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...(read the rest of Part 1 here).
Part 2 - targeting grid parity
Grid parity is the holy grail in the industry – to be able to install systems that generate electricity at the same price per kWh as the same prices as conventional such as natural gas. The Department of Energy's SunShot Initiative has set a goal for installed costs of solar systems of $1/watt. Solar developers are still some way off that target despite the low cost of panels with the average cost of installations less than 10kW under the CSI programme remaining stubbornly high at $6.97/watt.
Progress is being made, but the success of the grid parity of solar depends on the price of retail electricity that varies dramatically between states. In Arizona, the average price of electricity is $0.0966/kWh, while New York state has average electric rates as high as $0.1705/kWh.
Some of the wholesale prices for projects bid into California's RPS have been as low as $0.07/kWh on the utility side. Lease agreement financing and third-party ownership have become increasingly popular and have done much to dispel fears of high installation costs of rooftop systems.
SolarCity's success has prompted registration for an initial public offering, which may take place by the end of this year. Its project financing model, backed by Bank of America, Merrill Lynch and Citi, has helped reduce costs for consumers. But it relies heavily on the federal tax credit and puts a great deal of power into the hands of Wall Street.
“In order to monetise a tax based incentive you wind up giving a lot of the value to bankers and financial intermediaries,” said Recurrent's Kimber. “I don't think that's what the government intended but ultimately isn't the most efficient way to incent renewable energy.”
Thinking in the electric power industry has shifted away from the central station model stranded out in the desert. Permitting for projects and transmission has become such a thorny issue, with some applications taking 18 months, that the federal Bureau of Land Management has developed a Programmatic Environmental Impact Statement – a blueprint to standardise applications for utility-scale solar energy permitting in Arizona, California, Colorado, Nevada, New Mexico and Utah in what are callled “solar energy zones”.
“There's a trend right now away from the really large centralised project that are 100MW or more,” said Kann. “That's more a function of RPS standards than it is the loan guarantee programme. People tend to overplay the importance of the loan guarantee programme on the market in terms of the projects.
Small attraction
“But the trend has generally been toward the wholesale DG market – projects of 1MW to 20MW scale. They're smaller, they can be sited closer to load and they tend to be a little more attractive to utilities.”
Future growth is likely to take place closer to load through programmes such as Net Energy Metering, which has the potential to seed growth in residential solar as Feed-In Tariffs did in Germany. Forty-three states have an NEM programme which allows customers with solar PV systems to reverse the meter at times of excess generation.
NEM is popular with developers and consumers, with 40,000 accounts registered in California alone. But the utility companies are not so happy and have launched aggressive efforts to keep the cap conservative in the latest clash of utility resistance to solar.
Steven Weissman, director of the energy programme at the Centre for Law, Energy & the Environment at Berkeley University, said: “There's been a noticeable organised effort on the part of the California utilities to try to discredit the merits of the NEM programme. That effort is likely to impair any opportunities to expand the programme and could potentially threaten the current levels of the programme. In other words, it's conceivable that a successful campaign on their part could lead to some efforts to reduce NEM benefits.”
In December, the 2013-2014 session for the California assembly will reconvene and likely attract aggressive lobbying from the utilities on NEM. Other controversial legislation to expand other solar markets such as community solar is expected to be re-introduced. Senate Bill 843 aims to add another 2GW of renewable power as a choice for the estimated 70% of Californian businesses and consumers who rent their property, lease office space or face other barriers to solar, such as a shaded roof. SB 843 failed in September at the 11th hour after intense lobbying from California's three large utility companies.
“Those who are promoting solar in the legislature are going to be partially playing on the defence in the next session,” said Weissman.
On a national level, the industry has expressed concern over the future of subsidies depending on who ends up in the White House. But of more importance may be a change in chairmanship on the powerful Senate Committee on Energy and Natural Resources, according to Weissman.
Oregon Senator, Ron Wyden, is expected to replace current chairman Jeff Bingaman. Although Wyden is a Democrat, he is thought to be able to stop the bitter partisan struggles that have curtailed progress on US energy policy over the past two years.
“Wyden has demonstrated a strong willingness to work across the aisle,” said Weissman. “He is considering the extent to which we could create a meaningful federal policy requiring and promoting more renewables. Even Romney has made a point of mentioning him as somebody with whom the Republicans are able to work with.”
The China factor
Romney's campaign rhetoric about the impact of China on America's manufacturing base has been bellicose, but he has stopped short of support for the Obama administration's tariffs imposed on Chinese PV imports.
Late in 2012, the US Department of Commerce applied anti-dumping duties to Chinese import and countervailing duty tariffs are expected to be finalised this month. But the tariffs are not expected to have the desired effect – to level the playing field for US PV manufacturers – because most Chinese manufacturers will be able to circumvent the tariffs by sourcing silicon cells from Taiwan.
Kann said that a sharp dip in shipments was observed in the second quarter of this year, but levels of Chinese imports are expected to recover.
“It has had an impact on Chinese manufacturers to the extent that they had to change their value chains a little bit to get around the tariffs,” he said. “The impact on the US market has been pretty minimal.” Interestingly, China consumed 33% of global PV panel shipments in Q4 2012 (NPD SolarBuzz).
A post-ITC world
But a bigger question in the minds of the solar industry is what the US market may look like after the expiration of the ITC in 2016.
Although renewable energy sources provided about 13% of total US utility-scale electricity generation in 2011, 23% of that was generated by wind and less than 1% came from solar. That figure is set to grow at least until 2016, but how fast and to what levels is uncertain.
While the National Renewable Energy Laboratory predicted a nationwide potential for 4196GW of solar, great technological, regulatory, financing and political barriers coupled with low demand for new generation make GTM Research's projection of 32GW by 2016 look more realistic.
The greatest challenge right now is really having the will to finish on the part of the policymakers. Do they understand how close we are to succeeding because we are just on the cusp?” said Kimber.
“The biggest opportunity is just the scale of the market. We've cracked the door open on the electric power industry in the US and now we really need to become a mainstay, similar to the way wind has done.”
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