Opportunities Abound?

Opportunities Abound?

August 21, 2014

Many people remain bullish about the long-term prospects for renewable energy, but does it feel that way inside the utility-scale renewable energy companies?

A group of CEOs talked about the mood in the market at the Chadbourne 25th annual global energy and finance conference in late June. The panelists are Gabriel Alonso, CEO of EDP Renewables North America, Michael Alvarez, president of First Wind, Douglas Egan, CEO of Competitive Power Ventures, Declan Flanagan, CEO of Lincoln Renewable Energy, and Sandy Reisky, CEO of Apex Clean Energy. The moderator is Keith Martin with Chadbourne in Washington.

MR. MARTIN: Declan Flanagan, how optimistic are you about the prospects for building more utility-scale renewable energy projects in the United States? You said in an email earlier this month, “Developers were all doing wind, then they switched to solar. Will we all be doing natural gas next?”

MR. FLANAGAN: Let me start with reasons for optimism. The cost of constructing wind farms continues to decline. We have big projects in the middle of the country, and the capital cost of these projects is materially cheaper than it was 10 years ago. We have moved much lower than we were in 2008 and 2009, so that the cost is back to a competitive level.

Turning to utility-scale solar, panel prices have leveled off, but the balance of system on large projects continues to go down and there are performance and operating cost efficiencies.

So we are doing fairly well on the cost side. But the challenge in the US renewable business is that there is no market for the output from these projects.

We had figures for what was technically under construction at the end of 2013. Fully half of it by my calculation is in Texas. If you look at what is actually getting done or will get done, if it wasn’t for the Texas Public Utility Commission signing off on CREZ four or five years ago, the market would be massively smaller. Texas cannot be the market of first and last resort forever.

MR. MARTIN: How can things be massively smaller if the US market is basically one state?

MR. FLANAGAN: Very easily. There is no market. Texas has carried the wind business, and perhaps Texas is where the last wave of big utility-scale solar will take place because solar is increasingly becoming a distributed generation business, behind the meter and 20 megawatts and below.

You need a market. That has always been the problem.

MR. MARTIN: Gabriel Alonso, you looked into distributed solar. You decided not to take the plunge. You have gone back to utility scale. Smart move?

MR. ALONSO: We could not get the level of returns and the volume that we get with utility-scale wind. That was the primary reason. We would have needed to develop a very intensive manpower organization. We are just 300 people here in North America, and in order to get just 100 megawatts worth of distributed solar capacity every year, we would have had to multiply the organization by several times.

MR. MARTIN: Michael Alvarez, you are called First Wind, but you have now started doing utility-scale solar. How does the market feel to you?

MR. ALVAREZ: We have had a good run recently. We just transitioned into solar when it looked like the production tax credit for wind was not going to be revived. We now have our first solar project in service in Massachusetts in a challenging SREC market. We have about 350 megawatts of solar contracts in Utah and another 100 megawatts in development. We have about 150 megawatts under development in Hawaii. We have pretty much stuck to our core markets.

MR. MARTIN: Sanford Bernstein, the independent Wall Street research house, suggested in a report in early June that distributed solar will take 7% of the retail sales from utilities on average in the United States, but in Hawaii, the figure is much higher. It is 20%. How is there still a utility-scale market when distributed solar is taking away so much of the retail sales?

MR. ALVAREZ: Hawaii is a unique case because it is such a small grid. We are able to prosecute some utility scale there because of the need to avoid what I will call class warfare. That is, a lot of people cannot afford to put solar on houses because they do not own homes or they are in condos or other multi-unit residences. In Hawaii, the cost differential between distributed generation and utility scale is very significant. Utility-scale generation may be a third as expensive. So I think there is still a case to be made there, but to your point about solar rooftop penetration, I think the rooftop companies are installing about a megawatt a month on Maui, and the electricity load there is only 200 megawatts peak, so it is definitely putting pressure on our ability to do utility scale anywhere but Oahu.

MR. MARTIN: Doug Egan, Declan Flanagan asked somewhat facetiously, “We’re doing wind, now we’re doing solar. Will we all be doing gas eventually?” You are already doing gas. What is your view of the market outlook?

MR. EGAN: For the last seven or eight years, we have been building one gas-fired power plant per year and one large-scale, 150- to 300-megawatt wind project. Given the fuzziness of the market right now, the wind project that we were going to do ourselves this year has been sold to someone else and we have walked away from a fair number of sites and kept just our three or four best sites to see what happens next year or the year thereafter. We will focus on natural gas in a big way over the next couple years.

