Now Showing In Prime Time: Clean Energy Momentum Builds While Asset Managers Get Serious About Carbon Bubble

A local microgrid in Sendai, Japan. Source: NTT Facilities, Tokyo, 2006

By Walter Borden

ON the way to closing out 2013, renewable energy sectors quietly outperform the broader market. Notably, solar power and LED systems have entered prime-time in a big way.

Wal Mart has deployed, and is profiting on, the largest portfolio of solar panels of any retailer in the nation, just ahead of Apple. Costco runs 2nd  in the retail sector. Wal Mart’s implementation alone exceeds that of 38 US States combined. Meanwhile Dutch conglomerate Philips reports 33% profitability growth in its LED sales along with a presence in Home Depot stores. And residential solar has gone mainstream while distributed generation projects continue to increase exponentially, even as regulatory support scales down. Another intriguing development is Sunpower’s un-subsidized 70 MW plant in Chile that will sell solar directly on the spot market. This may well be the model of the future.

Corporate America profits on solar. Key facts:

  • GTM Research and SEIA report solar system costs decreases of 40% since the start of 2011 and 50% from 2010.
  • Commercial installation costs dropped 14.7% to $3.71 per watt for 2013.
  • Assuming a 10% return on investment and a 20% capacity factor, projected cost of this electricity are 8.5 cents per kW-hr, below grid prices  ex-ante tax benefits. 

The outlook grows ever brighter when one factors in twinned developments in microgrid and microfinance. In the case of microgrids, or distributed generation, both Connecticut and New York are deploying microgrids in the aftermath of Hurricane Sandy. New firms like Mosaic lead the way with cash flow generation for retail investors via interest rate income from solar projects over its crowdsourcing platform.

For Dutch Design week 2013 Lucid created a base frame where visitors can add to, and manipulate, light formations.
For Dutch Design week 2013 Lucid created a base frame where visitors can add to, and manipulate, light formations.

So what is the signal here? Basically, its that in the US, clean and sustainable economic advancement presents with wide variability around the state by state valence, with the balance now tipping to uptake in a majority of US States. Some of the sunniest states are in the late adopter category, there is still a large pool of untapped markets. While plenty of noise was generated around the predictable yet minor growing pains in US green energy public programs, these programs has spurned free market opportunities for sustainable value creation — even as subsidies are scaled back far more sharply than they were for other sectors like fossil fuel extraction and industrial agriculture.

Investors then, should look past efforts to define complex problems from a single datapoint (Solyndra perhaps is the best known and most overstated example). Given these developments, which are strongly indicative of an upward sloping trend line, we think investors are well advised to focus on mid and long term possibilities. Additionally, investors would be wise to monitor the growing concern of asset managers about overvaluation in petroleum assets: 70 of the largest pension funds are already inquiring as to risk exposure to a Carbon-based Asset Bubble to the petro-product majors.

One thing is certain, extemporizing around the economic inefficiencies of pollution on the part of petroleum producers has long since outlived its persuasiveness for many institutional and individual market participants. More analysis on this is in the works at Fund Balance.