By Guest-Blogger Don: Wanted, People Who Can Grow a Company by 8% (per month)

I was giving a speech earlier this month about Energy Security, and while preparing the speech came upon some stark realizations about electrical generation in the US:
1) Solar is equivalent to an insignificant rounding error for electrical generation in the US.
2) Coal will remain by far the dominant form of electrical generation assuming the status quo for at least 5 years and will probably be the first or second generator for 10 years.
3) Assuming current trends, solar not be out producing petroleum product (petroleum liquids, petroleum coke) for about 4½ to 5 years.
4) Growth of 40% per year in 5 years solar will still be a rounding error for electrical generation in the US.
5) With growth of 60% per year in 5 years solar will finally achieve the status of being a rounding error for electrical generation in the US.

This is based on the data from the US Energy Information Administration(1) (note that solar which is composed of PV, CSP and CPV is part of Other Renewables, but is also shown separately).
Total Electric Power Industry Summary Statistics, Year-to-Date 2011 and 2010
Net Generation (thousand megawatts)
Year Coal NG Nuclear Hydro Other Renewables Petroleum Total Solar

Total Electric Power Industry
Summary Statistics, Year-to-Date 2011 and 2010

   
        Net Generation (thousand megawatts)      

Year

Coal

NG

Nuclear

Hydro

Other Renewables

Petroleum

Total

Solar

2010

1087982

546400

466934

160470

96898

22766

2,392,565

801

2011

1041828

561903

452373

208967

113850

17826

2,406,389

1116

2011%

43.29%

23.35%

18.80%

8.68%

4.73%

0.74%

100.00%

0.05%

%increase

-4.20%

2.80%

-3.10%

30.20%

17.50%

-21.70%

0.60%

 

39.30%

and on a projected growth table based on growth of the current production for solar energy.

Years

40%

50%

60%

70%

1

0.06%

0.07%

0.07%

0.08%

5

0.25%

0.35%

0.49%

0.66%

10

1.34%

2.67%

5.10%

9.35%

15

7.21%

20.31%

53.47%

132.75%

 

 

 

 

 

 

 

 

This is despite an over 60% per year increase in installations (2). Being a CPV technology developer, you tend to think that if you came up with some ideas, there are probably a lot of people right behind you with similar ideas, and tend to think you are on a tight timeframe. I had a quick education about that not being the case. I worked with a VC who really liked the technology, did the due diligence and had it checked out, and then when everything was a green light, decided that CPV was too small a market.
This is somewhat troubling for me because I am a very strong advocate for solar energy because of the huge benefits compared to burntech (burning fossil fuels) and nonrenewable energy source are by definition a degrading energy source. Are there examples of capital intensive industries with hyper growth? Well if you are using a computer to read this and are using the internet to get the information, you are now using two examples. From 1995 to 2007 the number of internet users grew at an average of 48.6% per year (3) . The first few years were even more dramatic; with the growth rate from 1995 to 2000 the number or internet users grew at 88.7% per year. Personally I think that we will have about 40% increase per year in solar power generation for the next two years. In 2014 there will be an inflection point as solar is now cheaper than the grid and new electrical generation switches more to solar. I would predict between 60% to 70% growth per year. After that the growth rate will diminish quite a bit because while the majority of new electrical generation will be solar, the older forms (especially Hydro and Nuclear) that have already sunk the capital costs will still have cheaper electrical then solar. I would guess that around 2020 the growth rate will slow down by about 5% per year until it stabilizes at between 10 to 15%. How big can the industry get? Well six of the largest seven companies (by revenue) are energy companies. While the solar industry can pat itself on the back for getting $2.4 billion in 2010 for the energy companies that is chump change with the top six bringing in 1,782 Billion (4) during that same time. Almost all of the final big players will be decided by 2017, with most of them being in place by 2014.

Now what does this have to do with the title? Well being in a solar startup, the expectations are much different than other companies. If your company told investors that they expected to grow 100% per year for the next ten years (that works out to about 6% per month), they would probably be delighted. For a solar startup if you mentioned 100% growth per year it will be a short conversation. You need to be growing around 8% per month. Now let’s say that you decide to grow more aggressively at 9% per month. Well if you and your competition start out the same, in 9 months you will be about twice the size while your “slow moving competitor” is only about 1.85 times larger. Now let’s say you have a supply problem which halts your growth for three months. It will take you 20 months regain the lead. A startup with hyper growth is walking a fine line between aggressive growth and being able to maintain and control that growth.
For me personally it means that I will want and organization in place with good products, good engineering, supply chain management … by the beginning of 2013. It also means that this will not be a sprint, but a marathon. My oldest son will be going to college next year; I will definitely suggest he tries to do something related to solar. Finally for my sanity, in fact I do have some time which means I can see my younger son’s soccer game.

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Posted in Photovoltaics

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