MR. MARTIN: So you are giving up wind for now, and I don’t think you have even tried solar.

MR. EGAN: We have never tried solar. As I said, we are putting wind on the back burner until we know what the rules to the game are.

MR. MARTIN: Sandy Reisky, you made a fortune by developing sites for wind farms during the first wave of interest in wind and then selling the sites to BP or was it Shell?


MR. MARTIN: Soon after that, I met you on a plane. You were coming back from a solar conference. Now you have gone back to wind in a big way. How are you able to get traction in wind in this market when other people are starting to wonder whether wind is the right place?

MR. REISKY: We took a point of view in 2009 when we got back into the market that we are investing in the fundamentals of wind. It is getting cheaper over time. It does not use water. There is a product in which the market has an interest. We moved back into the market at a time when it had little access to capital. It was at the height of the financial crisis, and our mantra was, “Let’s pick up projects at good prices that are in danger of going off the cliff because the developers have run out of capital. Let’s find good projects that have good fundamentals and build a portfolio that way.”

Over time as the production tax credit has cycled, we have repeated that pattern to build a large national portfolio. We do not know exactly where markets might open up, but we want to have projects ready, and that game plan is starting to pay dividends. We have about 700 megawatts of projects with power purchase agreements that we plan to build in the next year, and we are building a 100-megawatt project now for Ikea.

Legacy Construction

MR. MARTIN: Of those 700 megawatts, how many would you say were under construction by the end of 2013 for purposes of qualifying for tax credits?

MR. REISKY: All of them.

MR. MARTIN: Michael Alvarez, how many megawatts of wind projects did you have under construction in time?

MR. ALVAREZ: About 750 megawatts, possibly 900 depending on what the IRS says in additional guidance that is expected.

MR. MARTIN: So we have 1,600 megawatts possibly on this panel. Gabriel Alonso, how many?

MR. ALONSO: We have 1,100 megawatts, but given how much cushion we built into some of the safe harbor compo-nents we acquired, we could expand that to 1,300.

MR. MARTIN: So we are at least to 2,700 megawatts. Declan Flanagan?

MR. FLANAGAN: We have tended recently to sell projects when they hit the notice to proceed. We have 500 megawatts of wind that has hit that point in the last 12 months.

MR. MARTIN: “Hit that point” meaning under construction 2013 or that you sold?

MR. FLANAGAN: Under construction in 2013.

MR. MARTIN: So we are at 3,200 megawatts at a minimum. MR. REISKY: We actually qualified over 1,300 megawatts through physical work on transformers.

MR. MARTIN: Now you’re throwing off my calculation entirely! So revise the figure you gave me before to 1,300 megawatts. Gabriel Alonso, data shows that whenever the production tax credit expires, new wind installations plummet. Does that mean that this industry still needs the tax credit?

MR. ALONSO: Yes. Installations plummet because there is an expectation in the market that we are selling power in Oklahoma at $25 per megawatt hour. Without the PTC, we cannot sell below $40 to $45 a megawatt hour.

Is it a bad deal to buy for 20 to 25 years at $40 to $45 a megawatt hour. No, I don’t think so, but when your expectation is $25, why would you as an offtaker move quickly to buy at $45. When the PTC expires, the immediate reaction is for the market to wait. That is why construction stops.

The reality is we still need the PTC. The economics of wind continue to improve. My main concern is that for turbine suppliers to keep investing in new technology, to keep designing longer blades, taller towers and improving the efficiencies of these pieces of equipment, they need growth not only in the US, but also worldwide, and I do not see that happening right

now. Europe is pretty much gone as a market for driving growth. Asia, particularly China, is not a technology-driven market. It is a commodity-driven market. South America is not that relevant. Africa is a big hope, but it is not there yet. Extension of the PTC is important if we want to keep seeing turbine suppliers investing in technology and driving down the cost of producing wind.

MR. MARTIN: Is the PTC needed if after it expires, market expectations take time to adjust, but they do adjust eventually?

MR. ALONSO: They will not adjust to the level of demand required to keep the turbine suppliers interested in continuing to pour money into improving the technology.

