Do you want to own a solar panel in a farm far away?

Business model innovations have been crucial for the solar industry in recent years. Community solar — where people can buy into community and neighborhood solar panel projects — has emerged, as has crowdfunding, where people can buy into solar projects and make back money (or a return) on them.

Now a young startup from Boston called CloudSolar is taking a spin on these two concepts with a plan to build a solar panel farm and enable people to buy individual panels (or even parts of panels) of the farm through crowdfunding, no matter where they live. The group launched an Indiegogo campaign on Wednesday morning to test out the idea and raise money (a $300,000 goal) to build their first solar farm.

As the name suggests, the team is making the analogy with cloud computing and the practice of remotely accessing data and computing over a network. In that way, anyone who buys panels in CloudSolar’s farm can remotely view how much power the farm and their panel(s) are producing and how many carbon emissions are being offset, via a cell phone.

However, that basic analogy with cloud computing starts to break down beyond the name and the mobile monitoring. Owners of panels don’t actually tap into their solar energy (the way you would with a cloud-stored song or AWS computing), and the electricity from the farm is planned to be sold locally to power companies in the region.

In the solar world this remote practice isn’t all that unusual, and some large companies, like Apple, are taking this approach for some of their solar farms. In North Carolina, Apple sells the energy from its solar farms (two of which are miles from its data center there) to Duke Energy to put back onto the grid; Apple counts its data center in North Carolina (legitimately) as solar-powered.

The Topaz solar farm.

The Topaz solar farm.

The CloudSolar team says its first farm is planned for “the Northeast,” and if everything works as planned, other sites could be built in California, too. If they can raise their funds, the group says they’ll build the first solar farm next year.

Now that solar panels are at their cheapest time in history, business models — not necessarily technology — are crucial for the industry. The solar-as-a-service business model — which emerged in recent years pioneered by SunEdison and expanded by SolarCity — now dominates the residential solar industry in the U.S., enabling customers to pay for solar power in monthly increments over decades, instead of paying for the expensive upfront fee of installing the panels. This innovation has opened the door for solar for tens of thousands of home owners in the U.S.

Crowdfunding for solar, while still a very (very) small part of solar project financing, has inspired a wave of new democratized funding models from startups for solar. Because solar systems steadily generate energy over 30 or so years and that power is sold to someone (a homeowner or a power company), investors (and regular people) can invest money into installing a solar project and then can make back a small return on the energy sales each month. Startup Solar Mosaic has gotten a lot of attention for its solar crowdfunding platform.

Solar Farm in Tucson, Arizona. Image courtesy of IBM Research, Flickr Creative Commons.

Solar Farm in Tucson, Arizona. Image courtesy of IBM Research, Flickr Creative Commons.

Then there’s the more charitable-oriented solar project startups like SunFunder, which crowdfunds solar projects in developing off-grid communities where solar power can change lives like Tanzania and Uganda. Like with Solar Mosaic, someone who invests in SunFunder can earn back their money, but making money probably isn’t your main motivation for participating in SunFunder’s campaigns.

CloudSolar’s idea is an interesting tweak on all of these models: community, solar-as-a-service and crowdfunding. But beyond the early adopter market who likes trying out new things on Indiegogo and Kickstarter, I’m not exactly sure what the motivation will be for people to buy into a remote solar farm.

Since the solar farm is probably no where near the panel owner, the motivation of helping your direct neighborhood or community probably won’t be there (though, perhaps CloudSolar could create more of a virtual community). Because the solar panel(s) will be owned by you, there’s not really much of a charitable aspect involved.

The Topaz solar panel farm, that uses First Solar panels in CA.

The Topaz solar panel farm, that uses First Solar panels in CA.

And the money making capabilities at a small scale are pretty basic. For $250, you can buy a quarter of a 250 watt panel (about 62.5 watts), and over 25 years you’ll make back $562, in payments every three months; a half panel is $450 (125 watts) and you’ll make $1,125 over 25 years; an entire panel is being offered for $650 to $750 and over 25 years you’ll make $2,250.

Obviously, the more money you put in, the greater your return. There’s an option to own 15 solar panels for $9,000, and two out of the nine spots for that have already been taken. I could see investors that are clean energy fans opting for these options, but probably not the average person. CloudSolar makes money by taking 20 percent of the money generated from the solar power.

