The United States PV Market: Project Economics, Policy, Demand, and Strategy Through 2013

by Shayle Kann

Demand for PV projects in the United States is rapidly expanding as a result of falling system prices, stimulus funding and new regulatory incentives. As the recession retreats, the U.S. is poised to become the largest global demand center for PV. Anticipating this trend, global solar market players from all parts of the value chain are seeking strategies to gain access to U.S. PV demand. Simultaneously, the market itself is evolving as utility-scale projects gain steam and innovations in project financing emerge.

However, the U.S. does not offer a singular demand market for PV. Rather, it is an amalgamation of 50 states, each of which has a unique set of incentives, regulations, electricity prices and political processes. Even within most states, these factors differ according to electric utility service territory and/or municipality. These factors ultimately impact PV demand and project economics differently based on project size, market segment, and end customer. Developing a downstream U.S. PV market strategy requires a deliberate, highly specified approach to each application, state market and market segment.

This report stands alone as the only analysis to provide the full range of tools necessary to develop a strategy to address each market. In addition to considering national trends in project financing, incentives and demand dynamics, it analyzes the 16 key state markets individually, accounting for each state’s unique incentive structure, solar availability, historical market size, barriers to adoption and electricity prices. It projects demand by market segment within each state, and uses these projections to develop a bottom-up forecast for the entire nation by state and by market segment. Finally, it contains competitive analysis of the project developers, integrators, and financiers that comprise today’s market, and the characteristics they will need in order to thrive as the market expands.

IN THIS REPORT:

  • Demand projections by market segment for sixteen primary state markets, together comprising over 97 percent of national demand
  • Analysis of demand drivers, incentive value, and subsidized grid parity for each market segment in each state
  • National bottom-up demand forecast by state and market segment
  • Competitive analysis of market players and development strategies
  • Comprehensive listing of incentives and regulations that impact the PV market, including the American Recovery and Reinvestment Act of 2009 (the stimulus package) and the potential for federal cap-and-trade
  • Analysis of trends in project financing and comparison of financing structures
  • Profiles of 31 residential, commercial and utility-scale project developers with U.S. operations

KEY FINDINGS:

U.S. PV Demand Grows in 2009 Despite the Recession: Grid-connected PV demand will reach 440 MW in 2009, up from 320 MW in 2008. In an upside economic scenario, demand could reach 544 MW in 2009. The residential sector and local/state government projects drive demand growth, thanks to stimulus funding and the recently uncapped residential Investment Tax Credit. California retains its dominant market share, accounting for 205 MW in the base case scenario, or 50 percent of national demand. Secondary markets in Arizona, Colorado and New Jersey support demand growth.

U.S. PV Market Becomes Global Demand Leader by 2012: Over the next four years, the U.S. will experience the most rapid demand growth of any major PV market. Base case U.S. PV demand grows to 1,515 MW in 2012, with annual growth from 2008 to 2012 averaging 48 percent. The upside scenario sees demand reaching 2,022 MW in 2012. During this period, the U.S. surpasses Spain, and potentially Germany, to become the leading global PV market.

Secondary Demand Markets Gain Increasing Importance: Although California’s market share remains relatively steady at around 50 percent of national capacity second-tier markets gain increasing value as their absolute size increases. By 2012, combined base case demand from leading secondary states Arizona, New Jersey, New Mexico, New York, Nevada and Massachusetts reaches 376 MW.

Price Convergence Between PV and Grid Electricity Already Reached in High-Demand Locations, 11 States to Follow by 2012: We model projects in 16 states to determine when post-incentive PV generation costs and grid electricity will converge. Each state offers an incentive package that favors some market segments over others. Price convergence in these markets is heavily sector-dependent. States with high levels of demand, such as New Jersey and California, have already experienced price convergence in particular market segments, while others stand on the precipice. By 2012, 11 of 16 states will have surpassed price convergence in the commercial sector, and ten will have done so in the residential sector.

New Financing Models Drive Residential Sector Growth: Financing models that obviate the need for direct ownership will drive residential market growth. Though we predict residential price convergence in a number of states, we maintain that up-front cost and simple payback are the two factors gating demand for residential projects. The expansion of residential solar financing through leases or power purchases agreements with little up-front cost will enable the residential sector to grow to 363 MW by 2012 in the base case.

Utility-Scale Demand Gains Market Share Through 2012: Utility-scale installations will be the fastest growing market segment, stealing market share from the commercial sector and reaching 466 MW in the 2012 regulatory scenario. This is a result partly of RPS requirements and a wave of new solar-specific RFPs in states with solar carve-outs. It is also a result of heightened interest in utility ownership of PV, for which there are numerous economic and operational benefits for utilities.

Successful Project Developers Build Adaptation Into Their Market Strategy: Unlike Germany, Spain or Japan, the U.S. is comprised of 50 differentiable PV markets. With changes occurring both over time and by location, addressable markets are in a constant state of flux. Successful project developers will build adaptation into their market strategy, rather than seeking to minimize its necessity. By doing so, they will turn the complexity of the U.S. market into an advantage, rather than a limitation.

*U.S. PV Bundle: Includes both The United States PV Market: Project Economics, Policy, Demand, and Strategy Through 2013 and PV Manufacturing in the United States: Market Outlook, Incentives and Supply Chain Opportunities at 20% discount

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Shayle Kann Senior Vice President, Research

Shayle Kann is the Senior Vice President of Research for Greentech Media. Prior to GTM Research, Shayle was a U.S. Fulbright Scholar with the Centre for Sustainable Energy Systems at the Australian National University. 

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