By LARRY SHERWOOD August 1, 2013
Once again led by utility-sector installations, PV capacity installed in 2012 jumped 80 percent over the prior year.
EVEN AS DOZENS of solar companies folded in 2012, photovoltaic (PV) installations spiked to stratospheric levels, both in terms of number and total capacity. Growth was astounding even for a decade averaging capacity increases of 65 percent per year.
The PV capacity installed in 2012 was 80 percent higher than the capacity of 2011 installations (see figure 1, and “Big Time for Solar,” July/August 2012 SOLAR TODAY).
The total capacity of 2012 utility installations increased by 150 percent, and distributed installations, largely on residential, commercial and government buildings, increased by 36 percent. The annual capacity growth rate has now exceeded 40 percent for six straight years. The number of systems installed in 2012 increased 46 percent, to almost 95,000.
Federal tax credits and cash grants are an important financial component of most installations. As important as incentives are, state renewable portfolio standards (RPSs) play an increasing role in growth.
Dramatically falling prices are opening new markets, and the availability of good financing options is contributing to the development of strong markets. The total installed cost for distributed installations fell 12 percent in 2012 and has fallen 33 percent over the past three years. The cost decline is even greater for utility installations. Falling module costs is the primary reason for the cost declines, but all elements of the system cost are lower.
These are among the highlights of U.S. Solar Market Trends 2012 from the Interstate Renewable Energy Council Inc., recently published at irecusa.org. According to the report, declining PV module prices, stable federal financial incentives and continued solar-friendly policies in some states contributed to strong PV market growth this past year. While solar markets remain heavily concentrated in a few states, more states have significant solar installations each year. All signs point to continued growth for 2013.
Utility-Scale Projects Continue to Grow
Utility-sector PV installations more than doubled in 2012 compared to 2011 and, for the fifth consecutive year, was the sector with the highest growth. The utility sector’s share of all U.S. grid-connected PV installations grew from virtually none in 2006, to 32 percent in 2010, and to 53 percent in 2012 (see figures 2 and 3).
Just 50 large utility installations (each greater than 5 megawatts DC) provided 45 percent of the total capacity installed in 2012. Contrast this with the 85,000 residential installations that, combined, represented only 16 percent of the capacity installed in the same year.
More than three-quarters of utility installations are located in just four states: California, Arizona, Nevada and North Carolina. All four states have RPSs, which are an important driver for these installations. Financing, of course, is also important. The three largest utility-sector installations each received a federal loan guarantee for at least a portion of their installation costs. Although this program is known for high-profile failed loans to Solyndra and other manufacturers, none of the guaranteed loans for specific solar projects failed. These loan guarantees, which supported 574 MWDC of installations last year, are a crucial component of the overall financial package for these projects.
Five installations were completed in 2012 that are larger than the largest systems installed in previous years. All five produce electricity for Pacific Gas and Electric in California. These installations are located in California, Arizona and Nevada, with the largest installation being the 289-MWDC Agua Caliente Project in Yuma, Ariz.
Construction began in 2012 on many additional utility-sector installations, and utilities and developers have announced plans for even more projects to be built in the next few years. Installations in this sector seem poised for continued growth.
Distributed Installations Grow in Size and Number
Distributed installations provide electricity for use at the host customer’s site, like a home or business. In 2012, the amount of distributed grid-connected PV capacity installed annually in the United States increased by 36 percent, to 1.6 gigawatts DC. Nearly 95,000 distributed PV systems were installed in 2012, a 46 percent increase over the number of distributed PV systems installed in 2011. Unlike the past several years, the growth in the distributed PV market was strongest for residential installations.
The capacity of PV installations in the non-residential sector, which includes sites such as government buildings, retail stores and military installations, increased by “just” 26 percent in 2012 compared with 2011 (see figure 1).
Although the average size of non-residential distributed installations remained constant at 120 kilowatts (kW), the largest installations continued to get larger. The largest 2012 installations in this sector were a 20-MWDC installation at an Apple data center in Maiden, N.C., and a 16-MWDC installation at Maryland’s Mount St. Mary’s University, with power sold to the Maryland Department of General Services and the University of Maryland System.
