Raise a glass to a successful 2019 in solar, as the final Q3 of the calendar year has proven to be the most successful one of the decade. Heck, with a statement like that, it might be better to raise the entire bottle!
But first, a quick overview of how the story played out.
After steady double-digit-percent increases in the early years of this past decade, U.S. residential solar experienced growing pains from 2016-17, as that nation’s presidential leaders changed from being more coal than solar-friendly, diverting subsidies towards fossil fuels over renewables. Tariffs on Photovoltaic hardware loomed ominously on the horizon and national installers pulled back in critical solar territories such as California and the Northeast. It seemed that the solar market was receding from its peak-installation crest, reaching its high-water-mark of annual installed capacity of 687 MWdc, set in Q1 2016. That all changed in Q3 2019, however, as the Federal Investment Tax Credit (ITC) ticked out its final remaining months of a 30 percent payback, before beginning to phase out according to the following schedule:
(CREDIT: Image provided by SEIA shows the gradual phase-out timeline of the Solar Investment Tax Credit.)
Enacted in 2006 the ITC offsets the cost of solar for residential consumers by 30 percent. Experts estimate the subsidy has helped the solar industry grow more than 10,000% creating hundreds-of-thousands of jobs and generating billions in revenue. Next year’s phase-out of the ITC has inspired many home-owners on the fence about installing solar to seize upon the financial opportunity. The result was that in Q3 2019 consumers installed 712 MWdc of solar.
(CREDIT: Image from SEIA WoodMackenzie Power and Renewables Insights Report)
Now, as the solar market readies to step into a new decade and matures out of its early product adopters in many North American states, a new report by Solar Energy Industries and WoodMackenzie Power and Renewables gives a glimpse into what the future of solar might look like.
When it comes to being a national leader for residential solar installations, Tupac’s California Love lyrics are fitting:
“Now let me welcome everybody to the Wild Wild West
A state that’s untouchable like Eliot Ness…we in that Sunshine state….”
Well, you get the idea.
The point is that California was and is projected to remain the state leading the residential solar market charge. In the big Q3 solar market performance of 2019, California accounted for approximately 41% of the nation’s installs which is roughly the equivalent of 300 MW.
Even though the ITC will begin phasing out in the subsequent years, the residential solar forecast for California is still promising. Fueled by people’s concerns about climate change, increased dissatisfaction with utility companies and public safety power shut-offs, and a new state mandate that requires all new buildings to generate enough solar power to cover their projected electricity needs — the home solar market in California is coming into the new decade strong.
Solar Diversification outside legacy markets
An interesting trend to take note of in the above Q3 2018 v 2019 charts showing residential solar installations is the market diversification that’s taking place outside the states that are usually known for being proponents of solar.
States such as Florida, Texas, and Nevada have plenty of sun, but unlike their more rainy Northwestern counterparts, they lack appealing state-wide incentives supporting the solar market. What SEIA’s new chart shows, however, is a different story about solar is starting to emerge.
Fossil fuel-friendly states that offer some of the lowest electricity rates in the nation and hardly any solar incentives have begun to see people switching over to solar. Reasons for this growth are attributed to improved solar technology and the economic competitiveness of solar as an unsubsidized resource.
What we can expect in the next decade is increased solar adoption in many of the states that did not offer incentives. Low market penetration across such states suggests that there is plenty of room for growth.
When it comes to solar pricing for the next several years, the long and short of it is that it is likely to remain stagnant into the mid-2020s.
This is because that while the annual system cost is projected to decline by 4 percent annually for the next five years, the phase-down of the ITC from 2020-2022 means that installing solar on your home might be cheaper now than a few years in the future.
That said, there’s always the possibility that there will be a disruptive innovation in the customer acquisition process, catalyzing more homes across the nation to install solar. California’s Title 24, for example, is projected to drive over one gigawatt of statewide solar demand over the next five years — that’s about as much residential solar as the entire state of Arizona currently has installed! It’s possible that other states might follow California’s lead in the years to come, however the reasons for people installing solar won’t be because it’s saving them money, but because a law is now requiring them to make the switch.
Barring such disruptions, SEIA’s outlook for solar over the next few years is as follows:
The chart shows that residential and non-residential solar are anticipated to remain stable, while Utility Solar is getting ready to ramp up.
One such premonition for the future is to think of solar is like a wave determined to reach the shore. Fossil-fuel companies might try to stop it, or consumers might ignore it, but it will eventually arrive one way or another. Whether it’s purchased at a higher rate from utility companies controlling its price, mandated upon people by states concerned about the implications of continuing to rely on fossil fuels, or purchased by a consumer at the lowest possible price, the next decade will see the inevitable new wave of solar installations arrive.