In the following interview, Sage discusses Gestamps U.S. solar plans until 2015, outlines the companys competitive strategy in light of the current turbulent market conditions, looks at the falling installation costs, and provides his take on why the microinverter industry still has some way to go in terms of its commerciality.
What is the current status of Gestamps U.S. photovoltaic project pipeline?
Our U.S. pipeline is actually over 1.5 GW, to be implemented over the next four to five years. We have a strong presence in Fresno, California, as well as on the East Coast, in southern California, and in the Inland Empire of California.
In order to achieve our goal, weve opened a project development office in Fresno and have a lot of greenfield pipeline. We have contracts and leased land tied up for around 400 MW in Fresno County. We like to think that all of it will go through. We feel that were going to get a very strong market out of Fresno. Were continuing to work with utilities in getting power purchase agreements negotiated and signed.
We also have a development team that weve partnered with called 8minutenergy. With them, we have 355 MW with all the land tied up and interconnection agreements in place down in the Imperial Valley of California.
It just depends on the timeline of getting the power purchase agreements (PPAs). Some of them are a little bit longer range forecast, because it takes a while to upgrade transmission systems for utilities. Were hoping to get one 50 MW project online by 2013 down in Imperial Valley, however.
Can you discuss the permitting process?
Each U.S. county is different in the way that they permit, and how we have to go about permitting. But in general, like for Fresno County, weve had good communication with their building and planning department from day one, and now have projects that are getting to the final stages of approval with them, in terms of site plans and decommissioning reports.
Several communities are a bit sensitive to companies development plans for solar plants, they want to make sure that there is a plan in place for it to be torn down at the end of the life cycle. Fresno, for example, has a 20 year old solar project from PG&E thats just been sitting there non-operational for years, and its a bit of an eyesore for some of the residents. So theyre extra sensitive when it comes to that, and we have to work with them and make sure that they know we are going to take care of it.
Have they been responsive to Gestamps efforts?
Fresno has been very responsive. Weve got some conditions of approval for a couple of projects right now that were finalizing and should be going into construction here, hopefully by the end of the year, or the first quarter of 2012. We do have purchase agreements in place and also interconnection agreements, so were working with them from the ground level, all the way up.
Then in southern California, weve got some conditions of approval where we have to take into account environmental aspects, such as burrowing owls. Here, we have to have environmental mitigation reports and work with the Department of Fish and Game. As long as you have a plan in place, and work with, ideally, local environmental consultants, they work with you, but it is costly, and thats just to get your grading and building permits to start mobilizing. There are a lot of unknowns that present themselves that we have to take care of.
What about permitting timelines?
The length of time to get conditions of approval is roughly three months, from really starting the plan of your project. Then you can start detailed engineering. From the start of engineering to receiving building permits that can take, from when you submit your engineering plans to when you get a building permit from a county, about four to six weeks. Theres a lot of back and forth discussions, and almost all counties are understaffed.
However, the project needs to keep going. We have timelines as far as financing. At the end of this year, for example, were looking at the end of the 1603 federal tax grant and, as has been reported, for Department of Energy (DOE) loan guarantees, there are timelines to get good and cheap money, and to have a better value for your project.
For us, weve partnered with a couple of different people. I cant go into specifics, but for quite a few of the projects, weve taken over ownership, so we do a lot of the financing ourselves on our balance sheets and so that allows a little bit of flexibility in terms of some timelines. Also, at the end of a project, we work with a bank or financial institute to wrap the project up.
What are installation costs like?
As we know panel prices have dropped significantly. The overall cost to install has dropped as well, because all the smaller component costs are dropping, and the installers are becoming increasingly educated with the installation process. Percentage wise, costs have fallen by between 15 and 20 percent easily, taking out panels.
We also continue to push for lower and lower costs, because were fighting against strong competitors. I just saw in Germany that theyve got rooftop installations down to USD$4 per watt, and thats just because of their experience and the time that theyve been installing those systems, – theyve perfected the materials and the labor. I feel that that same thing is happening in the U.S. As we get more installations, and as we export more solar, overall costs continue to drop.
Can you give me a concrete example of current costs?
Not really! What we do is send out requests for proposals (RFPs). For example, we sent out a RFP for a 50 MW project in 2010, and we were getting costs back, from strong companies, that were for between USD$3.70 and $5 dollars a watt, including panels and everything. Now were seeing those prices being significantly beaten by two MW projects.
How has Gestamp dealt with the turbulent market conditions this year?
Its been a trying year. We had lofty goals for Gestamp Solar USA to get megawatts in by the end of the year and its been difficult. Weve faced several challenges with the permitting process, working with utilities and the recent news of a couple of the DOE guarantees that have gone awry. However, for the most part, weve been very solvent in continuing our support and financing for several projects across the board.
Will the company be affected by the end of the 1603 treasury grant?
Its been on our radar: weve definitely recognized its effect and were doing everything we can to safe harbor projects. We planned and anticipated this last year and we got the fortune to get one more year, so its nothing new. But of course like everybody, we have to be that much more diligent and aware of projects that we look at acquiring.
How important is it to obtain an extension?
Its nice to have that extra capability and depreciation benefits, but I strongly feel that the solar industry can survive without it. I mean, weve seen such a drop in prices for solar modules and equipment, so theres been an adjustment already.
What about technological development? What is Gestamps main focus?
Weve been mainly focusing on single axis trackers, and some double axis trackers, in order to maximize the benefit from the sun. Weve been working with manufacturers, like Opel Solar, Hiasa and Ercam, on improving the installation process, and making sure the trackers meet all of the counties entitlement requirements, as far as base flood elevation goes. Were additionally looking at some of the details on the motors and how they operate, and in their flexibility in different size and type of parcels.
In terms of panel manufacturers, weve been working with a company called Solaria, which has a low concentration CPV panel, but with only a tracking device. Its been interesting working with them and were starting to get some data back from an installation and seeing how the modules are performing. The installation is in medium solar radiation and were going to see how it works directly compared with a standard polysilicon type panel, and see how the output correlations are going.
Microinverters: are they set to take over the inverter industry?
Weve been evaluating them, but we havent used them on any of our projects. I have two concerns: one is cost theyre still pretty costly compared to centralized inverters; and two is the mean time between failure (MTBF). If we have a plant with 20,000 panels, which is about a four MW plant, then were going to have 20,000 inverters out there. Theres more chance that you are going to have of one of those failing in a shorter time than you are going to be with having eight inverters out there, for example.
Were doing test cases right now with AC to DC converters, which is interesting, but we have to drive the costs down for balance of plants. Therefore, microinverters are a technology to look at in the future and it looks really good for smaller installations with shading concerns, but for bigger ones, were sticking with the standard inverters.
Do you have specific equipment manufacturers you always use?
Weve worked with long term industry players such as Trina, Yingli and Hanwha SolarOne within the U.S. and Europe, but a lot of our equipment comes from our long-standing relationships from our base headquarters in Spain. For panel manufacturers, we work with several in the form of a bidding process and then with other manufacturers, such as with combiner box and transformers, we work with them in a technical bidding process, and a financial bidding process.
What are the key strategies for moving forward into 2012?
Utilizing our experience, executing our timelines, and leveraging our long-standing relationships with equipment suppliers. Understanding all the challenges that are unique to the U.S. market is also crucial.
Rusty Sage has worked for Gestamp Solar since 2009. Before taking on his current role, he worked as both a system engineer, and civil engineering consultant. Having studied Mechanical Engineering at CSU Chico, he is also a four time world champion kayaker.
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