Federal stimulus legislation passed in February 2009 allowed commercial entities to receive the federal incentive as a cash grant instead of a tax credit. The program expired at the end of 2012, though projects that began construction in 2012 can still qualify for the cash grant in future years. In 2012, the U.S. Treasury awarded $2.3 billion in such grants, which funded one-third to one-half of all distributed commercial installations.
The capacity of residential installations increased by 61 percent and the average system size increased by 8 percent, to 6.2 kWDC. (See figure 1.) Most residential systems are now financed using the leasing, or third-party ownership, model. In this arrangement, the homeowner does not own the system, but makes monthly payments to a third-party owner. In states with high-cost electricity, the combinations of lower installed costs, stable federal tax incentives and good net-metering policies are growing the residential market, even with declining local incentives. California and Hawaii were the two largest residential PV markets in 2012, and both rely less on rebate incentives than in the past.
Other States Gain on California’s Lead
In 2012, more than two-thirds of grid-connected PV system installations were concentrated in California, Arizona, New Jersey and Nevada, as shown in table 1.
Six of the top 10 states for 2012 installations — Arizona, Nevada, Massachusetts, North Carolina, Hawaii and Maryland — more than doubled the capacity installed the year before. Nevada, Hawaii and Maryland joined the top 10 installation list for 2012, replacing New Mexico, Pennsylvania and Texas.
In Nevada, four large utility installations totaling 215 MWDC were completed in 2012, representing most of the Nevada capacity installed last year. Nevada’s ranking in the top 10 installation list fluctuates wildly, depending on how many utility installations are completed in a given year. Hawaii and Maryland made the top 10 installation list due to large growth in distributed installations. New Mexico and Pennsylvania both saw large drops in capacity installed last year. In New Mexico, the utility-sector installations dropped significantly, and in Pennsylvania the distributed installations fell off with the end of the Pennsylvania Sunshine Solar Rebate Program. In Texas, installation capacity grew, but not enough to keep Texas in the top 10 installation list.
State policies affect PV installations, with most installations happening in the few states with good solar policies. All states in the top 10 installation list have state RPSs, which mandate that utilities generate a percentage of their power from solar or other renewable sources, and which tend to encourage larger installations. Arizona and Nevada also benefit from solar installations supplying power to Pacific Gas and Electric to help meet the California RPS requirement. The RPS requirements and structure vary widely from state to date.
Though their impact on the total market is declining, financial rebates are the most influential state policies, especially for smaller installations. Five years ago, owners of most PV installations received a cash rebate from a state or utility incentive program, and this rebate was the most important element of the financial package. In that era, no state had a significant amount of installations without also having a rebate program.
For the past three years, the incentive expenditures have been declining, in part because the rebates provided per watt have been declining and in part because some states have stopped these programs.
Despite the decreasing incentives, installed capacity with rebate support continues to increase. When PV is less expensive, less incentive money is necessary to encourage installations.
On a cumulative per capita basis, the top five states — Arizona, Nevada, Hawaii, New Jersey and New Mexico — remained the same as the previous year, although the ranking of these five states changed. (See table 2.) The uneven distribution of PV installations shows that state policies are important, outweighing other factors like geography, resulting in concentrated growth in states with supportive measures.
Growth Will Continue in 2013
What can we expect in U.S. solar markets this year? As of June, indicators point to sustained grid-connected PV growth and the continuation of the 2012 trend of higher growth rates for larger installations. Like last year, further reductions in PV module prices, continuation of the federal investment tax credit and strong state RPSs will help drive market growth.
Many large solar projects began construction in 2012 in order to take advantage of the Treasury 1603 grant program. Most of these installations, both distributed and utility-sector projects, will be completed in 2013 through 2016. Since projects that begin construction in 2013 will no longer have the cash grant option, developers will need to find entities with tax bills large enough to take advantage of remaining tax credits.
Larry Sherwood (firstname.lastname@example.org) is president of the consulting firm Sherwood Associates and vice president of the Interstate Renewable Energy Council, Inc. (IREC). The solar data reported here was collected for IREC as part of a grant from the U.S. Department of Energy. A full report on the data is available at irecusa.org. Previously, Sherwood served as executive director of the American Solar Energy Society.