Schwarzenegger, Hedge Funds Invest in California Solar Power

July 7, 2006

July 7 (Bloomberg) — With the flip of a ceremonial switch, Microsoft Corp. dedicated a half-acre of solar panels on its Silicon Valley campus, bringing California closer to Governor Arnold Schwarzenegger’s goal of a million solar roofs.

That leaves about 980,000 to go.

Schwarzenegger, 58, is pouring $3.2 billion into solar energy, and investors are snapping up shares of solar-equipment companies. Hedge funds including SAC Capital Advisors LLC and GLG Partners LP have solar-power investments in the state. Even so, solar provides just 0.2 percent of California’s electricity. 

“It’s pathetic how few systems we have to date, given that the technology has been around for 30 years,” said Bernadette Del Chiaro, 34, clean-energy advocate for the Sacramento-based group Environment California.

The state had fewer than 20,000 solar roofs at the end March, according to the California Energy Commission. The panels on those roofs, even when combined with a solar-generating plant in the desert, took all year to provide 660 megawatt-hours of power. It takes 40 minutes for that much electricity to be generated by Rosemead, California-based Edison International’s new natural-gas-fired plant in Redlands.

Schwarzenegger, a Republican running for re-election, says he wants peak solar capacity to reach 3,000 megawatts, giving the state’s panels the power of three new gas-powered plants. He didn’t respond to requests for an interview for this article.

Million Solar Roofs

Last year, the governor proposed a law to create a retail rebate program that he called the Million Solar Roofs policy. While the plan hasn’t passed the Democrat-controlled Legislature, Schwarzenegger’s appointees to the Public Utilities Commission enacted part of the proposal. They offered $3.2 billion in consumer rebates — the biggest solar rebate program in U.S. history, according to the Washington-based Solar Energy Industries Association.

Investors, too, see a brighter future for solar. SAC Capital Advisors, an $8.5 billion hedge fund in Stamford, Connecticut, founded by Steven Cohen, and GLG Partners, an $11.2 billion fund in London, last month joined a group that invested $75 million in Nanosolar Inc., a Palo Alto, California-based company that is developing flexible solar strips. Representatives for both hedge funds declined to discuss the investment or the solar industry.

Initial public offerings by solar-panel makers have soared. SunPower Corp., based in Sunnyvale, California, is up 51 percent since going public in November. Q-Cells AG, based in Thalheim, Germany, is up 56 percent from its IPO price in October.

U.S. Left Behind

Jesse Pichel, a Piper Jaffray & Co. analyst based in New York, said the U.S. hasn’t been aggressive in developing solar power, yielding leadership to countries like Germany, which subsidizes the industry. German power distributors must pay consumers for solar power they make, at a higher rate than is paid to electricity-generating companies.

“America isn’t the big driver of solar,” Pichel said in a telephone interview from Germany. “It almost doesn’t matter what America decides. It’s happening whether government and business like it or not.”

Solar power’s year-to-year growth rate in California has slowed since 2002. Last year, the amount of solar power feeding the electricity system increased 46 percent. Growth was 65 percent in 2004 and 91 percent in 2003.

The state’s earlier incentive programs repeatedly ran out of money, said Barry Cinnamon, 48, a solar installer and president of the California Solar Energy Industries Association. Installers won’t hire staff and invest in equipment until a program has reliable funding, he said.

“When programs have money now and may not next year, you don’t get that efficient network of contractors,” he said.

Subsidy Impact

The state’s new program is to run for 10 years rather than just a year or two. The rebates initially will cut about a third off a system’s cost. The average price for a residential roof system is about $36,000, Cinnamon says.

By the time the initiative is phased out by 2017, the industry may be going “like gangbusters,” said Del Chiaro, the clean-energy advocate. She said most of the million roofs will be built in the final years of the program.

Schwarzenegger says he wants to make it easier to sell homemade electricity. As in most states, California’s investor- owned utilities must buy solar-generated power from customers, who rely on the program to help pay for their equipment, Cinnamon said.

A utility can purchase as much as a half-percent of its power this way. Schwarzenegger has asked the Legislature to raise that cap to 2.5 percent and require municipal utilities to participate.

Silicon Shortage

Global shortages are slowing industry growth. Installers and manufacturers have put off some sales because of a shortage of polysilicon wafers, the raw ingredients of solar modules that are assembled into panels. The panels on Microsoft’s buildings in Mountain View that were turned on in April required about 5 tons of raw silicon, said Richard Swanson, 61, president of SunPower, which made the modules.

Andrew Beebe, 34, president of Energy Innovations Inc. in Pasadena, California, which makes mirror systems that concentrate sunlight on photovoltaic cells, said he expects the industry to resolve those issues.

“There’s no reason why solar couldn’t be 10 percent of the worldwide energy picture,” he said.

To contact the reporter on this story:
Steven Bodzin in San Francisco at  sbodzin@bloomberg.net.
Last Updated: July 7, 2006 03:01 EDT

Source:  Bloomberg

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