TODAY’S STUDY: SUN OR STORMS FOR SOLAR?
Executive Briefing: The Future of U.S. Solar
Shayle Kann, November 2015 (GTM Research)
Solar power is on an impressive growth streak in the U.S., having gone from 2 gigawatts of cumulative capacity at the end of 2010 to a likely 26 gigawatts at the end of this year. More importantly, costs have fallen enough to make it clear that solar will play a meaningful role in the future of electricity in the U.S.
For the solar industry, it is time to start thinking about the next order of magnitude. Solar generates approximately 1% of all electricity in the U.S. today, but there is a realistic path toward 10% over the next 10-15 years. That path is by no means guaranteed; solar faces both advantages and disadvantages as it begins to truly scale. This report highlights the key forces likely to push, or impede, solar growth in the coming years and identifies opportunities for the solar industry to ensure its future.
Catalysts for Growth
• Rising Electricity Prices will continue to make solar more competitive in comparison
• Falling Solar Costs should continue for the foreseeable future, albeit at a more moderate pace than the past five years
• The Clean Power Plan could open up new state markets to solar and diversify the demand landscape
• Electricity Market Reinvention through initiatives such as New York’s Reforming the Energy Vision carries the promise of new revenue streams for solar as a grid asset
• Investment Tax Credit Expiration is looming and likely to generate the first down year for the U.S. solar market in well over a decade
• Solar’s Value Deflation Effect, through which the marginal value of solar power decreases as solar penetration grows, means that grid parity will be a moving target
• Electricity Rate and Net Energy Metering Reform can still erode the economics of distributed solar through the introduction of higher fixed charges, higher or new demand charges, or lower export rates for solar generation
• Investing in energy storage and load control can make solar a better long-term citizen of the grid
• Testing radical cost-reduction opportunities will leave the door open for step-function reductions in solar costs
• Participating in market reinvention will ensure that distributed solar receives its full value as the electricity market becomes increasingly distributed
Solar Has Come A Long Way In The U.S.
The Anatomy of a Booming Market
Five years ago, as 2010 came to a close, the U.S. was home to a total of 151,000 solar installations that provided 2.0 gigawatts of generation capacity. Thanks to a 2008 extension of the federal Investment Tax Credit, and a 2009 stimulus-package-driven program to enable the conversion of the tax credit to a cash grant (much needed in the wake of the ongoing financial crisis), the U.S. installed 852 megawatts (MWdc) of solar photovoltaics (PV) that year alone. Solar costs were falling precipitously; utility-scale solar installations were constructed that year for an average of $3.58/watt (Wdc), down from 63% from a decade prior. At the time, all of these numbers seemed impressive.
My, how times have changed. This year, we forecast that the U.S. will install 7.7 GW of solar PV, more than nine times the 2010 total. By the end of this year, the U.S. will have 26 GW of solar PV operating. Total capacity has increased by an order of magnitude in just five years.
Meanwhile, costs have continued to plummet. Today, the average cost to install a utility-scale fixed-tilt solar project in the U.S. is around $1.45/W all-in (including developer margins). We have even heard quotes for best-in-class projects in the Southeast U.S. planned for completion in 2016 at nearly $1.00/W. And average costs shouldn’t be far behind; we forecast that fully loaded average prices will hit $1.04/W by the end of the decade.
Over the next few months, the U.S. solar market will reach two symbolic milestones. First, early next year, the millionth solar installation will begin operation. Second, around the end of this year, solar will begin generating over 1% of all electricity in the country.
These milestones can be viewed through two different and equally appropriate lenses. On one hand, solar’s transformation from a tiny blip on the radar of the expansive electricity sector to a $15B+ annual industry with an ever-growing coalition of supporters is remarkable. The market has proven resilient in the face of incentive reductions, import tariffs, and many other roadblocks; solar clearly is here to stay. On the other hand, for all its growth, solar remains a bit player in the electricity sector. The industry has yet to fundamentally change the generation mix, or to significantly impact U.S. greenhouse gas emissions. There remains a long way to go…
Getting To The Next Order Of Magnitude…What Will 250 GW Look Like?...Catalysts For Growth…Solar’s Tailwinds Are Strong…Risk Factors…The Headwinds Are Blowing…Ensuring The Solar Future…The Solar Industry’s Work Today Is Laying The Groundwork For The Next Decade Or More…
Why the Future Is Bright, or Solar’s Coming Dawn, or the Market’s Day in the Sun
Traditional energy forecasters have always struggled to catch up with the solar market’s growth. And while many of them have now awoken to the possibility that solar may account for a meaningful portion of the electricity market in the coming decades, few have truly considered the shape of the path between here and there. It will be bumpy; solar remains an incentive- and regulatory-driven technology, and its near-universal public appeal will not always translate to perfect policy. But I find it very difficult to conjure a realistic scenario that doesn’t include solar achieving the next order of magnitude by 2030, if not earlier.
In the meantime, there is no shortage of work to be done by the solar industry, electricity regulators, utilities, and policymakers to ensure that the transformation at the edge of the grid produces a more affordable, efficient, resilient, and clean energy future.