The Sun is Shining on California’s PV Industry

The Sun is Shining on California’s PV Industry

In 2006, California Governor Arnold Schwarzenegger signed the “Million Solar Roofs Plan” into law to create incentives for solar power deployment and reduce the output of greenhouse gases by three million tons. The $2.9 billion incentive plan for homeowners and building owners who install solar electric systems was projected to lead to one million solar roofs in California by the year 2018. By the end of 2007, 280 MW of installed grid-tied PV had been installed, and not only was a powerful energy policy created, but a home grown PV industry got kick started into overdrive.

“When I ran for governor, I vowed to make the environment the centerpiece of my administration and turn back the clock on pollution,” said Gov. Schwarzenegger back in 2006. “My Million Solar Roofs Plan will provide 3,000 megawatts of additional clean energy and reduce the output of greenhouse gasses by 3 million tons which is like taking one million cars off the road.

As part of the statewide solar effort, last year the California Public Utility Commission (CPUC) initiated the investor-owned utility solar program, known as the California Solar Initiative (CSI). As of March 31, 2008, the CSI has received over 10,000 applications equaling 249.3 MW of new solar, including 40.7 MW added in the first quarter of 2008. The program has 33.4 MW of installed projects, including 14.2 MW completed in the first quarter of 2008. Solar installations in 2008 are expected to be at least 100 MW, significantly exceeding the 81 MW installed in 2007 and 59 MW in 2006.

Residential installations account for 89% of all incentive applications, but only comprise 15% of the total MW to be installed. Non-residential applications from commercial, government, and non-profit applicants make up 11% of the total applications but will account for 176.8 MW or 85% of generating capacity to be installed.

The contrast between California’s legislation and the U.S. federal government’s policies is stark—as the state has established a ten-year commitment with a goal of creating a self-sustaining solar industry free from subsidies after 2016. According to John Davies is Vice President of Green Research at AMR Research, “While it’s rare for anyone to use the words ‘nimble’ and ‘government’ paired together, one of the more impressive aspects of the California program is how the state has moved ahead quickly with the program since it was established in 2006 with a philosophy of improving it along the way.”

Even with uncertainties in federal tax incentives, the economy and concerns over the housing and lending market, many see the California solar panel market an inevitable powerhouse due to climate, population, environmental support, and other factors. David Chen, head of clean technology investment banking at Morgan Stanley in California, told the Wall Street Journal (June 30, 2008) that he predicts the industry will reach grid parity—the point at which the cost of solar energy is competitive with conventional grid-supplied electricity without subsidies—by 2012, "which will open up the floodgates for vendors that can price competitively."

Silicon Valley: Money and Innovation

Yet beyond the panel market, major technology companies, semiconductor companies, equipment suppliers, Silicon Valley’s unique mix of money and innovation is helping California become a major center in the world solar market. Applied Materials is among the largest equipment suppliers to the industry and SunPower is among the leaders in cell and panel manufacturing. In announcing their commitment to solar, Mike Splinter, president and CEO of California-based Applied Materials said, "The solar industry has reached the inflection point that Applied Materials has been waiting for, as solar customers seek economies of scale with suppliers who can better meet their needs for global support and who can provide advanced systems that meet technology, throughput, quality and yield goals. We plan to change the cost equation for solar power through adaptation of our existing technology and new innovation in order to help make solar a more meaningful contributor to the global energy supply." (Applied Materials, 9/06)

Silicon Valley is being increasingly called Solar Valley as venerable VCs and tech powerhouses turn their attention to solar power and renewable energy. Already Google has embarked on wide ranging renewable energy initiative involving multiple solar investments, and HP is partnering on a solar energy system designed to generate electricity "at twice the efficiency and half the cost" of traditional solar panels. Former U.S. vice president Al Gore has joining the board of legendary VC firm Kleiner Perkins Caufield & Byers, to steer the firm into greentech. More than a third of Kleiner’s latest fund, which was raised in 2006 and totals $600 million, will be invested in technologies

that aim to reduce emissions of carbon dioxide (Fortune 11/09/07).

On June 30, National Semi unveiled “Solar Magic,” a device that connects to solar panels and claims to boost the output of the panels by 30 percent or more. Earlier in June, Intel announced it is spinning off key assets to form an independent company called SpectraWatt Inc. The new company will manufacture and supply photovoltaic cells to solar module makers. In addition to focusing on advanced solar cell technologies, SpectraWatt will concentrate development efforts on improvements in current manufacturing processes and capabilities to reduce the cost of photovoltaic energy generation.

The Tip of the Solar Iceberg

But that’s only the tip of the solar iceberg. Although the United States is lagging far behind European countries such as Germany in implementing solar, its venture-capital investments in clean tech now more than double those in Europe. The U.S. venture-capital industry has spent $2.6 billion on clean-energy technologies in the first three-quarters of this year—up from $1.8 billion last year, and $533 million in 2005—according to new figures released on November 28 by Thomson Financial and the U.S. National Venture Capital Association (NVCA) and solar is the largest category of spending. California scooped $726.2 million of this year's U.S .clean-tech venture funding, followed by Massachusetts ($292.6 million) and Texas ($149.4 million). According to Greentech Media’s Venture Power Report, California received half of all the solar power investments. California also has received approximately 25% of the total U.S. patents awarded.

“This is the biggest market Silicon Valley has ever looked at,” says T. J. Rogers, the chief executive of Cypress Semiconductor and chairman of SunPower Corporation. “For entrepreneurs, energy is going to be cool for the next 30 years,” he says.

“The solar industry today is like the late 1970s when mainframe computers dominated, and then Steve Jobs and I.B.M. came out with personal computers,” says R. Martin Roscheisen, the chief executive of Nanosolar, based in San Jose, California (New York Times 2/17/08).

University Research Helps Grow the PV Ecosystem

Another attribute of California’s growing PV ecosystem is university research. The 10-city campus system of the University of California is home to many of the world’s top experts on renewable energy and is expanding research programs into solar. As part of his 2007-2008 budget, the governor has recommended a $95-million research and innovation initiative in the field of “green” technology. Last week, Stanford University received a $25 million grant from the King Abdullah University of Science and Technology, or KAUST, to fund a new center at Stanford, the Center for Advanced Molecular Photovoltaics.

The Global Climate and Energy Project (GCEP) at Stanford University is organized to conduct fundamental research on technologies that will permit the development of global energy systems with significantly lower greenhouse gas emissions. With funding and support from ExxonMobil, General Electric, Schlumberger, and Toyota, GCEP is a unique collaboration of the world's energy experts from research institutions and private industry. The Project's sponsors will invest a total of $225 million over a decade in solar research. Current research includes projects on nanowire and nanotechnology PV, organic solar cells, photosynthetic bioelectricity, ZnO, and metal-organic composites.

California’s unique mix of sun, money, smarts, history, and even personality are coalescing to form to solar center of excellence that will make a major impact on the global solar energy and PV market. Many of these elements will be walking the halls, staffing the booths and networking around town as SEMICON West and Intersolar join forces to hold the country’s premiere solar event from July 15-18 at San Francisco’s Moscone Center. For more information, visit www.semiconwest.org