My impressions from Intersolar North America

It was a very different mood in San Francisco last week. Different from last year. And different compared to this year's Intersolar Europe. I would call it a mood of cautious optimism. Less ostentatious booths. Less exhibitors in general. But the same number of visitors. The big 2016 party is over and everybody is curious what will happen next.

We have seen that in solar anything can happen. There is one thing that everybody agrees on: prices will continue to trend downward. Lower PPA prices affect the whole value chain. This  will continue to increase the pressure on hardware manufacturers, service providers and developers and it does not look like it is going to lighten up.

The solar industry looks like a snake that keeps shedding its skin as it grows.  We have seen high profile bankruptcies last year that have shaken the companies in their ecosystem. The list of unsecured creditors to SunEdison is long and includes high profile industry players. However as the SunEdison assets are reshuffled, it creates new business for banks, service providers and investment teams. In fact, I am starting to lose count of the number of investment teams that have mushroomed out SunEdison.

Companies that were working with the bankrupt residential platforms Sungevity, Verengo, American Solar and One Roof are now scratching their head as their buyer universe has been drastically reduced and are wondering how to adjust their business model. Meanwhile the DOE has funded another $46mm for the SunShot initiative. The funds are intended to support innovative, early-stage solar power technologies. This will allow some companies to gain market share from established players. And it will allow other companies to burn through new found cash without a clear path to profitability.

After the worries over the ITC extension in 2016 and the SolarWorld trade tariffs, the industry seems to have developed thicker skin in light of the Suniva case. I thought that there would be massive panel buying going on to hedge the Suniva risk, but I learned that apparently this is not the case. With projects starting construction in 2018/2019 it is indeed an awful long time to tie up cash. There seems to be more money than ever chasing those 2018/2019 pipelines. Most of them seem to have some sort of storage component and looser concepts of PPAs. Which makes me wonder: is the time for fixed rate long term PPAs finally coming to an end? I have always been puzzled why a corporate buyer would lock in a long term power price. Unless of course they have a long term view on energy market. Yes, banks won't like shorter PPAs with a variable component. But don't they have large energy desks? If banks in Japan can get comfortable with unlimited curtailment, I think it is time for the US banks to step up their game.

Anyway, there seems to be some clear writing on the wall: If you don't have enough margin today to withstand a further fall in pricing, it is time to get out of the market. Or reinvent the way you do business. For example by running your business even more efficiently. A whole new breed of software companies can make this happen for service providers. Call me.