Glenn Harris, SunCentric Incorporated
August 21, 2008 | 84 Comments
California, United States [RenewableEnergyWorld.com] With just over 120 days left before federal incentives expire, solar businesses in the U.S. are taking action to protect their core business. Layoffs, announced and unannounced, have started. Construction projects are being canceled or postponed and new sales have dropped dramatically. Uncertainty is forcing our solar businesses into difficult decisions -- not if, but when to cut and, how deep to cut. The coming loss of talented people and companies should be viewed as a loss of our country's intellectual property -- and a national tragedy.
It has been my habit over the years to look for the silver lining when it comes to the solar business in the U.S. But today, it's tough to find one.
A delay in a new federal program until a new administration can act in Q2 2009 is now a realistic scenario. This possibility makes it easy to imagine that U.S. grid-connected installations could fall to well below 100 megawatts (MW) in 2009, down from forecasts of 300 to 500 MW, which would represent a radical decline after years of steady growth. Each part of the channel and each business sector will be impacted.
Integrators and installation companies across the U.S. are most at risk. These local and regional businesses have no realistic way to create profitable new markets or work outside of the U.S. For those who focus on commercial projects, no Investment Tax Credit (ITC) means zero installations. Potential solar system owners won’t purchase and install systems without ITC certainty. Some well-managed and established residential installers will likely scrape by, but many companies will lay their work force off and go out of business. California’s residential installers, our largest market, have already been suffering because of high costs and low incentives. The loss of the US $2,000 ITC for homeowners will make a bad situation worse. Solar on new homes, which has been getting some traction despite the downturn in the new home construction market, will virtually stop as even the most progressive solar homebuilders and their partners lose the foundation of their business plan.
Solar distributors will be hard hit as many of the under-capitalized small and medium solar installation companies they serve will disappear overnight. If they are unable to sell the PV modules they have committed to, those modules will be sent to other countries, severely impacting revenues. Most of these companies have been through tough times before and will adapt again by downsizing and shifting their emphasis to the small off-grid segment and other markets allowed by their supplier relationships.
U.S. PV manufacturers and those international PV companies that support the U.S. market face many challenges and may consider the U.S. slowdown a minor market disruption. They will reallocate their products internationally and, based on world selling prices, make better margins. Some planned investments in U.S. manufacturing, organization and infrastructure growth will be canceled or postponed and some companies will scale back U.S. operations.