Why?
Because the prospect for nearly everything else stinks. Stocks continue to gyrate wildly on the slightest rumor of more troubles in Europe. Experts believe further foreclosures and forced sales will have to occur before the real estate market settles. Fast food chains and franchises must contend with the obesity epidemic.
Many venture capitalists have veered away from green technologies to focus on social media and Web 2.0 properties with light capital requirements. But it turns out that social media might resemble the film industry—temperamental developers, fickle public tastes—more than software or semiconductors. An internship as a gofer on “The Real Housewives of Covington, KY” might be better training than a Stanford MBA and three years at McKinsey.
But everyone needs energy. If we magically eliminated the Internet tomorrow, life would be like…like…1986. You’d go to Tower Records to buy CDs. Travel agents would issue paper tickets. We’d manage.
If you got rid of the modern energy infrastructure, civilization would be plunged back to the 1830s. I would not be writing this. I would be following a farm animal.
The urgency involved with energy–the fact that it’s a market based on needs instead of wants–played a substantial role in this week’s announcement that Bank of America Merrill Lynch will loan SolarCity approximatlely $350 million for its SolarStrong initiative to install 300 megawatts of solar panels at military housing installations over the next five years.
The Army needs power. It has expressed a strong interest in renewables because, among other reasons, it has to now deploy soldiers to the Middle East to protect supply lines. The cost of building and maintaining solar power plants as well as the revenue stream over the next 30 years can be predicted with nearly pinpoint accuracy. And SolarCity will hire veterans to complete the work, alleviating pressures on the Veterans’ Administration.
BofA also gained experience in financing solar with Project Amp, a 733 MW project spearheaded NRG Energy. It beats loaning money to an airline.
The power generated under SolarStrong will have to compete against the higher retail price of power, not the wholesale price that many other solar developers must face. But expect to see those projects get funding too. Multi-megawatt projects take months, not years, to build and the power gets sold to established utilities like Pacific Gas & Electric under decades-long contracts. Yes, the sun could implode and a political revolution could make it difficult to enforce power purchase contracts under any PUC installed by new regime, but if those things happened, we’d have bigger problems.
Over the past few years, many have compared the renewable energy movement to Sputnik or the Manhattan project. In reality, it’s going to be more like the rise of the suburbs: a mad dash to transform farms and fallow real estate into something more glamorous.
“Designing and erecting solar power plants is a people-intensive business,” said Kirt Mayland, the director of business development at installer Soltas Energy recently. “The 24GWs scheduled to be installed nationwide over the next five years will stimulate significant growth in the industry both in jobs and in ongoing economic activity.”
Are there risks? Sure. Solar remains more expensive than natural gas, coal and even wind, but it has advantages too. Gas will continue to fluctuate in price. The sudden advances in hydraulic fracking have lowered it to an unnatural state: the current prices are probably only temporary. By 2030, some have estimated that the U.S. will become a net importer. Oil is back in the $100 range.
Coal is expected to rise by 65 percent by 2035, according to the International Energy Agency. Riots and protests, particularly in China, however, may put a lid on demand. With carbon capture going nowhere quick, the sunset for coal could come quicker than expected.
Nuclear? Call me the next time a nuclear plant gets built on time and under budget. Nuclear advocates will often compare the “overnight” costs of nuclear plants with renewables. What they leave out is that the overnight costs don’t include interest: a $5 billion nuclear plant that takes 12 years will rack up more fees than a solar plant that takes nine months. Wind works well in the North Sea or Texas, but not on rooftops. It’s a mega-project business, with all of the complexities that can entail.
Solar remains an asterisk in total electricity production. It won’t topple the fossil fuel industry overnight. And many investors will remain skeptical. But a growing list of entrepreneurs and bankers will begin to understand the appeal of its simplicity.
It’s like a vice presidential candidate: solar will win because the other guy is worse.
SOURCE: http://www.forbes.com/sites/michaelkanellos/2011/12/01/why-solar-will-win/
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