We never saw it coming.
It caught us unprepared,
The day that solar power
Started spilling everywhere.
At first it was a trickle,
But then it was a roar.
And nobody did ever see
The likes of this before.
– Doug Hendren, singer and songwriter, “Solar Spill”
The solar industry may be one of the fastest growing businesses in America, but over the past couple decades, the solar ride has been anything but smooth.
Fears of on-again, off-again federal incentives have clouded long-term planning and scared off potential solar customers and investors alike.
On the state level, widely divergent clean energy policy environments from one state to the next have made it hard for the bigger players to spread beyond the solar nirvanas of the West Coast and Northeast.
For example, with PPAs and generous state incentives, every solar company wants to do business in Massachusetts, now tied with New Jersey as the #1 state for solar in the 2016 United States Solar Power Rankings.
But the solar industry rightly shuns my home state of Virginia, which may proudly rank #6 for education and #7 for technology, but sits shamefully wearing a dunce cap at #35 when it comes to policy to support solar.
Finally, for years, the solar industry could forget about any help from international climate change agreements, which have been as non-binding on the U.S. government as a limp rubber band.
Until now, that is.
Government to Solar Industry: OK, We Get It, We Need You
The solar industry is all abuzz about the renewal of the federal solar investment tax credit. As a result of the ITC extension, research firm IHS predicts that US solar industry will install 15 GW of new generating capacity in 2016, an increase of 61%.
But the effects of COP21 could be a bigger deal for the long term, even in the U.S.
For the first time in the history of climate negotiations, the agreement signed at COP21 conference in Paris in December 2015 binds the U.S. to cutting its greenhouse gas emissions in a way that will require America to seriously ramp up clean energy, most of which will probably be solar.
According to Time, “The agreement walks a fine line, binding in some elements like reporting requirements, while leaving other aspects of the deal—such as the setting of emissions targets for any individual country—as non-binding.” However, overall goals are binding:
The deal requires any country that ratifies it to act to stem its greenhouse gas emissions in the coming century, with the goal of peaking greenhouse gas emissions “as soon as possible” and continuing the reductions as the century progresses. Countries will aim to keep global temperatures from rising more than 2°C (3.6°F) by 2100 with an ideal target of keeping temperature rise below 1.5°C (2.7°F).
Congress could still try to scotch the deal but the Obama Administration has done an impressive job to make the agreement Republican-proof.
And climate activists are pushing hard for enforcement of the agreement. As 350.org founder Bill McKibben puts it:
But the powers that be won’t be left to their own devices. Think of the ever-growing climate movement as personal trainers – for the next few years our job is to yell and scream at governments everywhere to get up off the couch, to put down the chips, to run faster faster faster.
We’ll fan out around the world in May to the sites of all the world’s carbon bombs; we’ll go to jail if we have to. We’ll push. And if “personal trainer” doesn’t sound fierce enough, then think of us as a pack of wolves.
Exxon, we’re on your heels. America, China, India – that’s us, getting closer all the time. You need speed. It’s our only chance.
Meanwhile, since the fall of 2015, the U.S. Environmental Protection Agency’s Clean Power Plan has started to put intense pressure on utilities to phase out all coal plants and ramp up low-carbon power generation.
Because of high costs per kWh and continued fears over safety, 2016 probably won’t bring the “nuclear renaissance” long awaited by utility execs who keep deleting Silkwood from their Netflix queue and think that Three Mile Island and Fukushima “could’ve been worse.”
But with natural gas prices likely to stay low throughout 2016 — at least until those low prices put enough marginal frackers out of business to start cutting supply and raising prices again — plenty of gas plants will be on the drawing board. And also because of dropping costs, plenty of solar is also planned.
And of course, let’s not forget, the solar ITC extension. Also passed in December of 2015, the extension gives the solar industry five more years of support to ramp up business and bring down costs enough compete with grid power on cost alone.
In those five years, solar power capacity will jump to 100 gigawatts, representing 3.5% of U.S. electricity generation, up from less than 1% today, predicts the Solar Energy Industries Association.
While creating more than 200,000 jobs, “a five-year extension of the ITC will lead to more than $133 billion in new, private sector investment in the U.S. economy by 2020. And much of this growth will come from small businesses, which make up more than 85 percent of America’s 8,000 solar companies,” says Rhone Resch, president and CEO of the SEIA.
Together, these developments and others will make 2016 a historic year for solar. That’s why, with apologies to my friend songwriter Doug Hendren, I’m dubbing 2016 The Year of the Solar Spill.
5 Key Trends for the Solar Industry in 2016
But with rapid growth will come growing pains. No problem will be big enough to neutralize the many advantages pushing solar ahead in 2016.
But challenges created by fast growth could slow the solar industry in certain parts of the country. Some overeager solar companies in the hottest markets will even suffer at the hands of disappointed consumers and law enforcement.
So, in light of the ITC extension, COP21 binding commitments and the Clean Power Plan, here I offer my quick take on five trends that will both help and hinder solar industry growth in 2016.
An unprecedented bull market for solar in 2016 will mean more customers buying more solar. But it won’t mean that every solar company will succeed.
In particular, 2016 will bring very real risks for players who move too quickly, like solar installers who just want to make a quick buck.
But 2016 will bring perhaps bigger risks for players who move too slowly, such as electric utilities who just want to go on building big power plants while counting on docile state politicians to keep making ratepayers cover ever higher stranded costs.
