ORIGINAL REPORTING: Solar’s Changing Market And Policy Landscape Tax credit, net metering declines strike distributed solar, but falling costs, storage offer new hope; With tax credits and net metering threatened, previous withdrawals of financial support mechanisms show what the distributed solar industry may soon face.
Herman K. Trabish, Dec. 19, 2019 (Utility Dive)
Editor’s note: Few knew what real turmoil is last December.
Despite turmoil on key incentives and financial support that could threaten the distributed solar market, falling prices and battery storage are giving advocates something to cling to. Congress this week rejected an opportunity to extend the investment tax credit (ITC) for solar, likely impeding industry growth. Net energy metering (NEM), a key compensation mechanism for distributed solar in 39 states, and other financial supports for solar are also facing new challenges.
In addition, the market and changing incentives for distributed solar are working in opposite directions. Driven by new efficiencies in hardware and labor, installed prices continue to fall in most markets, Lawrence Berkeley National Laboratory (LBNL) reported in October. But rebates and incentives have "largely phased out" in leading markets and fallen very low in most others, creating "a significant counterbalance."
"It is very hard to say how one factor impacts a market because there are so many moving parts," Vikram Aggarwal, CEO of national online solar marketplace EnergySage, told Utility Dive. As changes compromise predictability, "consumers need certainty, and even a financial support [mechanism] scheduled to phase down with certainty will attract consumers to the next question, which is the price of solar, the electricity rate and the payback period."
The uncertainty and potential market impact brought about from the withdrawal of the ITC and retail rate NEM can be seen in past changes to distributed solar's financial supports, researchers and stakeholders said. Whether solar can sustain its growth depends in part on how the solar industry faces the coming changes, and how utilities and policymakers choose to understand the value of solar+storage.
Growth is slowing overall for distributed solar. U.S. residential solar grew 8% nationally in 2018, but only 7% year over year in the first half of 2019, according to the Q3 2019 Wood Mackenzie-Solar Energy Industries Association (SEIA) market report. In Q2 2019, non-residential distributed solar grew 2% less than in Q1 2019 and 16% less than in Q2 last year. "Since 2000, installed prices have fallen by $0.50/W per year," but that "has been substantially offset by a corresponding drop in rebates or other incentives," LBNL's Tracking the Sun 2019 reported.
The payback period for distributed PV went up from 7.8 years in the second half of 2018 to eight years in the first half of 2019, EnergySage reported in September. At the same time, "customer hesitation created by utility and regulatory uncertainty leapfrogged the high cost of installation to become the second most common challenge in closing sales in 2018," the February 2019 EnergySage installer survey reported.There is, however, a "small but increasing share" of distributed solar being paired with battery storage, found. It ranged from "1% to 5%" of installations in major markets last year, but was over 60% of Hawaii installations… click here for more