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Waiting for a Rockefeller: meet the next ‘supermajors’ of energy  

Credit:  Joe Ryan | Apr 04, 2016 | bloomberg.com ~~

More than a decade after the birth of the modern renewable energy industry, solar and wind await their John D. Rockefeller.

Clean power remains a tumultuous and fragmented business, crowded with companies grabbing for slices of an emerging market that aspires to reshape how the world meets its energy needs. They rise and fall as technology advances and demand seesaws. Some have grown into sprawling regional players, often propped up by government subsidies. A few, like Suntech Power Holdings Co. and Q-Cells SE, soared to prominence, then all but flickered out.

Yet there are still no companies that dominate the industry.

To an extent, clean energy resembles the early and volatile days of oil, when wildcatters flooded the hills of western Pennsylvania and gave rise to an unruly scrum of an industry. Into that chaos stepped Rockefeller, who in the mid-1860s began assembling the Standard Oil Trust, the predecessor of Exxon Mobil Corp. At its peak, the trust controlled 90 percent of the U.S. market and dominated the globe. Rockefeller imposed order on the riotous young oil market, creating the modern oil industry.

“We are a long, long way from anyone in the clean energy space exercising the kind of monopoly power that Standard Oil did,’’ said Ethan Zindler, head of Americas for Bloomberg New Energy Finance, an industry researcher. “It surely will consolidate, but we’re a long way from that yet.’’

Executives from the largest contenders for the renewable energy crown, including First Solar Inc. and Enel SpA, will gather at a Bloomberg New Energy Finance conference in New York starting Monday. A handful already have the scale to operate in multiple countries and the ability to line up global financing. Some of the prime contenders to lead the industry are:

Enel – Chief Executive Officer Francesco Starace is using the Italian utility’s dominance in its home market as a base to build an international giant developing clean-energy power plants. It’s also acting as a technology incubator for start-ups that bring utilities into new grid- and consumer-oriented businesses.
First Solar Inc. – Led by Jim Hughes, the biggest developer of utility-scale solar plants also is working on systems that grid managers use to integrate variable flows of power into their networks. It’s the biggest U.S. solar company.
Iberdrola SA – The Spanish utility led by Ignacio Galan is among the largest developers of renewable power plants, with generators and grids in the U.S., U.K., Brazil and Mexico.
State Grid Corp. of China – If dominating the industry means controlling the assets delivering electricity, this company will be at the lead, with the power grid that serves the most populous nation. State Grid has been expanding international connections from the Philippines to Brazil in search of deals to jointly develop energy resources.
Xinjiang Goldwind Science & Technology Co. – China’s biggest wind turbine maker emerged last year as the world leader in the technology and is one of the nation’s few companies with a global footprint, building wind projects over the past eight years in 15 foreign countries with a total of more than 1 gigawatt of capacity.
SolarCity Corp. – The rooftop solar developer backed by Elon Musk has revolutionized the home solar market by writing contracts that make the systems affordable for homeowners. Its efforts have accelerated the industry’s growth and challenged the traditional utility business model.
Duke Energy Corp. – The largest U.S. utility owner’s operations stretch from the country’s Midwest to the Southeast, cobbled together by former CEO and industry visionary James Rogers. He was among the first to capitalize on deregulation allowing independent power producers and utilities that transfer electricity across state lines.

The blueprint for global domination, though, remains on the drawing board. And questions abound about what a clean energy “supermajor” might look like, to borrow a term from the oil industry.

Will they need to rule both the wind and solar markets? Are traditional utilities with sprawling infrastructure and vast customer bases best positioned to rise? Or will it be new companies entirely?

“We are still in the formative years,” said Tom Werner, CEO of SunPower Corp., a San Jose, California-based panel producer majority-owned by the French oil major Total SA. “It is not clear yet what the business model will be that will catalyze you to be a supermajor.”

The top of the clean-energy pile can be precarious. SunEdison Inc. – the clean-energy developer based in Maryland Heights, Missouri – christened itself a “supermajor” in July when it announced its ill-fated takeover of rooftop installer Vivint Solar Inc. Since then, SunEdison shares have dropped 99 percent.

“My pets have a longer average lifespan than the solar companies I write about,” said Jenny Chase, a Bloomberg New Energy Finance analyst.

Feed-In Tariffs

Wind and solar technology has been around for decades, yet the modern industry only started booming in 2004, when Germany pioneered a method of subsidizing clean energy through feed-in tariffs. That mechanism guaranteed wind and solar companies a transparent revenue stream, allowing them to secure bank financing and develop enough scale to reduce costs.

Now, a dozen years later, David Crane, the former president and chief executive of NRG Energy Inc., said the moment for a supermajor could be ripe. He points to a recent selloff in renewable stocks that opens an opportunity for a private-equity giant or pension fund to cobble together a green behemoth.

Others, though, predict clean energy will remain a decentralized and fragmented industry, making it unlikely for anyone to dominate. Antitrust laws put in place partly to break up Standard Oil ensure that no one company ever will have Rockefeller’s market power.

Still, size and global reach is important for renewables to drive down costs in what’s essentially a commodity business focused on selling electricity, said Francesco Venturini, CEO of Enel Green Power SpA. He predicted that the industry would ultimately be led by a handful of players, rather than a single monopolist.

“I don’t think there is going to be one Rockefeller,” he said.

Source:  Joe Ryan | Apr 04, 2016 | bloomberg.com

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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