An article on Sprott Power caught my attention this afternoon. They announced that they closed their second round of flow-through share offerings this past month. The flow-through share is an interesting financing mechanism in concept, though it is little used in the renewables industry in Canada, as it is limited to financing "development" work.
The concept of a flow-through share was adopted in the renewables business from the mining business in Canada. There, mining prospectors issue flow-through shares to sell-off tax credits for their prospecting to other companies. This provides them with a means to raise money for their exploration and mine development work. This is useful for these companies as these future tax credits would be parked for many years as an idle asset until the mine starts to be profitable. The flow-through share simply allows the prospector to hand over these tax credits to other companies who can use them right away.
To solve a similar problem in renewables, where potential tax credits are not useful earlier in a project's development, the Canadian government created a special tax class called the Canadian Renewable Conservation Expense. This program allows for "flow-through" shares for development expenses for renewable energy projects. Flow-through means that the project developer can create a special class of shares, "flow-through shares", and can allocate tax credits for project development expenses to these share holders, rather than having to bank these tax credits to offset future profits.
Although interesting, there are a few things that I believe keep this mechanism from being adopted more widely than by larger wind farm developers. First, the market for buyers of flow-through shares is small, as buying tax credits for renewable energy projects is exotic -- it is not well known and these shares look very different from common stock. Second, development costs for renewables projects are a much smaller percentage of a completed project's costs than they are in the mining space (a few percent, rather than in the teens). Third, these flow-through shares have to be established before the project begins. Due to the "distributed" nature of renewables projects (small and dispersed) and the immaturity of the industry, development work is largely undertaken by small companies or individuals, who do not have the scale to establish such a special class of share and to market them before a project begins.
Thanks to a financial market in Canada that is somewhat versed in the concept of flow-through shares, Sprott was able to oversubscribe its latest flow-through share offering (sold more shares than it initially anticipated). Thus, although flow-through shares for renewables project development are exotic, there is an appetite for them. This means that there is more capital available not only for developed and operating projects, but also for those in the early stages who are out there with nothing but a dream and a lot of hours of sweat equity invested. This program is yet another innovative way that Canada overcomes the conservatism of Canadians, if only the renewables business can continue to stay in business during this era of fiscal restraint and amnesia about climate change.
For those of you trying to complete OPA FIT applications here is a handy bit of information.
Property records are public information, but access to them is antiquated. When applying to the OPA for a feed-in-tariff (FIT) application you need to provide the legal description of the property. This is something like "Plan 54 -Portsmouth Village -Part Block 181, Can 1, Part Lots 78-88 Inclusive, Part Lot 144, Lots 120-143 Inclusive, Lot 24 & Part of Gardiner SI.", in the case of the West campus of Queen's University.
The easiest way to get this information (that I've found so far) is to use Teranet's excellent property search tool. The kind ladies of the City of Kingston municipal registrations office showed me this tool. Since that date, I discovered that you can access this tool online. Simply create an account here: Teranet Express. If you know the property owner, such as "Queen's University", you can search by name and you only need to know the county where the property is located. This is a big time saver.
I just purchased a car. I spent a bit of time on the road for my work (what others have told me is an inordinate amount of time). As I work in renewable energy and am a sustainability advocate, to walk the talk I wanted and I feel I need to drive the most sustainable ride that I can. My finding, a Ford Fiesta 2011 with its 6 speed automatic transmission. I really wanted a Honda Civic C/NG that runs on natural gas and my second choice was a Jetta TDI. The TDI was 10k more and although I love the engineering of that diesel engine, it is diesel and the premium was too high for me to digest. The Civic is too tough to source and CNG is too difficult to find in a lot of the places that my work has been sending me. That I hope is my next vehicle. CNG (Compressed Natural Gas) is an obvious choice in North America where it is cheap, plentiful and less polluting than oil (even when fracked from shale, relative to bitumen sands). A CNG in combination with regenerative braking would be a killer car for energy geeks like me. I did not consider a number of cars that others point to, largely because I did not like the aesthetic or design of those other cars (like the Yaris, for example). The Hondas are good, but just not as good as the Fiesta with the Super Fuel Efficiency package. It also helped that as an employee at Johnson Controls, I get a "Ford Partner" discount, so that tipped me over to Ford. The spreadsheet that I used to analyze this can be found here:
My interest in Johnson Controls is that I believe that infomatics is key to sustainability. Sustainable technology solutions are derived or impelled by infomatics as they allow us to:
1. Measure. better ability to measure effects and to synthesize the data gives us the ability to see what is happening in our energy systems.
