SMA Shocks the Market

Peter Gabriel used to have a lot of hair. SMA still does but it looks like they're going to get a wicked hair cut in 2012. You have to give credit to SMA for being brutally honest regarding their guidance. Part of me thinks this shockingly poor guidance is timed to be used as ammunition against the FiT reorganization currently underway in Germany. Another part of me thinks SMA has had an incredible run at high margin and it's about time they joined their polysilicon, wafer and module brethren in the galleys slaving away like everybody else. It's not that I want to see SMA go down but I do want to see more competition in the inverter market.

SMA has promised to invest in R&D and focus on new areas - they've targeted energy management and energy storage. I believe SMA should concentrate on energy management first and storage fifth. I'd like to see them integrate their EMS solution (Sunny Home - Sunny Business - Sunny Whatever) directly into their inverters.

Why the new strategy?

The new strategy is due to a shift in the market. The larger ground mounted photoelectric projects which feed all their production into the grid are losing ground to smaller projects that feed a portion of their production into the grid and use the remainder on site. This is a sharp reversal of the trend we've seen over several years where we had larger projects gaining market share. I say sharp reversal because over the last few years large projects have only slowly gained market share from 10 to 15 to 20 to 25 percent year by year. In 2012, Germany is likely to see the share of large projects drop from 20 - 25% down to 5 - 10%. This means all those large project focused inverters SMA has gotten good at building over the last several years are going to see significantly less sales. This has been a long time coming so they can't claim they've been blindsided by current events.

The proposal currently on the table in Germany has many interesting aspects. 1. No more self-consumption bonus. Germany has discontinued the SC bonus because you don't need a bonus when the retail price of electricity is 6 to 8 cents higher than the FIT. 2. You only get the FiT for 85 to 90% of your production. This new requirement is structured to ensure production is coordinated with on-site consumption. These two aspects encourage self-consumption with a stick approach as opposed to the carrot method used over the last few years.

The new FiT doesn't go far enough to encourage self-consumption but you can only package so much into a single proposal. Soon enough we'll see additional regulatory movement in the direction of encouraging self-consumption.

Here's me talking to SMA

Me:Hey SMA, check out that wall.
SMA:Yeah, neat wall.
Me:Take a couple steps back.
SMA:OK... Is that a letter on the wall.
Me:Take a couple more steps back.
SMA:Ahh... yes... it's writing.
Me:Yeah... What kinda writing.
SMA:Instructions?
Me:You get a star.

The writing on the wall says the future (at least the next several years) is going to see a heavy investment of research into self-consumption. If SMA focuses on this trend they can position themselves to take maximum advantage. How do you take advantage of this trend? The passive participant rides the wave and builds products according to market demand. The active participant tries to steer the market in coordination with building products to meet demand.

If SMA is smart they'll lobby for smart. One thing they could do would be to lobby for smarter appliances that have communication abilities that mesh with their smart inverters. A corollary second best strategy would be to lobby for updated appliance testing and reporting standards so that more information is provided to the market concerning how appliances work. In either approach the basic idea is to force appliance makers to provide more info about their appliances work so that SMA's energy management systems have better info to work with. If SMA can get more info they can deliver more savings to the consumer. The more savings they can deliver to the consumer the more profit that can shave off the top for themselves - capitalism works.

There's a common saying that moms teach their children: Necessity is the mother of invention. As it turns out I learned the less common version from my dad: Struggle is the father of all things. I am neither a momma or a papa's boy. I have my own take on this. The best thing worth fighting for is love... So if we must struggle for invention let it be for what we love. Saddle up.

Solar Racks.... bahahahahahaha

Whoa!
Pow!
Bing!
Well hello there!

See Also: Renewable Girls

How many Monkeys does it take to Fuck a Football?

My first impression was: Shit! Is that a tape measure? Why aren't those guys wearing floaties to go with their sissy fall gear. Hard hats on a roof? GAY!!! No wonder our system costs in the US are outrageous.

Turns out this is a picture of the hands on portion of a training course. err... ummm... My bad. Keep up the good work guys!

Odds and Ends

Economics of Photoelectricity - March 2012

Let your representative know how you feel about PACE. Takes one minute. Vote here.

I like coming up with new words to describe solar. One place I think there's a shortage of appropriate terminology is in the area of rooftop solar. Sometimes I say rooftop solar but what I really mean is end-user behind the meter sited solar - could be ground mounted, facade mounted or rooftop but the important thing is that the solar is behind the meter. How about independent photoelectrics (iPE)? The Hipsters would gogaga over this pitch. Fuck Apple and their trademarks. Alternatively, you could capture the idea of independence with the term Indy solar... Is it just me or does indy solar not have a nice ring to it?