Declan pointed out another issue: we have a problem of markets. Some utilities are buying more than they actually need under state renewable portfolio standards because, at $25 a megawatt hour, it makes sense to buy. They would not do that at $45. If legislators decide that state residents are suddenly having to pay $20 more for renewable electricity to meet RPS standards, then we are at risk of losing state RPS programs. The legislatures are already under pressure to repeal the programs. Loss of the PTC will add fuel to that fire. We need to be mindful of this when we stop the PTC.

MR. MARTIN: Declan Flanagan, yes or no, the PTC is still needed?

MR. FLANAGAN: Yes, it is still needed because there will be a big slowdown if it goes away. If your time frame is five or 10 years, yes we can adjust. But there is no turbine supplier that can go without a few years of orders. There is no developer that can keep 300 people on the payroll for a few years of no activity. Over 10 years, it picks back up. It will get back to the starting point. Pessimism is an essential ingredient of any successful developer, so you always have a “glass half empty.”

MR. MARTIN: An essential ingredient of an Irish developer. [Laughter.]

MR. FLANAGAN: Maybe my Irish Catholic pessimism is a key ingredient to our business success. That being said, the US market and US renewables specifically is a more interesting place for me to work than elsewhere. The challenge with which you have to deal is this PTC cycle. Be prepared if the PTC goes away, be prepared if it comes back, be prepared to play it in the way that Sandy Reisky mentioned. The 500 megawatts of wind that we sold recently were all projects we acquired in December 2012. We had no idea the PTC was going to be extended later that month. Maybe we will get it wrong the next time. This uncertainty around the PTC is an odd way to try to do business.

I have been in the US for 11 years now, and I think the longest plan horizon in terms of PTC clarity I ever had was maybe 24 months.

But all that being said, there is still a deeper set of opportuni-ties than we have seen in other countries when you scratch beneath the surface.

MR. MARTIN: Doug Egan, why have you given up on wind? You are now exclusively gas, at least for the next two years you said.

MR. EGAN: We still have probably 1,500 megawatts of wind sites and, if we get the PTC back and if the rules are clear, then we will jump back in, but for the time being, we are out of that market.

Firmer Product

MR. MARTIN: Sandy Reisky, did you ever jump into solar or are you exclusively wind?

MR. REISKY: We are working on solar in areas of the country where it makes sense and where we already have a wind project underway. The marketing pitch is that we can add solar for a buyer as a way to have a better delivery of power if there is a dip in the wind during the day. Solar can fill the gap.

MR. MARTIN: Michael Alvarez, how do you see the prospects of solar versus wind?

MR. ALVAREZ: We’re pretty excited about our solar opportunity at this stage because we have been so successful at landing these contracts, but we have not given up on wind at all, particularly in New England where we see a pretty significant opportunity still ahead of us, possibly with a hybrid product that might combine wind and hydro to make for a more firm product. New England is still short renewable power.

MR. MARTIN: Let me go across the panel. How many megawatts will you install this year and how many next year, starting with Declan Flanagan.

MR. FLANAGAN: We did 30 megawatts of solar in the last 12 months. Gabriel can count this in his numbers as well because we sold the projects to EDP at notice to proceed. A lot of projects get double counted in this business. We also sold 500 megawatts of wind. We are now in a sort of reload, so we do not plan to bring any projects to the notice-to-proceed stage in the next 12 months. We are now more focused on the next cycle across ERCOT and PJM, the markets we understand the best.

MR. MARTIN: Gabriel Alonso, how many megawatts this year, how many next year?

MR. ALONSO: This year, around 350 in the US. Next year, 400 to 450.

MR. MARTIN: And are you also handling Mexico or just the US?

MR. ALONSO: Yes, Mexico and Canada.

MR. MARTIN: And are you counting Mexico and Canada in those numbers?


MR. MARTIN: How much in Mexico or Canada?

MR. ALONSO: Nothing through 2015. In 2016, another 200 megawatts.

MR. MARTIN: Michael Alvarez, megawatts?

MR. ALVAREZ: We have currently 300 in construction, and another 200 about to come on line. Next year, depending on how the additional guidance the IRS is expected to issue on the construction-start rules comes out, somewhere in the neighborhood of 300 to 400 megawatts.

MR. MARTIN: Doug Egan, guess how many megawatts.

MR. EGAN: We have 800 in construction currently and will have another 800 at notice to proceed by the end of the year.

MR. MARTIN: Gas-fired power projects in which states?

MR. EGAN: Maryland and New Jersey.

