Green Wombat

First Solar: The Google of Green Tech?

Solar panel maker First Solar’s Google-like stock price — shares soared 34 percent today to close at $224.43 — is either a sign that green tech is getting bubbly or that investors genuinely see a huge potential market in renewable energy.

Probably a bit of both. The Phoenix-based company makes thin-film solar modules for use in solar power plants or in rooftop arrays for commercial buildings. While thin-film offers lower efficiency than traditional silicon-based solar modules, it can be produced cheaper, and First Solar (FSLR) has been rapidly ramping up production. The trigger for today’s investor love was First Solar’s third-quarter earnings report on Wednesday that showed revenue spiked 106 percent to $159 million from the previous quarter and up a whopping 290 percent from a year ago. First Solar — fun fact: it’s biggest shareholder is the estate of Wal-Mart (WMT) heir John T. Walton  — also upped its 2007 revenue forecast to $480 million to $485 million from an earlier estimate of $400 million to $415 million. The stock fell back to $206.85 at the close of trading Friday.

Investors were prepped for by recent announcements from First Solar that the company would double its manufacturing capacity by the end of 2009 and that it had signed new deals with customer. Much of First Solar’s production goes to solar companies in Germany, where generous government subsidies have made the a country solar hotbed. First Solar also is benefiting from being one of the first new-generation thin-film solar companies to market. A host of thin-film startups like Nanosolar and HelioVolt — they also minimize the use of expensive silicon but use a different technology — have scored hundreds of millions of dollars in funding from venture capitalists but have yet to produce products.

Savvy investors also know that the U.S. market is poised to take off, particularly for utility-scale solar projects.  Half the states now have imposed so-called renewable portfolio standards that require varying percentages of utilities’ electricity be obtained from greenhouse-gas free sources. In California, for instance, in addition to the state’s global warming law that will cap greenhouse gas emissions, portfolio standards oblige utilities like PG&E (PCG), Southern California Edision (EIX) and San Diego Gas & Electric (SRE) get 20 percent of their power from renewable sources by 2010 and a third by 2020. They’re going to need a lot of solar power plants to meet that mandate.

That explains why other solar module makers have experienced a similar run-up in their stock. For instance, SunPower (SPWR), which makes solar panels used in residential and commercial arrays as well as in photovoltaic power plants, has seen its shares spike 81 percent over the past three months to close at $141.93 on Thursday. That’s a 322 percent premium over what the stock was trading a year ago.

Berkeley approves first-in-nation solar homes financing plan

The Berkeley, California, city council Tuesday night greenlighted a proposal to pay for the installation of solar panels and solar hot water systems for any homeowner or commercial building owner in a move to dramatically boost local use of renewable energy. Property owners would retain ownership of the solar systems, paying back the cost over 20 years through an assessment on their annual property tax bill.

“We’re off and rolling,” said Berkeley Mayor Tom Bates after the city council unanimously gave initial approval for the Sustainable Energy Financing District.

Cisco DeVries, Bates’ chief of staff who devised the municipal solar financing proposal, said the city hopes to start signing up homeowners by June 2008. But first it must hammer out the legal and financial details. The city will likely float a bond to obtain millions in bank financing to pay for homeowners’ solar arrays.

“The banks and others have been very interested in this,” said Bates. “The banks that Cisco and I have had conversations with have been very encouraging.”

City manager Phil Kamlarz said Berkeley should be able to obtain a lower interest rate than commercial home equity loans as the property tax assessment will act as a lien, putting banks first in line to collect in the event a property owner defaults.

“We’re looking at what’s the benchmark to make this thing work and right now its less than 7.5% so we’re going to try to make this less than 7.5%,” he told council members.

A property owner would choose a solar installer from a city-approved list. It appears to be a win-win situation solution to the high cost of going solar. The homeowner immediately begins saving money on electricity bills without incurring the $15,000 to $30,000 upfront cost of installing a solar system. They also usually get a boost in their property value from the solar array and the property tax that pays for the system is deductible on their federal income tax return. When the house is sold the solar array and the tax assessment remain with the property, passing to the new owner and thus further diluting the cost of the system.

