A conversation with solar’s oracle, Jenny Chase

A conversation with solar’s oracle, Jenny Chase
File - A workman installs a solar panel on Thursday, Aug. 11, 2022, in Salt Lake City. Across Europe companies are weighing up the U.S. Inflation Reduction Act's $375 billion in benefits for renewable industries against the European Union's fragmented response. (AP Photo/Rick Bowmer, File)

BloombergNEF analyst and author Jenny Chase joined Episode 71 of the Factor This! podcast to discuss her spiciest predictions for 2024, as well as the release of the second edition of her book, Solar Power Finance Without the Jargon, which is available now. Subscribe wherever you get your podcasts.

When Jenny Chase speaks or, more frequently, tweets, the solar industry listens.

For nearly 20 years, Chase has chronicled the twists and turns of solar's meteoric growth as a market analyst for BloombergNEF. Her research is indispensable. Her annual prediction mega-threads are legendary.

As much as the moniker makes her squirm, Chase is the closest solar has to an oracle. She joined Episode 71 of the Factor This! podcast to discuss her spiciest predictions for 2024, as well as the release of the second edition of her book, Solar Power Finance Without the Jargon, which is available now.

Here are some of the highlights from Chase's latest round of "opinions about solar," supplemented with context from her appearance on the context (edited for length).

1. "We don't need a solar technology breakthrough… Today, solar developers just need a grid connection and permission to sell electricity…"

Chase:  So first of all, solar modules are always getting better. The average the total, the average solar module this year was about 21.6% efficient, and from 2012 it was about 15% efficient. So there are a lot of engineers making incremental tweaks to modules, all of which make them more efficient, which means you get more watts for less space and less materials.

And it's great! The reason I don't get wildly excited about the generation, about the generation is like, for example, we're currently moving from PERC to TOPCON, which are solar cells that look very similar and are slightly higher efficiency. And if you're reading my book in three years time, most likely we've moved on to something else.

I also think that people get a bit prematurely excited about perovskites. The lifetime is still pretty bad. There are a few, allegedly commercial, projects being deployed in China, but I'm not sure I really believe that those are going to be any good. And if fundamentally this is not a very stable semiconductor, I really doubt that the companies have cracked the stability.

The current generation of modules is what we've got and it's good enough. And the differences between that and a couple of years time are actually pretty much none when it comes right down to it.

2. "Right now the price of solar modules hits a new record low every week (currently $0.136/W) due to oversupply. Some manufacturers will exit in the next two years. This is quite normal in this industry, and nobody will learn any lessons from it. Good for buyers, though."

Chase: The funny thing is I published that at the end of October. It's now 12 cents per watt. Solar manufacturing is a viciously competitive industry. Partly it's because technological generations move so fast. And also because everyone loves solar and wants to keep building factories. So, you build a factory, it's great. Here's a new shiny tech. And then three years later, somebody else has gone and built another factory with the newest shiny tech.

There's a pretty permanent oversupply situation and the bottleneck is usually polysilicon because those are the highest CapEx factories, the slowest to expand. And what happened this year was a switch was a whole bunch of polysilicon factories came online in Inner Mongolia, Sichuan and Yunnan, Chinese provinces. We are back in oversupply after supply being a bit tight last year and prices have crashed.

Watch the full episode on YouTube

3. "The US Inflation Reduction Act includes a license to print money for solar manufacturers and hydrogen firms. It’s good for clean energy, but it's also like hitting the accelerator on a car with the handbrake on."

Chase: So, there is a pile of money for clean energy in the Inflation Reduction Act, in particular for hydrogen. I know you're wrangling about the precise rules about what counts as clean hydrogen, but it's about $3/kg Production Tax Credit for hydrogen. And then hopefully the manufacturers can actually sell it for money. So it's generous. But the generosity, the economics are not what is holding back the building of particularly solar in the U.S. What's holding back build of solar in the U.S. is grid connection and finding places where you can legally connect to the grid. It's also frequently quite difficult for American developers to get the modules they want, even if they're willing to buy outside China.

4. "Solar plant operation and maintenance in desert environments will prove more challenging than PV project stakeholders currently expect."

Chase: We hear a lot about insurance issues, largely related to extreme weather. Insurers don't want to take on risk if there are going to be tornadoes or cyclones or heavy hail that breaks (modules). A big thing that's happening as well is that, as the CapEx of a project comes down, the OpEx becomes a more important part of it. It's somewhere around $8-10/MWh on most projects, and if something goes wrong, it's still hugely important. This is something that does add up, and when you're closing finance for a project, it's very much in your interest to lowball the amount it's going to cost you in maintenance. I think sometimes that lowballing was not accurate. The reason it's in your interest is because you've got an individual who has to close a deal, otherwise you don't really have a job anymore. You are very much going to make the numbers coming out of your model work and then you'll probably have another job by the time it turns out that this is a bit more challenging.

5. "Traded electricity wholesale markets are the worst way of deciding how to dispatch energy resources, except for all the others that have been tried."

Chase: Power markets work to decide which asset actually runs. Does a gas plant run? Does a coal plant run? Does a solar plant run? And of course, if you have a solar plant and sun, then the solar plant will always be running. It kind of makes sense. But once you get a lot of solar and wind, which is the same in the mix, you get a very volatile power mix, especially once you start closing some of those coal and gas plants because they don't need it anymore.

What that means is that you're going to get crazy volatile power prices. You could get $8,000/MWh power prices in Texas. What do you do about that? Do you panic or do you just say pay it and let the markets sort it out? I'm sure there were various thoughts on this. I'm kind of a market fundamentalists. I think that the cure for high power prices is high prices, which encourage people to respond. I do think that we shouldn't be panicking too much about high power prices and probably not too much about low power prices either. But we do have to let the market respond.