There was a solar eclipse yesterday. The kind in the sky where the moon partially obscures the sun.
Not an eclipse of the solar industry. Definitely Not.
Yes, I know things are tougher than they've been in recent years. Thirty-five percent tariffs on modules using Chinese cells. Low (or negative) gross margins for many companies. Renewed criticism of our industry from the incumbent energy producers and distributors, threatening our relatively meager incentives while they continue to feed like hogs from their own direct and indirect incentive troughs. And a worldwide economy that, at best, faces major challenges.
We'll get over it. Solar is the future — and we all know it.
The tariff is a temporary setback. Our government made its preliminary decision, and we will adjust — while still advocating for free trade and good jobs. I predict that the adjustment will happen very quickly.
Some manufacturers may raise their prices slightly, taking advantage of the tariff. But there is so much supply that it is unlikely that wholesale prices will increase sustainably — if at all. Far-sighted Chinese manufacturers are already procuring non-Chinese cells for only a few percent more, and these cells are on their way to the U.S. in tariff-compliant modules. There are dozens of non-Chinese module suppliers who are starting to sell their quality products in the U.S., so there will not be a sudden shortage of inexpensive modules. Because solar cells and modules are a commodity, high cost manufacturers will not magically see their pricing disadvantage erased. On the contrary, prices are likely to keep declining.
The most important fact is that rooftop solar is cost effective today in many U.S. locations. With today’s lower installed costs of solar, all you need are high electric rates and a reasonable amount of sun. This “cost effective” equation continues to improve as solar costs decline and electric rates increase — so much so that by 2020 rooftop solar will be cost effective for most of the U.S. For “wholesale” solar, the results of California’s Renewable Auction Mechanism demonstrate that solar is also one of the cheapest generating sources for utilities. Twenty-year power purchase contracts averaged 8.9 cents per kwh, a price that is very competitive with fossil fuel energy sources. Let's repeat that mantra: solar is cost effective today.
Seemingly arbitrary public policy decisions — such as tariffs here in the U.S. or incentive roulette in Europe — are only temporary. Irrational capitalist market behavior — such as 50 percent industry overcapacity with prices still dropping — albeit painful, will only make solar even more cost effective. It is inevitable: the solar industry will eclipse, gradually and inexorably, traditional forms of energy and energy distribution.