Bates said other cities have approached him about replicating the Berkeley initiative. The city has won the backing of utility PG&E (PCG) and the solar industry has, not surprisingly, been enthusiastic about a program that promises to expand the market for solar panels made by companies like SunPower (SPWR) and Sharp as well give installers more work.

“This is going to create green collar jobs,” said Bates.

Berkeley’s left-wing politics often puts it on the fringe of the U.S. mainstream but when it comes to environmental policies, the Bay Area city has led the way. Berkeley, after all, was the first city to adopt curbside recycling decades ago, now common even in some of the reddest of red states.

“The power of this is really expanding it beyond Berkeley,” noted one council member.

PG&E's latest Big Solar power deal

PG&E this morning finally consummated a long-expected solar power deal with Silicon Valley startup Ausra, agreeing to buy 177 megawatts of green electricity generated by a solar thermal plant to be built by the company on California's central coast. As Green Wombat reported Friday, Ausra -- backed by marquee venture capitalists Vinod Khosla and Kleiner Perkins Caufield & Byers -- has filed a development and licensing application with the California Energy Commission for the project, called the Carrizo Solar Energy Farm.

With its latest power purchase agreement, PG&E (PCG) has committed to buying more than 1.2 gigawatts of greenhouse-gas free electricity from three large-scale solar power plants -- enough to light nearly a million homes. Construction of the Ausra power plant is expected to begin in 2009 and go online the following year. Terms were not disclosed -- they never are in power purchase deals -- but Ausra revealed in its Energy Commission application that the agreement runs for 20 years. The company, which decamped to Silicon Valley from Sydney last year, claims that its Compact Fresnel Linear Reflector system -- long flat mirrors that focus the sun's rays on water-filled tubes to create steam that drives electricity-generating turbines -- will produce power at costs competitive with natural gas-fired plants. A pilot power plant (Ausra photo above) is up and running in Australia. The Carrizo solar farm will be a boon for the San Luis Obispo County economy, employing 350 workers during construction and creating 100 permanent jobs, according to Ausra.

Carrizo will be the company's first solar power station in the U.S., though in September Florida utility FPL (FPL) announced it would build 10-megawatt demonstration plant using Ausra's technology as well as a 300-megawatt version if all goes as planned. Ausra executives have told Green Wombat they anticipate rolling out enough solar farms to produce at least a gigawatt of electricity over the next few years.

That might be taken as so much Silicon Valley hype, and only time will tell if the technology lives up to its promise, but regulatory and economic trends indicate that deals like the PG&E-Ausra agreement is just the beginning of a wave of Big Solar projects. California's investor-owned utilities -- PG&E, Southern California Edison (EIX) and San Diego Gas & Electric (SRE) -- face a 2010 deadline to source 20 percent of their electricity from renewable sources, with the ante rising to 30 percent by 2020. Those utilities are actively negotiating gigawatts of solar power deals, sources tell Green Wombat. Meanwhile, California-based solar power companies like Ausra and BrightSource Energy, as well as a host of overseas competitors, are moving to license prospective projects, confident they'll secure power purchase agreements with utilities as well as the financing to build their solar power plants. That Morgan Stanley (MS) has quietly invested in BrightSource -- the company is negotiating a 500-megawatt agreement with PG&E -- is but the latest sign that Wall Street is looking to profit from Big Solar.

Even California's green governator weighed in on the PG&E-Ausra deal. "Today's agreement between PG&E and Ausra highlights how clean energy will create jobs in California while delivering a reliable source of renewable energy," said Arnold Schwarzenegger in a statement. "I'm pleased to see California companies rising to the challenge of AB 32, California's historic initiative to reduce carbon emissions and combat climate change. Clearly, California continues to lead the nation in clean energy research, development and generation."