pv magazine: In the past you have been critical of efforts to extend the ITC in the past, but called the recent extension of the ITC and PTC the perfect deal. What are the most important differences between this deal and past efforts?
Jigar Shah: The big thing that I was looking for was the phase-down. In the sense the phase-down makes this a permanent solution. The argument that I have been making for a long time is that there is very low-cost capital out there that really needs to see more cash flow, and less tax credits, to get interested in investing.
And this deal sort of pushes them off until 2023, but that is neither here nor there. It is not like those guys are itching to get in. They can come in 2018, or they can come in in 2023.
pv magazine: In the past you've talked about certainty versus uncertainty. Can you explain why this is important?
Jigar Shah: When you think about these huge pools of capital such as pension funds, or Chinese and Japanese or Korean money, these are generally three-year conversations. It's not something like, I go in, I pitch them a great deal on solar, and they say great we're in, we are going to fund it.
It's more like, that's really interesting, we've never done a solar deal before, let us hire our favorite consultant, to tell us whether this is a good deal or not. Let us do this, let us do that. It is more of a three-year process to get them involved. This eight-year extension that we have been under has been really helpful to getting folks like that into the game, which has really been useful.
Now there are those who have no interest in investing in solar, not because they are against it, but just because they don't really love the tax credit. Because if you are a pension fund, you don't pay taxes.
And so now we are going to go back to them and say, now there is a phase-down now by 2023, why don't you go back and do all the work that you need to do, so that by 2022, you are actively able to invest.
That certainly matters. The sheer amount of money that we need to raise in order to be able to accomplish the goals here, it is pretty massive. We need to raise something in the order of $400 billion dollars, which is what I have been calculating.
And that money doesn't come just from wishing for it. There are people who have to go out and raise it.
pv magazine: So do you believe now with this extension and phase-down, that we are going to be able to raise the kind of capital that we are going to need to really expand the solar industry to scale?
Jigar Shah: I do. Yeah, and that $400 billion is not just deployment capital. I think you are going to see a lot of new manufacturing plants go up in the U.S. now because we have all this intrinsic demand here in the U.S. I think you are also going to see a lot of additional money going in to R&D for solar and wind, because of the huge opportunities available.
pv magazine: Are you still concerned that through 2020, 2023 that the solar industry will remain overly dependent upon tax equity? What do you see as the effects of this?
Jigar Shah: We will be for sure, right? That's what this extension has done, is make the tax equity essential at least through 2022. And that's what it is. I've made my peace with it. I wish it would have phased down faster, and that's what I was lobbying for, but the phase down was the key thing I fought for.
The wind industry had no phase-down in 2012/2013, and then they have this boom-bust cycle where thousands of people were whip-sawed and lost their jobs. That's not going to happen now in the solar industry. Which is fantastic news.
pv magazine: Now that the ITC has been extended, with the phase-down, and the commence construction clause. When you look big picture, what impact do you expect for the solar industry to 2020 and beyond?
Jigar Shah: I think the first thing that people have failed to acknowledge, is that with this deal, we are now Goliath and the utility companies are now David. So the roles have reversed.
We now have the responsibility of being the dominant force on the regulatory stage, and it is the utility companies who are now working every which way to figure out how to stop us. And that's a much different dynamic than we had before. So we need to understand that as an industry, and make sure that we resource that.
It used to be that we were very reactive. So whenever the utility companies did something, we said OK, fine, we need to fight that. Now we need to say, hey, if the utilities are going to do something, what do we do, who do we fund, how do we make sure that the literature is clear. Such that, at the time at which we need to defend ourselves, we have already done all the research and the work.
pv magazine: What sort of responsibilities do you see the solar industry and renewables broadly as having in this new environment?
Jigar Shah: For instance, it is obvious that now that we have this long-term extension of the federal level, the fight is going to go on to net metering in the states. So what is our position on net metering in the states? And how do we defend that?
So if our position is, we want to leave it exactly the way it is, then we have to do our own research with credible academics saying, well this is what the impact to people's neighbors is going to be if we do it exactly the way it is now.
We can't just say the utilities are lying when they say it is going to cost an extra $45 a month to every person. We have to be able to say, our academic person who has excellent credentials says this.
pv magazine: Do you also see the potential responsibility for the solar industry in other areas, such as grid integration of large volumes of renewables?
Jigar Shah: So we have to put together an entirely new framework. Essentially, what this extension did was to destroy wholesale markets in the United States. Wholesale markets assume that you have variable costs to operate. If you have very low variable costs to operate, then that means your technology (solar and wind) is going to be preferred over things that have higher variable costs.
It means that we are going to basically bankrupt almost every coal plant, as well as old natural gas plants, in the United States.
Either we have to say, no, we need those natural gas plants, which I don't believe, but some people do. Or we need to say, we need a new framework by which to integrate storage and existing gas plants that aren't going to be shut down because they are very advanced and efficient, or add demand response and load control.
All these advanced grid edge features which we have been pursuing for the last 20 years, we now have to put a framework together, it is our responsibility to put that framework together for utility 2.0.
pv magazine: Do you see REV as an example of this?
Jigar Shah: Yeah, REV is one example of this for sure. But there needs to be other examples. We are in the early stages of doing this. The renewable energy industry now has to have a definitive point of view on this. Before we were very responsive to these efforts. Now we actually have to have a proactive point of view.
pv magazine: Anything else about this ITC extension which we haven't covered?
Jigar Shah: The scale of what happened in Paris, and what happened in DC this week, with respect to the ITC extension, is truly massive. I think that people have a hard time grappling with it.
This one policy, combined with China and India's efforts, etc., will make solar and wind the dominant electricity technology that will be deployed over the next 10 years – at a trillion dollar scale.
Globally. And the reason for that is because as we convert these money sources over to solar and wind, they are not going to be only be converted for the U.S. market, they are going to be converted towards the technology for markets around the world, right?
Once you are used to investing in a technology, you are like, hey why don't I invest in India, or China, or Brazil, or other places.
When I look at the coverage so far, it's been very light. People think oh you got another extension, which is great. This is literally fundamentally groundbreaking. I think people are missing how extraordinary this news really is.
Interview conducted by pv magazine Americas Editor, Christian Roselund.
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