One of the more clear motivating factors for someone to participate in this is, frankly, guilt — or put in a nicer way, someone who is looking to offset their own grid energy or gasoline usage. Offsets are a little controversial because they’re always so complicated.

If you buy one solar panel it would offset the use of your iPhone for forever, or your laptop for over a decade, or driving thousands of miles in a Tesla car. But when it comes to offsetting the energy used by an average house? One panel only offsets the energy used by an average home by about seven months. So, unlike if you had solar panels on your roof or you bought into a community solar program through your utility, one panel isn’t gonna cover you.

Big growth, but also losses, for solar company SolarCity

By the end of 2014, solar installer and financier (and soon to be solar panel manufacturer) SolarCity had installed about 1 GW worth of solar panels cumulatively on the rooftops of commercial and residential buildings. For comparison’s sake, that’s like the total of a really large coal or natural gas plant, but scattered across tens of thousands of rooftops. But SolarCity confirmed in its fourth quarter and year-long earnings Wednesday that it will install another gigawatt of solar panels in 2015 — basically doubling its entire amount this year.

The dramatic growth can be seen not only in SolarCity’s growing revenues, but also in its losses. For 2014, SolarCity generated revenue of $255.03 million, up substantially from its 2013 revenue of $163.84 million. But losses also widened significantly as well, and SolarCity posted a loss of $375.23 million in 2014, which was much larger than its loss in 2013 of $151.76 million.

SolarCity panels, image courtesy of SolarCity.

SolarCity panels, image courtesy of SolarCity.

From Wall Street’s perspective, SolarCity posted a wider-than-expected loss in the fourth quarter of this year of $141.14 million, from a Q4 2013 loss of $64.54 million. SolarCity’s stock dropped more than five percent on the earnings news.

To sustain its growth in this highly competitive market, the company is investing heavily in sales and marketing (close to $80 million in the fourth quarter of 2014 and $239 million for the year). The company is also investing in lowering its costs down the road, through its recent acquisition of Silevo and R&D into lowering the costs of its solar systems.

The good news is that SolarCity’s growth strategy is working to grab market share. The company, which is only eight years old, said it has the largest amount of solar customers among its competitors (190,000 by the end of 2014). It has a goal to have 1 million customers by 2018. SolarCity has long been strong on selling solar panels to residential customers, and the company grew its residential solar panel deployments by 110 percent from the previous year.

SolarCity factory in upstate New York.

SolarCity factory in upstate New York.

The bad news last year, beyond the continuing losses, was that SolarCity had some delays in projects with its commercial customers, leading to less commercial projects deployed. Also, naturally, SolarCity and its solar energy generation don’t perform as well in the darker winter months.

One of the interesting newer initiatives from SolarCity is its acquisition of Silevo and its plan to build its own solar panels in a factory in upstate New York. Being a vertically integrated solar company can help SolarCity cut costs and control its supply chain.

The company said on the earnings call that its factory in New York will be ready by the first quarter of 2016. “The foundation has been poured and erection of the steel structure is expected to begin over the next few weeks,” the company wrote in its shareholder letter.

This is an energy storage startup you need to know about

Inside a sunlit, cramped office near San Francisco’s financial district, entrepreneur and former political operative Susan Kennedy has been leading a team that is at the forefront of the emerging market for energy storage. The company, Advanced Microgrid Solutions, was in stealth mode until it became one of a handful of companies that recently won contracts — and a whopping 50 MW order — to build and manage large installations of batteries in buildings for utility Southern California Edison.

But unlike other companies on that list, Advanced Microgrid — founded in 2012 and funded with private equity from undisclosed sources — isn’t a big energy company, nor has it otherwise built a history of delivering on projects. And, on a side note, in the male-dominated energy industry Kennedy’s executive team boasts more women than men.

Susan Kennedy

An advisor to Advanced Microgrid Solutions, Nancy Pfund, described Kennedy as “a talented individual” who “has a good lay of the land in terms of knowing what’s compelling for utilities.” Pfund is a managing partner with DBL Investors, a San Francisco venture capital firm that invested in Tesla Motors and SolarCity. Tesla is building a large battery factory for both its cars and the kind of energy storage projects that Advanced Microgrid is developing.

