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An Energy Eclipse
Another Sign of Solar’s Shaky State

SunEdison is a major player in the solar energy market—the U.S.-based company is involved in both the manufacture and installation of solar power, in addition to its operation—and it’s having a downright dismal year. Its share prices are down below $2, and it’s now being forced to shed holdings in an attempt to find firmer financial ground. Katie Fehrenbacher writes for Fortune:

SunEdison is also now desperately cutting costs and slashing some of the divisions that once made it highly valued. Earlier in the month SunEdison sold off its Japanese solar arm to a Thai oil company.

Now it’s continuing its slash and burn strategy to stay afloat. But with a handful of lawsuits pending, and a stock price below $2 per share, how much runway does SunEdison have before it reaches the end of the cliff?

SunEdison isn’t the only solar company struggling, either. SolarCity, the solar firm Elon Musk helped create, saw its stocks fall to a three-year low earlier this week, while a leading solar stock index has fallen more than 27 percent so far this year. Some of this can be put down to the fall in global oil prices, because while solar energy and petroleum products don’t directly compete with one another, bargain crude can throw the costs of subsidizing renewables in sharper relief for policymakers.

Some of it can also be put down to uncertainty over net metering, a term that describes the ability of solar producers to sell the excess power they produce back to the grid, at the state level. This arrangement favors solar producers and strains utilities and grid operators; utilities argue that net metering adds to their own costs while threatening the stability of grids that weren’t designed to send power in two directions. And in many states (most recently Nevada), these net metering deals are being reworked. These changes alter the underlying economic calculus for many solar producers, which is why investors are understandably spooked.

This is a distorted market. Until solar technology advances far enough to be able to compete with fossil fuels on its own merits, and, maybe more importantly, an energy storage option emerges that allows solar producers consistently to contribute power, this industry will remain one that’s reliant on government largesse. Due both to cheap oil and to the strain that net metering puts on grids, policymakers are finding it harder to justify supporting solar—and the stock market is showing it.

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  • WigWag

    SolarCity, the solar firm Elon Musk helped create, saw its stocks fall to a three-year low earlier this week, while a leading solar stock index has fallen more than 27 percent so far this year.

    • CaliforniaStark

      Am not seeing the similarity between oil and solar. Oil stock prices are falling because of oversupply; there is a glut on the market — as a result primarily of fracking and other new technologies. It is a supply and demand issue.

      Solar is heavy subsidized; recently Congress extended the federal tax credit for installing solar. This presumably should have increased the demand for solar and raised solar company stock prices. However, there are now concerns whether net metering will continue; as the CEO of Solar City has stated; without net metering “solar makes no sense.” The solar industry is dependent on the ability of its customers to sell their solar power back to a utility at retail rates. Without subsides and governmental entities requiring net metering; much of the solar industry would be in peril. It is a government regulation and subsidy issue.

      • WigWag

        Everything you say is true, but it is also true that as the price of oil and gas decline, solar becomes a less financially attractive alternative not a more financially attractive alternative.

        The post suggests that the price decline in solar stocks is a surrogate indicator for the health of the industry. If that’s true, it is also true for solar’s fossil fuel competitors.

        As for the grid, it’s little more than a belching behometh ripe for destruction. Grid operators fighting net metering are exactly like taxi fleet owners fighting Uber or television networks fighting Netflix. Like all rent-seekers, they’re begging the Government to protect their increasingly outdated business model while they fight tooth and nail to disparage and destroy their more nimble and consumer friendly competitors.

        Disintermediation has disrupted one industry after the next and my guess is that electricity generation and distribution is the next huge industry about to be revolutionized.

        The day is coming rapidly when battery technology will allow consumers to store the electricity they generate at home (from solar or wind) making electric utilities and the grid redundant.

        Even more realistic is the possibility of developing small, full-time generators, powered by natural gas, that can provide electricity for entire apartment buildings, housing developments or even single-family homes. Companies large and small (including General Electric which has invested billions of dollars in this effort) are making rapid progress in bringing full time gas fueled generators to market.

        Electric utilities can be expected to do what every other miserable commercial dinosaur has done when faced with death by disintermediation; they will beg the Government to slay their competitors.

        It won’t work.

        Maybe not in the short term, but in the medium term, electric utilities and the grid itself are toast.

        • CaliforniaStark

          It is ironic your attacking the grid as a “belching behemoth”, but at the same time demand that the grid purchase your solar power at retail cost. Is there an expectation that the grid be forced to buy your excess solar power, even when the grid does not need it? Is solar really a more ‘nimble and consumer friendly competitor” when its survival is dependent forcing a utility to buy it at the retail rate?

          Have been hearing that the day will rapidly come when battery technology will allow solar users to go off the grid for almost 20 years. At present there is not battery technology on the horizon that will accomplish this in an economical manner. There is progress being made, but no realistic break through technology yet. Maybe in another 20 years.

          Agree that natural gas generators may be a more realistic solution; but doesn’t that involve using the natural gas pipeline grid? Where I live the utility provides both gas and electricity; and the majority of the electricity is generated by natural gas.

          Hawaii may be providing a possible solution to the issues involving net metering. It has ended net metering to news users, and now will only buy power at a market rate from customers when there is a need for it. It also is encouraging smart meters, which operate electric appliances when solar power is available, and will encourage storage.

          Ending net metering might create a major incentive for the development of solar storage. A Tesla executive has stated that where there is net metering, there is no benefit to having home batteries. Net metering is hurting the development of new storage technologies, and that in itself might be justification reforming it as was done in Hawaii.

          • Andrew Allison

            Why should the grid not purchase power at the same price at which it sells it? I’m already paying for all the “peak demand” generating capability that the utilities are proving. The infrastructure argument fails on the grounds that the costs to the utility are part of the rate base. The argument that it’s not fair to charge all ratepayers for the costs associated with reverse flow fails on the basis that it’s equally unfair that all taxpayers are subsidizing solar.
            Here’s the real problem: the solar industry is based solely on taxpayer subsidies. Given that the US is already the world leader in the reduction of CO2 emissions, it is utterly inappropriate that alternative energy be subsidized.

          • david russell

            Why should Walmart not purchase goods at the same price they sell them for? Ans: They’ll go out of business.

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