Surveying the Solar Landscape

Sponsored by Deloitte

According to a recent report from the Solar Energy Industries Association, US solar and storage companies have announced more than $100 billion in private sector investments since the passage of the Inflation Reduction Act in August of 2022. So while there's certainly momentum (and capital) flowing in the right direction for solar, the forecast is not entirely sunny.

Daniel Cruise, partner and Head of Renewables at Lium Research, joins the show to discuss which segments of the solar sector are looking bright ... and which segments might have a cloudy future.

From Deloitte

Power, Utilities & Renewables services

Start charting your decarbonization path today

Discover what’s sustainable, renewable, and possible in the future of energy. Deloitte’s Renewable Energy Seminar is back September 27-29, 2023! Register today!

Sustainability SmartPod episode featuring Deloitte's John Mennel

Highlights from Daniel Cruise

Current trends in the renewables sector - (5:06)
Clouds in the forecast for residential solar - (6:46)
Utility-scale solar looking bright - (11:36)
SOLARSAT insights - (14:11)
Battery storage moving slow, but remains crucial - (17:18)
Big-picture risks for the renewable sector - (18:09)
Daniel's bold predictions - (19:56)

More resources from Lium Research

Utility-scale solar analysis

Residential solar analysis

Daniel's previous appearance on this podcast

Learn more about SOLARSAT from Lium Research

Sign up for the Renewable Energy SmartBrief

Follow the show on Twitter @RenewablesPod

Transcript

(Note: This transcript was creating using artificial intelligence. It has not been edited verbatim.)

Sean McMahon  00:00

This episode of the Renewable Energy SmartPod is brought to you by Deloitte. The way we power the world is changing. And Deloitte is helping leaders amplify innovation, inspire, change, and illuminate a cleaner, brighter future of energy. Explore how Deloitte can help your company create a more sustainable net-zero future. To learn more, click on the Deloitte links in the show notes. 

This episode is brought to you by AI Impact. AI Impact is a new virtual event that will separate hype from reality and deliver insights into how industries and business functions will be enhanced and tested in the age of AI. Featuring thought provoking keynote speeches, and exclusive discussions with world renowned AI experts. This event will provide the knowledge, context and inspiration you need to navigate the complexities of AI. Participants will learn how to identify opportunities, address issues, and make informed decisions that will leverage AI to its fullest potential. AI Impact, which is brought to you by SmartBrief, is taking place September 27 and 28th. To learn more about AI Impact or to register to attend the event. Go to ImpactAISummit.com. That's ImpactAISummit.com or click on the link in the show notes. 

What's up everyone, and welcome to the Renewable Energy Smart pod. I'm your host Sean McMahon, and today we're going to be taking a close look at the solar industry. According to a recent report from the Solar Energy Industries Association, US solar and storage companies have announced more than $100 billion in private sector investments since the passage of the inflation Reduction Act in August of 2022. So while there's certainly momentum and capital flowing in the right direction for solar, the forecast is not entirely sunny. 

In a few minutes, I'm going to be joined by Daniel Cruise. Daniel is partner and head of renewables at Lium Research. He's been on this show once before, but it's always nice to check in periodically with him and the team at Lium because they are a market intelligence firm that keeps a close eye and a satellite lens or two on the energy industry. Daniel and I are going to talk about trends he is seeing in both the residential and utility scale solar sectors. 

In case you missed it, be sure to check out the last episode of this show. Amid the push to quote electrify everything, Terry Collier from 3M stopped by to walk us through the importance of optimizing the existing grid. So we all can get the most power out of the infrastructure we have right now.

 Looking ahead, I'm going to be joined in a couple of weeks by Harald Overholm, the CEO of Alight. Harald and the team at Alight are based in Stockholm, Sweden, so we're going to get his perspective on what organizations across Europe are doing to accelerate the transition to solar. 

And looking even farther out on the schedule. We've got some great shows coming up that will focus on Climate Week and COP28. I can't wait for those. But for right now let's get things started with Daniel Cruise from Lium Research. 

Hello, everyone, and thank you for joining me today. My guest is Daniel Cruise. Daniel is a repeat guest to this podcast. He and his co-founder Joseph Triepke founded Lium Research. Daniel, how're you doing today?

Daniel Cruise  03:35

Good. How are you, Sean? Glad to be here.

Sean McMahon  03:37

Yeah, it's good to have you back on. It looks like you adjusted with me many change. You guys are co founders and partners. But now you're the head of renewables for Lium. So what was driving that split of duties?

Daniel Cruise  03:47

You know, I think I think it was just more of a focus of into renewables and wanting to be more dedicated to the space. And I think we we kind of see the writing on the wall and know that renewables is where we need to be. And so we wanted to have one of us dedicated to renewables and one dedicated to shale. And so I raised my hand and and here we are.

