June 8, 2018

Positive Solar Market Development in the US — Even in Times of Import Tariffs

On January 22, 2018, the Trump administration levied a 30% tariff on solar imports to the US. Although they acknowledged that from 2012 to 2016 the volume of solar generation capacity installed annually in the US more than tripled, the administration also claimed that the numbers had been artificially inflated by “low-priced solar cells and modules from China.” According to a fact sheet released by the US Trade Representative, this tariff will last for 4 years and will fall by 5% annually, dropping to a 15% tariff in 2021.

What’s happened since that early 2018 announcement to the US solar industry? As so many gloomily predicted, did the solar power industry’s growth prospects dim following the decision? Will there be slower expansion in critical state markets, especially those that are just starting to adopt utility-scale solar?

Insider Solar Forecasts: Progress Despite the Trump Administration

Paula Mints, founder and chief market research analyst of the solar market research firm SPV Market Research, does not see significant shrinkage in the market for utility-scale and large commercial solar, although she forecasts some slight adjustments due to margin squeeze for the distributed-generation residential and small commercial applications. “Investment in the distributed generation of things where net metering is offered as an incentive is really driving the demand side,” said Mints, noting that the US government has to “make a decision to do something and follow through with it.”

“The trend in the U.S. led by utilities and states — despite the Trump administration’s dislike of solar and other renewables — is to increase the deployment of solar and other renewables,” she outlined. “In the wake of solar-plus-storage, it is always forgotten that when it is appropriate, you can install wind and solar together with natural gas to ameliorate the variability and more toward more renewables.”

Mint, whose areas of expertise include global markets and applications for solar products, cell and module cost and price analysis, and system and trend analysis, added that, before the Trump steel/aluminum tariffs were announced, she didn’t expect a slowing in overall US demand for photovoltaic (PV) deployment into residential, commercial, or multi-megawatt deployment, and she still does not.

What data-driven patterns are emerging that support Mint’s interpretation of solar trends?

Opportunity Ahead for the US Solar Industry

US citizens as a whole need no persuasion that climate change is real. Indeed, most people who are polled support renewable energy, conservation over resource extraction, and protection of the environment more than fossil energy production. In a Pew Research Center survey conducted last year, 74% said “the country should do whatever it takes to protect the environment,” compared with 23% who said “the country has gone too far in its efforts to protect the environment.” These percentages translate into widespread public interest in the infrastructure required to support a renewable grid, including solar projects, which are already nearly competitive with fossil fuel sources.

Solar power purchase agreements (SPPA) are falling in price and have become increasingly appealing to building owners. In an SPPA, a solar developer owns, operates, and maintains the PV system while the owner hosts the system and agrees to purchase the system’s electric output for a certain amount of time. The owner becomes confident in having access to stable, affordable electricity; the developer receives financial benefits, such as renewable energy tax credits and income generated from the sale of electricity. Many SPPAs were initiated in 2017, with more expected in 2018 and beyond.

Capital costs are also falling, so a whole new pool of investors is starting to find solar projects appealing. Solar stocks allow portfolio managers to help their clients diversify, especially since so many small investors are looking for opportunities to divest from fossil fuel assets. Due to the stability of solar stocks and their status as a sustainable asset, the solar industry seems poised to continue to attract the investment it needs to exceed the pace of its competitors.

In What US States Should We Expect Distributed Generation to Grow?

While states like California, New York, and Hawaii have taken the lead in setting ambitious renewable energy policies, a number of smaller states in the Northeast have not been far behind, with special emphasis on solar generation.

¤ Massachusetts is in the process of designing its new solar incentive program, the goal of which is to create a long-term sustainable solar incentive program that promotes cost-effective solar development in the Commonwealth;

¤ Pennsylvania Governor Tom Wolf announced in March, 2018 that 78 new Solar Energy Program (SEP) projects had received approvals in 22 counties through the Commonwealth Finance Authority (CFA), which will expand solar energy implementation and promote development across Pennsylvania;

¤ Texas expects total solar power capacity to reach about 2,000 megawatts by the end of 2018, up from 1,100 megawatts last year and just 15 megawatts in 2010, according to the Electric Reliability Council of Texas, with the caveat that rapid solar growth could further upset the state’s power mix and add to the downward pressures on prices that have stymied merchant power companies;

¤ New Jersey has legislation pending that will require generators to source an increasing amount of their electricity from behind-the-meter solar, to reach 5.1% by 2021, which is the most ambitious target for distributed solar in the US, exceeding even New Mexico’s 4% distributed solar mandate;

¤ Kansas’ cooperatively operated wholesale generation and transmission utility, Mid-Kansas Electric Company, Inc., has signed a 25-year power purchase and asset acquisition agreement with Lightsource BP to build a 20-megawatt project, and Mid-Kansas will be purchasing all of the solar energy from the facility; and,

¤ Any state along the western grid is a good bet as a solar feeder to California.

Final Thoughts

Florian Wessendorf, managing director of Intersolar, opened this year’s Summit by addressing solar and storage’s growth despite market hurdles caused by shifts in federal policy. As the solar market evolves, it will be supported by advancements in battery storage technology alongside additional demand from new markets. Increasing numbers of electric vehicles on US streets will also add to the demand for solar.

The energy transition to solar will become even more important as the electrification of the transportation section continues, concurs Bernadette del Chiaro, executive director of the California Solar & Storage Association. Del Chiaro reminds us that policymakers need to focus on fuel switching to reduce carbon footprints and circumvent natural gas usage. “As we electrify everything,” she offers, “it’s important to strengthen the grid’s resiliency to blackouts and interruptions. The fires in California have further illustrated that importance. With increasing deployments of distributed solar and storage, we can use these renewable assets to provide electricity to emergency situations.”

No comments:

Post a Comment