Currently in the United States there are twelve states, referred to as the “Dazzling Dozen” in a report by Environment America, that are paving the way to a more renewable country.
The 12 states that are a part of Environment America’s “Dazzling Dozen” include the following: Arizona, California, Colorado, Delaware, Hawaii, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, North Carolina and Vermont. With California, Arizona, New Mexico, Nevada, New Jersey and Hawaii currently in the lead for solar capacity. Due to public policies and incentives these states are setting an example to the other 38 states in the U.S. on how harnessing power through the sun’s energy is possible. These states have set up policies allowing homeowners, businesses and utilities to utilize the sun’s energy by installing a solar array on their rooftop. According to Environment America’s recent report, the “Dazzling Dozen” account for only 28 percent of the U.S. population, but 85 percent of the nation’s installed solar electricity capacity.
With the declining panel prices and advancements in technology, utilizing the sun’s energy is becoming one of the preferred types of energy sources in the U.S. Therefore, the U.S. has more than three times as much solar photovoltaic (PV) capacity today, as in 2010, and more than 10 times as much as in 2007. According to research compiled by the Solar Energy Industries Association (SEIA), in the first three months of 2013, solar power accounted for nearly half of the new electricity generating capacity in the United States.
With the “Dazzling Dozen” leading the way by example, the U.S. solar industry hopes other states will follow, allowing the U.S. to receive 10 percent of their energy from solar by 2030. Solar industry leaders and experts feel this is an optimal time to invest in solar power due to the declining price of the modules and advancements in panel efficiency. Not only will solar power save energy consumers money in the long run, but it also produces 91% less emissions and pollution than gas-fired power plants.
According to Environment American’s report, “More than half of the 50 states have the technical potential to generate more than 20 percent of the electricity they currently use from solar panels on rooftops. In the western states of California, Arizona, Nevada and Colorado, the share of electricity that could be replaced with rooftop solar power exceeds 30 percent”
Research done at the National Renewable Energy Laboratory (NREL) estimated that rooftop PV systems could generate more than 20 percent of the electricity used in the United States each year. In addition, researchers from the Environmental Science & Technology publication found that solar energy could supply one-third of all electricity in the Western US by 2050, while reducing emissions 80% below levels in 1990. A team at Berkley University of California found using a virtual simulation of western America’s electrical grid that if the U.S. reaches the goals set out in the Sunshot initiative, the western U.S. could save $20 billion by 2050.
The Investment Tax Credit (ITC) is a 30 percent tax credit for solar systems on residential and commercial properties that was implemented by the US government in 2006. However, after 2016, the tax credit will be brought down to a mere 10 percent. With rapidly declining solar panel prices, the ITC drop should not impact the viability of future solar financing solutions for solar installations.
The 2008 extension of the residential and commercial solar ITC has helped annual solar installation growth by over 1,600 percent since its implementation in 2006, which is a compound annual growth rate of 76 percent. The government’s goal of extending the ITC until 2016 was to help create a solar market that was price competitive and self -sustaining, with the hopes of lowering costs for consumers. The ITC has been a part in the creation of over 625 manufacturing facilities that produce solar components across 48 states.
The US Solar Market continues to grow
According to GTM Research’s most recent Solar Market Insight report, around 90 percent of the nearly 5,000 MWs of solar capacity installed in the US were built after the ITC was increased to 30 percent during the Bush administration.
The US just recently celebrated reaching 10 gigawatts (GW) of installed solar capacity, with the predictions of reaching 18 GW by 2014.The most recently available Treasury information shows that under the ITC program, there were 44,052 solar projects awarded $2.76 billion.
Surviving the recent set back
Although the ITC program suffered an 8.7% decrease due to US sequestration spending cuts, the US solar industry has continued to grow. Despite the decrease, the US solar market has been able to thrive in part to third-party solar financing options. At SCF, we offer a variety of solar financing solutions to commercial, municipal or non-profit entities looking to install a solar array on their property.
Performance based incentives (PBI), investment tax credits, and other incentives allow the solar industry to grow with a variety of solar financing options. In California, the presence of various PBIs allow for the state to reach its solar installation goals. In particular, the California Solar Initiative (CSI) program has had an incredible impact on the increase in solar installations across the state.
Understanding the California Solar Initiative
The California Solar Initiative program began in 2007 with the mission to transform the solar energy market by reducing the cost of generating solar power in addition to facilitating a self-sustaining solar industry. In order to transform the industry, the CSI set out to achieve a goal of installing 1,940 megawatts (MW) of solar capacity by the end of 2016.