Sean McMahon  04:08

Well, I guess, obviously, that makes it the perfect guest for this show. Like I mentioned, you've been on the show in the past. So if listeners want to go back and listen to that they can but just in case, they haven't tell us a little bit more about what you're the team at Lium do.

Daniel Cruise  04:18

So we are a research firm, we are focused on institutional investors. And what that means is when we're researching topics or the industry, we have institutional investors in mind. And so we have them in focus. And so part of that research is making sure that we're not just listening to what companies are saying and what anecdotes are saying we're also leaning on a heavy base of data and historical and taking that historical data and making predictive research out of it and making it something that investors can use something that corporate development teams can use something that's not just hey, this is the hearing Now, how do we use this data going forward? So in a nutshell, that's that's kind of what we do at Lium.

Sean McMahon  05:06

Yeah, I gotta say, I appreciate the market insights you all share. I'm on your email list. And I advise any listeners of the show to try and sign up for that. It's a lot of actionable Intel, like you said. So yeah, what are you in the team and Lium finding in the in the renewables market space these days? What kind of trends Have you spotted?

Daniel Cruise  05:22

There's a ton going on right. Now, as you can imagine, Ira really changed the game. For a lot of people, certainly a lot of investor interest out there. As we go into the different verticals, I would say, right now, we're most heavily focused on the solar space and within the solar space, kind of splitting our time between residential, solar and utility solar. And within those, we're really trying to get a handle on the here. And now, for instance, what's happening July, August, September, in both residential and utility. And as I think about those two spaces, I see them really going in two different directions. So on the residential side, I think there's a lot of challenges that we've seen lately, we can probably get into some more of those in detail, there's a lot of what the data is telling us now is that it's tough out there, activity is not going up, it's actually going down. So it's a really, really tough market. On the total flip side, almost exact opposite as utility solar and the utilities, solar market, we're seeing that market up into the right, it's certainly the best we've seen it, covering this. And I would argue it is the most active it's ever been in the United States. So those are kind of broadly what we're looking at and seeing.

Sean McMahon  06:46

So I mean, I, I could take a guess what's driving those kind of opposite trends. But you're the expert here. So tell us why is why is the residential side having a tough moment. And obviously, on the utility side, there's more to it than just the IRA. So walk us through it.

Daniel Cruise  07:00

Yeah. So on the on the residential side, what you have not going for you are not going for it is. First and foremost, this will be a surprise to probably no one here, but California ne M and specifically 3.0. It started officially on April 15 of this year. And what it did was changed the rules on solar in California in essentially gave less of an incentive to California homeowners. And so that market is a huge market for residential solar before to give you a sense before California NEM 3.0 kicked off, it was probably 40% of the entire United States in terms of home solar. So huge market, since April 15, we've seen permits in California, dropped almost 60%. And so since that time, there's probably 60%, fewer, two thirds of the people that were getting, getting solar no longer getting it on a on a weekly and monthly basis. So that puts you down probably 30 or 40% year over year in the by far largest market in the United States. So that's California, and then some other things also going on in other states.

Sean McMahon  08:15

Okay, before we get into the states, just real quick, one thing, you know, acronyms, a lot of folks might not listen to. So any M net energy metering, that's what we're talking about. And it kicked in April 15. You said Was there any ramp up of activity right ahead of it? Or if you know, homeowners and folks trying to get in just ahead of the deadline, or was it steady going into that?

Daniel Cruise  08:34

Yeah, that's that's actually a good question. And there was a huge ramp up, I would say into it. If we look at the data from February, March and half of April, I think on our data, you had a 50 to 60% increase over that time period in people filing residential home solar permits. And so now the obvious knock onto that is now that we've filed permits, and we fall into connection applications, the lot of those are still being installed here. And now. But if we just look at permits, since that time, you're down 30 or 40%, or sorry, down 50 or 60%.

Sean McMahon  09:15

So that's going on in California, you mentioned there's some trends you're spotting in other states. Where else do you want to take us?

Daniel Cruise  09:21

Yeah, so the other states, as you can imagine, it's more mixed. You're having divergence in some of the different areas. The first I'll start on being the most challenging, and one of the other big ones is Texas, Texas is having a real tough go at it hasn't been a change in policy necessarily. But this has really been driven by the economics of solar. The Economics of solar lot of most people went in Texas when they go out to get home solar, they're either buying outright or they're getting loans and so that as we know, interest rates have gone up by a lot. And so those interest rates that really impacted activity in that state. You also had energy prices, or electricity prices, although they're good, the trajectory is nothing like it was last year. And so it's just a real tough comp. Looking at Texas, I would go around the other parts of the south, particularly in the southeast southeast last year, it was fantastic. Florida was fantastic. This year, though, kind of kind of running in that same trend is Texas just pretty challenging as we move to the rest of the US, mixed in other places, but there is an area I would I would call it the northeast, that's actually doing pretty well, up there bucking this trend still moving towards solar. And that's the one area that I would call out. That seems pretty good right now. But But overall, it's just a lot of a lot of tough spots in the residential solar market right now.

