The opportunity costs that a homeowner can save by choosing to install a solar energy system were covered in our previous post about investment timing and have not changed in a matter of months. Without significant increases in retail electricity prices or expiration of incentives, the math for those costs is nearly the same. However, it only takes a few months to better see the activity for 2015 and how many forecasts might be exceeded. We advised caution that demand might impact materials and labor availability. This update is not intended to sound alarms, but it explores a few of the more current data and trends that should be helpful for you to decide if now is the time to invest in your future with a solar PV system.
This information illustrates there is steadily increasing acceptance and interest in solar PV for residential, commercial, and even full utility scale systems. While today there may not be any threat of demand taxing supply, it simply becomes more possible as this trend continues. But there is also comfort in knowing a greater number of people are finding the benefits are sufficient to take the leap.
First the History
As recently as the end of 2014 most analysts were predicting upwards of 500,000 homes and businesses would have installed some form of solar PV energy system. This was a very big jump from the end of 2013 results, which saw greater activity at the utility scale, or over approximately 1 MW per site.
From the Solar Energy Industries Association (SEIA), here are key 2014 results:
- There was over 34% capacity growth in 2014.
- Approximately 645,000 homes and businesses had moved into some level of local solar power generation.
- The residential segment grew the most, at nearly a 51% expansion.
- Distributed solar PV energy systems are now about a quarter of the entire solar power mix, making up approximately 1 GW of total capacity to 4 GW of utility scale capacity. That’s a lot of self-sufficiency!
- The top 25 corporate users had more than doubled their solar generating capacity over the two year period ending in 2014.
- K-12 schools finally represented a substantial fraction of the total capacity, with about 490 MW installed across almost 3,800 sites.
It is clear that 2014 was a very active year and represents a large expansion of both sites that have made the leap as well as adding significant generating capacity to the nationwide power mix.
Going Forward in 2015 and 2016
According to a report from the LBNL, installed costs continue to fall, although they are leveling to some degree. The residential sector experienced a slightly less than 10% decrease year-over-year in 2014, with larger installations seeing a slightly greater cost drop. Utility scale sites enjoyed an almost 20% reduction, primarily from market competition.
The analysts performing the study find 2015 trends to be similar by midyear. What cannot be predicted yet is the impact on second and third quarter anticipated demand due to changes in California incentives, accelerating purchases. Increased activity in Southeastern states as well as the Northeast began in 2015, also due to favorable policy changes and community efforts to get more fair treatment from utilities and utility regulators.
More than homeowners are steadily becoming more active. Large investors including utilities see positive signs to invest, especially factors such as Levelized Cost of Energy (LCOE). LCOE is used to compare the relative cost of energy produced by different energy-generating sources, regardless of the project’s scale or operating time frame. It is a way to determine actual lifetime costs and full benefits in a way that is equal for every alternative. Utilities, businesses, and even third party investors use this as one key measure of the value of their investment. Recent reports show that the LCOE of renewable energy, and especially solar and wind are reaching “par” with traditional means of energy production. This transition to near equivalency in lifetime costs and return on investments could be a big catalyst in driving more purchases soon.
Also noteworthy is the increased interest as well as increased action around community solar. These systems are popular for investors to participate in the solar revolution by building solar farms that can be shared by many “subscribers” under a variety of agreements. Even some municipal authorities and utilities are on board, not only investing but accelerating the process from start, through design and permitting, to connecting to the grid.
Some signs that community solar may explode include the following:
One analyst, Greentech Media (GTM) forecasts a near tripling of community solar capacity in 2015 as well as sevenfold increase by the end of 2016.
A more specific sign is the activity in regions not previously in the top states for solar activity, like Colorado and Minnesota, as well as utilities like the Tennessee Valley Authority (TVA). In fact, TVA has begun to offer financing for community solar farms that average over 1 MW each, and they are creating long term plans in response to the ratepayers in the territory requesting more distributed generation and independence.
In Minnesota alone, more than 900 MW of community solar has been proposed just since the opening of the application process in December 2014.
We highlight community solar primarily because it has become popular with many homeowners or general ratepayers who don’t have the right circumstances to invest in solar. The analyst GTM concludes that an estimated 13.5% of U.S. households have rooftops suitable for solar. Community solar is a prime solution for the remaining 86.5% of households could to from solar power as if the panels were installed on their homes.
Looking across the globe, there are signs that renewable energy and especially solar PV systems are becoming increasingly popular and sought after:
In the United Kingdom, the government is considering expediting the plan to eliminate coal burning power plants to as early as 2023. While for Britain this will certainly create a much greater market for gas-fired central power plants and perhaps even carbon capture technology, the country is still well suited for increases in energy from renewable sources. Large scale onshore and especially offshore wind has been popular, but solar also has a huge role to play. Many analysts see the rapid decrease in costs as a driver to give solar PV systems the ability to be second renewable source behind wind in the UK. They look to Germany as an example, where the roles of wind and solar are flipped, but where together they still comprise a significant portion of the energy makeup.
In India, the Ministry of New and Renewable Energy (MNRE) has become more aggressive in setting the country on course for expanding all energy production and providing more to the over 300 million citizens without access. The MNRE offers project financing and predicts over 4 GW of new solar capacity in 2015 and 2016 on the path to reach over 15 GW of additional solar capacity. This was on top of nearly 2 GW realized by the end of 2014.
In fact, worldwide the International Energy Administration (IEA) predicts renewable energy will represent two-thirds of the world’s energy capacity additions between now and 2020. Wind and solar will represent nearly half of the predicted 700 GW of additions. While it is a five-year projection, the agency suggests much of the activity will occur soon due to policy uncertainties in some markets.
The Near Future for You
Of course, we are not predicting any near term emergency. The goal is to keep track of the local market and all the global trends in an effort to stay informed of major factors that influence demand and ultimately supply. Across the globe there is a steady change in policy, consumer demand, energy prices, and more that keep the energy supply in flux. But the fact is by most indications the value of renewable energy sources is increasing and the costs are decreasing.
What does this mean for you?
Perhaps it is reason to stay tuned to the market or even advance your decision making.
Perhaps it simply gives you comfort that your local and worldwide peer group is growing.
Whether you choose to go solar today or in the near future, you can join an exploding population of people, businesses, and utilities who already took the leap.
Interested in learning more about YellowLite’s renewable energy solutions? Reach out to us today to learn more.