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Solar Energy Is Heading to Mainstream in the United States

Shayle Kann, Vice President of Research at GTM, wanted to assess whether solar is becoming mainstream. He decided to use a checklist, since the U.S. solar market is so complex. As he explained at the U.S. Solar Market Insight Conference

  • With diverse markets in each state, the U.S. has a geographic complexity not found in most countries. Each state has its own regulations, electricity prices, and other factors affecting the market. States even have submarkets.

  • Solar is not just an electricity-generation technology — it’s also a retail product. These days, traditional solar salespeople are joined by car dealers, home-improvement companies, home-automation companies, and environmental groups.

  • Market growth is accelerating. We now have a solar installation every 4 minutes in the U.S., compared to one every 10 hours in 2001. Projections for next year are for one every 3 minutes, going down to every 90 seconds by 2016.

Solar checklist

So Kann devised a checklist to help answer the question, At what point does solar become mainstream in US? And how close are we? His conclusions:

checklist full 1. Solar must be a primary source of new electric capacity in the U.S.

So far in 2013, solar has in fact been a primary source of new electric capacity. A big source of excitement is that this year, the U.S. is likely to install more solar than Germany.

Germany vs US

2013 Cumulative New PV Installations in 2013 by Quarter, U.S. vs. Germany. Source: GTM Research

Although growth has not been consistent across market segments, we’ve seen big increases in all areas. Residential solar grew an amazing 230% in the last few years, admittedly from a relatively small base, but along a consistent trajectory. This, Kann says, is the beginning of the hockey stick.

Non-residential solar also grew 230%, though that segment was more volatile and is now in a bit of a downward trend, with the result that 2013 may be flat. That may be due to dynamics in a few states like New Jersey, Hawaii, and Massachusetts, and GTM believes it will pick up. The utility market has also shown steady growth, with 23 times as much installed in the third quarter than a year ago.

Checklist half 2. Solar must be cost-competitive without reliance on fickle incentives.

We’re not quite there on this checklist item, but we’re getting close. California, Kann says, is a prime example of solar’s ability to become competitive without federal or state incentives.

The operative word here is “fickle.” Kann was quick to note preemptively that he was aware of the many incentives for fossil fuels. But those for solar have not always been as steady.

In any case, we’re heading in the right direction. In California, the solar market is growing, and Q3 2013 was the first quarter when more than half of residential installations in the utility territories were not CSI-funded.

At this point, 82% of solar in the U.S. remains concentrated in a few states. For other states to get to where California is, we need to lower the cost of solar, and we need further innovations.

checklist full 3. Solar must be taken seriously by the electricity industry.

Heard about the Utility Death Spiral? Yes, that’s a rhetorical question. Whether or not you believe it’s a real threat, you’d have to acknowledge that in 2013, utilities have been taking solar very seriously indeed. As Kann noted, “2013 has been huge in that regard.”

This year, battles have raged around the country between solar advocates and utilities, on balance turning out pretty well for the solar industry. That doesn’t mean that all utilities fight it; some are even investing directly in solar, or in solar projects. Whatever their reaction to solar, utilities are definitely taking it seriously.

Checklist half 4. Solar must be bankable.

On this count, we’re partway there: according to Kann, “Solar is kind of bankable.”

What does “bankable” mean? Solar must be financeable and a mainstream source of investment. It’s headed in that direction. Residential solar financing is growing, doubling from $1.2 billion in 2012 to $2.3 billion so far this year. New tax equity investors are getting into residential solar, a big improvement since that was a bottleneck in the past. And this has been a big year for securitization. SolarCity’s first offering of $54 million wasn’t huge, but the next one will be bigger — and it was a major milestone for solar financing that served as a proof of concept.

So although financing is not where it should be for solar to be mainstream, 2013 was a year of “some big precedent-setting events.”

Yes, solar is becoming mainstream 

The upshot is that in the aggregate, solar is on the way to becoming mainstream — closer than Kann thought before measuring it against a checklist.

GTM is even confident enough in solar to attempt a 15-year forecast, something they’ve been hesitant to do before. That forecast predicts more inroads for solar. We now have about 11 GW of cumulative capacity on the grid, and GTM predicts that by 2027 that will reach 158 GW. That would mean that solar would account for about 15% of all electric capacity in the U.S. — compared to 0.5% today. When you account for capacity factor, that comes to about 10% of electricity production.

Though that might not seem mainstream, it’s significantly more than what we have today. And Kann notes that the GTM forecast is conservative.

He left the conference audience with these questions: What would it take for this forecast to be too small by half — for solar to be more like 20% of solar electricity generation? What are the technical, regulatory, financial, and policy barriers? And how can we lay the groundwork to make solar mainstream?

 

Rosana Francescato's picture

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Discussions

Rosana Francescato's picture
Rosana Francescato on Dec 18, 2013 5:36 pm GMT

Hi Willem,

Thanks for your comment. Of course I am familiar with the production data. Shayle Kann was not saying that U.S. production is close to that of some other countries or that solar is a major source of our energy — yet. He did illustrate that the rate of solar production is increasing. Neither he nor I said it is mainstream, but we believe it’s heading there.

Even the article you point to says that solar is a “promising startup” that “could really make a dent.”

Time will tell. Like the author of the article you point to, I am optimistic.

Thanks,

Rosana

Donald Osborn's picture
Donald Osborn on Dec 20, 2013 12:35 am GMT

Willem, cut some slack. The headline said “Solar Energy Is Heading to Mainstream ” not is maunstream now. The article and the facts support the headline as written. Solar is headed in the right direction to become an important part of the energy mix.

Clayton Handleman's picture
Clayton Handleman on Dec 20, 2013 1:28 am GMT

Rosana,

Thanks for the post and for sharing an interesting set of conclusions from the US Solar Insight Market Conference.  It is encouraging to hear that GTM Research has reached a point of high enough confidence that they are sticking their neck out and projecting 10% of capacity factor adjusted electrical energy will be produced by solar by 2027. 

There are many ways to interpret the term Mainstream and I think by the vast majority of those measures, the solar industry has already earned the crown.  As I go back a long way in the industry, I could imagine mainstream simply referring to the fact that solar is an industry with products that are safe, commercially availble from stable companies, and backed up by mature codes and standards such as the UL standards for module and inverter safety, IEEE 1547 interconnection standard and an entire section of the National Electric Code long ago completed, stable and specifically for solar.

But the industry has gone much further and modules are made by publicly traded multinational companies many producing GWs annually.  Many of the inverter companies have been in business for decades and have reached quality and reliability levels such that 10 year warranties are becoming the norm with some as high as 20 years.  Solar PV now has module sales of >$20B annually.  And with modules coming in at about 1 / 5th of installed system cost that puts the industry, as a whole, up at about $100B annual revenues.

PV is used in an ever growing array of applications including street lights, microgrids, emergency backup, many types of portable power such as highway signs and communications systems.  The military is adopting solar to replace Diesel generators in forward positions which have fuel costs of around $400 per gallon.  And of course the largest market is for utility scale power production.

I would say that the ONLY measure by which one could argue that solar is not mainstream is that PV is still producing a relatively small fraction of electrical energy on the grid.  But even there, Navigant and GTM both are projecting that in a relatively short period of time solar will provide a contribution to the overall generation portfolio comparable to what hydro now comprises. 

As a long time macro trend watcher in this industry, I have seen time and time again that even the optimists are generally surprised to the upside at the pace of growth and the resilience of the solar industry.  It is an exciting time to be a part of it and I think your report makes a lot of sense and accurately conveyed the results of the GTM work.  Thanks again.

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