After celebrating the extension of a key federal tax credit last December, America's solar industry finds itself in a bizarre place. 

"You can make a case that...this has been the best year for solar that we've ever seen in the U.S. But you could also make the opposite case -- that 2016 has been the year in which removing the upcoming expiration of the ITC has exposed a lot of the underlying problems that solar actually has in its nascent state," said Shayle Kann, the senior VP of GTM Research, in a keynote address kicking off today's Solar Market Insight Conference in San Diego. (Squared members can watch the video here.)

"And as it turns out, this has been a pretty rough year for solar in the U.S. It just depends on the lens through which you're looking at the market," said Kann, who went on to illustrate why 2016 is solar's weirdest year.

Kann presented 2016 as the best of times and the worst of times for solar. He made a compelling argument for both cases.

The positive case for solar

"How much solar are we building in the U.S. this year? The answer is 'a ton.' Right now...we think the U.S. will install close to 14 gigawatts (DC) of solar...this year. That's up from 7.5 gigawatts -- almost a doubling of the market across a single year. That is enormous growth by any standard, even by the relatively high standards that solar has set for itself. So, we are indeed going to have the biggest year for solar in the U.S., in terms of new capacity additions, that we've ever had."

"This is going to be a banner year for solar capacity being added to the grid in the U.S. When all is said and done, solar may well be the top -- if not one of the top two or three -- sources of new electricity generating capacity and, potentially, new generation in the U.S."

"Solar is still getting cheaper and, in fact, it's getting cheaper faster than most people, us included, expected at the beginning of this year." He added, "We have re-entered an oversupply cycle for solar modules."

"Module prices have been plummeting. [...] We've seen precipitous declines, the likes of which we haven't seen since 2010 and 2011 in the U.S.

"We think it's entirely possible in the U.S. for a large-scale purchase from a top-tier Chinese manufacturer, for a multicrystalline silicon module -- that prices will be in the low 30 cents per watt.

"You could see a standard, best-in-class, turnkey, utility-scale project under a $1.00 per watt, this benchmark we've been talking about for almost a decade now, by 2018 -- well before the 2020 SunShot goal.

"2016 is the first year in which the average PPA price for a new utility-scale project in the U.S. is below 5 cents per kilowatt-hour.

"You're probably going to start to see, over the next couple of years, what feel like ridiculously low PPA prices. You're starting to see this in some international markets. We've seen-sub 3 cents per kilowatt-hour PPAs signed in places like Chile, Mexico and the Middle East. You'll start to see that coming in the U.S. as well.

"The big change over the last couple of years, particularly in utility-scale, is that the pipeline is starting to develop almost everywhere."

"We have 20 states in the U.S. that have over 100 megawatts of solar in the pipeline. That's a big national market."

The not-so-positive case for solar

"The S&P is up about 5 percent on the year, and every pure-play solar company that is publicly traded is down a lot on the year. And this is making no mention of SunEdison, which also happened this year."

Growth in residential solar has started to tail off.

"Year-over-year, this year, residential solar in the U.S. is going to grow something like 23 percent. In fact, based on some of the latest numbers, it might be more like 20 or 21 percent. Many industries would kill for 20 or 21 percent year-over-year growth -- but when you've grown accustomed to a market in which, in the last four years, the slowest growth year is 59 percent -- that does feel like a big slowdown.

"One of the things underlying some of the slowness in residential solar this year is that for the first time in recent history, generally speaking in the U.S., residential electric bills are not going to go up.

"Back to the utility-scale market. We're building out this gigantic pipeline and we're adding so much to the grid, but if you look at new procurement -- new PPAs signed this year for utility-scale solar -- it's down a lot."

A few reasons for optimism

Kann had a few reasons for optimism about what's coming next and where GTM Research thinks the market is heading.

Kann spoke of the "new submarkets -- different kinds of ways to get solar built, new types of customers." Although the industry has been talking about these submarkets for years, "for the first time in 2016, they are actually resulting in meaningful volumes of installations."

Those submarkets would be community choice aggregation, community solar, solar-plus-storage and offsite corporate solar installations.

Kann said that although procurement is down, "It's worth reiterating just how big the existing pipeline is," adding, "Even just as of today, there's still about 9 gigawatts of utility-scale solar that has a contract in place and an expected 2016 commercial operation date."

"Aside from that, you have another 12 gigawatts with a contract in place for after 2016."

Additionally, the renewable portfolio standard is receding as the dominant driver for utility-scale solar, and new drivers are emerging.

"The market isn't slowing down [at] the same [pace] for everyone. There are lots of local, sometimes regional residential solar installers who probably would tell me that they're having a great year and expect to do the same next year.

"Will we end up with a small number of large companies [in residential solar] or a large number of small companies? The trend line right now is toward a large number of small companies."

Rising electricity prices might help with customer acquisition.

"We think residential solar is going to continue to grow. Gone are the days of 50+ percent annual growth for residential solar. I will eat my words if we see another 50 percent growth year for residential solar in the next few years. On the other hand, I also don't see the market flatlining or shrinking anytime soon. It will continue to grow at a more moderate, incremental pace over the next few years."

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