The Year Ahead: Three Trends to Watch in Corporate and Institutional Solar

In the past year, the U.S. solar industry has achieved record growth, with new installations passing the one-gigawatt mark in only three quarters.  For corporate and institutional solar customers, rapidly dropping prices and the Treasury Cash Grant helped to make solar more affordable. However, the outlook for 2012 might not be quite as bright for corporate solar customers.  In 2012, the rapid drop in module prices is expected to slow and financing will be harder to obtain, but at the same time new programs, such as community solar, will bring solar to new customers.  Here are a few key issues to watch in 2012 for corporate and institutional solar customers:

Solar Prices

In 2011, solar panel prices dropped precipitously from around $1.60 per watt to less than $1 per watt.  However, the rapid drop in solar prices might not continue into 2012.  

The drop in panel prices in 2011 was partially driven by improved technology and lower production costs, but also by excess capacity and an oversupply of panels.  Many module manufactures sold modules below cost to get rid of excess inventory.  As manufacturers reduce excess inventory and slow production, the oversupply of modules will likely subside and pricing will more accurately reflect manufacturing costs. 

A more ominous sign for solar prices comes from trade allegations against Chinese module manufacturers. In October, a handful of U.S. solar manufacturers led by SolarWorld formally accused Chinese companies of dumping panels in the U.S. market.  The US Commerce Department is considering punitive tariffs of 50 to 250 percent on Chinese solar panels according to the NYT. Low-cost panels from China have played a crucial role in reducing the cost of solar for consumers.  Trade sanctions could blunt or significantly slow the drop in module prices, leading to higher costs for customers installing solar in 2012.

Expiration of Cash Grant

The expiration of the Treasury 1603 Cash Grant Program at the end of December will make it harder for customers to finance solar facilities.  Since being enacted in 2009, the Program has awarded more than $1.4 billion to develop more than 22,000 solar projects.  It was a crucial financing mechanism—helping corporations with limited tax appetite monetize the Investment Tax Credit. In July 2011, a survey of major tax equity investors by the U.S. Partnership for Renewable Energy Finance found that the expiration of the grant would shrink the total financing available for energy projects by 52 percent in 2012. With the expiration of the cash grant, corporations with limited tax appetite and institutions with no tax burden must rely on tax equity to help finance solar purchases. 

Community Solar

On a more encouraging note, community solar, which has the potential to bring solar to the masses, has been gaining momentum in the past few months. Community solar allows electricity customers to purchase solar generation from a shared solar facility typically at a cost lower than retail electric rates. The shared solar facility can be located anywhere in the utility territory, built on unused or degraded land.   Community solar has the potential to open up the market to hundreds of thousands of additional residential and commercial customers who rent their home or office, or don’t otherwise have adequate space for an on-site solar system. 

Currently, a number of states have undertaken efforts to spur the development of community solar, including Massachusetts, Colorado, Maine, Vermont, Washington, and California.  Colorado and Washington State have both passed laws enabling and incentivizing community solar gardens.  However, these programs have placed prohibitive limits on system size or on the overall size of the program.  To bring solar to the masses, community solar programs must allow for multi-megawatt solar gardens, which have the best project economics, and a large program capacity to allow as many businesses to participate as possible.  One such program introduced in California last year and still pending legislative approval fits this bill.  The Community-Based Renewable Energy Self-Generation Program (SB 843) would allow for solar gardens less than 20 MW and individual subscribers can purchase up to 2 MW from an individual solar garden.