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Rebound: US Photovoltaic Market Growth through 2010

Recently, AltaTerra Research presented a national web conference on the American solar market with Jon Guice, an expert on U.S. solar market entry, and Larry Sherwood, author of the annual "U.S. Solar Market Trends" reports published by the Interstate Renewable Energy Council (IREC). We believe the information shared—including actual installation data collected from a wide variety of sources and locations in a highly diverse and fragmented national market—to be the freshest, latest authoritative look at the U.S. market, and we would like to share a few of the highlights with you here.

In these highlights, we focus on the market for grid-connected photovoltaics (PV) in the U.S. We recognize that the U.S. is not the dominant market for PV in the worldwide marketplace and encourage interested readers to look at world data to round out the information presented here for a complete picture of the global market. Within the scope of the U.S. market for grid-connected PV, the insights we provide here include actual data through 2008, estimates for 2009 and projections for 2010.

Data Through 2008

The data presented in this web conference come from Larry Sherwood’s ongoing work with IREC, and are based on a wide variety of about 40 sources around the country, including government sources and analysis of actual installations. Some of these sources are publicly available, such as the California Solar Initiative database, which is updated weekly. While anyone can access the data from these public sources, it is a challenge to understand and compare the data due to differences in reporting.

For the purposes of the web conference, for example, all data was converted to DC watts. Another challenge in analyzing the data for PV installations is determining in which year the installation happened since most of the data comes from incentive programs. We attribute installations to the year in which payment was made. The installation of many projects near the end of the year makes a big difference in how many installations are accounted for in each year.

Chart credit: IREC

As shown in this chart, the total capacity of off-grid PV installations in the U.S. has been growing at a modest rate over the past 5 years. The real story is the growth that has been occurring in the grid-tied market. Prior to 5 years ago, off-grid installations accounted for more than half the market. In 2008 they accounted for only about 15% of the market.

Projections for 2009 and 2010

The chart below shows installed megawatt (MW) capacity for grid-tied installations through 2009 and 2010 (estimated). The data is broken down by residential, non-residential and utility installations. Residential and non-residential installations are defined as on-site installations on the customer side of the meter. In utility installations, the power goes into a bulk power market and is resold by the utility to its customers. Utility installations include fields of PV panels, and some instances of utility installations on customer buildings.

Chart credit: IREC

In 2008, the residential market was a little more than a fourth of the total market. The non-residential, commercial and institutional market was the largest portion, with most of the largest installations financed through power purchase agreements (PPAs). In 2009, we do not expect much change in the distribution of the market share between residential, non-residential and utility installations.

Despite the dire press about what is happening in 2009, the reality is that 2009 has been a good year for installations in the U.S. Based on available data for installations to-date, known installations that are in the pipeline, and announced large projects that we expect to be completed by end of year, we estimate a growth rate of 25-40% for 2009. This does not account for projects that remain under construction at the turn of the year. While this growth is slower than the past several years, in which we saw growth rates in the 50-75% range, it is still growth, which is especially good in hard economic times. In looking at individual incentive programs, every program is experiencing healthy growth rates of 25-80%.

In 2010, we expect growth rates for grid-tied PV in the U.S. to accelerate up to and perhaps beyond the growth rates of previous years. Module prices are decreasing, opening up new market opportunities. The federal stimulus is also going to have a big impact. For example, the rules for the cash grant program, which is being offered as an alternative to the federal tax credit, were just announced in July, so most projects under that program will not be installed until 2010. The utility-scale market is projected to grow to 300 MW by 2010. There are also a number of federal installations on the horizon, with direct funding being provided for solar projects on government buildings. In addition to other federal and state programs and the ongoing popularity of incentive programs, all signs point to a good year in 2010. Overall, we anticipate a U.S. grid-tied PV market on the order of 1 GW (1000 MW) in 2010.

This may leave some readers wondering why our expectations for 2009 and 2010 are lower than most projections from other analysts—particularly those that are taking positions in relation to publicly-traded stocks. Part of the answer is that the information presented here is based on bottom-up analysis of the market, a much more data-intensive approach than the top-down approach used by many stock analysts.

For further details, you can find the complete presentation and archived recording from the web conference at AltaTerra Research's website.

The full conference included state-by-state market data, issues such as financing, module prices and project size growth, trends and connections to solar thermal markets, and key factors driving the market in 2010.

Click here for more information.

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