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2008 Cleantech Predictions: Solar December 7, 2007

Posted by Andrew Chung in 2008, China, Cleantech, India, predictions, solar.
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Many of our readers may not know that Lightspeed has been very active in cleantech over the past year and a half. We have evaluated over 400 cleantech startups to date and have made investments in solar (Stion), biofuels (LS9), clean coal (Coaltek), LED lighting efficiency (Exclara), and batteries (Mobius). My partner Peter Nieh and I (Andrew Chung) lead up the cleantech effort here at Lightspeed, and here are some of our solar prognostications for 2008:

1. Solar will sustain its torrid growth, as costs continue to fall. The solar market has grown at ~40% per annum in recent years, and there are many reasons to think that it will sustain, if not exceed, that clip in 2008. Solar panel prices have followed a predictable experience curve since the 1970’s, with prices dropping by 20% with each doubling of manufacturing capacity. As the silicon-dominated industry moves to thinner and higher-efficiency wafers, increases manufacturing scale, improves wafer and cell processing technologies, sees polysilicon prices return to rational levels, and migrates production to lower-cost countries –- costs will continue to drive towards parity with grid rates, and solar will become increasingly more attractive. Companies have developed creative PPA (power-purchase agreement) financing models to reduce or eliminate upfront installation costs, which will make solar more accessible for a wider range of corporate and residential customers. The election year should also see more state subsidy support for solar and a renewal of the federal tax credit, which will further bolster growth.

2. Emerging startups that benefit from the polysilicon supply shortage will face increased pressure, as the poly-Si crunch begins to ease. Solar veterans can debate the timing endlessly, but many expect additional poly-Si supply to come online by late 2008. Startups that tout silicon-independent solar solutions, like concentrators and thin film (CIGS, a-Si, CdTe, etc.), will face pressure to come to market more quickly, as their cost/supply advantages erode with greater availability of poly-Si and a retreat from spot-pricing. E.g., none of the CIGS thin-film startups, which have collectively received hundreds of millions in investment in recent years, managed to reach mass commercialization this past year as many had projected. They will continue to be under pressure to reach market before the window of opportunity closes.

3. Entrepreneurs will increasingly look beyond cell and module production. As the technology-heavy areas of cell and module production get crowded, more and more entrepreneurs look to startup opportunities in the downstream balance-of-systems part of the value chain. This area has seen less attention to date, yet makes up ~50% of the total installed cost. Novel packaging techniques, distributed inverter / MPP tracking / power management technologies, systems monitoring solutions, streamlining of the installation process, and creative solar financing models — entrepreneurs increasingly recognize the ripe opportunity in this part of the solar business, and 2008 should see heightened startup activity in this area.

4. China and India will begin to emerge as strong domestic markets for solar. With a 500 MW coal-fired plant going up in China every week, the growth of greenhouse gas emissions has reached dizzying levels. China already “boasts” 16 of the 20 most polluted cities in the world, with hundreds of thousands a year dying prematurely from such pollution. Many experts expect that the government will spend tens of billions of dollars in the next 5-10 years –- a significant portion going to solar -– to reach the mandate of 15% from renewables by 2020. In India, where the energy shortfall has reached 15% and domestic coal reserves will run out in ~50 years, the government is actively pursuing incentive policies and feed-in tariffs to help drive the use of solar and other renewables. 2008 should see further policy refinement in both countries, which will spur increased domestic adoption of solar.

5. More IT entrepreneurs will continue to start or join solar ventures. Cleantech has captured the imagination of many seasoned IT entrepreneurs, and we expect that 2008 will be another high-water mark for crossovers into the space. Solar, in particular, has been attractive to IT veterans due to a high translatability of manufacturing skills from semiconductor production in the upstream part of the value chain; and the applicability of IT-related disciplines like power management, systems management and monitoring, supply chain management, and financing arbitrage in the downstream part of the value chain.

If you missed them, here are our 2008 predictions for consumer internet, enterprise infrastructure and mobile as well.

Comments»

1. Lightspeed: 5 Predictions for Solar 2008 « Earth2Tech - December 7, 2007

[...] We love cleantech investors who blog. Andrew Chung, a Senior Associate at Lightspeed Venture Partners, pens an interesting post on 5 predictions for the solar market in 2008. Chung says the Lightspeed team has evaluated over [...]

2. inderpreet - December 7, 2007

spot on! Another opportunity area for India (and perhaps China) downstream is to develop strong design and engineering practice to support rapid and cost effective project execution for western solar economies. ;)

3. Earth2Tech » Blog Archive » Lightspeed: 5 Predictions for Solar 2008 - December 7, 2007

[...] We love cleantech investors who blog. Andrew Chung, a senior associate at Lightspeed Venture Partners, pens an interesting post today on five predictions for the solar market in 2008. Chung says the Lightspeed team has evaluated over [...]

