Solar Roundup: OneEnergy Funding, SolarCity Bonds, Mariners, Natural Gas

The business of solar power continues to attract more money as innovative companies refine ways to finance and connect solar projects to the electrical grid.

OneEnergy Renewables, a Seattle company developing mid-sized solar power projects, has raised $5 million in Series B funding, as residential solar giant SolarCity announced plans to sell solar-backed bonds to individual investors.

Also, Kirkland, WA-based Clean Power Research introduced new software that promises to make the process of applying to connect solar to the electricity grid more efficient. Meanwhile, the Mariners have added a solar array at their Arizona spring training facility (pictured at top).

These companies are helping bring down the cost of solar power, but solar continues to face stiff competition displacing power generation from low-cost natural gas prices in the U.S. A new report out Wednesday led by researchers at Pacific Northwest National Laboratory finds that the global abundance of natural gas—which produces half the greenhouse gasses of coal per unit of energy—offers little chance of slowing global climate change without other policies. That’s because low-cost gas is predicted to displace low-emissions energy technologies like renewables and nuclear in addition to coal; increase energy consumption; and contribute the potent greenhouse gas methane to the atmosphere as it is produced and distributed. (The report appears in the journal Nature online.)

Climate-conscious investors Ecosystem Integrity Fund led the funding round for OneEnergy, with individual members of Seattle cleantech-focused angel group Element 8 also participating. The company, formed in 2009, has raised a total of about $8.3 million and plans to use the new funding for hiring and expansion of its so-called Purpose-Built Solar sales model to more customers and regions, and for additional project development. OneEnergy plans to go from 11 employees to 15 or 20 in the next six months.

Co-founder and CEO Bryce Smith says OneEnergy, which is first and foremost an early-stage project developer, has dozens of projects totaling hundreds of megawatts of solar capacity in its development pipeline and expects to see construction begin on at least some of them in 2015. OneEnergy focuses on distributed utility-scale solar projects, ranging in size from 2 to 60 megawatts. (The capacity of the average utility scale wind turbine, by comparison, is about 2 megawatts.)

Rendering of a stand-alone solar project.

Rendering of a stand-alone solar project.

These stand-alone projects cover acres of land, connect directly to the electricity grid, and provide wholesale energy, as opposed to smaller rooftop and carport projects that deliver power on the customer’s side of the electricity meter, offsetting retail energy usage.

Smith says OneEnergy is trying to serve corporations and large institutions such as universities that consume lots of energy and want to help mitigate costs and carbon emissions with solar power. These customers may not have space on their facilities that is suitable for solar or large enough to accommodate a solar installation that would make a meaningful dent in their energy portfolio. Rather than own the facilities themselves, these customers can buy the energy output from the solar projects.

OneEnergy identifies promising development sites, accounting for the usual factors like annual sunshine, incentives, land availability and value, access to transmission capacity, and more. It secures land, permits, and connections to the electricity grid—reducing risks associated with the project at each step along the way—and then works with third-party solar engineering and construction firms to finance and build the projects.

While lots of project development companies are doing the same thing across the U.S., OneEnergy is trying to differentiate itself by also securing customers for the projects—its Purpose-Built model.

Smith

Smith

“As we take the risk out of projects, one of the biggest risks is finding a home for the power,” Smith says.

It is becoming easier each year to sell the benefits of solar, he says. Total costs for utility-scale solar systems dropped more than 2 percent to $1.69 per watt from the first to second quarters of this year, according to GTM Research, continuing a long downward price trend helped by nearly every piece of the supply chain, from solar modules to construction, and, more recently, financing—part of the so-called soft costs the industry has focused on reducing.

“[Solar] is certainly increasingly cost-competitive with grid electricity and the costs have obviously come down substantially over the past few years, not only hardware and installation costs, but also financing costs [which] have come down substantially even in the last six to 12 months with some of the new yield cos on the market, and solar-asset backed debt instruments,” Smith says. A large solar energy company may spin off their completed projects into a separate company—a yield co—that has a significantly lower risk profile because it essentially owns a reliable, long-term operating asset with contracted income streams to support annual dividends to shareholders. Examples include TerraForm Power (NASDAQ: TERP), the yield co of SunEdison; NRG Yield (NYSE: NYLD), and Abengoa Yield (NYSE: ABY).

The solar debt instruments are gaining momentum, too. On Wednesday, SolarCity (NASDAQ: SCTY), the residential solar installer backed by Elon Musk that has been an innovator in solar financing, announced plans to offer up to $200 million in bonds backed by income from its customers’ monthly payments. The San Mateo, CA-based company is targeting individual investors with the bond offering with bonds available in sums as small as $1,000. SolarCity says bonds will mature in one to seven years, paying up to 4 percent interest.

These financing trends are helping companies like OneEnergy attract customers with the prospect of immediate savings from solar power. “That’s a real change. We can offer savings from day one, which was not the case a few years back,” Smith says, adding that the savings will only increase over the life of a solar project as average electricity prices increase.

Companies across the solar industry spectrum are working on ways to continue driving costs down. Clean Power Research is selling its PowerClerk Interconnect software to move the heavy load of paperwork needed to apply for connection to a utility power grid online —another soft cost of solar. Clean Power Research, citing the Solar Electric Power Association’s research, says an online tool for processing interconnection request can double the speed that utilities handle these applications compared to document-based methods.

Mariners players and fans heading to spring training next year will see a new 345 kilowatt solar array on the roof and carport at the team’s Peoria, AZ, facility, shared with the San Diego Padres. The just-completed system fits with the team’s broader sustainability goals, which include a league-leading recycling program and efficiency improvements that have reduced natural gas and electricity usage. Healthy Planet Partners developed the project which was built and financed by Kyocera Solar.

No guarantee that the new solar power will extend to the Mariners offense in 2015. But here’s hoping for a sunny pre-season.

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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