Something big and orange has been promising to make the world great again for a while, and people have started to get upset lately because they don’t see it happening. People like us, who question how something so powerful and with such influence around the world hasn’t lived up to our expectations yet. The truth is that it has been actually exceeding our expectations and people have adopted it with open arms. We’re talking of course about the promise of the sun providing clean energy for the entire planet. Take this quote from the “Solar Market Insight Report 2016 Q4”:
Primarily driven by utility PV, the U.S. installed 4,143 MWdc of solar PV in Q3 2016, increasing 99% over Q2 2016 and 191% over Q3 2015. This marks the largest quarter ever for the U.S. solar industry.
Why is it the largest quarter ever? Because this is what the number of solar installations looks like over the past 6 years:
That above chart you’re looking at isn’t cumulative solar capacity, it’s the number of installations coming online every quarter. This is spectacular growth that begs just one question. Why isn’t there any money to be made investing in solar, or to be more specific, why did solar investors lose -82% over the time frame seen above? That’s right. If you had the insight to invest in shares of the Guggenheim Solar ETF (NYSEARCA:TAN) at the beginning of 2010, you would have been rewarded with an -82% loss. If instead, you would have bought a low-risk Dow Jones Index ETF, your investment would be up over +90%! When you look at the chart above, how can this even be possible?
Solar power has evolved far past bulky blue photo voltaic panels, but not everyone has been paying attention. Solar is set to bypass the aging spiderweb of the electrical grid in the same way that cell phones hurdled the landline system, and some companies out there have to be making a killing. As investors, we’re going to get to the bottom of why the Guggenheim Solar ETF (NYSEARCA:TAN) has performed so poorly while solar is taking off in a spectacular fashion. The first place we want to look is to see where all the VC money has been spent on solar over time by looking at all the biggest solar startups out there. There are six solar startups that have taken in $75 million in funding or more and are still operating.
UPDATE 2/22/2017 – These six startups were pulled from the Crunchbase database and sorted by funding.
Founded in 2004, Oakland-based startup BrightSource Energy has taken in a massive $801.4 million in funding to build utility-scale solar power plants across the globe. We first talked about Brightsource more than three years ago when we noted that they don’t actually use solar panels. Instead, they use “solar-thermal” which is 1000s of mirrors that reflect the sunlight to a focal point where all that heat creates steam which in turn generates electricity. This method of harnessing solar energy is referred to as concentrated solar power.
BrightSource is responsible for the world’s biggest solar-thermal power plant, the Ivanpah Solar Electric Generating System in Southern California. Ivanpah is a billion-dollar, 377 MegaWatt facility that is the largest of its kind in the world.
While the installation seen above is powering 140,000 Californian homes (or the equivalent thereof), pundits are saying that concentrated solar is doomed. No, it’s not because the thing has been zapping birds out of the sky with its powerful rays, it’s because of cost issues. Solar panels are just getting too efficient these days and concentrated solar cannot compete on cost. Sounds like a showstopper for Brightsource, at least here in the USA.
Founded in 2011, Mosaic is also based in Oakland, and has accrued $285 million in funding to develop the nation’s leading solar lending platform. We first came across Mosaic 3 years ago and wrote about their crowdfunding platform that let retail investors fund commercial solar projects. Mosaic must have found a more lucrative opportunity, because since then they have pivoted into residential solar financing. The most common Mosaic loan, the PowerSwitch, provides clients with the capital they need to cover the full cost of solar panels plus installation. That means, no money down; just a flat monthly payment. The motivation isn’t just to go green–it’s to save some green, too. Mosaic claims that their clients save on average $30,550 over the total span of their solar panel life.
The process of applying for a loan, connecting with contractors, and navigating installation can be a daunting process. Mosaic claims to offer the easiest experience in the business taking customers from start to finish, offering low loan rates, and reduced fees along the way. The Company raised $220 million of their equity financing in August of 2016 and was expecting to originate $1 billion in solar loans by the end of 2016. It looks like this solar business model is working.