4. 2008 Mobile Predictions « Lightspeed Venture Partners Blog - December 7, 2007

[...] ways to build an online media business to $50m in revenue2008 Consumer Internet Predictions2008 Cleantech Predictions: SolarGames 2.0: Asynchronous gamingTop social networks for engagement – some suprises!2008 Enterprise [...]

5. Scott Boutwell - December 10, 2007

It will be interesting to see how these companies will scale; via direct sales, given the complexity of the solution, or perhaps via channels (resellers, VARS, etc). I think the Engineering & Construction (E&C) industry is poised to serve as a viable channel; these companies serve as trusted advisors to capital project decision makers in multiple verticals.

Besides providing project management, engineering design process, and overall construction mgt skills, these companies can provide access to additional capital and also nurture more opportunities to test and pilot projects.

I blog on this subject and other EC& topics; see link below.

6. Cleantech Investing » Blog Archive » Technology-enabled services and cleantech - December 11, 2007

[...] may move to Colorado — and perhaps to the Midwest…  Andrew Chung of Lightspeed has some cleantech predictions for 2008… and Chrysalix and Robeco have formed a joint venture that will do European cleantech venture [...]

7. Five cleantech predictions for 2008 | Greenbang.com - December 12, 2007

[...] are some predictions from Andrew Chung of  Lightspeed Venture Partners, a Silicon Valley-based VC firm. 1. Solar will sustain its torrid growth, as costs continue to [...]

8. David Scott Lewis - December 13, 2007

Andrew, I hope you’re right, but I suspect that you’re way too optimistic. For reference, I’m with a Going Green 100 “solar” venture, Zytech Solar, based in Spain, with most R&D/PE&D in Germany and Austria, and with manufacturing in two locations in China, and legal/admin in Hong Kong — and all of this from day one (except Austria, which is a relatively recent addition). (BTW, I’m based at the China HQ operation in Qingdao.)

1. Have you checked the price for modules over the past few months? It’s up 20 cents on average. Reaching grid parity? Boy, I wish I could agree. Unfortunately, this will take several years. Look at CSP and CPV to lead the way.

2. Exotic materials. You may not realize this, but there’s a shortage of exotic materials. This will hurt price/performance. Might see a breakthrough, but don’t count on it.

3. Entrepreneurs go BOS. True. But so are a lot of big boys. Don’t expect that this game will be won by entrepreneurs.

4. China and India. I’m ready to gag. China, probably. Uh, gee, which Indian solar company has gone public on NASDAQ? Sure, I know about the same ones you do. Don’t bet on India for this. This isn’t ITO or BPO. This is about manufacturing. In manufacturing, China wins, India is irrelevant. Indians who argue otherwise are lying. (BTW, in ITO and BPO for western clients, China will take decades to catch up with India. Yes, decades. And I was VP, Business Development with the two largest U.S.-focused, China-based ITO firms. In ITO and BPO, India wins. But in the solar power sector, China wins — relative to India.)

This being said, China is still primitive beyond belief when it comes to manufacturing solar cells, modules and collectors. As a guy with eight years in the robotics and factory automation business, I was appalled when I first saw how modules are manufactured. Something out of the 1950’s. They (i.e., Chinese companies) talk a lot about automation, but it’s mostly talk. They complain of greater quality problems with robotics and the like. They’re stupid and/or lying. This just shows that they don’t get it. Matter of fact, this point came up at yesterday’s annual China PV industry summit. (I was one of only two Americans at the summit who were not affiliated with the DOE or an American university. Fifteen westerners, 450+ Chinese. Where were you?)

5. IT types in this sector. Good luck!! Hey, I’m one of them. Ex-Microsoft, Oracle, Samsung, META Group. Manager, New Markets; Director, E-Business; Director, Strategic Planning; Vice President, E-Business Strategies. And I’m now in the solar power industry!! Wow, lucky me. Well, Internet types will go crazy as to how SLOW this industry is. Also, it’s the larger scale projects that will really matter, not what is put on a rooftop. This means utilities. For IT guys, they might as well be selling coal; knowledge transfer to this sector isn’t easy. We can all talk bits and bytes. Now you can have all sorts of fun reading chemical patents. To say that IT types will make it in green tech is as ridiculous as saying that IT types will make it in biotech or nanotech (which is exactly what was said in days past). This is a different game. Wait until you MANUFACTURE your first product in China. I’m already laughing thinking about this.

