Solar Industry - Bubble Burst or Bunge
The Solar Bubble popped between September '08 and March '09.
Many Solar Stake holders would agree that there was a bubble and the bubble did pop then.
But the Bunge metaphor as put by Mr. Widicus Rolle, Managing Director at Carbon Finance Strategies LLC suddenly puts it in a different perspective.
May be it was a fall and not the pop.
We the 'Solar stake holders' loaded so much of costs to Solar goods (Illusion of seller's market ???) and Capex across Solar manufacturing value chain, we broke the floor.
The Spanish and other floors, it appears, were not yet FIT to take the weight we were adding rapidly. The fall or may be the 'pop' happened.
Look at what has happened and is happening since March '09.
The 'Economic Rents' of the Poly have evaporated. Many a cost has fallen off during our fall or has been dropped consciously by us. For we realised we are not really in Seller's market. Spain changed it. The Power Shift occurred.
It shifted from the Goods manufacturer to the Power Producer. He is no more waiting for Solar Goods but has started asking about its price.
The Solar Power market seems to be moving away from "pre-committed FIT guaranteed for years" to "tarriff based bidding" mode. "Paring Costs for Grid Parity" is the new road the goods manufacturers and Power producers are racing on.
Good for Solar Energy.
We might reach the Grid Parity point faster. That Launch pad of "parity" could give us and our countries the escape velocity to reach not just 'Energy Security" but even 'Energy Independence'.
What are the investments that can bring us up quicker now?
The FIT, counter measures to GHG, Carbon credits, Cap and Trades, Comprehensive costing of Fossil-Energy, Depleting stock and rising cost of fossil fuels, are all at best interim and external enablers. They can at max be counted for inertia breaking.
That is what the Govts of USA, Japan, and subsequently EU did, of course at different times and obviously for very different reasons. We, in Solar Energy, hit our High-point on 2008. Nearly 5GW of new generating capacity was installed in just one year. Solar PV generation capacity is over 15GW.
Inertia broken?
No and Yes.
No because almost all the goods manufacturers and PV power producers seem to say they are still not viable if they are paid for their electricity what their "fossil counterparts" get. They need more from the Govt. /Utilities for some more time.
Yes because atleast one Solar Goods manufacturer is reported to have told a State Govt of US that the Differential tarriff is no more needed as their panels have already crossed the Goal-post of less than a $/Wp.
This company is predicted to become and be the top dog of the World Solar Industry.
The Hows and Whys of their current claim to world leadership
The CSi based Solar manufacturers in each segment of its highly fragmented value-chain are striving to pare the costs and then the prices by
- Reducing the quantity of Silicon used
- Avoiding the wastage of Silicon
- Reducing the cost of Silicon
- Defragmenting / integrating the manufacturing atleast in geographical terms if not in process terms
- Increasing the efficiency of panels
- Reducing the Capex of their projects
- Reducing the capital cost by Converting the Capex to Opex
- Reducing the Opex leveraging Asian cost advantages and No-Tax locations
- Unleashing the advantages of the Economies of Scale
All these are across the value chain upto the stage of Panels.
At the BOS, Power plant Design, development and implementation stage the cost savings are attempted mainly by exploiting the local economics and global expertise.
So does it mean that the investment opportunities that can bring us up quicker are in the above Nine areas only?
More than these nine spaces. Let us begin with the nine.
How, what and why the top dog of Solar could crack any or all of the above?
First, their material is not Csi and hence their manufacturing straight away attacks the first four questions and has the Cost reduction.
They have also moved into Asian location to avail of the cluster advantages, tax exemptions, Capex reductions and their conversion to opex, the reduction of Opex itself etc.
Their capacity expansions have also been in terms of hundreds of MWs availing the advantages of the the mega Economies of Scale.
The whole Solar-value chain is now investing in initiatives that are Paring the Costs so that each one of them can cross the goal post of "less than one$ /Wp"
The new markets for Solar Power and hence for Solar goods will be fundamentally different in more than one ways.
Firstly, they may not offer a pre-determined FIT but ask us to bid stating at what tarrif and for how many years are we ready to install power plants by when.
Secondly, the new entrants like China, India and the US may each offer market opportunities that are many times more than the Cumulative Global Installed Capacity of the world as on Date.
Hence the investment opportunities that could lift us up from the Solar power Generation are from the Companies that have the size, scale and most importantly presence in these big markets.
China is already a net exporter of Solar Goods. USA is the pioneer who lost the game to Europe and also lacking the manufacturing cost advantages. We in Salmon Leap believe, India with its impending 20GW market announcement could be the investment opportunity of the industry.
Their National Action Plan on Climate Change and the Solar Mission under it is setting new bechmarks is what we learn from a Barclays report on Solar. All this is said to be coming straight from the office of the Prime Minister of India. If his track record on Nuclear power is anything to go by, nothing can stop him from reaching the Solar target set for India
Invest in Paring the Cost and in the new large markets that offer low cost manufacturing as well as Solar power generation of not MWs but GWs.
They will bring us up so quick that we might start worrying whether it is a bubble or a bunge.
I like the bunge.
To think of it Salmon Leap, our company's name, has the 'Bunge' phenomenon in it.
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