Five Key Takeaways from the U.S. Solar Market Trends Report
By Larry Sherwood
August 21, 2012
The solar market, while relatively young, is an increasingly important part of the American economy. My latest IREC report, U.S. Solar Market Trends 2011, answers important questions about the solar market. What are the trends in the market, and what forces are at work? Which sectors of the market are strongest, and why? What are the prospects for solar energy in the near future?
Last year was another banner year for solar, with large increases in both the number and average size of photovoltaic (PV) installations. The capacity of PV installations in 2011 more than doubled, compared with 2010 installations. More utility-scale systems and an increase in the average system size accounted for this dramatic growth. The total capacity of utility and nonresidential systems installed in 2011 increased by 145% and 132% respectively compared with 2010. The average size of all PV installations grew 64% in 2011, to 29 kWDC.
2. Installations are concentrated in a few states
In 2011, more than two-thirds of grid-connected PV system installations were concentrated in California, New Jersey, Arizona and New Mexico, as shown. Of the top 10 states, Arizona had the highest growth, with more than 4.5 times as many installations as the year before. The market more than tripled in New Mexico and New York, and more than doubled in California, New Jersey and Hawaii. On a per capita basis, six states — Arizona, Colorado, Delaware, Hawaii, New Jersey and New Mexico — had more installations than California in 2011, demonstrating how the market is diversifying across the country.
3. Utility-sector PV installations more than doubled in 2011 compared to 2010
The utility sector’s share of all U.S. grid-connected PV installations grew from virtually none in 2006 to 15% in 2009, to 32% in 2010, and to 38% in 2011. Of the 10 largest PV installations in the United States, five were installed in 2011. The two largest U.S. PV installations installed in 2011 were the 49-megawatt DC (MWDC) Mesquite Solar 1 Plant in Arlington, Ariz., which supplies power to Pacific Gas and Electric Co. customers in northern California, and the 35-MWDC plant in Webberville, Texas, which supplies power to Austin Energy.
4. The average size of non-residential distributed installations is increasing
The capacity of non-residential sector installations, like government buildings, retail stores, warehouses, and military installations, more than doubled in 2011 compared to 2010. The average size of a non-residential distributed installation grew by an astounding 46%.The largest installations to date in this sector were a 9-MWDC installation at Gloucester Marine Terminal in Gloucester City, N.J., and a 6-MWDC installation at the U.S. Air Force Academy in Colorado Springs, Colorado. Favorable economics for consumers and a rush to complete installations before the expiration of the Treasury 1603 Grant program at the end of 2011 fueled this explosive growth.
5. Policy remains the most important market driver
Federal tax credits and cash grants are an important financial component of most installations. State policies affect PV installations, with most installations happening in the few states with favorable solar policies. Though their impact on the total market is declining,financial rebates have historically been the most important state policy initiative, especially for smaller installations. State renewable portfolio standards (RPSs), which mandate that utilities generate a percentage of their power from solar or other renewable sources, tend to encourage larger installations. These are fast becoming the most important state policy tool. Installed PV costs are declining and there are now a few markets where PV costs compete with electricity prices.