Solar industry players converged in Scottsdale this week at Greentech Media’s annual Solar Summit, now in its twelfth year, to talk trends and themes.
Last year, the market was still reeling from the final Section 201 tariff decision and the uncertainty leading up to those tariffs. But now, according to Colin Smith, a senior solar analyst at Wood Mackenzie Power & Renewables, “the market has effectively overcome tariffs.” And though the industry is coping with the looming stepdown of the federal Investment Tax Credit (ITC), looking to continue pushing cost declines and deciding how solar can best be paired with storage, no single existential threat seems to be dogging the industry.
The themes of this year’s summit reflected a market reaching maturity more than one in flux.
“We’re entering this interesting point...where there’s no question that the market is moving forward. We’re going to see solar growth,” Smith said onstage at the conference. “It’s [now] a question of…how we actually re-engineer the system in place so that it incentivizes where we want to go…and also that the market is sustainable out to 2050, 2060.”
The trends covered at this year’s conference were wide-ranging, so I’ll dig into just a few of the topline takeaways below. If you’re looking for more, you can watch all of the panels through your Squared subscription here.
Moving past the crisis years
Smith joined GTM Research (now Wood Mackenzie Power & Renewables) around the time that the solar industry was working to extend the ITC in 2015. He saw companies weather that challenge, then face the test of the Section 201 tariffs. Both constrained the market for a time and caused anxiety among developers and advocates. Smith said those cycles of uncertainty had, in the past, come to define the solar market.
“It very much was this feeling...[that] you always have another crisis coming along,” he said onstage during the final panel of the summit. “This conference very much felt like we had moved past that.”
Smith said the larger industry has shifted away from playing defense against threats and has settled into more stable growth. While the future is by no means guaranteed, solar has the confidence to confront future uncertainties.
“We’re saying OK, there’s no crisis, but we need questions answered,” he said, citing future challenges like the re-engineering of the electrical grid to fully take advantage of solar benefits.
In addition to growing more secure, solar has also matured in terms of cost and applications.
According to Wood Mackenzie Power & Renewables, seven states have more than 10 megawatts of solar-plus-storage and 12 states have more than 1.6 gigawatts of solar-paired storage under contract or in procurement. Though 2018 brought record prices, an early 2019 deal in Hawaii included prices that one solar advocate called “mind-blowing.”
Solar has also become a more economical choice than coal in much of the world and is now beating wind in some U.S. states. Analysts say the energy source is also narrowing in on competing with combined-cycle gas plants on a levelized cost basis. In a presentation at the conference, Wood Mackenzie Power & Renewables Senior Solar Analyst Tom Heggarty said solar will undercut gas globally in the early 2020s.
“By 2023, we think solar’s going to be cheaper than gas almost everywhere around the world,” he said onstage.
Prepping for the ITC phase-down
Before that happens, the U.S. market will have to tackle the stepdown of the ITC, which drops to 10 percent in 2022 for commercial, utility-scale and residential systems owned by companies, and to zero for homeowners.
How the industry is dealing with the stepdown varies by sector. Michelle Davis, a senior solar analyst at Wood Mackenzie Power & Renewables, said she’s heard from commercial developers — who have projects that are more bespoke with unique financing arrangements — that dealing with the ITC can actually be a headache, in part because the benefit is limited in terms of who can take advantage.
“I don’t think a lot of commercial developers will be real sad for it to go away,” she said onstage at the summit.
Other sectors of the market will likely face more challenges without the financial help, but Davis said the clarity around the stepdown means the industry won’t be dealing with the uncertainty that preceded the Section 201 tariffs. Other analysts agreed that the industry is well situated to move past the stepdown (if the credit doesn’t get extended again, that is).
“There will be some bumps in the road that folks will have to get over in utility and residential, just because it will have an impact on project economics. But at the same time, I think the story...for the ITC phase-down has been: It just is what it is,” said Davis. “We know what it’s going to step down to and everyone has more ability to plan for the long term as a result. The lack of uncertainty means there’s not this anxiety about it that negatively impacts the industry.”
Clarity around how the tax credit is phasing out has many developers who already benefit from it starting to invest in strategies to take advantage while it’s around. Companies such as SunPower, Mosaic and Sunrun said during the Solar Summit that they are either planning to “safe-harbor” projects or are discussing the possibility with customers. Safe-harboring future capacity under the ITC requires investing 5 percent of a project’s total cost or starting significant construction.
“When we engage with our customers, they’re weighing these pros and cons,” said Erin Talbot, general manager of solar at Mosaic. “I’ve not seen anyone fall cleanly into one camp or another.”
Even as they’re strategizing, developers don’t seem to think the changes in price that may come as a result of the ITC stepdown will spur a pullback in demand from customers hungry for solar.
“Who bears the brunt of the ITC going down?” said Phil Robinson, director of solar project structuring at Constellation Energy. “The customers aren’t necessarily fazed by this — they still want to buy at the rate they want to buy at.”
As solar becomes increasingly prominent in the U.S. energy mix, advocates are working on making it more available to all. Groups like energy services platform Arcadia Power and Grid Alternatives, a nonprofit that works on renewable energy accessibility in underserved communities, joined the conference’s first equity-focused panel to discuss the need for reaching more consumers, and the market potential there.
“It’s not just about ensuring access to solar for low- and moderate-income people; it’s about ensuring access to solar and the benefits and the jobs for everybody across the country: low-income communities, communities of color and other communities that have been left behind to date,” said Melanie Santiago-Mosier, senior director for access and equity at Vote Solar, onstage.
Santiago-Mosier noted that 35 percent of U.S. households qualify as low-income. “Think about the potential for growth in our market,” she said.
Wood Mackenzie forecasts that community solar, a segment of the market geared toward making solar accessible to those who cannot have a rooftop installation, will drive one-third of non-residential PV in coming years. While much of the growth in the sector so far has been tied to a few state programs, others are cropping up across the country. Many, such as those in New Jersey and Colorado, also include carve-outs requiring a certain number of low- to moderate-income subscribers.
MJ Shiao, director of community solar at Arcadia, said a wider range of developers and companies that work to subscribe customers for those programs are bringing changes to the market that will make community solar more accessible.
“What a new class of community solar developers and subscribing organizations are bringing to the market is a truly customer-friendly community solar product; one where it guarantees savings for the customer. It doesn’t charge obscene — or any — early termination fees. The third piece of that is the access piece...is removing credit-score requirements,” said Shiao.
Santiago-Mosier added that providing solar to more communities is only part of the solution toward creating a more equitable solar market. The industry must also confront its lack of diverse viewpoints; a recent study from The Solar Foundation and the Solar Energy Industries Association found that the vast majority of the top jobs in solar are still held by white men. As the industry looks to expand and grow, Santiago-Mosier said it will have to confront that challenge.
“I am a Latina sitting before you in the solar industry, and I’m looking across this room and I’m very aware that I look very different from a lot of you in this room and from a lot of people in the solar industry,” said Santiago-Mosier onstage at the summit.
“For me it’s not a huge surprise, it’s not a huge leap to think that there might be a correlation between who we are as an industry and the fact that significant segments of the United States population are being left behind. So, this is where intentionality comes in.”