Month: October 2017

Mosaic closes US$307 million residential solar loan securitization

Residential solar loan financing company Mosaic has completed its largest solar loan securitization issued to date — with US$307 million in bonds sold across four tranches.

The loan transaction was placed with 29 investors in the US and Europe. Since the company’s inception, Mosaic has funded more than US$1.3 billion in solar loans.

The offering is comprised of US$307.5 million of notes rated by Kroll Bond Rating Agency with four tranches that carry ratings from “A” to “BB+.” The notes are modeled to a weighted average life of 4.1 yards.  An additional US$75 million of loans may be purchased during the 3-month supplemental purchase period.

Billy Parish, co-founder and CEO of Mosaic, said: “We are thrilled with the tremendous interest in this deal and what it means for the solar industry. After the overwhelming success of our first securitization, we knew there was deep and broad demand from investors to fund residential solar loans.  We are excited that this transaction both extends our relationships with existing investors and brings in new U.S. and international buyers.”

Deutsche Bank, BNP Paribas, and Guggenheim Securities served as as joint-lead bookrunners for the offering, with DZ Financial Markets operating as co-manager. Deutsche Bank acted as sole structuring agent.  

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Hawaii’s PUC expands rooftop solar and energy storage offerings

The Hawai‘i Public Utilities Commission has approved two new programmes expanding its customers’ abilities to install rooftop PV and energy storage systems, while also clarifying the terms of its existing programmes.

The new ‘Smart Export’ programme for customers exploring solar-plus-storage options allows customers to receive credits for power sent back to the grid during night time hours. It will apply to around 3,500-4,500 customers on specific islands. Credit rates are US$14.97 cents on O‘ahu, 11 cents on Hawai‘i Island, 14.41 cents on Maui, 16.64 cents on Moloka‘i, and 20.79 cents on Lāna‘i.

PUC is also replacing the Customer Grid Supply (CGS) programme with an updated CGS+, to allow customers to supply power just from PV systems to the grid, but with special equipment allowing the utility to reduce the system output in order to maintain grid stability. This will accommodate 5,000-6,000 customers. Credit rates under this programme are 10.08 cents on O‘ahu, 10.55 cents on Hawai‘i Island, 12.17 cents on Maui, 16.77 cents on Moloka‘i, and 20.80 cents on Lāna‘i. The Hawaiian Electric Companies also recently filed a roadmap to creating more resilient and renewable-ready island grids with the PUC.

Importantly those under the original CGS programme will continue to receive their rates for another five years.

Net metering customers will also now be able to add capacity to their systems provided they meet certain technical requirements.

PUC stated: “The decision clarifies that existing NEM customers can add ‘non-export’ systems and retain their status in the NEM programme.”

Finally, under Smart Export and CGS+, the PUC has also allowed new advanced inverter functions for solar-plus-storage systems that can help the grid during grid disturbances.

A more detailed breakdown on the programmes can be found here.

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Ohio utility launches RfP for 400MW of solar

AEP Ohio, part of major US utility American Electric Power, has issued a Request for Proposals (RfP) for 400MW of solar capacity in Ohio.

Preference will be given submissions that are located in Appalachian Ohio, will create permanent manufacturing jobs in the region and are committed to hiring Ohio military veterans.

Proposals are due 18 December 2017.

AEP Ohio committed to pursue the development of solar and wind generation resources in an agreement approved by the Public Utilities Commission of Ohio (PUCO) in November 2016.

AEP Ohio already distributes power from a 10MW solar farm near Upper Sandusky and it has also committed to procuring 500MW of wind generation in the state. Overall it provides electricity to nearly 1.5 million customers. 

Back at the start of the year, Ohio governor John Kasich vetoed a bill that sought to make compliance for investor-owned utilities (IOUs) with the state’s energy standards voluntary, as opposed to mandatory, for a further two years.

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Navigant on energy storage as ‘non-wires’ alternative for utilities and grid operators

One of the ‘value of energy storage’ questions that was being asked a lot two or three years ago was around the use of batteries and decentralised system architecture instead of traditional “poles and wires” grid networks.

It has been said for some time that spending huge sums of money on transmission and distribution (T&D) architecture buildout and upgrades could, in some cases, be deferred by the use of strategically-located energy storage systems, coupled with distributed energy resources like solar and wind.

However, aside from a handful of case studies and real-world examples, this potentially game-changing rethink of grid network planning has largely been less of a priority as a driver for energy storage deployments than might have been expected. Navigant Research’s recent ‘Energy Storage for Transmission and Distribution Deferral’ report sought to fill the knowledge gap.

Andy Colthorpe took the opportunity to ask the report’s lead author Alex Eller, a research analyst interested in areas including energy storage, distributed renewables and microgrids, three of the most burning questions he could think of.

