The U.S. solar industry is expected to see its expansion significantly curtailed this year after installing record capacity in 2016, marking the first annual decline in installations for the industry.
A new report from GTM Research and the Solar Energy Industries Association (SEIA) raises some question marks for the trajectory of the solar industry. In the second quarter, the U.S. installed 2.38 gigawatts of new solar PV. A decent performance, but with two-quarters in the books, the industry is only on track to install 12.4 GW of new capacity in 2017, a decline of 17 percent from last year.
The report from GTM Research and SEIA laid out a few reasons for concern. Residential PV only expanded by 1 percent quarter-on-quarter, the result of “weakness in the California market and a slowdown in Northeast markets, which are feeling the impact of pullback from national providers.” Solar’s super-charged growth in recent years can in part be attributed to state policies that mandate renewable energy. Those policies are reaching their limits, meaning that going forward, a lot of new installations will need to be made on a voluntary basis.
But, beyond those wrinkles, there are many reasons why solar providers still feel good about their prospects. Solar provided 22 percent of all new electric capacity in the U.S. in the first half of 2017, second only to natural gas. Also, the decline in installations this year will be in the context of a record-setting year in 2016 in which solar accounted for 39 percent of all new capacity - more than natural gas.
The expected expiration of tax credits at the end of 2016 - credits that were ultimately extended through the end of the decade - led to a massive volume of projects last year. As the industry refills the pipeline with new projects, 2017 was always going to be a bit slower than 2016.
As the solar industry matures, the heady growth rates will be harder to maintain. The industry has averaged annual growth rates of 68 percent over the last decade. As the industry continues to expand, it will still add large volumes of new capacity, but the figures, in percentage terms, will come down.
Most importantly, though, industry costs continue to decline, making solar more competitive than ever.
Costs are down 55 percent in the last five years, and the U.S. Department of Energy just released new research showing that the industry has hit a major milestone. In 2011, the agency laid out a goal to get utility-scale solar costs down to $1 per watt by 2020, a goal that the DOE says has officially been achieved this year - three years earlier than expected. Also, the DOE says solar generation now averages below 6 cents per kilowatt-hour, a competitive figure. And that ignores the fact that utilities are already signing deals with customers for even cheaper rates. SEIA says that solar has reached grid-parity in 27 states, compared to only 12 in 2014.