Three years ago, the market value of all publicly traded solar energy companies added up to a puny $1 billion. Today, their value comes to about $67 billion. Wow! That includes, of course, solar companies that have gone public in the last several years, among them Phoenix-based First Solar, Germanyâ€™s Q-Cells, and California-based REC Solar. There’s no doubt that investor enthusiasm is building for solar energy.
That data point comes to me from John Cavalier, an investment banker at Credit Suisse, who spoke at the American Council on Renewable Energy‘s finance conference recently in New York. Heâ€™s a sharp guy, and a big believer in solar. â€œThe opportunity for solar companies is absolutely tremendous,â€ he said. Among the key drivers: the rising price for conventional sources of energy and electricity, government incentives including an aggressive subsidy program in California (where else?), the desire for energy security and, of course, tightening emission controls related to global warming.
On the investment side, here are some of the names who have bought into solar companies: John T. Walton (of the Wal-Mart Waltons), John Doerr of Kleiner Perkins, Ted Turner, Google founders Sergey Brin and Larry Page, Goldman Sachs and T.J. Rodgers (CEO of Cypress Semiconductor). On the customer side, Wal-Mart, Lowes, Google, Home Depot, Starbucks, Johnson & Johnson, Toyota and Target are all buyers of solar energy.
Now, before we get carried awayâ€¦.the industry is not yet at whatâ€™s called â€œgrid parity,â€ meaning that itâ€™s still cheaper to buy electricity generated by burning coal or nuclear power than it is to generate it from rooftop solar panels. Thatâ€™s why much of the domestic growth in solar is coming in California, Arizona, Hawaii, New Jersey and Maryland, all states with generous tax breaks. Even more is coming from Germany, which got the industry rolling a few years ago by requiring utilities to buy renewables. But as the market has grown, there’s little doubt that economies of scale will make solar more competitive over time. That’s the logic behind the subsidies.
To learn a bit more, I visited with Scott Sklar, an industry veteran and an affable evangelist for solar. Scott, who is 56 and sports a world-class beard (see below) got enthusiastic about renewable energy way back in the 1970s, after the Arab oil embargo, when he worked as an aide to Sen. Jacob Javits of New York. (â€œ400 staffers overnight became energy aides.â€) He ran the solar industryâ€™s trade association for 13 years, and six years ago set up The Stella Group, a clean-energy consulting firm. Clients include the department of defense, wind and solar companies, investors, small businesses who want to install solar and real estate developers, including one who wants to build a community in the Bahamas powered entirely by renewable energy.
Scott, who once worked with E.F. Schumacher, the author of Small is Beautiful, says thereâ€™s tremendous opportunity to replace fossil fuels with solar power. More buildings in Tokyo use solar power to heat their hot water than in all of the U.S., for example. More important, two billion people on the planet donâ€™t have electricity; distributed, small-scale solar and wind power may be the best way to get it to them, he says.
Scott puts his money where his mouth is. At his two-story, 880-square foot office in Arlington, Va., he has installed double-paned Marvin windows, extra insulation, an energy-efficient heat pump and compact fluorescent bulbs, which together cut his energy costs by about 30%. (You can read about Sklarâ€™s office in FORTUNE Small Business.) Most of the electricity that he uses comes from solar roofing shingles and a small wind turbine. Electricity is stored in a small battery bank from Gridpoint, one of his clients. â€œThereâ€™s nothing like being able to tell customers that I have already solved the energy problems they are facing,â€ he says.
Iâ€™m hoping to write more about the solar business. Feel free to send me ideas.