cleantech insights

Who’s Brave Enough to Start a Solar Fund Today?

Sheeraz Haji

The other day an investor was updating us on his fund’s activities. He said their partnership had decided to focus on – you won’t believe this – capital efficient investment opportunities. Shocking! He was then quick to point out that they had only invested in one solar deal, and they were definitely avoiding solar going-forward. Sound familiar?

This conversation got me thinking – is anyone out there brave (or crazy) enough to start a new solar fund today. I’m not talking about folks willing to invest only in the downstream side. It’s well-understood that companies like SolarCity and SunRun are benefiting from cheap panel prices, government incentives, and financing vehicles. Many investors have noticed (for example, Silver Lake Kraftwork’s first investment was in Solar City); SunRun just raised another $60 million. I’m wondering if you know of any investors willing to focus new investments on solar technology (manufacturing) companies.

Why? My basic rationale is that it feels like the pendulum has swung too far to the negative, and there should be a plethora of solid solar companies to invest in at very reasonable valuations. Our i3 database captures almost 1800 solar companies. Yes, I know it’s tough out there for young solar manufacturing companies. Governments have had to scrap or rethink their support for solar (Germany represents the most prominent example); there has been substantial cost pressure from China, the low price of natural gas has proved a challenge and the variable nature of solar has made utility executives hesitant. While the market has grown significantly, solar capacity exceeds the current market demand creating a difficult pricing environment for suppliers. The result is we have seen and will continue to see plenty of failures, recaps, restructurings, bridge loans, and distressed sales of solar manufacturing companies. A certain presidential candidate even came to the Bay Area yesterday to emphasize this point. Reporters have also done a good job of covering the failures (e.g. link to

However, I believe we may be missing the big picture as we focus on the immediate challenges. Here’s why I think a courageous investor would do great investing in solar today:

1)      Governments are still supportive of solar. Saudi Arabia’s new goals are impressive: to invest $100 billion to generate one-third of its peak power from solar. Here in the US, the DOE’s Sunshot program is both aspirational as well as practical (by attacking the soft costs of permitting). Cities all over the world want to be leaders in solar and will find ways to support projects.

2)      Unlike wind, solar’s peak power tends to align with peak demand which means there will be new ways to incorporate distributed generation to help manage peak loads. Dow’s recent push into solar shingles (integrated into residential roofs is just the beginning.

3)      Yes, natural gas prices are low, but they also fluctuate. Solar is not cheap, but once a system is installed, the variable costs are low and predictable. As export markets for LNG evolve, there’s absolutely no guarantee gas prices stay as low as they have been.

4)      As one part of the industry gets commoditized, won’t there be new opportunities for innovation and technology differentiation in other parts? Competing with China to make cheaper cells and panels will be tough. But won’t there be lots of room for new balance of system technology and business models as well as all sorts of distributed generation including BIPV?

5)      Over time, big corporates will invest heavily in solar. We have already seen big companies like Total and NRG make significant moves. Others like GE have made acquisitions and seem to be evaluating the market. But over time, solar markets will be too big and too strategic to ignore.

Have I gone crazy? Or maybe someone out there shares my view that today might be the very best time to invest in solar.

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