Tesla, First Solar, Better Place and Comments on a Weird Quarter in Cleantech

Wow.  This has been a really interesting few months in cleantech.

First Solar announced a $0.99 cent/Wp target within 4 years for installed with trackers utility scale in its investor deck.  That equates to around $4-5 henry hub gas price in a new combined cycle gas plant.

The scary thing is that best utility scale PV solar is already approaching the $1.50/Wp range in the LAST quarter, equating to $7-8 Henry Hub.

The Top 5 PV manufacturers announced module costs all south of $0.65/Wp.  First Solar says <$0.40/Wp in 4 years. Greentech Media says the best Chinese C-Si plants will do $0.42 within 3 years.  Screw the EU and US dumping  trade wars.  That my friends, is grid parity for a massive swath of the electricity market wholesale AND retail.

These companies are learning to work on GP margins of sub 10%.  They are getting lean, and mean and good.


Better Place finally went bust with a whimper.  $850 mm in venture money gone.  As we predicted, battery changing for electric cars is a really bad idea.  But this time, unlike the billion that Solyndra took down, nobody noticed.  Maybe because EVs are being rolled out right and left.

Why was it a bad idea? Well, 1) they would make car companies have to change their fleets, and effectively COMPETES not leverages what the rest of EV and battery world was doing, 2) it implicitly assumes fast charging and better cheaper batteries were not coming, so we needed a work around – meaning if the industry succeeds, Better Place has no advantage, if the industry fails, Better Place has no leverage, a really bad bet for an EV lover, 3) it assumes the costs of the swappable battery car and changing stations were not high, and could come down as fast or faster than conventional EVs and battery technology, 4) it means basically all fillups are full service, which I consider a really dumb idea.  We stopped that in the US in 1980s?


Tesla got profitable, sort of.  Announced a positive EBITDA.  Well, ok, but a big loss if you excluded emissions credits that are expected to be a 2013 only event –  about 12% of revenue.  Exclude those and the car manufacturing business had <6% gross profit margins and still loses a lot of money.  But a huge step forward.  Especially as the Model S is now the best selling EV.  Oh, and seriously, even GETTING GPs to positive this fast is a big deal as well as EBITDA positive under ANY circumstances this fast.  Kudos!

This is huge, because as we reported last year, Tesla by itself holds up the venture returns in the cleantech sector.

An analysis of Stifel’s monthly report on EVs and Hybrids shows the Leaf, Volt and Model S making progress, still young and small and choppy sales, but EVs as a group outpacing sales of the HEVs at the same point in their lifecycle.  EVs + HEVs is now consistently at 4% of new US sales. Not half the market, but definitely real.


But somehow, nobody’s making much profits.  This industry is looking like profits will always be elusive and come either in the bubbles, or only to the #1 or 2 player.  2013-2014 are looking like set up years for cleantech.  Our prediction? By 2015 NO ONE will question whether cleantech sectors are viable.  It will be about how fast they erode other people’s profits.

Stunning Cleantech 2012

It’s been a busy, ummm interesting year.  We’ve tracked profits to founders and investors of $14 Billion in major global IPOs on US  exchanges and $9 Billion in major global M&A exits from venture backed cleantech companies in the last 7-10 years.  Money is being made.  A lot of money.  But wow, not where you’d imagine it.

5 Stunners:

  • Recurrent Energy, bought by Sharp Solar for $305 mm, now on the block by Sharp Solar for $321 mm.  Can we say, what we have here gentlemen, is a failure to integrate?  This was one of the best exits in the sector.
  • Solyndra Sues Chinese solar companies for anti-trust, blaming in part their subsidized loans????????  Did the lawyers miss the whole Solyndra DOE Loan Guarantee part?  It kind of made the papers.
  • A123, announced bought / bailed out by Chinese manufacturer a month ago, now going chapter bankruptcy and debtor in possession from virtually the only US lithium ion battery competitor Johnson Controls?
  • MiaSole, one of the original thin film companies, 9 figure valuation and a $55 mm raise not too long ago (measure in months), cumulative c $400 million in the deal, sold for $30 mm to Chinese Hanergy just a few months later.  (Not that this wasn’t called over and over again by industry analysts.)
  • Solar City files for IPO, finally!