Phunny Photoshop Phail

David Crane is the Funkin Man

NRG Energy's CEO Discusses Q4 2011 Results - Earnings Call Transcript

"We think over time, I mean, the way we think that the solar space is going to evolve in terms of going from big to small, absolutely everything that's happening in terms of solar economics is supporting that idea. We still have a good portfolio, as I mentioned, of utility scale, solar projects. The size solar projects that we started in the second half of 2011, the 200, 300 megawatts sizes, that's not going to be a part of the future. It's going to get smaller, and the cost of delivering distributed solar, we feel is working its way towards quite quickly $2.50 a watt, which again, it's impossible for anything from a grid parity perspective to compete with gas-fired generation when gas is $2.50 per million BTU. But competing in terms of retail grid parity, which distribute solar, that's the metric for it to compete against, we see solar being able to compete on a basis of retail grid parity in over 20 states within 2 years. So that's why we have to learn to go small with our individual solar project."

Volt/VAr Optimization

This video is about ABB's Volt-VAr Management System (VVMS). The idea behind this system is to lower the load on the grid by adjusting voltage down to a minimum value. The following equation shows the relationship between power, voltage and current. The equation shows that when you lower voltage you also lower power.

Power = Current x Voltage

Voltage management is a great idea but I'm not sure ABB's product is the most cost-effective solution. The bigboys have made the argument that small PV systems cannot be cost effectively equipped with voltage management capabilities. Apparently, SMA didn't get the memo. My question is, why rent voltage control from the utility when it's cheaper to own it yourself?

P.S.

Here's a price quote for a 12 kW PV system. With favorable financing conditions this 1502 Euro/kW system generates power for a tad under 10 ct/kWh.

P.P.S.

It will be interesting to see if field arrays survive the coming round of FiT cuts. On one hand I'm rooting against solar farms because I don't think this solution is elegant or sustainable. On the other I'm rooting for them because it would be awesome if PV farmers could make money in cloudy Germany with a 13.5 ct/kWh feed in tariff. It would also be a hoot to watch the industry try to cover up the temper tantrum they're currently throwing over these new FiT rules. Holy cry me a river of wolves batman! But I must admit, I do enjoy good propaganda.

Palo Alto's CLEAN Program (Feed-In Tariff)

Hello Jon

I have a question and some comments concerning Palo Alto's proposed Feed-In Tariff. Can you provide any detail on how the capacity value was determined? I've looked through several documents without any luck. $.006 is considerably lower than I'd expect but I fully realize this determination is utility specific. Also, the program appears to force operators to sell all their production at the FiT rate. I think you should make this part of the program flexible and allow operators to make a choice between gross and net generation payments. A gross payment structure (the status quo) would pay the 14 cents/kWh for all generation. The net payment structure would subtract out production that was consumed on-site at the time of production. You'd be able to measure this because you have two meters recording these quantities. If you give operators the choice between net and gross payment structures I think you'll learn more from the program. You'll also be providing these system owners with another source of potential revenue at no expense to the city.

In Germany the FiT program has a special self-consumption bonus. The operator that chooses to take the self-consumption rate rather than the FiT rate gets paid 8 to 12 cents/kWh rather than 24 cents/kWh. This seems like a ripoff before you consider the fact that electricity in Germany costs 25 cent/kWh. This means the operator who self-consumes electricity is effectively getting 33 to 37 cents/kWh for their production. To me this is almost overkill but it shows you how much they want to encourage self-consumption. The FiT architects in Germany see that the more production is self-consumed the less PV relies on the FiT. The only way for Germany to wean PV off subsidies is to maximize self-consumption.

You can do a similar thing with Palo Alto's FiT. Electricity rates will assuredly be higher than 14 cents/kWh within the next 20 years. Once rates are higher than the FiT the operator would prefer to self-consume their electricity. You should make it so your FiT program allows this. If there is a reason why you are disallowing it I would like to know.

I suspect your 50 MW cap will be heavily over-subscribed. You're in the belly of the solar beast after-all. You'll end up getting 100 applications the first month and the staff will be over-loaded. This defeats part of your program's purpose. It would be smart to consider portioning out the 50 MWs. You start with a 20 slot apportionment that is lottery based. Then you have a 40 slot apportionment that is again lottery based. With this structure you avoid overloading the staff and you also provide a means of observing learning over time. You'd also be able to tweak the FiT down over time based on the number of subscriptions you got.

One last thing Jon. I don't think your program is a true FiT. Feed-in tariffs are independent of the market and technology specific whereas your payment plan is based on avoided cost. Your program is what FiTs become when they grow up. I think Palo Alto should play up the competitive nature of their tariff program. Maybe you could hold an acronym competition that would double as a advertising campaign. The winner would get some solar panels or something. If you do end up changing the program's name I'd suggest Light Pricing - it gets the point across and it has a nice old school acronym. Have a great day.

Respectfully

Photomofo