2. Manage. with this resolution of the operation of systems and new controls brought on by networking technologies we have the ability to manage energy use, transmission and production
3. Integrate. with advanced systems we can begin to model, design and manage the intersection of once disparate systems. We have the processing power to visualize and model these interactions and this allows us to create virtuous cycles, where conjoined systems create synergy (the waste from one is energy for the next).
... this is a general high level thesis that is driving my work writ large.
The Federal government will let a popular solar thermal incentive program (EcoEnergy for Renewable Heat) expire this year, except it will continue to provide support for small residential solar hot water systems (a $1250 grant per system). This is mostly bad news for solar thermal manufacturers in Canada. This is obscure, as the majority of solar thermal manufacturers in this country focus on non residential systems, such as EnerWorks, an Ontario based manufacturer of glazed solar thermal collectors. For the most part the small residential solar hot water systems are thermo-siphon/glass tube collectors that are manufactured in China. Thus, this budget decision essentially favours the non-domestic manufacturers. It also ends an important market for commercial and larger scale solar thermal applications, such as the promising solar for process heat (commercial uses of heat) and the "killer app" for solar thermal, using solar heat to drive chilling equipment (solar air conditioning). This, in combination with the Federal governments inaction on CO2 (Carbon) legislation has put a huge dent in this industry.
Thus in summary, the 2010 Canadian Federal Budget will not renew funding for the EcoEnergy for Renewable Heat program, which will expire in 1 year and whose budget is now largely expired. Without provincial level programs commercial/industrial solar thermal in Canada will disappear, particularly as natural gas prices (which solar thermal substitutes) continues to be depressed.
Moving forward, solar thermal companies in Canada will have to focus on residential solar hot water products. There is no requirement for domestic manufacturing, so the only barrier to this market is for a company to achieve CSA 378 certification (a Canada specific certification).
(disclaimer: I have not studied this extensively, so the following is not authoritative)
The Solyndra solar tubes are mounted over a roof covered in a white plastic. Their added efficiency claims are due to light reflected off the roof and captured by the back side of these tubes. Because the tubes are round as the sun changes position during the day and through the year they plausibly can capture a bit more of the sun than a flat panel. My concern with this technology for Ontario is that the design is to have the tubes mounted at 1' which means that for a few months of the year they are likely to be covered by snow, or the angle of reflection off the snow below the tubes is less optimal. That may erase the gains that this system would have in other times of the year. This system requires that the roof needs to be flat, with little slope and needs the white plastic coating on it. So this is suited for commercial flat roofs that are new, or that require a "new roof" (typically every 20 years).
Another issue with these tubes is that they use "CIGS" which is considered the most environmentally detrimental of solar technologies (cadmium in particular). Supposedly this material is recyclable, but that may not be cheap or easy to do. I suspect that it is easier to recover these materials from these glass tubes than on laminated surfaces?
In terms of financial position, Solyndra is gearing up to IPO but they may have a tough time if silicon prices do not increase, or they cannot drive prices down comparatively. They and other thin-film technologies looked much better leading up to 2009 when technologies comparatively cheaper to silicon based solar and hence why Gunter Report predicts that Solyndra will flop this year. Strangely many in the solar industry are quite conservative about new technologies (I say strange as solar is all relatively new and one would expect that the field attracts more risk takers), so refutation and pessimism about new ideas always abound. I think that perhaps Solyndra is an interesting niche technology, but that it is better suited for lower latitudes and places without snow. I welcome input if you have any.
Ian is an innovator and serial social entrepreneur who focuses his time helping NGOs and companies to find sustainable solutions to address social, environmental and economic problems. He recently completed an International MBA at Schulich in Toronto, Canada. Ian is an expert in open source, economic development, sustainability and clean technologies.