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Solar PV in the Western US: Movement for Sustainable Distributed Generation Markets

Historically, effectively identifying growth opportunities in solar PV required vigilant monitoring of local and national policies. While this approach remains essential, there is a fundamental change that is taking place. Increasingly, project economics - even in the absence of new policies — are driving distributed generation (DG) market opportunities. To stay abreast of this change, stakeholders will need to change their approach to analytics.

To this end, a series of models may help identify sustainable market opportunities for solar PV. These models incorporate solar PV fundamentals (such as insolation, offset electricity price, net metering rules, the availability of time-of-use (TOU) pricing, etc.) to help identify jurisdictions in the U.S. and across the Americas where decreasing installation costs and strong project fundamentals are combining to drive market growth.

We thought it would be useful to share a perspective on the scale of the fundamentals-driven opportunity that exists in that region. We ran a series of assumptions through our U.S. behind-the-meter model to identify DG market opportunities in the absence of state-level policy support. We first looked at the opportunity in a single state, California, and then expanded our analysis to incorporate the entire western U.S.


California has long had policies that have been supportive of solar energy adoption. But California also has amongst the best market fundamentals in the U.S. It is a huge consumer of electricity, strong insolation, above average electricity costs (relative to the U.S. market), and strong interconnection and net metering policies. The following graph represents the market opportunity that exists in California - independent of state policy support — based on four general scenarios.

Clearly, California holds significant promise as a strong sustainable market. Capitalizing on this opportunity will require stakeholders to drive down system costs and to identify regions with attractive combinations of sunshine, electricity prices, and market infrastructure (e.g. TOU pricing, net metering policy, etc.).

Western U.S. 

We also analyzed the entire western U.S. region, assuming no state-level incentives, using two of the four scenarios outlined above.

  1. Conservative Pricing
  2. Investment Tax Credit Extension

We found that even without state-level incentives, the attractiveness of the western U.S. market will be largely determined by the success of the California market. In these two scenarios, California accounts for between 71 percent and 76 percent of the western U.S. market. Nonetheless, important opportunities for DG markets will arise in a number of other western states including Arizona, Hawaii, Colorado and Nevada. Combined, given the parameters of our analysis, these states would account for between 686 MW-2,339 MW over the ten year period. 


In the mid-term, given the potential size of most non-incentive markets in the western U.S., state-level policy will continue to loom large. Nonetheless, even with conservative pricing assumptions, it is clear that markets are entering a period of growth that is independent of state-level policy support and will result in important market opportunities. The firms that will capitalize on this growth will be those who are monitoring project economics at a regional level and investing market development dollars appropriately.

Even more importantly — for international firms — this type of analysis can help identify emerging markets that are not currently saturated with competition, as is the case in the U.S. Of course, monitoring global market opportunities is a major undertaking. As the required approach for this type of analysis changes from “policy only” to “policy and/or project economics” the task only becomes more daunting. A clear understanding of both fundamental and policy drivers is an essential part of strategic planning and those who move first to effectively identify emerging markets will have the greatest opportunity to benefit from them.

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