It was another bang-up quarter for U.S. solar, with 723 megawatts of new capacity installed in the first three months of the year, according to an industry report released today. That was a 33 percent increase over the same quarter in 2012 and drove total capacity to just shy of 8 gigawatts. Nearly half – 48 percent – of the new electrical generating capacity installed in the U.S. in the quarter was solar power.

This steady growth – particularly of distributed or “behind the meter” installations – makes it clear again that solar, despite still comprising a tiny percentage of electricity production, is fast become a disruptive force in the U.S. energy picture.

image via GTM Research, SEIA
image via GTM Research, SEIA

“We are on the cusp of a new solar revolution in the U.S., driven by the rapid expansion of distributed generation,” Shayle Kann, vice president of research at GTM Research, said in a statement that accompanied the release of the new data. “Installations will speed up over the next four years as projects become economically preferable to retail power in more locations. However, changes to net metering and electricity rate structures could serve as the market’s primary barrier to adoption.”

The report said that from the first quarter of last year to the first quarter of this year, the cost of residential systems fell 15.8 percent, from $5.86 per watt installed, to $4.93.

With the economics of solar now favoring homeowners in many places in the country, the issue of how distributed generation might impact utility companies is a topic of intense conversation – witness the report [PDF] by the utility trade association Edison Electric Institute. That report said solar photovoltaics – along with battery storage, fuel cells, geothermal energy systems, wind, micro turbines, and electric vehicle (EV) enhanced storage – “could threaten the centralized utility model.”

We saw this issue play out recently in San Antonio, where CPS Energy moved to scale back its metering plan by trimming the credited value of rooftop solar produced by rooftop systems to well under the retail electrical rate. An uproar ensued and the municipally owned company stepped back from the plan, but nobody thinks the issue will go away.

The utilities say that generous net metering schemes fail to take into account the cost of poles, wires, substations and the like – things that all customers, even those who produce more solar than their total power usage, rely upon.

The report pointed to one other possible obstacle to continued high growth rates: the availability of and cost of project finance. It said $48.5 billion would be needed during the 2013-2017 period. But the authors were optimistic that new financing structures – including crowdfunding and community solar – could help overcome that hurdle.

Annual added capacity (image via GTM Research, SEIA)
Annual added capacity (image via GTM Research, SEIA)

So what’s the outlook? It’s that 2013 will finish with 4.4 GW of new installations. For perspective, consider that last year 3.3 GW was added and the total going into this year was 7.2 GW. And annual additions will continue to rise — barring any of the road blocks mentioned — reaching 9.2 GW annually in 2016, the last year of the federal government’s 30 percent investment tax credit. “GTM Research and SEIA have increased each year’s forecast marginally from past editions of the report, due largely to increasingly bullish expectations for the residential market and the near-term opportunity it offers,” the report said.

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