The numbers don’t lie. The growth of the U.S. solar market has been phenomenal over the past few years, with the annual installation rate soaring toward 10GW within the next year or two. But behind the upwardly mobile statistics lies a simple truth: the massive increase in solar penetration has taken place in a handful of states, with many more states experiencing little to no participation in the solar revolution. This lack of diversification was one of the themes in Shayle Kann’s presentation on the state and future of the U.S. solar market at the annual Intersolar North America GTM Research analyst breakfast held in San Francisco last week.
GTM’s senior VP noted that the top five states—California (56%), Arizona (10%), Hawaii (8%), New Jersey (5%), and Colorado (4%)–accounted for 83% of the U.S. residential market in Q1 2014. The market mix in the nonresidential or commercial/industrial (C&I) sector was a little more spread out during Q1, as the top five—California (27%), New Jersey (18%), Arizona (13%), Massachusetts (7%), and New York (5%)—consumed about 70% of the total pie. While an increasing number of states have pushed close to or past the 100MW installed mark, the top states continue to grow at an even faster clip, according to Shayle.
The data reinforce what has been apparent in the U.S. solar boom for several years: each state is a market unto itself and each sector—be it residential, C&I, or utility (still the largest by far in terms of deployed megawattage)—has its own unique and malleable characteristics. In the case of residential, Shayle sees third-party ownership, the “solar lease,” which has been one of the primary growth drivers of the past few years, losing a bit of steam as low-interest “solar home loans” become more readily available. He posited that “every major solar residential company” will have loans in their portfolios soon (with the notable exception of Vivint Solar) because “it just makes sense.”
On the opposite side of the deployment spectrum, Shayle offered little near-term optimism regarding the small C&I sector, noting the difficulties in getting projects in that 10-100KW-ish range financed and installed. “The theoretical market for small commercial solar is boundless, but we can’t finance it and we’re bad at it,” he said. He did cite the truSolar initiative and Mercatus as among those trying to address this flailing sector, but as yet, no one “has cracked the code” on how to properly scale the small C&I market.
As for the utility segment, Shayle admitted that he had recently “changed his tune” on his outlook. Although the pipeline for mega solar farms has shrunk, over the past 12 months or so, more than 3GW of contracts have been signed for utility-scale solar outside the renewable portfolio standard procurement quotas. This represents a major market shift under way, one that underscores the increasing competitiveness of solar with other forms of energy in states not hitherto known for being friendly to the most plentiful renewable.
He pointed to First Wind’s signing of PPAs with Rocky Mountain Power to develop and build a quartet of 80MW projects in Utah (one of several deals nationwide made in connection with PURPA, the Public Utility Regulatory Policy Act) and the early stages of a merchant wholesale “non-PPA” solar market in Texas as examples of the changing face of utility-scale PV. As part of his predictions for 2014, Shayle has high confidence that at least 400MW of utility power purchase agreements, outside of RPS requirements, will be signed this year.
By early September, the second-quarter data will be processed, analyzed, and announced via GTM and SEIA’s ongoing U.S. Solar Market Insight report series. Considering the growth engine that solar has become, don’t be shocked if there are some upside surprises to the current USSMI PV forecast of 6.6GW for 2014, despite ongoing net metering challenges and possible impacts of the Chinese solar trade case.
PHOTOS BY RAUL GONZALEZ/IMPRESS LABS
Tags: commercial/industrial-scale solar, distributed generation, EPC / engineering, financing, interconnection, market research, next-generation PV, PPA / power purchase agreement, procurement & construction, project development, PV / photovoltaics, residential solar, solar energy, solar power, utility-scale solar