The backgrounds of Kennedy and her co-founders shed some light on the startup’s stealthy sprint into the market. Kennedy was the chief of staff to former California Governor Arnold Schwarzenegger, who signed the Global Warming Solutions Act of 2006 that created a master plan for reducing California’s carbon emissions. Kennedy also was Gov. Gray Davis’ deputy chief of staff and cabinet secretary; communication director for U.S. Sen. Dianne Feinstein; and a commissioner on the California Public Utilities Commission.

Kennedy’s co-founder, Jackalyne Pfannenstiel, was the assistant secretary of the U.S. Navy in charge of its energy strategy. Pfannenstiel also chaired the California Energy Commission and before that worked at utility PG&E for twenty years.

Tesla investor Nancy Pfund with Tesla CEO Elon Musk at the launch of the Model S.

Tesla investor Nancy Pfund with Tesla CEO Elon Musk at the launch of the Model S.

Standing around the kitchen table in one corner of the San Francisco office, the petite Kennedy spoke with great energy about transforming where and how electricity is sourced and how the grid is managed.

Why energy storage is emerging now

California is at the forefront of clean energy generation, and it is undergoing two parallel tracks of change: one defined by the rise of giant solar and wind power plants in remote locations and the other by the proliferation of solar panels on homes, offices and industrial buildings.

But along with the increase in renewable energy generation on the grid comes headaches for utilities in managing the grid, which needs to be able to maintain a balance of supply and demand to avoid blackouts. That worry was one of the reasons that California began carrying out a mandate over the past year that requires its three big utilities to buy 1,325 MW worth of energy storage services by 2020 (with projects completed by 2024).

Energy storage systems can discharge quickly onto the grid to deal with any supply imbalance caused by the intermittent infusion of solar and wind energy. They can also reduce the need to build a type of natural gas power plant that ramps up quickly and is used mostly when demand spikes, but that is inefficient at burning natural gas and spews emissions.

power grid

Kennedy is keenly interested in developing and owning storage projects on commercial and industrial properties. These systems can generate a variety of sources of revenue for the company.

Battery systems can bank solar electricity for use at night or when power from the grid is expensive during certain times of the day, say a hot summer afternoon. Even without solar, the battery system can still take in energy from the grid when electric rates are low and discharge it for onsite use during the day.

Aside from making money by helping businesses use energy more efficiently, Advanced Microgrid also hopes to get paid by utilities when it curbs the amount of electricity drawn from the grid for certain minutes or hours when the utilities call for it and uses its batteries to meet the buildings’ demand during those times (this is called “demand response.”).

Having multiple streams of revenue is particularly important in these early days of building the energy storage market, when advanced batteries are expensive and there aren’t enough installed yet to reach the lower manufacturing and project development costs that will come with scale.

“The opportunity to develop energy sources at the customer side of the meter will be the next-generation change in energy,” Kennedy said. “If we succeed, then we will change demand response forever. We will make it valuable to utilities. We won’t add congestion to the grid.”

How it works

Advanced Microgrid won four contracts totaling 50MW with Edison, which still needs to secure the utilities commission’s approval for them. The startup won the contracts because it understands how to customize projects to meet Edison’s needs.

Kennedy recruited Audrey Lee, who previously worked at the utilities commission as an adviser to the commission’s president, to lead software development and battery system designs. The company’s chief commercial officer, Katherine Ryzhaya, was a power purchase agreement negotiator at Pacific Gas and Electric.

SCE Starts Second Rooftop-Solar Installation, Awaits PUC Decision

One of the challenges for Advanced Microgrid is to figure out the size of the battery systems that are needed to meet the projected needs of the commercial buildings and the utility. There’s a penalty to be paid if Advanced Microgrid fails to deliver what Edison needs.

The startup plans to install the first 10MW of lithium-ion battery systems in clusters of commercial buildings in Orange County, Calif. Those systems will run from several hundred kilowatts to up to 1 megawatt. The company has developed in-house software for analyzing energy and other data and designing battery systems.

Advanced Microgrid is looking at buying batteries and the software for running its projects from companies that already have deployed their technologies commercially, said Kennedy. But she declined to say which companies are under consideration. Using proven technology also will be key to lining up project financing, which is also a subject she’s mum about.