So, I predict that the Year of the Solar Spill will also become the year of five other big things in the solar industry:
1. No-Money Down Solar
In part or all of at least 25 U.S. states, homeowners can already get solar power for no-money down through a power purchase agreement or solar lease.
In 2016, the solar industry is sure to increase the pressure on other states to make it legal and easier to offer both PPAs and leases to residential customers across the country.
By the end of 2016, any solar installer who’s still asking a homeowner to fork out $20K or $30K up front to buy rooftop solar panels will start to seem behind the times.
Money-upfront installers will start to feel ashamed that they haven’t yet arranged the financing to offer solar at no-money down.
Or, if their state still has bad solar policy, I hope solar companies will get angry at the dinosaur politicians in their state legislature who continue to be bought or bullied by lobbyists for electric utilities and their allies like the totally evil ALEC, an oil-industry front group that uses Koch Brothers money to turn back the clock on solar policy.
2. Solar Storage
So, you think the Tesla PowerWall is just a bunch of hype from Elon Musk and that practical batteries for home solar are really still 20 years away?
If so, you should know that many investors disagree. For example, Goldman Sachs and others are making a big case for investing in batteries in 2016.
If they’re right about storage, then it will mean more off-grid installations and less reliance on the goodwill of utilities to support grid-connected solar systems. This development alone should scare the crap out of the big utility companies.
In 2016, electric utilities will be wise to rethink stupid ideas to punish customers who connect solar systems to the power grid like:
- Offering lower payments to sell power back to the grid
- Limiting net metering or cutting it entirely or
- Adding standby charges
Edison Electric Institute, are you listening?
3. Commercial Solar
Retailers including Walmart, Apple and Ikea along with other big users of juice — especially tech companies with big data centers including Facebook and Amazon — have led the way to powering more of their own needs from solar arrays either located on-site or placed nearby their operations.
Major corporations have already committed to using 100% renewable energy by certain dates, according to a report from industry analyst Clean Edge:
- Goldman Sachs and Ikea by 2020
- Nike by 2025
- Candy maker Mars by 2040
In 2016, with lower costs and better financing including Property Assessed Clean Energy (PACE) along with loans, leases and PPAs, the solar industry will find a way to get access to the capital needed to crack the nut of mid-sized commercial solar, bringing shiny arrays to business parks and parking decks everywhere.
Many companies don’t know that they could see a complete payback from a solar system in five years, says long-time solar industry analyst Barry Cinnamon. The solar industry must do a better job of spreading that message in 2016.
“While historically the solar market has been concentrated on the residential and utility sectors, the ITC extension offers unique opportunities for the commercial sector,” says Megan Birney of Wiser Capital. Birney outlines three things the industry must do to maximize commercial solar in 2016:
- Take advantage of time provided by the ITC extension to bring down costs and expand the market
- Fight attempts by electric utilities to un-level the playing field for commercial solar
- Use storage creatively to help commercial customers shift their peak electricity usage to cheaper times of day
4. Solar Scammers
In 2015 in California alone, state officials have received more than 200 complaints from consumers about solar projects gone wrong, a 400% increase over 2010.
The lure of easy money in a red-hot residential solar market is sure to attract a whole new mob of shady solar telemarketers and fly-by-night roofing contractors who’ve decided that the solar boom means easy money.
In the worst case, a few bad apples caught tricking senior citizens into solar leases that cost more than their old electric bill will bring down the wrath of law enforcement, regulators and, ultimately, state legislatures.
In response to an epidemic of telemarketing scams for solar, Arizona’s legislature passed a consumer protection bill to regulate distributed energy sales.
In 2016, the solar industry should develop a way to police itself before regulators starting doing it, much as the film industry in the 1930s came up with its famous movie ratings system to successfully forestall government censorship. Otherwise, installers may face a whole new regime of government red tape and consumer ill will that could hurt the solar industry for decades.
Meanwhile, individual solar companies should wean themselves from tired “outbound” marketing tactics like telemarketing that nobody ever liked and for which consumers today have no tolerance.
Instead, the solar industry should embrace inbound marketing, also called content marketing. That’s when you produce helpful and interesting content that your potential customers actually want to see — and thereby, you build trust for both your company and for the industry.
5. Utility Solar
I hate to disappoint you, but 2016 won’t be the end of the regulated monopoly electric utility.
It won’t even be the beginning of the end for utilities. In fact, you should probably just get over the whole idea that nimble solar companies are going to put lumbering leviathan utilities out of business at any point before you retire.
With more than a century’s worth of generating plants, substations and transmission wires, the physical presence of utility companies alone will surely earn them another couple decades or more in which to sell electric power to the public in some form.
And a political and PR infrastructure that makes electric utilities the power behind the throne in many state capitols will help utilities survive for decades even as they lose more and more of their best customers to on-site solar.
But with nudging from the Clean Power Plan, 2016 will be a chance for the more progressive utilities such as NV Energy, Xcel or PG&E to get a definitive advantage over electric companies that remain stuck in the 1950s such as the Southern Company or my own provider, Dominion.
The solar industry should be prepared to work with friendly utilities, cooperating on joint ventures to build big arrays and programs for small distributed home installations alike.
At the same time, in 2016, the solar industry should be relentless in its own lobbying — in most cases, against incumbent utilities — to remove remaining barriers to PPAs and other solar-friendly policies that you can find in Massachusetts and New Jersey but not in Virginia or Florida.
— Erik Curren, Curren Media Group