While installers and developers sweat over rooftop systems and utility-scale projects in the desert, bankruptcies have been tearing through the list of manufacturers. The current brutal round of consolidation began before Solyndra collapsed last year and stability still looks a long way off in the US and globally.
Highs and lows
Shayle Kann, vice-president of research at GTM Research based in Boston, estimated a record breaking year of 3.2GW installed this year alone, added to the 4GW total as of the end of last year.
“Largely speaking, the entire downstream market of installers has been a bright spot. We are at this really rapid clip of growth in terms of installations. But on the other side of it, the entire manufacturing sector has been pretty bleak. That's really not just here in the US, that's a global phenomenon.
“It's a tale of two completely different markets right now.”
San Francisco-based Recurrent Energy is one of the developers reaping the benefits of record-breaking installation levels with 772MW added in the second quarter of this year – 477MW of that for the utility sector.
Sheldon Kimber, chief operating officer at Recurrent, said: “We've had a phenomenal year. We're in a period of pretty rapid growth. Last year, we grew over 100% in terms of volume of MW and pretax earnings. We expect to double that again next year.”
Recurrent Energy is the primary solar developer for Sharp and focuses almost exclusively on utility-scale projects. So far, it has installed 120MW and has 600MW of projects under contract. Large-scale projects of 100MW or more have become more economically viable through the dramatic cost reductions, said Kimber.
“I joined Recurrent six years ago. Since then, panel prices have gone from over $4/w to 60c/watt. I challenge almost any technology out there to show that kind of cost reduction curve.
“It competes with the high tech and the computer and software revolutions. It's shocking.”
Utility scale solar will continue to takes the lion's share of the solar market for some time to come, with large projects close to completion or under construction. BrightSource's Ivanpah project is a 392MW Concentrating Solar Power (CSP) station in the desert just a half hour's drive from Las Vegas. When it trains its 170,000 heliostats on three 450ft power towers early next year, the $3bn project will add substantial megawatts to the grid.
The Solar Industries Energy Association estimates there are more than 29GW of large photovoltaic (PV) and CSP projects either under construction or under development – the majority are in the western United States. But not all will get built.
California's pipeline for utility-scale projects under its Renewable Portfolio Standard, which requires utilities to purchase a specified proportion of their electricity from clean generation sources, is already oversubscribed. And many of the very large projects were backed with federal loans from the Department of Energy's loan guarantee programme, which has now closed. BrightSource's Ivanpah was backed with $1.6bn of US taxpayer's money and its developers and investors admit that the project was only possible thanks to government support.
Some in the industry are predicting the end of the pipeline for large-scale solar. Dustin Mulvaney, assistant professor of sustainable energy resources, at the Department of Environmental Studies at San Jose State University said: “I don't see any advantage in doing large-scale utility projects except to the utility who can buy wholesale power much cheaper.
“I'm from New Jersey and seeing the vulnerability of a large, centralised grid [after Hurricane Sandy] indicates it's really time for a paradigm shift and by reproducing this utility scale model, we're not going to get anywhere.”
Market drivers
RPS targets have driven market growth at the state level. In California, the largest US market with a 39% share of the market, rapid growth is set to continue for the next few years. The Golden State has the most aggressive RPS target in the US of 33% renewables by 2020, a 3.3GW solar target set by the California Public Utilities Commission and a 12GW goal for distributed solar set by Governor Jerry Brown. The state recently hit a milestone 1370MW for its pioneering residential programme, the California Solar Initiative, putting it on track to meet its target of 1940MW before its 2016 deadline.
But this blistering pace looks set to fall off a cliff as incentives ramp down. By far the most effective federal incentive has been the Investment Tax Credit, allowing investors to offset 30% of their tax liability against projects.
“The whole game was to create demand,” said Kimber. “With every bit of volume you get further down the learning curve and stand as a competitive source of generation in a larger and larger market.
“That's absolutely happening in an overwhelming manner. The ITC is one of the greatest successes in the history of policy tools in the energy industry.”
But the ITC is set to expire in 2016, by which time it will be the largest market globally. The US share of the global market is set to increase to 14% by 2016 from today's levels of around 7% as demand in regions such as Europe decline, according to GTM.
“If you remove the ITC today you would kill the market,” said Kann. “We need fewer incentives over time and indeed incentives have been steadily declining in most states but if you were to remove all incentives today you'd end up with no market.
“It's not going to be a uniform time when every single state is in the same position or every utility territory,” he said. “You'll have some places where solar does compete right away after 2016, the removal of the ITC will certainly hurt the market but by 2017 there should be a fair base of demand that doesn't require the ITC. You'll see a down year in 2017 but the market won't disappear.”
Read part 2 here...
About: Felicity Carus previously worked on the environment desk at the UK's Guardian newspaper. She covers renewable technology and clean energy policy and finance out of San Francisco, USA.
Renewable Energy Focus, Volume 13, Issue 6, November-December 2012, Pages 4-7