The use of energy storage in T&D spending referral has been long talked about – but until now it has been rare to see figures put on it, or accurate cost-benefit comparisons made. Why is that and is this now changing?

Much of the challenge when considering T&D deferral projects is that the specific economics of each project can be very different. The costs and time required to build new T&D systems, peak to average demand ratios, projected load growth, and availability of capital are all key considerations for new T&D projects or using storage to defer them. Due to the multitude of different factors involved, it has been very time consuming for storage developers to evaluate individual opportunities to defer T&D investments. 

Now that storage costs have come down and the industry is maturing, utilities are much more familiar with the technology and are identifying opportunities to defer upgrades using storage themselves. Furthermore, developers have gained sufficient experience to be able to streamline their process for working with utilities to evaluate these opportunities and propose solutions.

Could you offer examples of why a regulator, utility, transmission or distribution grid operator might recognise energy storage as a cheaper alternative from a technical standpoint – and explain what the drivers might be for doing so?

[Broadly speaking] there are seven main criteria that we identified in the report that will determine the viability of energy storage to defer T&D investments:

  1. High T&D upgrade costs
  2. High peak-to-average demand ratio; a shorter peak demand period only needs a shorter duration ESS, which may have considerably lower costs
  3. Modest projected load growth rate over the coming years – a relatively small storage system could be used to meet peak demand rather than a large capacity increase through traditional T&D.
  4. Uncertainty regarding the timing or likelihood of major load additions. [Energy] storage can be added incrementally as needed, unlike large infrastructure upgrades.
  5. Delays in T&D construction or construction resource constraints. There can also be local community opposition to new power lines and infrastructure.
  6. Limited capital available for T&D projects that must compete with other important investments
  7. An energy storage system (ESS) used for T&D deferral will be able to provide additional benefits or avoided costs, such as frequency regulation, renewable energy ramping/smoothing or energy shifting.

Will we see examples of behind-the-meter assets being used to provide what are more traditionally considered front-of-meter services, to benefit networks and reduce the required spend on T&D infrastructure?

Yes, we expect to see more projects utilising behind-the-meter (BTM) assets as part of “non-wires alternative” projects for utilities and/or grid operators. 

However, there are challenges in coordinating the operation and ensuring the reliability when using a network of hundreds or even thousands of BTM assets. As aggregation and management software continue to improve, this will become a more reliable form of load reduction and will be utilised more by utilities. 

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How Tesla and Vivint are taking different paths to the ‘one stop shop’ destination

What does it mean to be all things to all people? Does it overstretch resources to breaking point, or does it give you a chance to cast a wider net and capture market share, if your core offering gradually expands to encompass almost every available product and service in your chosen sector?

When Tesla ‘merged’ with (i.e. bought out) SolarCity in late 2016, consensus was that it created a clean energy behemoth of the likes never seen before. The longstanding close relationship between the two entities was obviously already in evidence, from the makeup of the executive board including Elon Musk in top roles at both (CEO and chairman of the board respectively), to SolarCity’s immediate enthusiasm for Tesla’s Powerwalls on their launch in May 2015.

Having now taken ownership of the US’ biggest residential solar PV installer and begun the softly-softly launch of its solar roof tiles, not to mention expectations placed on the PV module Gigafactory 2 in Buffalo, New York, it could be argued that Tesla’s not-so-subtle play for market domination now encompasses so much of the distributed energy system architecture that the company is a “one-stop-shop” for home clean energy solutions.

The appeal of the “affordable” Model 3, new strategies for selling stationary energy storage including virtual power plants and no-money-down options, not to mention the pair’s large-scale dispatchable solar-plus-storage projects in Hawaii and American Samoa mean that, as predicted by analysts at the time of the merger, Tesla-SolarCity is well-placed to address individuals’ and businesses’ distributed energy needs across a plethora of technologies.

Meanwhile Vivint, also in the top three of residential solar installers in the US, launched its first ever “Fully Integrated Solar” solution in September. Following tie-ups with smart meter and thermostat makers, Vivint’s rooftop solar projects can now be sold alongside EV chargers from ChargePoint and home batteries, for which Vivint is partnered with Mercedes-Benz Energy. CEO David Bywater claimed this made Vivint the first residential solar “one stop shop” for customers.    

Both of these providers have created “one-stop-shop” or “all-in-one” solutions. So, which is likely to prove the more successful strategy? Will it be the extended value proposition of bundling products and services from all the partnerships taken on by Vivint, or do the acquisitions and new product lines coming from in-house at Tesla-SolarCity represent the simplest and quickest way to scale up an all-in-one offering?

“It makes sense to compare this [Vivint’s launch] to the Tesla-SolarCity merger because it’s pretty clear that Tesla’s long-term strategy is to become a “one-stop energy shop”. So an ideal customer for them would be someone who would buy EV, solar and also energy storage,” Brett Simon, energy storage analyst at GTM Research, says.

