Normally, this is the weekly recap where I cover the breaking news from solar companies around the world, from new project signings to bankruptcies. But this week, the industry's focus has been on a much bigger picture: policy and advocacy.From California to Washington D.C., investors will want to buckle in for a wild ride in the solar energy space over the next few years.
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California may make solar mandatory
At the start of 2017, San Francisco made solar energy mandatory for all new buildings that are 10 stories or fewer. And the election of Scott Wiener, the author of that bill, to the state senate has brought the idea to the Capitol. Wiener has brought a summary proposal for legislation that would take the mandate statewide, which could end up in full legislative form within a couple of months.
Mandating solar on new buildings would be a huge boost for the solar industry, but it would have an ancillary benefit of being much cheaper than solar through traditional sales channels. Sales and marketing costs have proven to be very high for solar because sales staff often have to visit each home individually. Tesla Motors'(NASDAQ: TSLA) SolarCity, in particular, has had to lower its installation guidance multiple times over the past year, and costs have spiked because sales are becoming more difficult.
But knowing that new buildings have to have solar would help lower sales costs, and having the cost of solar rolled into a mortgage would lower financing costs, as well. The result should be a combination of lower costs for solar buyers and/or higher margins for installers. What companies will want to do next is partner with builders to efficiently sell their systems, which is where it's notable that SunPower (NASDAQ: SPWR) already has partnerships with seven of the 10 largest homebuilders in the country. That could be an advantage if the California mandate passes.
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The solar industry's biggest voice may be President Obama
Solar energy has grown by leaps and bounds over the last eight years, increasing from 1.3 GW installed in 2008 to an expected 14.1 GW in 2016. And investors have to keep in mind that subsidies and policies at the federal, state, and local levels have helped drive that growth.
Along with falling costs, the federal investment tax credit, state renewable mandates, and policies like PURPAhave helped drive the industry forward. The concern within the industry is that the new presidential administration and Congress will tear down some of that support. One of the biggest supporters of solar energy, President Obama, happens to be in the White House for a few more days, and he recently made a compelling case for more investment in the future in a Science article titled, "The irreversible momentum of clean energy," saying in part:
This should not be a partisan issue. It is good business and good economics to lead a technological revolution and define market trends. And it is smart planning to set long-term emission-reduction targets and give American companies, entrepreneurs, and investors certainty so they can invest [in] and manufacture the emission-reducing technologies that we can use domestically and export to the rest of the world.
Policy matters in the solar industry, and to maintain favorable policies that will drive future growth, the industry needs to have a positive message to sell to all Americans. President Obama may emerge as the loudest voice for the industry, and the message he outlined above is as good as anyone can ask for, no matter which way you lean politically.
The biggest rooftop solar system in the world
Tesla's Gigafactory will break a lot of records, but one important one will be the fact that it's expected to install the biggest rooftop solar system in the world, at 70 MW. That's about seven times the second-largest array anywhere else in the world.
If the plant is going to get 100% of its energy from renewable energy, the roof is a good place to start. This also likely will be a proving ground for SolarCity's solar panels that will be produced in Buffalo, New York.
Tesla is certainly putting its money where its mouth is when it comes to renewable energy. And powering what will eventually be the biggest factory in the world with renewable energy is a big endorsement of Tesla's overall vision of the future. Solar energy is literally going to help keep the lights on.
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