MR. MARTIN: Sandy Reisky, how many megawatts do you think you will install?

MR. REISKY: We are building 100 megawatts now, and we will install 900 megawatts next year.

Hard-Earned Wisdom

MR. MARTIN: Declan Flanagan, someone once said, “No mistakes, no experience; no experience, no wisdom.” You have been in the development business a long time. You started Airtricity in the US. You sold it. Now you have Lincoln Renewable Energy. What have you learned about the development business, perhaps through the school of hard knocks, that would count as wisdom?

MR. FLANAGAN: I always worry most about a project that has not almost died at least three times because you have not found its problems yet.

MR. MARTIN: You really show your Irish roots. [Laughter.]

MR. FLANAGAN: Yes, very comfortably so. [Laughter.] The other thing is not to let the perfect be the enemy of the good. When you have a good deal, take it, whether it is a PPA or a turbine supply agreement, whatever the element. I think there are a lot of projects now hanging around that were waiting for the perfect deal that will miss their window, particularly in this very choppy and unpredictable cycle. When you have a good deal, take it. It is all about momentum.

MR. MARTIN: Gabriel Alonso, you were president of Gamesa US, and now you have been heading EDP Renewables North America. You were also the chief development officer in between for EDP. What hard-won lessons have you learned about the business?

MR. ALONSO: The hardest won is that in 2007 and 2008, everybody was looking at having the biggest pipeline of projects under development. Ten thousand megawatts were not enough. It had to be 20,000 and, in the end, the cost of making sure you had a pipeline pretty much in every state so that you can take any opportunity is extremely expensive.

Moving that whole portfolio one inch forward is extremely expensive.

If you are building 500 megawatts per year and you are expecting to make $X million of net present value over the following 20 years, but you are spending to preserve optionality a big fraction of that future net present value, then you are pretty much killing your own business.

It is not possible to be everywhere. You have to be very selective about where you go.

MR. MARTIN: Michael Alvarez, hard-won lessons?

MR. ALVAREZ: Probably three: first, don’t believe a wind forecast that comes out of the box the first time. Cut it at least twice. Second, even though we are striving for innovation, all the time be very cautious about testing out new technologies because any problems will stick with you for quite a long time. The third is something that I did not appreciate early on and is what I call regulatory creep. It is starting to bind us as if we are nuclear power plant operators, and it is becoming very difficult to plan ahead in such an environment. It requires greater and greater overhead to be able to operate with the growing volume of rules and regulations.

MR. MARTIN: Regulatory creep at the state level or at the federal level?


MR. MARTIN: What is an example?

MR. ALVAREZ: The recent attempt to treat each wind turbine as a single generating facility.

MR. MARTIN: For what purpose?

MR. ALVAREZ: To regulate it as a bulk electric facility.

MR. MARTIN: Doug Egan, hard-won lessons?

MR. EGAN: If you are going to fight the federal government, you have to have a really deep pocket. It has been difficult.

MR. MARTIN: Litigation in this country is a custom to which we resort when two people who are so angry they do not want to talk hemorrhage money instead on lawyers until that becomes more painful.

MR. EGAN: It is remarkable how many steps there are in the process. We won two cases in federal district courts in Maryland and New Jersey. Now we will see if the third and fourth circuit courts of appeal see the issues the same way, in which case it will probably go to the Supreme Court, where it will cost us even more.

MR. MARTIN: Sandy Reisky, hard-won lessons?

MR. REISKY: We are seeing the conventional sources of fuel really push back. There is a huge effort underway to try to roll back renewable portfolio targets in state after state. Gandhi had this saying, “First they ignore you, then they laugh at you, then they fight you, and then you win.” I think there is a lot of fight still ahead of us. Ohio was a bit of a wake-up call. The industry is working really hard and did a great job pushing back on a lot of the other efforts, but there is still a lot of work to do.

MR. FLANAGAN: Building on the comment about regulatory creep, all of these things have the effect of narrowing the potential market. Eagle take permits are becoming a bigger issue. Ohio froze its RPS target for the next two years. Turbine set backs are being adjusted. The renewable energy opponents are becoming very sophisticated. If you want to see how this story can play out, just look at how sophisticated onshore wind opposition has become in places like Ireland and the United Kingdom where they know precisely how to adjust set back limits to destroy huge swathes of projects.

You have increasingly sophisticated opponents of renewable energy who are able to use regulatory creep to their advantage. Add to that utilities that have no incentive to enter into long-term power contracts to buy the output.

