In 2012 renewable energy — largely wind and solar — accounted for nearly 50 percent of all new electric generation put on the U.S. grid. According to a new Ernst & Young report, United States renewable energy attractiveness indices, 13.1 gigawatts of wind were added to the grid last year, as was 3.3 gigawatts of photovoltaics (PV).
“While overall U.S. investment in clean energy is down, it’s still ahead of annual investment from prior years,” said Michael Bernier, senior manager, National Tax, Ernst & Young. “What’s important to note is that the $44.2 billion invested is not representative of the industry’s true expansion. Solar technology, for example, is increasingly cost effective. As prices fall, the initial investment goes a lot further. $1 billion installs a lot more solar than it did five years ago.” The company also report earlier this year that U.S. is now the most attractive country for renewable energy investments.
The report found that investment in clean energy was down from the $65.4 billion in projects in 2011, but still slightly more than the annual investments seen in 2007 through 2010. Despite the falling investments, the report noted that deployment continues to rise. “The dollar figures do not necessarily represent the industry’s true expansion, especially in light of rapidly falling prices for solar technologies. Including wind, solar, biomass, geothermal, waste heat and water sources, renewables accounted for a record 49 percent of added capacity in the U.S. in 2012,” the report stated.
It was a banner year for solar in the U.S. as well, with residential, commercial and utility segments of the market growing. Overall, the U.S. installed 11 percent of all PV installed globally last year, which the report says is its highest market share in at least 15 years, the report said. “The utility market, which continues to be dominated by installations in the southwest of the US, completed 8 of the 10 largest domestic projects currently in operation,” it said. Distributed generation also grew in both the commercial and residential segments. “As prices drop and financing becomes more standardized, this segment of the market seems to be poised for substantial expansion over the next few years.”
The report found that the solar industry grew 34 percent in 2012, with 1.3 gigawatts coming online in the fourth quarter alone and California becoming the first state to install more than 1 gigawatt in a single year. The top five states in terms of solar installed in 2012 were California Arizona, New Jersey, Nevada and North Carolina. However, Colorado is still among the top five states in terms of overall solar capacity.
The report also noted that the use of third-party ownership of rooftop PV now accounts for more than 50 percent of the residential and commercial market for solar installers in 2012. “Average residential system prices dropped nearly 20 percent between Q4 2011 and Q4 2012, and industry experts expect this segment of the market to surge as third-party financing options spread throughout the country,” it said. Overall, utility solar was the largest segment, 1.8 gigawatts of new utility-scale solar. “The project pipeline looks promising for the foreseeable future, with PPAs in place for 10.5 GW of capacity, 3.1 GW of which are currently under construction,” the indices stated. However, as utilities fulfill their renewable energy portfolio requirements Ernst & Young said the pipeline could slow down.
Going forward, new financial structures to fund residential and commercial solar may gain traction, making it easier for companies to finance solar. “San Francisco-based Renewable Energy Trust Capital is seeking an IRS ruling to open the real estate investment trust (REIT) structure to solar projects. If it succeeds, solar developers could essentially package residential and commercial solar deployments as properties that return low-risk cash annuity streams to investors,” the report said. Congress also is looking at bills that would allow master limited partnerships (MLPs) to finance renewable energy projects, including solar. “In providing a low-risk, consistent revenue stream, distributed solar is becoming more attractive to large-scale investors,” the report said. Both structures would allow for longer-term returns at lower interest rates than project financiers can generally get from banks and they could lower the cost of solar even further.
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