If all goes well, Advanced Microgrid expects to bring online the 10MW project in Orange County by Jan. 1, 2017 and the rest of the 40MW in Los Angeles by the end of 2017.

The pressure is on for the startup to deliver. “We passed the first test by winning the bid. Now we have to prove that we can build them and create values on both sides,” Kennedy said.

An increasingly rare type of solar farm goes online in California

When the huge solar farm just outside of Las Vegas called Ivanpah opened up in early 2014, many lamented that this type of solar plant, called solar thermal, could soon become a dinosaur. Late last week another of these large solar thermal farms was officially turned on, and it truly could be one of the last of this size built in the U.S., thanks to a one-two punch of changing incentives and economics.

Large utility-scale solar panel farms use rows and rows of solar panels to directly convert the sun’s energy into electricity. Solar thermal farms, on the other hand, uses mirrors to concentrate sunlight to heat liquid that produces steam and makes electricity from a turbine. These sites are essentially using the heat of the sun to produce electricity.

Abengoa's solar thermal farm Mojave Solar

Abengoa’s solar thermal farm Mojave Solar

Spanish power giant Abengoa celebrated the opening last Friday of a huge 280 MW solar thermal farm called Mojave Solar, built just outside of Barstow, California. The project can provide enough solar power for 90,000 homes in California, and was built across 2 square miles.

Abengoa said the site will generate $169 million in tax revenue over 25 years, provided a peak of 2,200 construction jobs, and now employs about 70 people. California utility PG&E is buying the power from Mojave Solar, and the facility will help PG&E meet California’s state mandate to generate a third of its electricity from clean power by 2020.

Abengoa finished another 280 MW solar thermal farm in Gila Bend, Arizona at the end of 2013. Years ago, power companies were as bullish on solar thermal farms as they were on solar panel farms, which are increasingly being constructed in the deserts of California, Nevada and Arizona.

The Topaz solar farm.

The Topaz solar farm, built by MidAmerican, outside of San Luis Obispo

But a few years ago the price of solar panels began to drop dramatically, from an average installation cost of $5.79 per watt in 2010, according to the Solar Energy Industries Association, to $2.71 per watt in the third quarter of 2014 (this is the average cost blended across all types of installations). Utility-scale solar panel installations can be as low as $1.68 per watt according to GTM Research.

As a result, some power companies that had solar thermal farms planned converted these sites over to solar panel facilities. Other companies that had developed businesses off of developing solar thermal sites cancelled projects in the U.S. that were no longer deemed economical and focused internationally.

A look at the heliostats and 2 of the 3 towers of Ivanpah. Taken from the 6th floor of the Unit 1 tower.

A look at the heliostats and 2 of the 3 towers of Ivanpah. Taken from the 6th floor of the Unit 1 tower.

But ultra cheap solar panels are only part of the headwinds facing large utility-scale solar thermal farms in the U.S. There’s also a couple of important incentives that have been changed as well.

First off, the federal investment tax credit (ITC), which delivers a 30 percent tax credit to solar project developers, is planned to be cut to 10 percent by the end of 2016. While it could be extended, the uncertainty is threatening the construction of utility scale solar farms, using both solar thermal and solar panels. The New York Times noted in an article this weekend that there are no future large solar thermal projects planned in the U.S.

Then there’s the fact that federal incentives in the form of loan guarantees are also no longer widely available for solar thermal plants. When Ivanpah was built, it used a $1.6 billion loan guarantee from the U.S. government to construct its 347,000 mirrors and three huge 450-foot towers. Likewise, Abengoa’s Mojave Solar used a $1.2 billion loan guarantee to finance construction. These types of large loans are no longer regularly coming out of the Department of Energy.

NRG Energy CEO David Crane and Energy Secretary Ernie Monitz cutting the ribbon at solar farm Ivanpah, just outside of Las Vegas

NRG Energy CEO David Crane and Energy Secretary Ernie Monitz cutting the ribbon at solar farm Ivanpah, just outside of Las Vegas

While large solar panel farms are still low cost enough that they could continue to be constructed, solar thermal farms the size of Ivanpah (392 MW, 5 square miles), Mojave Solar (280 MW, 2 square miles), and Solana (280 MW, 3 square miles) are far less likely to get built in the future. (Though, solar panel projects will also be impacted by the reduction of the ITC.)