The only way you can get utilities to sign PPAs right now is to tell them that the PTC is about to disappear so that this is the best deal they are likely to get, which is not a very sustainable business plan.

Evolving Strategies   

MR. MARTIN: Sandy Reisky, I read in a piece in the New Yorker magazine about Cory Booker, the US Senator from New Jersey. When he started raising money for his political campaigns, he learned an important lesson from an investment banker. Investors are interested in the business plan but they are more interested in the people because successful people find a way to be successful ultimately. Most business plans evolve over time. How has your business plan evolved?

MR. REISKY: In my experience, if you are looking to raise money and you ask for money, you will get advice. If you ask for advice, you are more likely to get capital.

We have moved out of brownfield development. When we launched the business, we thought there was an opportunity to put smaller-scale sites for utility scale wind near load centers where the power might have a higher price. The lesson we learned, and maybe not quickly enough, was that it is awfully expensive to try to overcome all of the challenges on a brown-field site.

MR. MARTIN: Doug Egan, how has your business plan evolved?

MR. EGAN: We have narrowed our focus to what we can do for the next two or three years, and it is natural gas.

MR. MARTIN: Michael Alvarez?

MR. ALVAREZ: We expanded into solar. We have done some careful evaluation of storage. We put in place a financing vehicle in the Northeast through a joint venture with Emera that has been very successful, and we have stepped up our M&A activity by an order of magnitude. The business has become so capital intensive in terms of the resources needed to develop and letters of credit. Development costs and security have gone through the roof, and there are a lot of developers who are failing as a consequence. They lack the means to put that kind of capital to work, so we see an opportunity to pick up some additional projects.

MR. MARTIN: If the cost of capital is an increasingly important element of the business, how do you drive down the cost of capital for a company like First Wind?

MR. ALVAREZ: Through the joint venture that I described earlier. We have a long-range opportunity to put projects in the Northeast into a joint venture with a Canadian utility holding company at a pre-ordained rate as long as the projects meet specified criteria. We have looked at yield cos, but I am of the same view as Declan who asked, “Where is all the product going to come from,” so I think our opportunity may be in supplying product to the yield cos that will be hungry to meet their earnings projections.

In the long term, we need to find another source of capital that is easy to replicate.

MR. MARTIN: Gabriel Alonso, how has EDP’s business plan evolved?

MR. ALONSO: We are making sure we diversify our footprint so we have now an operating wind farm in Canada, and we will have one soon in Mexico. We are not exclusively relying on the wisdom of this Congress to extend the PTC. Within the United States, we are making a huge effort to understand and anticipate where future demand will be located so that we have, in line with my previous comments about optionality cost, a much more focused greenfield approach to our development activities. We are trying to make sure that we are not already eating today the future profits of the wind farm we eventually build.

MR. MARTIN: You sold electricity from an Oklahoma wind farm to Southern Company in Atlanta, Georgia, correct?


MR. MARTIN: How does that make sense? How does it work?

MR. ALONSO: It is a complex structure. We relied on the existing transmission system in both SPP and Entergy to do that. It took us 18 months of negotiations. It was not easy, but we were able to crack the Southern code, and the Public Service Commission in Georgia a few weeks ago voted 5-0 in favor of the PPA and actually encouraged Georgia Power to do more because our PPA price, even after you add the transmission costs, is below the long-term avoided cost of Georgia Power.

MR. MARTIN: It must be a swap so you avoid the wheeling charges.

MR. ALONSO: No, we are not avoiding the wheeling charges. We have purchased transmission capacity to move power from Oklahoma all the way to Southern Company.

MR. MARTIN: Declan Flanagan, how has your business model evolved?

MR. FLANAGAN: In any business, big or small, it is always important to have a plan of record, but you have to be willing to scrap your plan of record and adopt a new one on short notice. As an example, due to the risks around tax credits for wind and solar, we have been developing natural gas projects for over a year now. We are actually in the process of changing our name from Lincoln Renewable Energy to Lincoln Clean Energy.

My experience has been that success is about working backwards from the market. Understand the market dynamics, customers and transmission and do not try to be just a wind guy or a solar guy regardless of the market. It is too tough to manage all the risks. If you are just a utility-scale solar developer, there is just not enough product as the market shifts to a more distributed focus. If you are just a renewables guy, there is a risk of having 2016 be a very slow year due to tax credit expiration.