“It looks to be that Vivint is pursuing a similar strategy. The advantage there is that you [can] either a) have a customer who loves everything, buys everything and you get a big sale upfront, or b) they buy one thing and you can create an existing customer relationship and down the road potentially upsell them on an additional product.”

Partnerships versus in-house vertical integration

“The advantage of vertical integration is that you can have much more certainty in supply and whatnot, but on Vivint’s side the advantage of not necessarily having a specific house model and in-house manufacturing for storage is that they could really go with anyone as the market matures,” Simon says.

According to Simon, the selection of Mercedes-Benz as Vivint’s partner is an interesting one. The luxury car brand enjoys unparalleled brand recognition – albeit for its (non-electric) cars rather than for clean energy. The German company’s “reputation for making high-end products that perform reliably” is an important cornerstone to the installer’s strategy, giving Vivint credibility in a new and unfamiliar market.

“One of the big challenges for Tesla is that they are betting very heavily on some newer products that haven’t necessarily made as big a splash in the market, whereas for someone like Vivint to come at it the way they are – they are trying to think strategically about how they want to move into this market, how they want to add storage as a piece of their overall solar offering.”

Solar as a gateway to DERs

Part of the advantage of selling a holistic solution could be that while the value proposition for solar remains excellent in many parts of the US for homeowners, energy storage, despite rapidly falling costs, remains one of the more expensive distributed energy resources (DERs) available on the market.

Ditto EV chargers, but perhaps less so for thermostats, smart meters and other small components. So are Vivint and Tesla-SolarCity using solar as a “Trojan horse”, to get all of these other technologies deployed, so the industry can start building scale on an unprecedented… scale? How much customer ‘pull’ does each component have? According to Simon, it is without doubt that solar will remain the primary focus of each company’s offerings.

“Things like EV chargers and storage are more of an add-on. So the ideal customer would purchase everything, but I would say that most customers that they’re getting are still, for the foreseeable future, drawn by the solar piece of the equation and then might be saying, ‘Hey, I’m also planning to get an EV, so why don’t I add the EV charger’, or ‘I’m in an area where there are time-of-use rates so maybe I want to add the storage on as well’. But I still see solar being the main thrust of this piece and the other parts of this equation as add-ons.”

As for the appeal of solar cross-subsidising more expensive items like batteries, Brett Simon said it is hard to tell to what extent Vivint might be doing this, as pricing has not been disclosed publicly.

“[Whether] some of these companies might try to undercut the cost a little bit to gain market share – I would say that certainly, especially in a market like storage that’s trying to get off the ground, to get their name out there, I wouldn’t be surprised if some of the initial system pricing for storage is lower than it should be – from what things like the economics of a full system price would bear out.”

Starting the energy storage market off from a small wedge

Vivint, Tesla and rivals like Sunrun are aggressively pushing residential energy storage forward into the regional markets where it makes the most economic sense. In Sunrun’s case this means a head-on focus on California and Hawaii, two states which combine incentive and support programmes with utility business models that value the benefits of energy storage to integrate solar and shift peaks to match supply with demand.

“With the residential storage market today, it’s still quite small in the US. So even being targeted on Hawaii and California is probably sufficient for the near term, given that those are the two hottest residential storage markets.”

Brett Simon believes that those full-service package offerings will eventually span the US, as battery prices continue to fall and markets and regulation are reconfigured to better accommodate energy storage and other cleantech. Part of this could be the creation of subscription plans, third-party ownership or energy storage-as-a-service business models to match the success of such offerings in the solar PV market.

“I would think that, as there is this shift going on in the solar market, that there would also be this shift overall for the package to have some kind of a monthly payment where at the end of the whole arrangement, the customer would own the system, even if they’re paying in some sort of instalment plan.”

Parallel lines

So two parallel strategies for delivering an “all-in-one” solution. It sounds like a neat way to get energy storage in houses that hadn’t perhaps thought about it before, or a great way for vendors to bundle up their products and those from partners at scale. It could also be a great proposition for their customers. One company in Germany, Beegy, actually offers heat and electricity packages for homeowners on a monthly subscription basis, including PV, batteries and heat pumps, all for less than the price of utility power. Making things easier for the customer and putting the customer experience at the forefront needs to be a key part of this type of ‘holistic’ value proposition.

“When you go shopping, if you have a clothing store you like, you’ll buy your shirt, pants and shoes all from the same store,” GTM’s Brett Simon says.

“You might go to multiple stores to get a better deal, but if you can make as few trips as possible, that’s ideal and companies across the world do this. Again I think this integrated strategy has that advantage that you can build these customer relationships and long-term, continue to sell them products and services – assuming that you can demonstrate value.” 

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