Utilities calculate how much clean power they need (most likely to meet a state mandate) and then compare it to the cost of building a new natural gas plant, a wind farm or either type of solar farm. If natural gas plants, or other types of clean power, are cheaper than solar thermal facilities, then it’s an easy decision.

But large solar thermal farms could still find life outside of the U.S. They can uniquely store thermal energy at night, providing electricity far longer than solar panel farms without energy storage can.

BrightSource, which is the startup behind the Ivanpah site, recently announced a joint venture with China’s Shanghai Electric Group to build utility-scale solar thermal plants in China. Their first proposed project is to build two 135 MW solar thermal projects in the Qinghai province of China.

The booming rooftop solar industry

Remember a few years ago when Solyndra went under, solar manufacturers in Europe were tanking and complaints about China dumping their excess panels on the U.S. market were the shape of the news. What a difference a few years make.

Now the conversation is squarely focused on real business competitive questions, namely how to lower supply chain and operational costs amid a booming market where the company that lowers costs the quickest wins.

SolarCity is dominating the rooftop market. And when it turned in its most recent quarter, which saw both revenue and losses grow as the company invests heavily to lock up the market, we got a pretty good picture of the cost breakdown for the company.

Ucilia Wang writes:

SolarCity’s chief operating officer, Tanguy Serra, gave a breakdown of three major areas of cost — installation, sales and administration/overhead — during an earnings call with analysts on Thursday.

The total cost that combined all three areas reached $3.03 per watt during the second quarter, with installation accounting for $2.29 per watt.

The sales costs were $0.48 per watt during the second quarter while the overhead was $0.26 per watt. Serra didn’t give a comparison to previous costs for these three areas except that the installation cost was $3.16 per watt when the company went public.

What’s interesting to me about those figures is that sales costs still remain high at almost 16 percent of costs. SolarCity is working on lowering that and acquired Paramount Solar last August for $120 million.  The idea was to bring on a virtual sales organization to try and lower those costs. There may well be an incremental benefit of bringing in house that type of sales and marketing arm.

And that lowering of costs is important in squaring off against privately held competitors, Vivint and Verengo (Reuters has reported that Vivint filed confidentially to go public). But in terms of competition with utility scale solar, the funny thing is that utility solar should have much lower sales costs because it doesn’t have to deal with marketing to consumers yet rooftop solar remains competitive and is getting ever more competitive.

Utility solar should theoretically offer more price competitive solar if it could actually sell a differentiated product to interested consumers. Like if a utility customer you could easily get solar power guaranteed at a specific rate. Environmentally conscious businesses are increasingly becoming a utility customer that may want to know where it’s power is sourced.

But the reality is that utility electricity rates remain higher than rooftop solar in most markets that SolarCity is targeting, places like Hawaii, Arizona, California and Nevada where sunshine is abundant and retail electricity rates are relatively high. The reasons for utility rates being high are many but have to do with everything from unions to infrastructure costs related to managing distribution and transmission.

And even if sales/marketing costs remain stubbornly high, SolarCity is doing what it can to lower installation costs. It acquired solar panel startup Silevo and is planning a solar panel factory in New York to further drive the margins of solar panel makers out of the value chain. The high solar conversion rates of Silevo were also likely attractive to SolarCity as it tries to differentiate itself in the rooftop market.

Going forward, SolarCity in modeling over 500 megawatts of installed solar next year and almost a gigawatt in 2015. The rooftop solar market is booming, having grown 60 percent last year, and traditional energy players like NRG Energy have taken notice, eager to enter the market.  Utilities entering the rooftop market hasn’t been ruled out either, as some innovative utilities consider that it may be better to join them than to fight them.

Still, from where I sit, SolarCity is still way out ahead. Utilities and energy companies may have access to capital and engineering expertise, but SolarCity still has a significant head start and is getting increasingly efficient at using acquisitions to focus on driving down costs. That makes for a difficult competitor.

One year with the Chevy Volt: What a fun ride it has been!

After 12 months and 15,000 miles, was the Chevy Volt the right car for us? With our prior home solar panel investment and driving habits: yes. But it’s not a good car for everyone and there’s one thing I’d change.