Solar installations led by utility-scale projects poised to set a record for 2016
Energize Weekly, December 21, 2016
Installations of solar photovoltaic (PV) generation in the United States reached a record 4,143 megawatts in the third quarter of 2016—double the previous quarter and up 191 percent compared to same quarter in 2015, according to a study by GTM Research and the Solar Energy Industries Association.
Solar accounted for 60 percent of all the electricity generation installed in the third quarter and was led by utility-scale projects, the study – Solar Market Insight – said.
As good as the third quarter was, the fourth quarter for 2016 is set to surpass it with 4.8 gigawatts (GWs) of capacity. GTM Research forecasts that a total of 14.1 gigawatts of PV installations will come online in 2016. Utility-scale PV will account for more than 70 percent of all new capacity.
The burst of activity came from a scramble to book installations before the expected expiration of the 30-percent federal investment tax credit (ITC) for solar projects at the end of this year. The ITC was at the last minute extended to 2020.
“The expected expiration of the ITC is the big driver of what we are seeing come online,” in the utility-scale market, said Austin Perea, a solar analyst with GTM. There a so many projects in the queue that the fast pace of installation is set to continue through the first half of 2017.
Community solar added more capacity in the third quarter of 2016 than it installed in all of 2015, making a major contribution to the second largest quarter ever for the non-residential PV market.
While the market for utility-scale solar and non-residential were robust, for the second time in five years, the residential PV fell quarter-over-quarter primarily due to a slowdown in California and other major markets.
The solar market has been driven for years by states with renewable energy portfolio standards (RPS), which required that a certain percentage of electricity come from renewable sources. As those targets are being met, new forces are helping to drive the market, the report said.
Large corporate customers have increased purchases of wholesale power from offsite solar generators. The demand is coming mainly from Fortune 500 companies with large industrial loads or their own renewable energy targets. Google, for example, is committed to obtaining all its energy from renewable sources by 2017.
In the Southeast, utilities are also voluntarily adding solar as a hedge against volatile natural gas prices and to fill in for retired coal-fired generation.
More projects are also coming online through provisions in the federal Public Utilities Regulatory Policies Act that encourage small power-production facilities.
“The underlying trend is non-RPS procurement driving an increasingly large share of the utility solar market,” Perea said. “In 2016 non-RPS procurement will account for the majority of utility PV installations, which has historically never happened before. As recently as 2014, RPS accounted for 85 percent of installed utility solar capacity.”
By the end of 2016, GTM Research expects more than 800 megawatts of offsite wholesale solar to come online, growing fourfold over 2015.
On top of that, investment-grade commercial and municipal customers continue to serve as anchor subscribers to most community solar installations. Altogether, community solar is expected to add more than 200 megawatts on an annual basis in 2016, growing fourfold over last year.
“In the long term, large corporate customers’ demand for solar-plus-storage versus offsite wholesale PPAs (purchase power agreements) will play a critical role in shaping the breakdown between onsite and offsite development,” the report said.
The residential market, however, saw “a significant slowdown” at the end of 2016, with installations down 10 percent from the second to the third quarter. The five leading markets—California, New Jersey, New York, Arizona and Massachusetts—were particularly hard hit.
The market analysis saw three trends contributing to the slowdown. First, it is getting harder and costlier to land new leads and convert them into sales. There is “customer fatigue” as homeowners are flooded with pitches.
Second, the market demand is shifting from leases and purchase power agreements to demands for cash sales and loans, leaving installers playing catch-up. Finally, publicly traded residential solar companies are struggling to continue while becoming profitable, the study said.
There were a handful of emerging state markets—such as Utah, Texas and South Carolina—that are beginning to scale as national installers. Still, the top five markets have accounted for 70 percent of the overall market
So, the new markets will “offset, but not fully offset” the decline in the big five, Perea said. To keep pace, he added, installers will have to push beyond the early adopters in markets and find ways of reaching and selling to a broader market.
While the impact of the incoming Trump administration on the solar market is not yet clear, Perea said that the extension of the ITC was done with strong bipartisan support.
“Without question, the extension of the federal ITC ranks as the most important policy development for U.S. solar in years,” the market study said. “Between 2016 and the end of the decade, the ITC extension will spur nearly 20 GW of additional PV capacity, positioning U.S. solar to remain a double-digit gigawatt annual market heading into the next decade.”