As 2012 is coming to an end, SolarCity’s suspenseful IPO could be the final bright spot of a troubled year. Yes, as has been noted many times over the past few months, we are in Gartner’s trough of disillusionment, but the plateau of productivity might not be so far away.
The downside
So where do we stand now? First of all, the solar market has been deeply affected by the dramatic cost reduction of solar panels due to Chinese manufacturers. While China and the US are disputing trade tariffs, solar modules continue to fall in price, creating a lot of victims among US module manufacturers or emerging startups working on cheaper cells.
Wind Production Tax Credits are also expiring at the end of the month, which will likely dramatically impact the wind market. Last time the PTCs were allowed to expire, at the end of 2003, installations dropped 77 percent the following year. Power Purchase Agreements for wind projects have also never been so low: from $ 72/MWh in 2009 they decreased to $ 35/MWh by 2011. The equation might be hard to solve in 2013 for the wind industry.
IPO attempts in the cleantech sector have not been so successful either. Several companies ditched their IPO plans in 2012, such as solar thermal company Brightsource, waste fuel company Enerkem and electric vehicle company Smith Electric. In addition to SolarCity, Enphase is one of the only companies that made out this year. VCs are now stepping out of the industry as some have put heavy investments into development and manufacturing and have seen few returns.
The upside
However, this year could just be a step that eventually delivers market maturation rather than a “crisis”. Low cost Chinese manufacturers actually enabled a dramatic increase in solar panel installations, particularly in the U.S. With a more than 100 percent year-over-year increase in mid-2012, the US market has been booming this year and grid parity is on good track.
The focus has now shifted beyond module manufacturing and to new financing mechanisms such as leasing or crowd-funding. The objective is to make solar projects more accessible by avoiding high upfront costs and enabling the mass-market to participate in this effort.
Venture-capitalists are also not totally out of the game yet. The energy market is a tough one to penetrate with high upfront investments and 20-30 years payback as you build a new power plant – a far cry from the quick returns of IT/Internet companies. That is why VCs shifted their attention to what they know best: software.
Call it Green IT, Cleanweb or Cleantech 2.0, these are the application of web business models to cleantech. Focused on software or apps, these products do not need high capex and can generate some revenues fairly quickly. Some people are skeptical about if the cleanweb can be as disruptive as next-gen energy technologies like new solar cells. Nonetheless IT will be a useful tool that will support and promote the cleantech market, and act as a catalyst for breakthrough technologies. In fact, these apps and software could be the trigger to bring renewable energy or electric cars to the mass market.
Ultimately, policies are still decisive for our industry. Obama‘s re-election creates hope regarding the PTCs’ extension. A few game-changers were also introduced this year: the Green Button initiative announced in 2011 really materialized this year through utilities’ adoption and the Apps for Energy challenge. It opened up a new market in terms of energy services and will help entrepreneurs to develop their products without entirely depending on utilities to reach end-customers. More recently, California’s Cap and Trade market finally put a price on CO2 emissions. This will enhance energy efficient systems and promote low-emissions technologies.
In a few words, a lot of money has been spent over the last years within the cleantech industry. 2012 has actually been the witness of a market concentration, where we had to start rationalizing the expenses in order to build a sustainable system. With most of the technologies now in place, we need to modulate and bundle them, so they meet the market’s expectations. Inevitably, cost structures and customer adoption will be decisive for the cleantech to really and sustainably take off.
As an engineer Maud Texier dedicated her efforts towards the energy market. She hails from the oil & gas industry, and started her career working in electricity markets. As an analyst on a power trading desk, she studied the market mechanisms that can develop new demand-response models. Maud is now scouting new technologies such as renewables, storage or energy efficiency, for a large power utility, and analyzing the main trends of this growing market.
Images courtesy of SolarCity, flickr user Tapestry Dude.
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