U.S. Solar Market Smashes Records, Continues to Grow

The U.S. solar market had its biggest year to date in 2016, installing 14,762 megawatts (DC) of solar photovoltaic (PV) electric capacity. The United States is now home to more than 1.3 million solar PV installations. This creates a cumulative capacity of more than 40 gigawatts. That’s enough clean electricity to power more than 8.3 million average American homes for a year.

The new record represents a 97 percent increase over the previous record set in 2015. This has nearly doubled the previous record of 7,493 megawatts (DC) installed according to a new report, titled “U.S. Solar Market Insight,” from the Solar Energy Industries Association (SEIA) and GTM Research.

This growth was primarily driven by the utility PV segment. This segment accounted for 72 percent of installations, representing a 148 percent increase over 2015. The report credits the incredible volume of demand from pull-in projects that utilities procured ahead of schedule. Developers rushed projects through due to uncertainty over the federal government’s extension of the 30 percent Investment Tax Credit (ITC). ITC was extended for five years—through 2021— in late 2015.

Low-cost solar drives utility and business investment

Thanks to government subsidies, the PV market has solidified its position as a driver of solar installation growth in 2017. Projections from SEIA include utility PV installations of 8.7 GW (DC). This tells us that many utilities have met interim or final renewable energy mandates, or state renewable portfolio standards (RPSs). The SEIA report states that 64 percent of current projects in development are driven by non-RPS mechanisms.

What are non-RPS mechanisms? Primarily, they are solar-friendly states, like Texas, North Carolina and Utah. These states are looking to expand into new markets, according to a GTM Research paper titled “The Next Wave of U.S. Utility Solar: Procurement Beyond the RPS.” The three primary drivers are:

• Voluntary utility procurements
• Must-take procurement from qualifying facilities under the 1978 Public Utility Regulatory Policy Act(PURPA)
• Corporate procurement from utility-scale solar systems

The last driver is the smallest of the three, but industry analysts expect it to be more active in coming years. In 2016, through direct access programs, contracts for difference, and green tariff programs, large corporate customers accounted for an unprecedented 10 percent of annual capacity additions. This totaled more than 1.0 GW (DC).

Altogether, the continued rise in non-RPS procurement stems from the growing number of locations where utility solar is now a cost-competitive resource. This is compared with new-build natural gas alternatives. In fact, the installed cost for utility-scale solar has dropped more than 50 percent since 2007, according to Lawrence Berkeley National Laboratory.

With the five-year extension and phase out of solar’s 30 percent ITC, the National Renewable Energy Laboratory (NREL) projects the installed cost for solar could drop 43 percent further by 2020.

Residential solar market cools

The residential market slowed down from record growth rates during the past several years. The residential market only saw a 19 percent growth in 2016. The SEIA states that installers in major markets have cited difficulties in reaching customers outside of early adopters. Early adopters have driven the market to date. In non-major markets, such as Utah, Texas and South Carolina, installations began to scale in 2016. These emerging markets are expected to offset some of the deceleration seen across major states.

Solar pricing shows marked decrease

System pricing continues to trend downward across all market segments. On average, U.S. PV system pricing fell by nearly 20 percent. According to the SEIA report, price declines in modules, coupled with substantial price declines in inverters and structural balance of systems are the reason for the changes in system pricing. The declines were driven by excessive component supply vs. demand.

Hardware markets were fiercely competitive in 2016. There was a 32 percent cost reduction for the residential market segment and 42 percent for non-residential. The average pricing for residential rooftop systems dropped 17 percent. This landed at $2.89/W (DC) and fell by 20 percent, landing at 1.62/W (DC) for non-residential.

Utility fixed-tilt and single-axis tracking projects ended the year with average pricing of $1.06/W (DC) and $1.18/W (DC), respectively. Year-over-year pricing fell by 20 percent and 23 percent, respectively.

Solar Market Outlook

For the first time, solar ranked as the No. 1 source of new electric generating capacity additions brought online. At 39 percent, it beat out both natural gas (29 percent) and wind (26 percent).

GTM Research forecasts that 13.2 GW (DC) of new PV installations will come on-line in 2017. That is down 10 percent from a record-breaking 2016. Utility PV is expected to account for 66 percent of that new capacity.

Total installed U.S. solar PV capacity is expected to nearly triple over the next five years. By 2020, more than 18 GW (DC) of solar PV capacity will be installed annually. By 2022, 30 states in the U.S. will be 100-plus MW (DC) annual solar markets, with 25 of those states being home to more than 1 GW (DC) of operating solar PV, according to the SEIA/GTM Research report.

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