more complex, early examples of cross-sector collaboration will drive industry improvements and help establish the basis for future innovative partnerships.