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Watch Out California, Here Comes the Rest of the U.S.

The U.S. solar PV market is becoming increasingly fragmented. And while that's somewhat frustrating for solar businesses working across states with different incentives and regulations, it's a very good thing for the overall health of the national market.

In 2005, California represented 80% of the U.S. solar market; today, it's only 30%. According to a recent report from GTM Research and the Solar Energy Industries Association, East Coast markets – lead by New Jersey, Pennsylvania, Florida and North Carolina – installed more solar than California in 2010.

With Nevada, Arizona, Colorado, New Mexico and Texas putting up solid numbers in the top ten states, the Western markets are still proving dominant. But the emergence of a diverse range of Eastern markets in the top list is evidence that the U.S. solar market is becoming increasingly diverse.

I attended the PV America conference this week and spoke to a wide range of folks in the industry about this shift.

In 2007, there were only four states that developed over 10 MW of PV; in 2010, 16 states reached that threshold. Below, Rhone Resch, president of the Solar Energy Industries Association, talks about why that's so significant. He also describes why the scattered nature of the American solar market will actually create more sustainable growth in the long-term.

I also interviewed Shayle Kann, the managing director for solar at GTM Research, about how the diverse American market fits into the similarly-diverse international picture. With between 1.5 GW and 2 GW of solar PV potentially coming online in the U.S. in 2011, it will still only represent a small portion of the 20 GW expected globally. But that share will continue to grow as Germany, Italy, the UK and Ontario continue reducing their Feed-in Tariffs.

One other surprising trend in 2010 was the growth in U.S. manufacturing capacity. Despite gloomy reports about the country losing the global race to establish a strong solar manufacturing base, the U.S. increased wafer production by 97% (to 1,018 MW), cell production by 81% (to 1,657 MW) and module assembly by 62% (to 1,684 MW).

China still dominates the manufacturing sector, representing more than 70% of added production capacity in 2010, according to iSuppli. Some onlookers believe that with the right policies, America could catch up. But Alan King, VP and general manager of Canadian Solar, doesn't see that happening. He says the lack of a coherent federal policy – along with the patchwork of state and local markets – make investing in U.S.-based production facilities a guessing game.

The take away from all of this? The U.S. is clearly a growth market well into the future, with states continuing to lead the way. While the scattered framework creates a more sustainable macro-environment for solar, it still has its limitations.

If the federal government continues to put off establishing a federal clean energy target, creating a price mechanism for carbon and forming coherent permitting and interconnection standards, those factors could be the difference between a good solar market and a great solar market.

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