Filed under: Sustainability
In my last posting, I raised the question of whether 2012 will offer us the best of times or the worst of times for the renewable energy and clean tech sectors in 2012. I concluded that only time will tell, but in this post I am going to hazard a guess.
Here it is: pessimists and optimists are both right in their outlook for 2012. Put another way, 2012 will not be a huge bust any more than it will be a huge boom.
No doubt, at the macro level, things will be grim. The heady growth of prior years will be a distant memory as the market struggles to maintain 2011 performance. In fact, odds are even or better that the we see a modest slowdown in 2012. The loss of the Cash Grant Program, in particular, will push tax equity supply down at a time when demand is growing, stalling a lot of projects. Luckily, an overhang of projects begun in 201l under the Cash Grant Program will require completion in 2012, helping to smooth out the effect of a slowdown.
At the micro level – the company level – things will be interesting with a lot of winners and losers. The marginal difference between them will be small (and perhaps attributable as much to luck and perseverance as skill). The losers will feel the pain, but the winners will see strategic gains that position them for strong future growth when installed costs approach grid parity and the economy turns the corner.
Winners are likely to be larger developers, well positioned with capital and building on established, successful track records. In the development game – even for distributed generation – developer size will matter. Winners will also include highly innovative technology companies – those with new products or processes capable of competing with low cost, commodity products made overseas. The winners will have to be patient. Surviving 2012 will be more the focus than growth. When growth returns, innovative companies that have crossed the funding valley of death will see a boom time.
Losers are likely to be the developers in the middle and lower end– eking out a modest success today will not be enough to insulate against the downdrafts of 2012’s competitive landscape. Even larger developers unable to capitalize on their scale will fail. Losers will include manufacturers producing commodity products with undifferentiated performance – regardless of how profitable they are today.
Christopher J. Lord, Managing Director, Capiron, Inc., CJLord@CapIronInc.com
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