Founded in 2013, San Francisco startup Dividend Solar has taken in $214.5 million to create partnerships between homeowners, installers, and investors, making solar installation a collaborative process every step of the way. The Company partners with institutional-scale investors who are looking for the stable, lower-risk returns that the residential solar lending business provides. Their $0 down EmpowerLoan is secured by the solar energy system as opposed to a lien on the house. Here’s a look at how their loan product compares to a traditional “power purchase agreement” or PPA:
Just like Mosaic, Dividend Solar also took in the lion’s share of their funding ($200 million) in the summer of 2016 showing that institutional investors believe the residential solar lending market has some growth potential in the coming years.
Founded in 2007, Los Gatos startup Tigo Energy has raised $116 million to dish out smart module technology to the solar industry. What’s a smart module? In short, a type of solar panel power optimizer that gives every PV module superpowers.
Here’s why smart modules are a big deal: they increase the efficiency of solar panels, so the cost of solar across the entire supply chain drops dramatically. Tigo’s smart modules work with any inverter, and are cloud connected, so consumers have easy access to cloud-based module-level monitoring.
Yes, it’s just as smart as it sounds. Tigo is definitely not alone in the smart module scene, but it has taken the spotlight with the Tigo TS4 Smart Module. The TS4 platform can be selectively deployed with different functionalities per module at different price points. Tigo is confident that their modules can maximize energy harvest at minimal cost, and guarantees that its product will reduce operation and maintenance costs over a matter of years.
Founded in 2006, Dresden-based startup Heliatek has collected $96.75 million to develop and produce breakthrough solar cells that have the ability to absorb a broad spectrum of light. Heliatek is pushing the limits of what organic solar cells are capable of by developing low cost methods of manufacturing them on flexible polyester film (PET film). We first came across Heliatek 3 years ago and liked that they were targeting the lucrative building-integrated photovoltaics (BIPV) market. Why the hell are we just putting solar on roofs? Why not cover every single square inch of a building that gets sunlight with solar panels, right?
This notion is what drives one of Heliatek’s most exciting developments, HeliaFilm, the world’s first vacuum roll-to-roll solar cells. This film can perform the incredible feat of allowing 50% of sunlight through a window while maintaining a 6% solar cell efficiency.
HeliaFilm keeps the energy conversion efficiency of other more rigid solar cells, even though it’s light, flexible, and less than 1 mm thin. The roll-to-roll manufacturing process is also a huge breakthrough in solar production. Heliatek has also been developing a transparent solar film option, completely changing the look and feel of traditional solar. The Company holds the world record of 13.2% cell efficiency for non-transparent organic solar cells.
Founded in 2008, Massachusetts startup 1366 Technologies has taken in $93.5 million in funding to attack “a 35-year-old manufacturing challenge that has hindered the wide-scale adoption of solar“. The traditional PV wafer making process is cumbersome, expensive and wasteful. Now is the time to change all that and break the molds.
It’s always nice when you go to a company website and their value proposition is just – SMACK – right in front of your face. Here’s what 1366 has placed prominently on the first page of their website:
The silicon wafer is the most expensive part of a solar module, representing nearly 40% of its cost. 1366 Technologies has invented a breakthrough in solar photovoltaics manufacturing called the Direct Wafer® process. It cuts the cost of the standard, silicon wafer by more than half and slashes the energy needed to produce the wafer by more than 60%.
That pretty much says it all, but how are they coming along since we first wrote about them over 3 years ago? As it turns out, they have a steady stream of news releases coming out about their accomplishments, investments, and partnerships, but perhaps the most notable news for investors would be that they sold 700 megawatts of wafers to Hanwha in 2016.
So there you have the 5 biggest solar startups by total funding. In coming articles, we’re going to explore just why it is that the solar ETFs have performed too poorly and try to determine if there are any ways for retail investors to make money instead of getting badly burnt as they have been. We’re also going to see what sort of interesting solar startups have cropped up since we’ve been away.
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