Sean McMahon  10:50

Yeah. So it sounds like policy in some places, and also just interest rates and others, right?

Daniel Cruise  10:55

Yeah, yeah, the interest interest rates and electricity prices as well, just kind of easing up.

Sean McMahon  11:00

We'll be right back. 

Building a brighter tomorrow starts with illuminating greater possibilities today. That's why Deloitte helps organizations weave sustainability into their business decisions. Join Deloitte in creating a brighter, cleaner tomorrow. To discover what’s sustainable, renewable and possible in the future of energy, click on the Deloitte links in the show notes. 

And now back to my conversation with Daniel Cruise from Lium Research. 

And so now let's flip to the utility scale side of things. So you mentioned the inflation Reduction Act. What else is driving that growth? And again, are there any states or regions where you're really seeing big infusions of development?

Daniel Cruise  11:48

Yeah, I'll answer the first part, kind of what else is driving so IRA is huge, you get a lot more incentives, the economics are a lot better now than they were a year ago. But the driving force, I think, at least the way that we see the data is more pent up demand. And so in late 2021, most of 2022, I think there was a lot of demand for solar that wasn't moving forward, whether it be ad CVD issues, whether it be uncertainty around the IRA, whatever it has been, I think there's a lot of pent up demand. And so applications had continued to go up over the last couple of years filing and queues etc. It just you weren't making orders, you weren't starting construction, you really weren't moving forward on those. Now, I think you're getting all of that come to fruition and come to reality. And so we're seeing not only an increase in applications, but also now really seeing it on the ground, seeing orders get placed, we're seeing construction started. And we're seeing some of the easing on the interconnection side where they finally get interconnected. So all those things are just kind of coming together hitting on all cylinders.

Sean McMahon  13:02

Are you seeing any kind of speed bumps due to supply chain issues? You know, solar panels and things like that? Or is that all kind of smoothed out from what you're seeing?

Daniel Cruise  13:09

There are some companies that still talk about it a bit on the solar side, just on what we see on the the anecdotes side and modules. There are companies that still talking about it, there is still talking and seeing some detainment from you Flippa UFL. Pa, especially now that it seems like the Department of Commerce is moving down to some of the tier two suppliers. So that is some of that. But more I think, a bigger picture as it relates to the supply chain for utility scale. It's probably just we need a lot of panels. And so like if you if you need panels, it's harder to get I don't think that's the same on the residential side, I think you have more of a supply available supply, you have a lot of inventory. But on the utility scale side, I think it's just, it's just more difficult to get panels. We need a lot of them here in us. And I think we're having a difficult time. The rest of supply chain, I think it's doing as well, as you could ask them, I think things are really doing well here on the supply chain side.

Sean McMahon  14:11

On the previous episode, we had you on to talk about solar sat, which is one of the information services you provide. I highly recommend all the listeners go back and listen to that episode to learn more about solar set. But what does that information telling you right now about the utility scale solar market?

Daniel Cruise  14:26

Yeah, so that's, that's been really cool to see that product flourish and give insights. The thing that we're seeing there that really struck us lately is new construction. So before we came out with solar said, I think the industry has been relying on mainly one resource and that's going to be your interconnections. And so the world has access to see how many projects interconnected to the grid. What the world I don't think has been seen as To how that timing relates to the solar industry. But being able to take some of the satellite imagery to combine that with the rest of our research that we're doing to put that with AI, we've really been able to separate out all the pieces and the timing of what happens to actually get that into connection. And what we find is that as we go through the different imagery, we can see, we can see when Earth starts, when they start clearing land, when trackers start to be installed, we can see when panels get to install, we can track that project all the way through. What we found at a high level is man, there's a lot going on behind the scenes. And it takes a lot longer than what people anticipate and normal algorithms that you run on when construction happens. And if you look at the EIA, all of this stuff is wacky. But if you if you just look at take the data separated for new construction, what you'll see is, is in the last few months, the number of companies moving dirt for the first time has spiked. And so to put that into perspective, over the last three months, there's been over I'll say in DC, but almost 10 gigawatts DC have projects that have started. And so on an annual basis, that's 40 gigawatt DC that you're talking about is happening in the United States. To put that in perspective, in 2022, we had less than 15 gigawatts that was interconnected to the web. So you're talking about 15 gigawatts up to 40 gigawatts, if you were able to break out that time in there. So So that's been the biggest thing. And I think that has implications across the space, not just for this month, but over the next 18 months and how we're looking at the industry and utility scale solar, you're not seeing that in the interconnections. You're gonna see reports come out that, hey, we're up big or up 50% 60% from last year on interconnections, but interconnections now we're still really low, you'll get lucky to get 20 gigawatts on interconnections this year. But as we go forward, we can see what new construction is now it's huge in that will start to play out into the rest of 2023 and 2024.

