National Solar Market Year in Review
- Mar 14, 2019
The U.S. solar industry continued its expansion in 2018, albeit at a slower pace. For the third year in a row, the U.S. solar market installed double-digits gigawatts of solar photovoltaic capacity, with 10.6 gigawatts coming online in 2018, according to a publication of Wood Mackenzie/Solar Energy Industries Association. The study forecasts 14 percent growth in 2019 compared to 2018, with more than 12 gigawatts of installation anticipated.
Even though last year’s amount slid 2 percent from the 2017 total, for the sixth straight year, solar was one of the top two sources of new electricity generating capacity in the U.S. Last year marked a period of rebound as the residential market grew by 7 percent, while non-residential photovoltaic registered an annual decline of 8 percent. Utility solar also contracted, mainly due to the impacts of Section 201 tariff uncertainty, which also shifted project timelines, affected by the tariff schedule. Overall, solar photovoltaic has accounted for 29 percent of new electricity generating capacity additions, lower than 2017 due to a surge in new natural-gas plants in early 2018.
Cumulative operating solar photovoltaic capacity totals 62.4 gigawatts, which is about 75 times more than a decade ago. The fourth quarter of 2018 was last year’s best-performing semester, when 4.3 gigawatts of solar photovoltaic was installed, a 139 percent increase from the previous quarter and a 4 percent increase from the last quarter of 2017. About 6.2 gigawatts of utility solar were installed in 2018, accounting for 58 percent of total U.S. annual capacity additions.
“The solar industry experienced growing pains in 2018, in large part due to the unnecessary tariffs that were imposed on solar cells and modules, but this report still finds significant reason for optimism,” SEIA’s president & CEO, Abigail Ross Hopper, said in prepared remarks. “The total amount of solar installed in America is on track to more than double in the next five years, proving solar’s resiliency and its economic strength. It’s clear, this next decade is going to be one of significant growth.”
Soon after the uncertainty of the Section 201 tariffs dissipated, about 13.2 gigawatts of utility solar PPAs were signed last year, yet most of them with expected commercial operation dates in years after the tariffs have stepped down. Total installed U.S. photovoltaic capacity will more than double over the next five years, according to the report’s authors, with annual installations reaching 15.8 gigawatts in 2021 prior to the expiration of the residential federal Investment Tax Credit and a drop in the commercial tax credit to 10 percent for projects not yet under construction.
Voluntary procurement was the largest driver of new PPAs signed and is expected to drive 51 percent of 2019’s capacity additions. Of all new PPAs signed last year, commercial and industrial off takers only accounted for 153 megawatts of actual capacity additions, but C&I procurement drove 21 percent of all new PPAs.
State solar photovoltaic installation rankings place California on the leading position with the addition of 3,395 megawatts of photovoltaic installed in 2018. Texas occupies the second position (up from the fourth position the year prior) with an expansion of 996 megawatts, while the third rank is held by North Carolina, up by 906 megawatts, pushing Florida on the fourth rank.
In the residential photovoltaic segment, residential installation growth exceeded expectations thanks to sustained activity in California, Nevada and Florida. The non-residential sector gained from a pipeline of projects grandfathered in under more favorable compensation policies in California and Massachusetts.
The utility solar segment holds the largest share of annual installation in the country, registering nearly 6.2 gigawatts installed last year, a 3 percent drop year-over-year. Utility photovoltaics pipeline currently amounts to 23.9 gigawatts. In the last quarter of 2018, installation volumes were lower than anticipated, partly due to the Section 201 tariffs, which had some projects push target completed operation dates from 2018 to 2019.
U.S. utility solar market procurement has seen consistent growth and signs point toward sustained activity. Last year, some 13.2 gigawatts of utility solar of PPAs were signed, the third quarter distinguishing itself as the record quarter for contracted pipeline with 25.3 gigawatts.
Prices across segments are now all at historic lows, despite tariffs on modules, inverters, aluminum and steel: $2.98/Wdc, $1.51/Wdc, $0.93/Wdc and $1.04/Wdc for residential, non-residential, utility fixed-tilt and utility single-axis tracking systems, respectively. System pricing fell by 4 percent, 8.5 percent, 15.1 percent and 14.4 percent in the residential, non-residential, utility fixed-tilt and utility single-axis tracking markets, respectively.
Declines in pricing are led by declining hardware costs. Cuts to demand in China last year led to over-supply conditions that led to lower module prices, partly mitigating the impacts of module tariffs in the U.S.
Commercial and industrial procurement is anticipated to remain a strong driver of utility solar in the next few years as the number of companies pledging to meet 100 percent renewables or zero-carbon targets increases. Renewable portfolio standards also seem to make a come-back as many of the newly elected governors are in states that have joined the U.S. Climate Alliance or campaigned on a pledge to join the Alliance and commit to the Paris Agreement rather than federal participation.
State RPS policies vary, based on RPS targets, the entities they include, the resources eligible to meet requirements and cost caps. In many states, standards are measured by the percentage of retail electric sales; Iowa and Texas require specific amounts of renewable energy capacity rather than percentages and Kansas requires a percentage of peak demand. While most state targets are between 10 and 45 percent, seven states—California, Hawaii, Massachusetts, New Jersey, New York, Oregon, Vermont and Washington, D.C.—have requirements of 50 percent or greater.
Non-residential photovoltaic market is anticipated to see tepid growth in 2018, due to reduced incentive environment across major state markets. This translates into elevated growth in 2020 as the next wave of states with robust community solar mandates—New York, Maryland, Illinois and New Jersey—start to bring online installations currently included in their pipelines. Furthermore, solar-plus-storage will also begin to have an impact on non-residential demand.
Charts courtesy of Wood Mackenzie/SEIA U.S. Solar Market Insight