From 2009 through 2014, U.S. solar PV installations grew at a compound annual growth rate of over 60 percent. This resulted in a 2014 market that was 12 times larger than it had been five years earlier, and 108 times larger than a decade prior.
This year will be an exciting one for the U.S. solar market, and our team at GTM Research is already discovering new insights. But before we get too far into the year, here is one final set of 2015 predictions.
In order to stay true to my inner analyst, I’ve tried to construct predictions that are both objectively measurable and not blindingly obvious. No room for me to weasel my way into half-credit here. As a result, I could easily go zero for seven. Here we go anyway.
1) At least three utilities will propose new programs that include utility ownership of rooftop solar in their regulated territories.
There are many facets to the increasingly complex relationship between utilities and rooftop solar, but direct utility ownership has historically been rare.
California utilities had a program to own commercial/industrial assets beginning in 2009, which was ultimately scaled back because the utilities’ costs exceeded those of third-party solar installations. In Arizona, APS and TEP caused a stir in 2014 with proposals to own residential solar. And a handful of other utilities have signaled their interest in rooftop solar ownership.
Without placing any judgment on the merit of these ideas, I do believe many utilities are considering proposals of their own, and I predict at least three of them will be announced this year. Whether they are ultimately implemented is another question entirely.
2) There will be at least two more acquisitions of distributed solar companies by utility affiliates (unregulated subs or competitive retailers).
Over the last three years, there has been a slow progression of unregulated affiliates of utilities purchasing distributed solar developers. NRG (I know, I know; arguably not a utility) bought Solar Power Partners and Roof Diagnostics; NextEra bought Smart Energy Capital; Edison International bought SoCore Energy; and just last month Duke Energy purchased a majority stake in REC Solar.
Note that all of these acquisitions (save NRG/Roof Diagnostics) were in the commercial space, where investment activity in residential solar has come more from competitive electricity retailers (e.g., Direct Energy/Astrum Solar) or minority investments (e.g., Clean Power Finance’s big utility equity round).
I don’t think this trend has run its course. There are still a number of both residential and commercial solar developers that would benefit from a parent with a bigger balance sheet and a lower cost of capital, and dozens of unregulated utility affiliates without any major investment to date in the burgeoning distributed solar market. I predict two more acquisitions this year, one of which will be the first full acquisition of a residential solar company by a true U.S. utility affiliate.
3) Loans for residential solar will gain incremental market share, but third-party ownership will remain >60 percent of the residential market.
Last year brought many residential solar loan announcements. Big funds were raised by Sungage Financial and Mosaic, banks such as EnerBank and Admirals Bank scaled up, and SolarCity made a huge splash with its MyPower loan product.
This year, we will see these products start to gain real traction and reverse the trend toward third-party ownership that had been in place since 2009. But some clear-eyed realism is warranted here, too. Most residential solar installations (in fact, over 60 percent) will still be third-party owned in 2015, down from around 70 percent in 2014. Despite their arguably preferable customer economic profile, loans do still have some barriers to overcome -- particularly with regard to complexity and comprehensibility. We’re believers that it will happen, but it will take time.
4) Annual solar installations will grow in 75 percent of states this year.
We track the solar market in 32 individual states each quarter as part of our U.S. Solar Market Insight research program. Looking out across all these markets, we see reason to expect annual growth in nearly all of them.
Growth could be incremental in some states (Arizona, Massachusetts), and in others substantial (Georgia, Utah). But we expect an overall downturn in only five states, with a few others right on the cusp. We predict that solar installations will grow in three-quarters of all states we track in 2015. Among the contenders for an annual downturn: Indiana, Missouri, Tennessee and Vermont.
5) A solar company will acquire a U.S.-based energy storage company.
Energy storage is the next big thing for solar companies. Despite a very nascent market (details to be announced on Thursday), energy storage has captured the attention of nearly every major solar company in the U.S. And many companies have already made an investment in the space.
But there is a growing crop of small, venture-funded energy storage companies that will look increasingly attractive to larger solar companies, whether for their hardware, their software or their development skills. I wouldn’t be surprised to see one of the large, vertically integrated solar companies (SunPower, SunEdison, First Solar or SolarCity) make an aggressive move into the energy storage market through an acquisition. My money’s on SunPower.
6) Solar will account for over 40 percent of new electricity generating capacity in the U.S.
Solar made up over 30 percent of new generating capacity in 2014, up from just 10 percent in 2012. According to the EIA, there are 9.6 gigawatts AC of non-solar projects with regulatory approvals slated for 2015 completion. Based on our forecast for the solar market this year (see the forthcoming U.S. Solar Market Insight report), we predict that solar will make up over 40 percent of new generating capacity -- a new record.
7) More than 250,000 solar projects will be completed this year.
Installers completed nearly 200,000 solar projects in 2014, up from 145,000 the year before. This year, thanks largely to continued rapid growth in the residential market, we expect to see over a quarter-million solar projects connected to the grid.
This will bring the cumulative total number of installations within striking distance of 1 million, and if the market exceeds our expectations, it could foreseeably surpass that mark late this year. If not, the U.S. solar industry will truly have something big to celebrate in early 2016.
Shayle Kann is the Senior Vice President of Research at Greentech Media, where he leads the GTM Research team. For more information on GTM Research solar services, including U.S. market analysis, contact Matt Casey at [email protected] or visit www.gtmresearch.com.