The Solar Energy Industry is Red Hot - Will it Get Hotter?
- December 11, 2013
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The solar industry has been very hot. Record amounts of new solar capacity have been installed over the past two years. The accelerating pace of adoption of solar panels for distributed generation (installed at the point of use, rather than sold into the power grid) and the downward trend of module prices have created exuberance over the industry’s future.
Solar has reached and eclipsed price parity with traditional fuel sources in some markets, and ultimately the potential market for solar PV is huge. A solar module costs approximately 1% of what it did 35 years ago and prices for solar pv panels have plummeted since 2010, with an average price per watt for modules falling from $1.81 in 2010 to less than $0.70 and today.
It is clear that the future is very bright for the industry. What is less clear is when growth will accelerate and how near-term challenges for the industry could create some rough patches for the industry before widespread adoption drives truly explosive industry growth.
The rapidly decreasing costs of solar cells and corresponding growth of the global solar industry have lead people to invoke Moore’s law and predict that the installed capacity of solar PV on homes and businesses will double every two years. The total installed capacity worldwide and in the U.S. doubled over the last two and a half years. While the steep decline in the cost of manufacturing solar panels appears to be flattening out, the associated balance of system costs, along with customer acquisition, transaction and capital costs will continue to drop, though this will likely happen inconsistently in fits and starts over coming years. Meanwhile, the per-unit cost of retail electricity delivered by utilities will begin to rise as costly infrastructure demands combine with stagnating or falling demand caused by the penetration of distributed power systems. These two merging dynamics – dropping solar costs and rising utility rates for electricity have caught the eye of more than a few investors and analysts.