Andrew, I hope you’re right. But as somebody living in this industry, in a company with a global footprint, and with product ranging from standard modules and solar thermal collectors to both CPV and CSP systems (we’re almost ready to announce a 25 MW CSP project), this ain’t Kansas. To all IT types: If you think this is the next great thing, think again. If you want to save the world, join Greenpeace. What drives this industry is pricing. For 7 cents per kilowatt/hour, then let’s talk. Worrying about global warming is a bad (maybe just plain stupid) reason for wanting to get into green tech. It’s about money. It’s about the utilities. It’s about a global footprint. It’s NOT at all like IT, even less like a Web 2.0 (ad)venture.

9. Brian Feinstein » User acquisition: Good old-fashioned direct mail. - December 17, 2007

[...] was speaking with Andrew Chung from LSV this afternoon about user acquisition strategies for my new startup. Andrew, a brilliant [...]

10. Ivan Hall - December 18, 2007

In order for Americans to get maximum benefit from solar, manufacturing must remain here. Politicians must sell job creation. Installing solar has to become as fundamental as building interstate highways was. Most definitly the gateway to achieving this is through the utilities, and towards achieving that is through the state legislatures, and towards achieving that is through the population at large, and towards achieving that is through job creation. How does America bail itself out from latest financial crisis? Simple, it goes solar, leveraging a captive host via our electric utility providers.

11. Tom Rust - December 18, 2007

I agree on most points. All the thin film technologies also suffer from rapid degradation rates – 1-2% per year, vs the silicon 0.1-0.4% per year. This means only 10 year lifetimes vs 25-100 years for polysilicon and monocrystalline silicon technologies. They also have poor efficiencies – 1/2 of silicon, so double the area is needed for the same power. So they need double the installation rates of at best $0.80/watt – or close to $1.60/watt – furthur reducing the advantage of the thin film cost/watt.
I also hope for all of our sakes that there are no industrial accidents with the CdTe mfg plants – these are toxic materials – unlike silicon PV. The last thing we need is for solar to get a black eye from such an event.
2008 will be the year of low cost silicon PV technologies, in vastly reduced silicon usage, yet decent efficiencies and much lower costs/watt.
The solar thermal concentrators look inexpensive, but are actually poorer in land efficiency than PV, and many hidden maintenance issues/costs. I dont want to see them killed, as I think we need all the clean power technologies we can get, but they are NOT as low cost and low maintenance as the low silicon usage PV technologies coming out in volume in 2008.
These new reduced silicon technologies cut the silicon needed by a factor of 2x-8X, with almost no loss in overall efficiency. There are side benefits also, including high voltage modules with better fault tolerance and lower installation costs from reduced copper costs.
Increasing the silicon supply is positive for all the silicon players. Reducing the cost drops the module prices. But as installed cost with long lifetime gets cost down to and below fossil fuel costs for energy delivery, the demand will skyrocket, so we will need every silicon savings technology we can use.

12. The 2008 Predictions Galore - December 28, 2007

[...] Lightspeed Venture Partners has comprehensive lists for different categories: Consumer Internet, Solar, Mobile and Enterprise Infrastructure. 13. BusinessWeek has their list of Media Predictions for [...]

13. מתקנים מתנפחים - February 4, 2008

I love green world too

14. מצלמות אבטחה - May 3, 2008

We love cleantech!!! Good Post!

15. מתנפחים - November 23, 2008

You made very good job! (-:

16. 2009 Cleantech Predictions « Lightspeed Venture Partners Blog - December 3, 2008

[...] 2009 Cleantech Predictions December 3, 2008 Posted by lsvp in 2009, China, Cleantech, biofuel, electric vehicles, energy efficiency, energy storage, predictions, solar. trackback Lightspeed has invested across several cleantech areas, including solar (Stion), biofuels (LS9, Solazyme), clean coal (Coaltek), LED lighting (Exclara), and energy storage (Mobius Power). Here are some of our cleantech predictions for 2009 (see our prior year predictions here): [...]

17. Greentech Media: Cleantech Investing » Blog Archive » I predict that… - December 9, 2008

[...] a couple of sectors (esp. energy storage) and geographies (esp. China) things will look brighter.  Last year Andrew and Peter also posted their predictions for 2008, specifically about solar, and while they weren’t fully right about things it’s mostly because that whole sector [...]

18. 2010 Cleantech Predictions « Lightspeed Venture Partners Blog - December 18, 2009

[...] Peter Nieh and I (Andrew Chung) teamed up again this year to make a few predictions about cleantech in 2010 (see our prior year predictions for 2009 and 2008): [...]

19. 4 Predictions About Cleantech in 2010 | Reaction Radio - January 30, 2010

[...] Peter Nieh and I (Andrew Chung) teamed up again this year to make a few predictions about cleantech in 2010 (see our prior year predictions for 2009 and 2008): [...]

20. מתנפחים - April 28, 2011

coming out in volume in 2008?


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