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US solar power has become critical to avert a looming energy crisis, the head of a large rooftop solar installer has said, even as shares in renewable energy companies continue to plummet this month.
“I do feel like we are headed to an energy crisis of some sort,” either in the oil business or power business, John Berger, chief executive of Sunnova, told the Financial Times.
“Privately, very privately, some utilities are realising that, to meet the demands of electric vehicles and electrification, power companies like us are necessary. That they cannot do it all,” Berger said.
Sunnova’s share price closed down 5.9 per cent on Friday to $8.67, its lowest level since March 2020. Other big solar companies Sunrun and SunPower closed at lows not seen since the initial days of the Covid-19 pandemic.
“The share price is bad,” Berger acknowledged.
The tumble comes as higher interest rates have driven up the cost of renewables financing and threaten to undermine the price cuts from the subsidies in President Joe Biden’s climate law, the Inflation Reduction Act.
Houston-based Sunnova partners with solar panel companies and then leases equipment to homeowners, or sells to homeowners in power purchase agreements. It also securitises solar loans and sells them to investors.
In September, the US energy department finalised a $3bn partial guarantee for Sunnova’s solar loans. On Thursday, Sunnova priced $244mn of solar notes, its first with the DoE’s partial guarantees.
Berger said shareholders have not appreciated Sunnova’s ability to increase prices as the costs of solar equipment fall. In the third quarter of 2023, North American solar prices rose 4 per cent from the prior three months and were up 21 per cent year-over-year, according to a report from pricing provider LevelTen.
Prices for solar components have fallen from their record highs last year. Polysilicon spot prices dropped about 70 per cent from mid-April to mid-July, the energy department said in an August report. And solar module prices have fallen as well amid oversupply and slumping prices for certain commodities, it said.
Lower solar equipment costs have helped offset higher financing costs, Berger said. Simultaneously, the company is able to raise its prices for solar power.
Rooftop solar is expected to grow just 9 per cent this year, down from record annual growth of 40 per cent last year, as the higher cost of financing squeezes homeowners out of the market and incentives in California, the largest market for rooftop solar, are slashed, according to a report from Wood Mackenzie and the Solar Energy Industries Association. The report said the segment would not recover to the same levels of growth as previous years.
“People are reassessing project economics,” said Michelle Davis, global head of solar at Wood Mackenzie, an energy consultancy.
“Interest rates increase just the general cost of capital . . . If your costs go up, then that production tax credit doesn’t go as far.”
The troubles facing the residential solar industry highlight the conflicting goals of the Biden administration, as the Federal Reserve’s effort to tame inflation by raising interest rates risks undermining the US plan to rapidly deploy renewable energy as it increases financing costs.
Rooftop solar, compared to utility-scale solar, is more likely to be financed by loans and is vulnerable to interest rate increases. The technology gives homeowners more control over their power sources, relieves stress from the grid, and can help speed up the pace of renewable deployment due to faster permitting timelines.
“The macroeconomic challenges in the economy have made the residential solar business grow slower this year than last year,” said Peter Faricy, chief executive of residential solar giant SunPower, which reported a net loss of $30mn last quarter and lowered its 2023 forecast by 20 per cent.
“We would all like to see it grow faster, not just because we’re in the business of it, but because of the impact it has on the environment.”