Report: U.S. Solar Market Sees 50% Annual Growth

Solarenergy installations in the United States are poised to grow about 50percent annually in the next three years as the country closes in onGermany, the largest solar market in the world.

The U.S. is likely to install 400 megawatts of new solar projects in2009, and see the growth reach 1.5 gigawatts to 2 gigawatts of newinstallations in 2012, according to GTM Research’s new report releasedTuesday.

The strong demand represents over $6.1 billion in investments per year and the creation of 50,000 jobs, GTM Research said.

The report, The United States PV Market Through 2013: Project Economics, Policy, Demand and Strategy, analyzed the scope and financing of power projects by major developers such as Sempra Generationand Renewable Ventures. It also examined policies and demand of bigsolar states, and detailed the impact of the American Recovery andReinvestment Act of 2009 (ARRA).

"One of the big conclusions in our report is that the United Statesis really a ridiculous complex of state markets and utility markets,and each functions pretty much independently from the other, except forsome relatively loose common threads," said Shayle Kann, an energyanalyst at GTM and co-author of the report.

Like other hot solar markets in the world, government incentives area big reason for fueling growth in the next few years. Last October,Congress extended a 30 percent investment tax credit for solarinstallations for eight years. The legislation gets rid of a $2,000 capfor residential installations and allows the utilities to takeadvantage of the tax credit.

Another booster shot is coming from the ARRA, which has created ahost of grants, tax credits and loan guarantees for manufacturing solarenergy equipment and installing it.

These federal subsidies, coupled with states’ own incentives andmandates for renewable energy installations and consumption, willpropel growth for residential and utility-scale projects, the reportsaid. Projects developed to service utility customers will likely growthe fastest, from installing nearly 91 megawatts in 2009 to adding 466megawatts in 2012, under a conservative estimate.

Twenty-nine states and the District of Columbia are requiringutilities to serve up an increasing amount of renewable electricity.Out of the 29 states, 16 of them (and D.C.) have specified the amountof solar electricity and/or distributed generation in the power mix,according to the renewable energy database DSIRE.

These state mandates have prompted utilities to sign renewableelectricity power purchase agreements or start developing their ownwind, solar and other renewable power plants.

California has the most aggressive goal, mandating 20 percent ofrenewable electricity by 2010 for its investor-owned utilities. Theutilities aren’t likely to meet that mandate by 2010, however (see Cal May Add 365MW in 2009, Still Short of 20% Mandate).

But half a dozen states are seeing rapid growth. GTM Researchestimates that new installations in Arizona, New Jersey, New Mexico,New York, Nevada and Massachusetts will grow collectively from 54megawatts in 2008 to 376 megawatts in 2012.

Increasingly, developers who are benefiting from these state policies are veterans of the power industry, not startup companies.

Sempra Generation, for example, belongs to Sempra Energy,which also owns the utility San Diego Gas & Electric. SempraGeneration developed a 10-megawatt solar farm next to its natural-gaspower plant in Arizona and sold the resulting solar electricity to thePacific Gas and Electric Co. starting in January this year (see PG&E to Get Solar Power For the First Time). PG&E has since agreed to buy power from another, 48-megawatt project from Sempra.

"You really have to have access to large financing channels, andSempra is an example of that," Kann said. "The project development gameis becoming more crowded quickly. Anybody who enters has to be verydeliberate about how their strategies line up with the dynamics of themarkets themselves."

Although a growing number of utilities are buying or developingtheir own solar farms, that doesn’t mean they are less inclined to buysolar electricity from independent power producers, he added.

"Look at natural gas and coal, where utilities don’t necessary havethe capital to own every asset they get power from," he said. "You willsee the same thing ultimately in solar."

Although many solar companies peg the U.S. as a reigning market oneday, it remains to be seen when the country will reach that goal.Germany has become a bright spot in the otherwise gloomy market thisyear thanks to its generous solar incentives.

The country already has about 1.5 gigawatts of new solar projects from January through September this year, and it could add another 1 gigawatt or more by the end of the year, according to Germany’s solar industry association.

Surpassing Germany might take more time than some company executiveshad foreseen earlier this year. For one thing, the ARRA so far hasn’tgiven solar the boost that some had hoped for.

Although the ARRA spells out a myriad of incentives for solar, manyof the programs also award money to projects for other types ofrenewable energy generation, electricity transmission, energy storageand even biofuels.

Competing for these federal dollars has proven difficult and moretime consuming than some companies had anticipated. As a result, theSolar Energy Industries Association is now lobbying for a newlegislation that would sweeten and extend some of the incentives forsolar only (see Solar Industry Lobbies for Manufacturing Tax Credit, Cash Grant).

Photo via Sempra Energy.



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