Monday, July 9, 2012

Snapshot of the US Solar Industry

Written by Anne Fischer | 09 July 2012

Solar photovoltaic installation on the Northwest Harvester buildingThe US solar market is one of the fastest growing in the world. According to “US Solar Market Insight: Q1 2012” (SEIA and GTM Research), PV installations in the US were up 85% over the same quarter last year. Forecasts expect PV installs to exceed 3200MW this year. And add to that, prices are dropping at a rate of about 17.2% year over year. This is all good news, but the reality is that the industry has to keep reinventing itself as it deals with the challenges inherent in promoting solar energy to the point where it is a significant part of the renewable energy mix in the US.

Part of the mix

Renewable energy is nothing new to the US and its use is increasing. In 2011, renewable energy made up nearly 40% of the additions to national electric capacity. The renewable energy mix accounted for nearly 12% of US primary energy production last year.

Chart of Renewable Energy Sources in the US
Source: “Renewables 2012: Global Status Report,” Renewable Energy Policy Network for the 21st Century www.ren21.net

Hydroelectric capacity at nearly 80GW is impressive. Built mostly in the 1970s at dams operated by federal government agencies, this number is not likely to go up. Wind installations increased dramatically in the past decade, and, according to the EIA, this was partly due to federal financial incentives and state government mandates, such as renewable portfolio standards.

Solar’s share of the renewable energy mix is still low, but growing. In 2011 installed solar in the US amounted to only about 4.5GW (4 of PV and 0.5 of CSP). But solar stands apart from other renewables because of the different technologies that make it applicable to varying insolation levels as well as topographies.

Achieving competitive pricing

“The feed-in tariff is the best fuel to get solar started, but it does not create a sustainable market,” said Peter Krause, PV Segment Manager of Siemens Industry. He noted that with a FiT, price and efficiency are never the issues. “To get to a sustainable future for solar, a model that we have here in the US is to get to grid parity.”

Solar is a hedge against price fluctuations because the energy at its core is free and abundant.

Rick Myers, Senior Director, of Solar Vertical Market Management at Siemens Industry, Inc., said the US solar market is driven solely by costs because there are no feed-in tariffs. He said that with the federal tax credit due to run out in 2017, the industry is moving toward reducing costs, which has already happened in manufacturing. The US government sees the advantage in reducing costs and has stepped in with the Department of Energy’s SunShot Initiative, which has a goal of reducing the price of solar energy by about 75% between 2010 and 2020. Even prior to SunShot, the US solar industry was bringing down costs: In 2004, the cost to install a solar system was $8 per watt, and when SunShot began (2010), the cost was down to $4 per watt.

Despite lowering costs, one challenge to making solar affordable will continue to be the fluctuating price of gas. When it’s low, the large scale solar systems have a hard time competing with the wholesale electricity market. Chris O’Brien, Head of Market Development at Oerlikon Solar, a manufacturer of equipment used in thin-film production lines, said that it would help if planners had to base investment decisions on the 10-year price of gas. He noted that the real benefit to renewables is that they provide a hedge against volatility. The benefits of increased solar penetration is that once installed, solar technologies have low operating costs, they provide insurance and security against disruptions in fossil fuels supply, and solar is a hedge against price fluctuations because the energy at its core is free and abundant.

Solar photovoltaic installation over a home garage

Partisan politics

State incentives, like the feed-in tariff schemes of Europe, may do more harm in the long run for the solar industry. Mark Cerasuolo, Senior Marketing Manager of Outback Power, designer and manufacturer of power electronics for renewable energy, back-up power and mobile applications, said that in the US, “The various state, local and utility incentives are such a patchwork; they’re constantly in a state of play” The problem, as he pointed out, is that installations can be accelerated at times, but in the long term there is uncertainty due to the volatility of state support. And in this election year, the uncertainty surrounding support for renewables is huge.

A survey by the Associated Press-NORC Center for Public Affairs Research showed that, while most Americans see energy as an important issue, partisan politics alters voters’ perception of potential solutions. Carol Browner, who was an energy and climate adviser to President Obama and a former head of the Environmental Protection Agency, said the partisan divide makes it more difficult to engage in a thoughtful conversation about what makes sense for the country. “Unfortunately it doesn’t matter if you are a Democrat or Republican—you pay for your energy, you buy your fuel-efficient car and you fill it up,” she said. Interestingly the AP-NORC poll found that 95% of Democrats and 97% of Republicans say they have taken energy-saving steps in the past year. Perhaps the greatest step they can take collectively is to vote to put a price on carbon; a single action that according to Dr. Dan E. Arvizu, Laboratory Director at the National Renewable Energy Lab, will signal the start of a “profound transformation.” Siemens’ Krause concurs. He anticipates that by 2017, assuming the tax credit has run out, the solar market will be pretty big and Co2 may be a bigger issue.

Written by Anne Fischer, Managing Editor, Solar Novus Today

Photos courtesty of SolTerra Systems, Seattle Washington

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