The CSI Program focuses exclusively on solar energy systems used by customers who want to offset some or all of their own energy consumption. The electric portion of the CSI Program has a 10-year budget of $2.2 billion. The CSI Program pays solar consumers an incentive based on system performance. The incentives are either an upfront lump-sum payment based on expected performance, or a monthly payment based on actual performance over five years.
The golden state holds true to its name
According to the California Solar Initiative Annual Program Assessment, through the end of the first quarter of 2013, California had an estimated 1,629 MW of installed solar capacity at 167,878 customer sites. Out of all the states in the US, California represents 40 percent of the industry’s total solar capacity. The CSI Program as a whole has installed 66 percent of its total program goal, with another 19 percent of the goal reserved in pending projects.
According to research done at Lazard Capital, the solar industry is forecasted to be the fastest growing segment of the global power market, with a projection of an additional 50 gigawatts (GW) to be installed by 2015.
The Solar Energy Industries Association’s (SEIA) Solar Market Insight Report, states the U.S. had a successful and strong Q1’13, with the installation of 723 megawatts (MW). The SEIA also found that 48% of all new electric capacity during Q1 came from solar power. SEIA concludes in their report that the success in Q1’13 is an indication that the U.S. is going to have another record year for the solar industry.
Therefore with a growing domestic demand, purchasing solar cells and modules from overseas may not be the most economical choice for solar consumers and developers in the United States. A senior energy analyst, who recently spoke at Intersolar North America in San Francisco, stated that localized manufacturing and production of solar cells and modules will benefit the United States. Ultimately, it will be cheaper for end users and developers to purchase solar cells or modules from domestic manufacturers; due to shipping and tariff costs that are included when being imported from overseas. According to Sanjay Shrestha, managing director at Lazard Capital, the prices for Unites States’ manufactured solar panels could be as much as 10% cheaper than solar panels coming from China. Although China currently has 30% lower production costs than the US, the return on investor capital (ROIC) would be 8.3%, which is lower than the 10.8% ROIC of the US for a 1 GW system.
Benefits of manufacturing domestically in the US:
- improve working capital management
- create more jobs for Americans and utilize local workforce
- shorter lead times with intensive quality control
- a sustainable supply chain
Suniva, one of America’s leading manufacturers of high-efficiency and cost competitive solar cells and modules, is a prime example of a successful solar manufacturing plant located in the US. Suniva has experienced unprecedented sales bookings in Q1’13, allowing the company to expand its module assembly operations. This expansion will allow for 24/7 operations of solar modules, along with the hiring of 48 new employees. Greg Mihalik, vice president of manufacturing and operations said in a recent press release, “Suniva is currently sold out of capacity for Q2’13, which is extremely satisfying to know that our products are so well-received by our customers and distributors”. This year Suniva was awarded with “Manufacturer of the Year” for their products’ quality and reliability, allowing the company to set standards in the global PV marketplace.
Solar financing solutions have allowed the solar market to grow at a record rate in recent years. By 2020, it is projected that solar developers will spend more than $134 billion on solar energy systems worldwide. A report done by Navigant Research on the Solar PV Market, predicts that from 2013-2020, 438 gigawatts (GW) of solar will be installed. Therefore, industry experts estimate that by the end of 2020, solar photovoltaic (PV) will be cost-competitive with retail electricity prices, thus allowing for solar energy costs to reach grid parity. According to the Solar PV Market report, grid parity is targeted to be reached in 2017, about a year after most solar subsidies are planned to come to an end.
The United States’ Solar Industry recently celebrated a new PV milestone; more than 10 GW of PV installed nationwide. The United States is the fourth country to hit this solar capacity, following behind Germany, Italy and China. The solar industry in the United States is currently experiencing significant growth, with a compounded growth rate of over 50% since 2007, according to a NPD Solarbuzz report.
In the first two quarters of 2013, more than 1.8 GW of solar was installed. Solar installations began to increase as the price per watt met a significant decrease. From 2011, prices per watt (for solar installations) have dropped from about $6 per watt to $3 per watt for commercial and utility installations. Industry experts predict there will be an 80% increase in solar PV installations over the next 18 months, therefore surpassing 17 GW by the end of 2014. As a solar financing company, Sustainable Capital Finance will continue to play a major role in financing commercial solar projects to help the US reach its installation goals.