Solar Deja Vu
Am I having flashbacks to the solar boom of the 1970s, or the telecom boom of the 1990s?
by Lee H. Goldberg

Judging from the huge attendance at the Solar Power 2006 Conference in San José, it looks like renewable energy has finally hit the mainstream -- and in a very big way. In fact, the biggest indicator that solar power is well on its way to becoming a major factor in our economy is how much the event resembled the normal electronics trade shows I usually cover. While there was a sprinkling of old-school 1970s-era granola munching solar veterans like myself, the crowd was really a slice of middle-America on a show floor that much more resembled Home Depot than Woodstock. It was a pleasure to rub elbows with the other 9000 engineers, entrepreneurs, architects, building tradespeople, and consumers as we all browsed the huge assortment of solar panels, inverters, solar hot water systems, and other clean-tech essentials on display.

To be honest, I really got a kick out of seeing the latest crop of high-efficiency hardware, but the most exciting part of the show was seeing how deeply renewable energy has penetrated the consciousness of the mainstream business and investment community. This was most evident in the talk that Vinod Khosla, CEO of Khosla Ventures, gave about how renewable energy technologies can compete effectively with fossil fuels. Khosla, formerly a General Partner at Kleiner Perkins and founder of Sun Microsystems, is passionate about renewable energy and has turned his resources and experience toward the goal of weaning America off foreign oil and other fossil fuels. His clinical, VC-oriented analysis is that while most photovoltaic technologies are not ready to compete directly with coal-fired plants yet, the growing economies of scale and several new technologies should soon enable them to match or beat the higher-priced gas- and oil-fired peaking generators used to prop up the grid during high-demand periods. Over time, he feels that advances in concentrating photovoltaics, solar-thermal generation, and energy storage technologies will produce systems that can be economically scaled to the size required to go toe-to-toe with fossil fuel plants.

Khosla also pointed out that if we can end the hundreds of billions of dollars in invisible subsidies that divert taxpayer dollars to help keep oil and coal cheap to use, America's timetable towards becoming completely energy independent would be greatly accelerated. To this end he supports Proposition 87, a California voter initiative which would add a 1.5% to 6% tax on producers of oil extracted in California. The $4 billion the program would raise is intended to help reduce oil and gasoline usage by 25% by providing research and production incentives for alternative energy, supporting the introduction of alternative energy vehicles, and promoting other energy efficient technologies.

Other speakers talked about other obstacles that solar power faces, including a severe (but temporary) shortage of silicon and other materials used to construct PV panels and an uneven state regulatory environment that does not always allow small-scale solar-electric facilities to sell back their power to the grid at competitive prices. But despite these problems, and the absence of any meaningful support from the Federal government, there have been enough state-level and private initiatives to have pushed solar and wind power to the point where the improved economies of scale will enable them to nibble away at fossil-generated electricity and eventually displace most, or all, of it.

Indeed, it appears that solar power has just hit the beginning of a hockey-stick-shaped growth curve that will help it rival the size of any other high-tech industry within a decade or so. The only concern I have is that clean energy may have to experience at least one more serious downturn before it becomes the next overnight success. That's because the sharp upswing in interest from the investment community has attracted so many new players to the industry that may, or may not, add any real value or have any long-term prospects -- other than to line the pockets of their principals. In fact, I got a distinct feeling of déjà vu that recalled the heady days of the late 1990s that preceded the 2001 implosion of the comms industry and most of the rest of the high-tech sector.

If my experiences in the networking industry are any indicator of things to come, I'd expect to see another year, or three, of steep growth for anything with the word solar attached to it. This will likely be followed by a shakeout that will scare off the fair-weather investors and condense the number of players in the field by 30% - 50%. But while such a market adjustment will be unpleasant and even downright ugly, the industry is now strong enough to survive the shock, learn the necessary lessons, and move on to becoming a major driver in the global economy.

Hopefully, the inevitable downturn is at least a couple of years away, because I've already got plans to be back at Solar Power 2007. Given the growth I saw this year, I'd expect that the technologies we'll see next year will be even more spectacular, and the after-hours parties should begin to rival the most lavish ones I got to enjoy at the telecoms shows back in 1999. And that's a piece of déjà vu I'd like to experience all over again.

Comments? Questions? Tips on hot new solar technologies or after-hours parties? Write me at  lhg at en-genius dot net.