Six Observations about the US Solar Industry Mid-2015

In the U.S. mid-2015, deployment of solar technologies into all applications is at a pivotal point with several factors at play.

1. The federal investment tax credit (ITC) is set to sunset for the residential application and to decrease to 10 percent for the commercial application at the end of January 2016.  The upcoming change is driving accelerated activity into the residential and small to large (<50-MWp) commercial deployment. 

Analysis: If the U.S. congress does not extend the ITC before mid-2016, inactivity could lead to a sudden cessation in activity.

2. California Assembly Bill 327 mandated changes in the states net-metering program beginning in mid-2017. California’s investor owned utilities (IOUs) have put forth plans that add fees to the electricity bills of customers with PV systems on their roofs as well as lowering the compensation paid by utilities for electricity fed into the grid. The proposal put forth by California’s IOUs is similar to proposals from IOUs in other states. 

Analysis: In the U.S. proposals that add fees to the bills of residential customers with PV systems on their rooftops erode the economic benefit and would slow deployment.

3.  Business models such as the residential/small to mid-market solar lease that do not require a down payment and replicate to a degree the electricity-renting paradigm are stimulating a strong market for DG PV in the U.S. across all states where the model is allowed.  

Analysis: The residential/small commercial solar lease business model relies on profits from the older installations paying for future. This business model overcomes end user switching costs by offering free maintenance and installation has an economic appeal. The annual escalation charge included in this model however ensures that overtime the cost paid for the system is far higher than financing and owning the PV system.  Should flaws in this model not be corrected the potential for a customer backlash is high.

4. New Environmental Protection Agency rules put forth by President Obama’s administration requiring a reduction of power plant emissions from 2005 levels by 32 percent by 2030 and California’s successful Cap and Trade law. 

Analysis: California’s Cap and Trade requirement took effect in 2012 with compliance beginning in 2013.  Thus far the fairly-secretive program has been successful and relatively seamless.  California’s program and the likelihood of similar programs in other states, coupled with the new EPA power plant rules could accelerate deployment in the U.S. of renewable energy technologies. Unfortunately, coal producing states have already filed lawsuits and with an upcoming change in administration in November 2016, the new EPA rules could be reversed.

5. Commercial Building Boom and hot home buying market. 

Analysis: The commercial building boom in the U.S. and the hot home buying market could be very good for commercial and residential PV system deployment if it lasts.  A crisis in commercial building or another shock to the residential home buyer market in the U.S. would have an impact on PV deployment that would ripple through all business models.

6. Tariffs on imported cells and modules from China and Taiwan have and have not been successful. 

Analysis: The initial tariffs on modules imported from China did not provide a more competitive environment for domestically produced product as manufacturers in China simply imported cells from Taiwan and assembled the imported cells into modules.  Additional tariffs on modules imported from Taiwan had a significant negative effect on cell manufacturers in Taiwan but did not stop the inflow of lower priced product from China and other regions into the U.S. though there has been a more favorable market for U.S. manufactured cells and modules.  Government inaction early, that is, failure to incentivize the use of domestically produced product, coupled with government inaction too late does not add up to course correction.  

Lead image: Hand with magnifying glass. Credit: Shutterstock.

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SPV Market Research is a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry. Areas of expertise include PV technologies, markets and applications. Specifically: capacity, production, shipments, inventory, costs and prices for photovoltaic crystalline and thin film cells and modules as well as global market analysis including applications, system costs and prices, component costs and prices, market growth, history and forecasting and research into consumer attitudes about solar as well as the consumer buying experience. All Solar All of the Time www.twitter.com/paulamints1 Blog: www.paulamspv.com pmints@spvmarketresearch.com www.spvmarketresearch.com

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