Since the 1950s, solar electricity has grown in leaps and bounds: from research laboratories to supplying power for space applications; from backwoods, off-grid homes to large utility-scale systems. Similarly, the cross-section of industry folks now spans the gamut: from lab coats and glasses to tie-dyes and sandals, to Carhartts and boots, and, most recently, to suits and wingtips.
While exciting, navigating such rapid change has been challenging for many in the PV industry. However, the end result is that, like any developing industry, the market forces that propel these changes are making solar affordable and more attainable than ever before.
The PV industry has been enjoying steady growth. From 1996 to 2006, the worldwide installed capacity grew tenfold—from 0.7 gigawatts (billion W, or GW) to 7 GW. It is over the last five or so years that incentive programs around the world, combined with lower equipment costs, have enabled exponential growth. From 2006 to 2010, global installed capacity went from 7 GW to 40 GW. (In the United States, installed capacity grew at a slower pace, from 0.6 to 2.5 GW.) In 2011 alone, another estimated 23.8 GW was added globally. Of that, 7%—about 1.7 GW—occurred in the United States. According to the Solar Energy Industries Association (SEIA), in 2010, the overall U.S. solar industry grew to $6 billion, up from $3.6 billion in 2009 (the 2011 estimate was not available at the time of printing). In the United States, it’s estimated that the industry employs more than 100,000 people at 5,000 businesses.
The incentive programs that have spurred this worldwide growth include feed-in-tariff (FIT) programs, which pay a premium price per kWh for PV-produced energy. FIT leaders include Germany, Spain, Japan, and Italy. While a handful of U.S. communities have adopted FIT and other production-based incentives, they’re relatively new in the United States. Instead, tax credits, grants, and rebate programs that reduce upfront system costs have historically dominated in the United States. During that same time, module prices have declined from about $5 per W in 1995 to around $1.50 now.
The PV industry is maturing—and experiencing growing pains. PV manufacturers attempting to meet the rapidly growing demand for modules quickly opened new manufacturing plants and increased production at existing facilities. Unfortunately, increased module production coincided with the overall economic downturn, fluctuating incentive programs, and less expensive modules available from overseas—particularly China (see “U.S./China Trade Dispute” sidebar).
This led to an enormous module surplus, outstripping demand to cause a drop in module prices. An industry shakeout is underway—several U.S. solar companies declared bankruptcy in 2011, including Beacon Power, Energy Conversion Devices, Evergreen Solar, Solyndra, and SpectraWatt. Meanwhile, production cutbacks or reorganizations have been announced by many companies, including Conergy, Day4Energy, REC Group, SolarWorld and SunPower.
Possibly as a result of some of these high-profile PV manufacturing company closures (namely Solyndra, which received $535 million in government loan guarantees before failing), the latest blow to the U.S. PV industry was losing the 1603 treasury program, which was allowed to expire on December 31, 2011. This program, created under the American Recovery and Reinvestment Act of 2009, allowed federal grants to be given for commercial, industrial, and agricultural RE projects in lieu of the 30% tax credits.
While SEIA and other solar advocacy groups continue to push for an extension of 1603, they are also focusing on state-level policies and legislation. SEIA stated, “State efforts will entail a number of different policy efforts, including net metering, a financial tool for recognizing [the] value of distributed generation on the grid, and removing barriers to grid interconnection and permitting.”
PV module prices are at a historical low, due to the oversupply. As a result, grid parity—the price at which PV-produced kWh, without subsidies, is equal to or less than electricity from conventional sources—is being approached or even reached in areas with higher utility rates, such as Hawaii. John Farrell, senior researcher at Institute for Local Self-Reliance and author of Solar Grid Parity 101, estimates that by 2016, PV systems in California and New York will join Hawaii in achieving grid parity. And Andrew Beebe, chief commercial officer at Suntech, says that with some scenarios at the utility scale, it’s already been achieved. “In some cases,” says Beebe, “utility installations are now projected to deliver electricity over 25 years at less than $0.10 per kilowatt-hour, without government subsidies.” The near future will likely reflect a shift, from PV companies chasing subsidies to those seeking economically sustainable investment projects, such as large-scale utility systems that are cost-competitive with conventional energy.
Shayle Kann, managing director at Green Tech Media Research, says that the “U.S. solar [industry] is entering 2012 with a sense of cautious optimism,” with three questions on the mind of everyone in the market:
Regardless of all of the industry shake-ups, the sun still comes up each morning—along with our choice to take advantage of its free energy. When I first started teaching in the solar industry, one of my favorite things about it was our focus on individuals choosing to take power into their own hands, and not needing to wait for anyone (i.e., the utility or government) to do it for them. We installed a full system with each class we taught, and it was exciting, empowering, and fun. There were no subsidies back then, and the cost for a grid-tied PV system was about $10 per watt, installed. Each new installation felt like a personal victory.
We still have that choice, but at about half the cost (and, for now, we still have a 30% federal tax credit). So, my forecast, from a consumer and end-user perspective, is that things still look pretty sunny.
Justine Sanchez is a technical editor with Home Power and an instructor for Solar Energy International. She is certified by ISPQ as a PV Affiliated Master Trainer.