Good Morning
What we’re reading this week:
Filling the hole SVB left in the climate tech ecosystem (H)
Solar companies offer reassurance after renewables financier Silicon Valley Bank collapses (UD)
BlackRock walks a tightrope on climate (A)
The Greendicator
Top Deals of the Week
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Airex Energy, a seven-year-old Canadian startup that transforms turn sawmill byproducts and logging residue into biocoal pellets, raised a $27.8 million Series B round led by Cycle Capital
SolarCycle, an Oakland, Ca.-based solar panel recycling company, has raised $30 million in Series A funding. Fifth Wall and HG Ventures led the round (F)
Algae-based jet- and diesel-biofuel company Viridos raised a $25M Series A led by Breakthrough Energy Ventures (BW)
Green Li-ion, a lithium ion battery recycling startup, raised a $20.5M pre-Series B led by TRIREC (PRN)
Carbonomy, a startup helping farms become sustainable and increase their revenue via carbon credits, raised a $16M Series A at a $130M valuation led by Hedonova (PRN)
Intelligent fluids, a startup developing safe / sustainable cleaning fluids, raised a $10M Series B led by WAVE Equity Partners (PRN)
Green Theory
Track Change on the Solarcoaster
Booms and busts in the solar industry over the last few decades have dubbed the sector the solarcoaster. These twists and turns historically connected to policy shifts in the US, as a construction company vice president shares in this 2018 piece on the solarcoaster: “It’s a ‘solarcoaster’ because you can’t predict what states will get incentives and whether they will change.” Looking back, at that time, installers or solar developers would have seen solar demand that ebbed and flowed with the political winds.
It’s not that solar installations required subsidies to compete with utilities necessarily, but developers needed to be ready for surges in requests for solar projects, and sometimes got caught in a policy-induced drop in demand. As challenging as these fluctuations have been for solar developers, the pressure on solar manufacturers is even higher. It takes much longer to build a factory than it does to hire an electrician and pick up the latest panels from your local distributor. In concert with increasing solar efficiency through new research and techniques, many manufacturers set up shop, expecting decades of productivity, only to become obsolete after building expensive factories.
Price’s jump ramp
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Through the risks borne by solar companies, one trend has marched steadily for over 50 years: the price of solar has fallen. In the US, solar systems in 2020 were less than one third of what they cost in 2010. Of course, the solarcoaster never lacks surprises…
In the last few years, the solar cost drop has reversed, and prices are creeping up. Controlling for inflation, solar hasn’t necessarily gotten more expensive, especially relative to other energy sources. For instance, US home rooftop solar got nominally more pricey in 2022 compared to 2021, but by less than electricity cost inflation overall.
Still, for an industry used to drops in real prices year over year, this switch comes as a shock to the system. Now, with more sustainability targets in place, and the value proposition of solar stronger than ever, a new word invokes thoughts of a downward swing in the US solarcoaster ride: supply.
US Solar Supply On the Move
Whereas before solar developers hinged on policy to help predict demand, today they must consider policy to understand supply more closely. Through investigations, tariffs, and other regulatory constraints, the amount of solar installed in the US was moderately curtailed in 2022. At the same time, not all of the supply woes can be blamed on regulators trying to enforce laws on anti-slavery standards. The same supply chain challenges across the economy since 2020 hit the highly concentrated solar supply chain especially hard.
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Since 2010, China has cornered more and more of the market for each of the key manufactured materials that eventually become a solar photovoltaic (PV) module. At one point, the market was so concentrated that 1 in every 7 PV panels was made in just one factory in China. The rapid shift to solar manufacturing in China, across the value chain, was a direct consequence of the government creating subsidies for manufacturing, and encouraging entrepreneurship in the space. Today, as the Chinese manufacturing economy increasingly focuses on serving a domestic market, and US trade policy continues to target products made in China, reliance on so few solar supply chains has started to raise alarms in the US.
On the other hand, China’s cost-saving improvements in manufacturing techniques have brought solar to many more consumers, and accelerated the energy transition, so some researchers are cautious about the recent rush to manufacture more solar outside China. A study in Nature reported that the concentration of solar manufacturing in China saved the US, China, and Europe a combined $67B from 2008-2020, due to enhanced efficiencies.
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Regardless, a “transition away from China” is underway in the US solar supply chain, on the heels of the Inflation Reduction Act (IRA). With far more solar component manufacturing capacity planned than the small amount online today, time will tell if the rush to fill supply chain gaps can be met domestically.
If solar prices are rising from supply bottlenecks for the first time in decades, but now more affordable than fossil fuels, perhaps the perfect opportunity for a competitive, domestic solar supply chain finally greets the US. On the contrary, if the US wants to mirror China’s ascendant takeover of solar manufacturing, the IRA won’t cut it.
The Closer
“MISSING Last seen on the Daintree river 11th Feb wearing nothing but a big smile . 14ft 70 year old male, Grey complexion, Plus size large build. Gummy smile. Answers to the name of Scarface .”
Remarkable story told through IG by David White, crocodile guide