Understanding Future Uses of Roofspace and Defining An Early Path to Profitable Roof Estate Investing
September 5th, 2013
Via Business Insider, a look at five reasons solar energy is apt to explode in the near-term. Of particular note is the evolution of yield co’s:
We just told you that if current rates hold, there will be one new solar installation built in the U.S. every 83 seconds by 2016, for a total of 9 gigawatts.
Deutsche Bank’s Vishal Shah, Jerimiah Booream-Phelps and Susie Min are out with an even more bullish projection: they think that the U.S. could hit 50 gigawatts (although this would still only be 2% of the entire U.S. energy picture):
They offer five reasons for their outlook:
1) Solar is already cost competitive in 10 states
Deutsche Bank estimates the levelized cost of energy for solar to be $0.11 to $0.15 per kilowatt hour, compared with $0.11 to $0.37 kilowatt hour for retail electricity, for states including New Jersey, New York, Connecticut and Vermont (along with the usual suspects like California). “Considering the improved economics of solar in these markets along with other growth enablers such as solar leasing, availability of low cost financing, we expect installed capacity growth of ~600% over the next 4 years,” they write.
2) Solar will soon be cost competitive in 12 other states
Electricity in the existing parity states is slightly more expensive. But Deutsche Bank predicts the overall cost of solar will decline to $2.50 from $3.00 over the next 18 months, at which point states that enjoy historically cheaper electricity including Pennsylvania, Massachusetts and Maryland, along with Washington DC, will see parity.
3) Renewable corporations are getting smarter about how they’re structured
More companies are creating “C” corporations that act as holding companies for renewable assets. These are also known as YieldCos. RenewableGridMag has compared YieldCos to REITs and MLPs, which enjoy special tax breaks. “If investors value MLP and REIT assets at 7% to 8% distributable cashflow yield, there is good reason to believe they will value renewable assets at similar, if not lower, yields.” Deutsche Bank says the tax benefits enjoyed by YieldCos can reduce solar financing costs by up to 300 bps, “in addition to providing significant amount of liquidity within the solar sector.” Ultimately, YieldCos can bring the levelized cost of energy down to $0.08-$0.14 per kilowatt hour from $0.10 to $0.16.
4) The expiration of the solar investment tax credit in 2016 could see a flurry of new installations coming on line.
Currently, the ITC stands at 30% of the cost of purchase. Deutsche Bank assumes there will be a big new push into solar as the ITC expires. But if it’s extended Deutsche Bank estimates a full 47 states will be able to reach grid parity.
5) Solar leasing is booming
Solar leasing allows residents to get solar installed on their home for free, and pay nothing for maintenance. Deutsche Banks says solar leasing firms are already “highly profitable” and will see greater incentive to go after users before the expiration of the ITC in 2016.
The revolution is real.
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Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has held a lifelong interest in environmental and conservation issues, primarily as they relate to freshwater scarcity, renewable energy, and national park policy. Working from a water-scarce base in Las Vegas with his wife and son, he is the founder of Water Politics, an organization dedicated to the identification and analysis of geopolitical water issues arising from the world’s growing and vast water deficits, and is also a co-founder of SmartMarkets, an eco-preneurial venture that applies web 2.0 technology and online social networking innovations to motivate energy & water conservation. He previously worked for an independent power producer in Central Asia; co-authored an article appearing in the Summer 2010 issue of the Tulane Environmental Law Journal, titled: “The Water Ethic: The Inexorable Birth Of A Certain Alienable Right”; and authored an article appearing in the inaugural issue of Johns Hopkins University's Global Water Magazine in July 2010 titled: “H2Own: The Water Ethic and an Equitable Market for the Exchange of Individual Water Efficiency Credits.”