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The Solar Energies Industries Association (SEIA) recently released final solar installation figures for 2012. From all the bad news surrounding bankruptcies among solar manufacturers and tariffs with China, one might have expected the worst. But the figures were, in fact, quite solid and suggestive of a sustainable trend of growth, both in residential and utility solar PV.
In fact, the U.S. as a share of global deployments of solar PV actually took a much larger share, to just under 12 percent, up from around 3 percent in 2010. 3313 megawatts came online in the U.S. in 2012, a 76 percent increase over 2011 with GTM Research predicting that we'll see continued growth up to 4300 megawatts this year.
Solar remains very regional in the U.S. California, Nevada, New Jersey and Arizona accounted for 2356 megawatts or 71 percent of all the solar power installed last year. Part of that is how much sun those areas get but in places like New Jersey, it has much more to do with incentives.
The entire industry remains somewhat subsidy dependent. The investment tax credit goes from 30 percent to 10 percent in 2017, which will impact companies like SolarCity, which will have to address their cost of capital.
Though SolarCity said during its recent investor presentation that in its last financing round it lowered its cost of financing solar contracts from 8 percent to 3.45 percent. Historically the company has paid 8 to 12 percent for financing, even with the investment tax credit. Cost of capital is critical to the whole solar installation business, particularly for companies like SolarCity and Sungevity which are building their businesses around zero down lease programs for residential solar. It's unclear if this news from SolarCity is a positive sign that financiers are assigning less risk to solar, which could take pressure off installers.
Residential rooftop aside, the big win in 2012 was actually on the utility side. Utility scale installations grew 134 percent last year and account for more than half of installed solar. It will be difficult to sustain that level of growth, partially because some very large solar projects in the hundreds of megawatt scale will finally come online and satisfy renewable mandates.
But if install prices keep coming down, look for utilities to consider additional solar installations. The installed price crept down to $2.27/Watt for utility installation in the fourth quarter and 5.04/Watt on the residential side. Those are record lows. Still, prices must come down even further.
Non-hardware costs like permitting and marketing remain a real problem for U.S. solar installers. German companies pay just 7 cents per watt for customer acquisition and customer design costs, ten times what U.S. companies. It costs less than half to install a solar system in Germany.
In September the Department of Energy issued a competition for the SunShot Prize, which would give $10 million to a team that "that repeatedly demonstrates that non-hardware costs, or price to plug in, can be as low as $1 per watt (W) for small-scale photovoltaic (PV) systems on American homes and businesses." The DOE makes it clear that while hardware costs have declined as much as 75 percent in the last four years, soft costs seem unmovable.
So despite the carnage among U.S. manufacturers, the Solyndra hangover, and the failures of Chinese manufacturers, the U.S. installation environment remains promising. U.S. tariffs appear not to have had a significant impact on solar deployment.
The key, as always for solar, is to just get through the next 6-8 year march toward grid parity by continuing to show that solar can be safely and reliably integrated on the grid. Yes, cheap natural gas remains a looming concern that could bring retail energy prices down, which are solar's key competitor.
But even if natural gas stays this cheap (which I don't believe it will), I don't believe that utilities will necessarily lower prices for customers. That's particularly true in the many regulated markets in the U.S. Rather, solar install costs just need to keep moving down and becoming more competitive, as do financing costs. Both of these reductions seem possible. In the end this is the most hopeful aspect of solar-that it keeps getting cheaper.
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http://gigaom.com/2013/04/04/slow-and-steady-wins-the-solar-race