A Better Use of Time           

MR. MARTIN: A question from Scott Bank with Chadbourne in New York.

MR. BANK: The IRS made it easier about a month ago for renewable energy companies to convert into real estate investment trusts or REITs. Is anyone on the panel thinking of moving to a REIT structure?

MR. FLANAGAN: To be honest, I spend much less time thinking about the capital structure than thinking about how we can get someone to put his or her balance sheet behind a power purchase agreement. Our challenge in this market is not capital as much as lack of a market for the output.

A disproportionate amount of effort goes into solving the wrong problem: capital versus customers.

We have seen Microsoft, Ikea and others get into long-term offtake contracts. The regulatory focus should be how can you encourage more of that. Let’s put thousands of Washington, DC hours into that because I think the capital structure will solve itself very easily if there are power contracts with creditworthy offtakers.

MR. ALONSO: That is a very important comment. Utilities have a load migration problem. It is very complicated for them to predict how much load they will be serving 10 or 15 years from today. They do not know whether to buy 10% wind or 30% or 40%.

This is something that we need to work on as an industry because it can really open up the market. The signals that we have received from Walmart, Microsoft and these other companies are a very promising opportunity for us because we are talking about creditworthy companies.

MR. MARTIN: What do you tell companies like Microsoft to get them to buy? You have an intermittent supply of power. How do you sell them on buying that?

MR. ALONSO: It takes time. There is an educational process.

The good news is that there is already a mimic effect. When Microsoft or Google does it, immediately the management of other companies asks whether it is something they should do as well. Fundamentally what you tell them is they need to look at the long-term profile of their cost of energy. How variable is it? How susceptible is it to fluctuations and price shocks? How can they fix the long-term price of electricity? The best way to do it is a long-term power contract with a wind project.

Industry Business Model

MR. MARTIN: Last topic. It seems like the power industry business model is undergoing a major transformation of the sort that happened after the Arab oil embargo when the independent power industry was born. You have very slow growth in demand for electricity: just 0.9% a year in this country. The new global warming regulations the Obama Administration announced are expected to reduce the extent to which we rely on coal for electricity from 38% to maybe 30% over an extended time period. There is not much opportunity there, and then what opportunity there is being taken up by distributed solar.

Do you sense the business model is changing? Is there room for independent power companies? Is there room for much growth?

MR. ALVAREZ: Yes to all three questions. I spent most of my career looking at 3% per year of load growth. Now we are less than 1% per year load growth. But in fact what will happen over the next few years is there will be coal retirements, and that creates an opportunity. The key is to look for specific spots on the grid that are not being served the way they should be, and that is what we have been doing for the last two or three years.

MR. MARTIN: Or do what Gabriel Alonso suggested; join the crowd with the distributed generators by picking off retail customers like Microsoft and Google?

MR. REISKY: I think also it may not be on the radar in the near term, but electric cars are really coming, and this will lead to a significant increase in electricity demand. All the major manufacturers are bringing models out. The electricity to run them is four times cheaper than gasoline, so there is a fundamental market driver for consumers to switch once the range, battery and infrastructure issues are addressed. The long-term outlook is very bullish for the electrification of transportation.

MR. ALONSO: I expect that utilities that have not been active in owning wind farms will become more active because if you are the CEO of a large utility in the US, how are you going to deliver growth to your shareholders? We will see more utilities owning wind farms, maybe not within their own service territories, but through unregulated affiliates. There are few ways for utilities today to deliver growth. Cutting costs cannot be a permanent solution.

MR. MARTIN: So is that an opportunity for you? You become a feeder for utilities?

MR. ALONSO: No, for us it would be competition. I expect that there to be more room with coal retirements and I agree with Sandy that electric cars are the future, but I think there will be more competition on the supply side.

MR. MARTIN: Sandy Reisky, you had another thought?

MR. REISKY: We are trying to position ourselves not to be captive owners, so we are interested in selling high-quality projects into the capital markets or in a build-transfer scenario to a utility. Our business model is built to anticipate a market in which utilities start looking for growth or there are yield cos looking for growth.

MR. MARTIN: Rob Morgan, chief development officer for RES Americas, you get the last question.

MR. MORGAN: I am curious to hear your views both personally and what your company might be doing about storage. Are you seeing a market developing for storage?

MR. FLANAGAN: I do not see an IPP opportunity in storage. Storage is a technology play more than a project