Page 52 - North American Clean Energy November December 2015

Money and Industry

Focus Will Keep the

Light Shining on

Solar Energy

by Michael Horwitz

here's promise and potential for solar energy, thanks to a recent wave of consolidation and reassessment by

other energy companies about the role of clean technology. A combination of consolidation trends and a growing

concentration of capital focused on this industry should herald a period of meaningful change and considerable
growth.

Understanding the current state of the solar market requires a little exploration of its with customers, and that in turn, is helping more mainstream utility companies see how
historical antecedents, looking back a decade or so to 2004-2005, when emerging energy they can take a similar approach.
technology companies were generating excitement, but not yet a lot of business. Seeing hese are the trends to encourage. he combination of capital to provide for product

the potential, the capital markets were open, but the end users were not yet there to development and customer engagement, and the presence of, not only, dedicated solar
generate real scale.
companies like the Big Five, but also multinationals who can move quickly to large scale
hen in the inancial crash of 2008, when the markets feared that the world was coming operation make this a promising investment environment.
to an end, energy prices collapsed, and all of these new technologies, many of which were For example, last year, one acquisition looked like the simple purchase of a bill-

not yet proitable, came down along with the rest of the market. Tech companies were processing company for commercial industrial customers. But, what it really amounted
ready to abandon their investments and the sector altogether.
to, was instant access to millions of customers looking for energy management solutions,
In the last couple of years, though, there's been a growing recognition that the strategic where solar can play a signiicant role. Other companies, known for their work in other,
and regulatory environment is of great signiicance and will reshape the entire sector.
energy-related businesses are buying solar companies as a means to spearhead their own

he kind of companies that have performed well in this latest phase of the industry's foray into residential solar power distribution.
development are the specialized capital partners, known as “yieldcos.” hey will play a Looking at these three principal paths to an expansion of the industry – the rise of
major role in helping technology irms achieve scale, and transform the utility industry.
dedicated yieldcos to ensure access to capital, consolidation from a fragmented market into
Publicly traded yieldcos provide inancing for emerging technologies and distributed a sector coalescing around the Big Five solar companies, and the steady increase of large,

generation, such as small-scale solar production that puts the energy it generates back on multinational corporations seeing the viability and value of increasing their own roles
the wider power grid. As established sources of capital, they allow the industry to move in the sector – there's a positive conclusion to be drawn. his is the
away from the transient nature of venture capital or, on the public company side, large beginning of a trend, and the start of the next wave of IPO and capital
mutual funds that may have considered this an investment sector that simply didn't pan formation that will transform this massive industry.

out as well or as quickly as expected. What industry watchers are looking for now, are large
companies inside and outside the energy industry who want to bolt on solar producers
Michael Horwitz is a Managing Director in Baird’s Global Investment
to get into new markets to reach consumers in a diferent way. Now this consolidation is Banking group.
evident, it likely means a few exciting years of improved performance and an array of new

products are on the horizon.
Robert W. Baird & Co. | www.rwbaird.com
he next several years are going to be dominated by a set of players labelled the Big
Five: SolarCity, Vivint, NRG, Sungevity, and Sunrun. hey've positioned themselves to be
buyers so they can scale up before the federal Solar Investment Tax Credit expires at the

end of 2016. hey are adding new technologies, acquiring customers, and making a close
connection to residential and industrial customers to then layer on new solutions and new
opportunities to present to the customer. hey’re thinking about multi-year relationships

52 nacleanenergy.com
NOVEMBER/DECEMBER 2015