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In May 2014, Barclays downgraded its rating on U.S. electric utilities, citing fears that growth in the PV and energy storage market will drive grid defection. The Barclays credit strategy team wrote:
"Over the next few years, however, we believe that a confluence of declining cost trends in distributed solar photovoltaic (PV) power generation and residential-scale power storage is likely to disrupt the status quo. Based on our analysis, the cost of solar + storage for residential consumers of electricity is already competitive with the price of utility grid power in Hawaii. Of the other major markets, California could follow in 2017, New York and Arizona in 2018, and many other states soon after… We see near-term risks to credit from regulators and utilities falling behind the solar + storage adoption curve and long-term risks from a comprehensive re-imagining of the role utilities play in providing electric power."
Barclays paints a dire picture for utilities and a rosy one for PV and energy storage developers. But Barclays' analysis uses a market valuation technique that doesn’t currently apply in most markets under present policies.
Case in point, Hawaii uses net metering, which provides a strong disincentive for energy storage. On one hand, Energy storage developers like SolarCity (NASDAQ: SCTY) and ZBB (NYSE: ZBB) should do more research before entering this market. On the other hand, the situation for American utilities in general (NYSEArca: XLU) may not be as dire as Barclays analysis leads one to believe—at least not due to the adoption of PV and ES.
This short analysis highlights the danger of using the wrong PV and ES valuation approach to draw conclusions concerning the near term business case for PV and ES. (See the full article here.)
Regulation – China kicks of energy 13th Five-Year Plan meeting: The official communique listed a number of green related high-level themes for the 13th Five-Year Plan, including low carbon, energy saving, sustainability, and clean energy. Market-oriented reforms weren't mentioned prominently. (China Power, in Chinese)
Regulation – WSJ reports on anti-corruption drive’s relation with power reform: The removal of energy officials could be related to overcoming stubborn resistance to energy reform, especially at the local level and at State Grid. (WSJ, in English)
Solar – West China expected to vastly exceed 2014 solar plan targets: Total solar installations in West China (Xinjiang, Qinghai, Gansu, Inner Mongolia) could reach 8 GW, over three times the announced plans of the central government. Qinghai has approved projects of 1.2 GW for 2014, over double the theoretical limit of feed-in tariff subsidy for 2014. (BJX, in Chinese)
Wind – XEMC begins offshore wind turbin installation in Fujian: XEMC, which has a manufacturing base in Fujian, has begun installation of 10 units of 5 MW turbines in Pinghaiwan, Fujian. The 50 MW project is budgeted for RMB 1.22 billion. (Windpower Monthly, in English)
Wind – 300 MW Heilongjiang project approved: Ruihao Group has received approval for a 300 MW project at Ladanpao in Heilongjiang. (Windpower Intelligence, in English)
Efficiency – China LED firm snags US$ 80 million in VC funding: Lattice Power claims that it has a high-efficiency, low cost LED. GSR and KPCB joined the round. (Dow Jones, in English)