My call for the 5 highest risk mega stunners yet to come:

  • Better Place – Ummmmmmmmmm.  Sorry it makes me cringe to even discuss.  Just think through a breakeven analysis on this one.
  • Solar City – a terrifically neat company, and one that has never had a challenge driving revenues, margin, on the other hand . . .
  • BrightSource – see our earlier blog
  • Kior – again, see our prior comments.  Refining is hard.
  •  Tesla – Currently carrying the day in cleantech exit returns, I’m just really really really struggling to see the combination or sales growth, ontime deliveries, and margins here needed to justify valuation.

I’m not denigrating the investors or teams who made these bets.  Our thesis has been in cleantech, the business is there, but risk is getting mispriced on a grand scale, and the ante up to play the game is huge.


Right Time for Better Place?

by Richard T. Stuebi

Although the benefits of electric vehicles (EVs) have long been intuitively understood, EV market adoption has been limited by various issues associated with batteries.  Batteries cost too much and are too heavy/bulky, the operating range an EV is too short, and there’s no convenient way to recharge batteries with the speed and ubiquity of filling up a gas tank.

Well, there’s a lot of money being invested in many companies to address the first set of issues concerning battery cost and performance.  However, there hasn’t generally been a lot of attention paid to the question of how excellent/cheap batteries will get recharged – even though the lack of a solution on this issue would completely nullify the value of any progress on battery technologies for EVs.

Enter a company called Better Place.

Having secured $350 million of new investment in early 2010, led by HSBC (London: HSBA), Palo Alto-based Better Place is developing proprietary technology and installing infrastructure to streamline the process by which electric vehicle (EV) owners recharge batteries.

I recently had the opportunity to visit the research and testing facility for Better Place, which is located just north of Tel Aviv in Israel.  At this facility, Better Place allows visitors to test-drive a near-production prototype EV made by Renault (Euronext:  RNO), with whom Better Place is working closely.  It’s a fun exercise to gun an air conditioned mid-size five-passenger sedan up to 60 mph in a few seconds with no transmission shifts and virtually no sound, although Better Place has virtually nothing to do with the EV or the battery within it.

More interestingly, the facility lets future would-be EV drivers interface with how the battery pack would be recharged – if the vision of Better Place gets adopted.

Better Place envisions that EV drivers would buy a monthly subscription to Better Place recharging services.  At parking spaces hosted by Better Place, there is a post about one meter in height, in which is embedded a retractable cord to plug into the EV for battery recharging while the car is parked.  The retractable cord is unlocked by an electronic key card that the Better Place subscriber waves in front of the charging post.  (I wish I had asked what happens if a non-subscriber occupies a Better Place parking spot, or if a user forgets to disconnect their EV from the charging cord before driving away.)

This is all well and good for commuters or around-towners that have ample parked-car time for a recharge, but Better Place also has a solution to the EV challenge of quick recharging for long-distance trips.  Better Place has developed a service station design involving robotic arms in underground bays to reach under a parked EV, extract the depleted battery, and replace it with a fully-charged battery – all within a couple minutes. Thus, an EV-driver can be back on the road as quickly as refilling a gas tank, without even having to get out of the car.

Additionally, Better Place is developing software to facilitate vehicle-to-grid (V2G) utilization, wherein the customer would enable the EV’s batteries to sell power back to the grid during high-value peak periods.  Each customer would set his/her own parameters as to when Better Place would allow the grid to tap the EVs batteries for resale to the grid:  some customers would be willing to save (or even make) a few dollars by letting the grid utilize the EV for power supply pretty much anytime, whereas other customers wouldn’t want to risk depleting the EV batteries (and hence EV range) for any price.

The Better Place business model has many interesting and compelling aspects to it – recurring revenues, different price points and subscription packages – but it has one very scary element:  there is no avoiding its capital intensity.

In essence, Better Place strives to become an unregulated utility, with massive infrastructure deployment in its parking recharge posts and service stations.  Better Place needs to gain sufficient critical mass of customers in relatively dense geographic areas in order for the infrastructure investments to pay off.  Over time, Better Place can stitch together multiple clusters into pan-reginoal and eventually national ubiquity.

Although smart money is making a big bet on Better Place, only time will tell.  Be on the lookout for a Better Place regional pilot taxi program in the San Francisco Bay Area in early 2011.