Sean McMahon  17:18

Okay, so we talked a lot about solar. What are you seeing on the storage side of it? Batteries? You mentioned that earlier? So is Lium tracking that at all? Yeah, so

Daniel Cruise  17:25

that's probably the other thing we've been spending a lot of time on. The applications on the storage side have been absolutely fantastic. They've been a moonshot, the attractiveness of that market is really high, both on the residential side and the utility scale side. The problem with that, at least on a utility scale side, it's just it's just slower moving than what we would have thought. But generally, as I had mentioned earlier, like battery and storage has to be part of the equation for energy transition, regardless of if if we get the hydrogen or not like that has to be a part of it here. So we're keeping a close eye on that it's harder to really make relevant calls here in the near term. But But yeah, that's that's the other big thing. I think,

Sean McMahon  18:09

You know, I mentioned at the top that you're obviously now the the head of renewables at Lium. So what do you see big picture for the renewable space here in the US? I'm talking growth potential. You know, we've talked a lot about the IRA already. Any potential risks out there, you know, a lot of people seem to be talking like, it's just all blue skies, we're going to rock and roll. But, you know, maybe you've got a different perspective. So what's your big picture analysis of the renewable sector,

Daniel Cruise  18:33

You know, the biggest risks is not going to be a surprise, the biggest risk is interest rates, interest rates, change the economics dramatically, not just on solar and residential, solar, but across the space. And so if you don't have an attractive interest rate environment, there's no way you're going to transition to renewables. So that's your biggest risk. The other big risk is that batteries don't in storage, don't make up that gap. Solar is fantastic. But it's fantastic for for the South. And it's fantastic. For Texas, it's good in the in the in the north, but it's not going to it's not going to be the savior of the north. So I mean, these are obvious things that have to be figured out, you can figure it out with energy storage, you can figure it out by putting in wind and then eventually hydrogen will be here. But but really, in the near term, like we obviously have to make sure that the intermittency isn't a mitigating factor of the transition. So those are those would be my two risks.

Sean McMahon  19:32

Do you see any political risk? I mean, we've got an election coming here in a little more than a year and there's a lot of people worried about, like the dismantling of the IRA.

Daniel Cruise  19:39

Honestly, because political risk is so prevalent and part of everything. Probably just left it out. There's always going to be massive political risk here and that's not going to change. But that's that, to me, doesn't seem very surprising.

Sean McMahon  19:56

Okay, and so now let's switch to your predictions. I mean, I I'm sure your insight on what's going on and what risk might be. But any bold predictions for what the renewable space looks like in five or 10 years?

Daniel Cruise  20:07

Positive or negative? Give me both. Both. And I'll start, I'll start on the negative side, maybe. So negative would be on the residential side, I've obviously been talking about how challenging it is on the residential side. On the residential side, I think people were going to be surprised next year, how much residential declines again, I think it's already declining. But I think those those kind of declines, and that could actually accelerate into next year, there's a lot of factors that could get worse rather than better. And so to put that into perspective, like installations in the United States for residential solar could be down another 10 20%. Next year, wow. This year, we'll be lucky if we get flat this year. And that's after growing by double digits for multiple years. So I think that's probably the bold prediction, I would take on the residential side. On a more positive note. It'd be on the utility scale side. I alluded to it earlier, but based on what we're seeing on the ground, and then applications, I think we could hit 40 gigawatts turned on mine in 2024. That compares to less than 15 gigawatts and 2022. So that's a that's a big increase. A lot of that go into Texas, Texas is already this year, we've got Texas solar contributing, almost 8% of peak summer electric, electricity comes from solar. You look a year or two from now you're looking at almost 15% in Texas is gonna come from from solar. That's from 0% in 2019. So it's all utility scale, like Texas is not moving on residential, they're moving on utility scale. So big things happening on that.

Sean McMahon  21:52

Okay, well, hey, Daniel, I really appreciate your time today. love to have you on the show again, and everything you always share. I always come up with these conversations a little bit smarter. Thank you.

Daniel Cruise  22:00

Cool. Yeah, thanks, Sean, appreciate it, and it's been great.

Sean McMahon  22:09

Well, that's our show for today. But before we get out here, I want to say one final thank you to the sponsor of today's episode, Deloitte. 

Thank you all for listening. And if you haven't already, please subscribe or follow this show on Apple, Spotify, Google, or wherever you listen to your podcasts. And as always, please be sure to share it with your friends and colleagues. Have a great day.