State and Future of U.S. Solar · 2016-05-19 · Source: GTM Research, U.S. Residential Solar...

U.S. Solar Market Insight: 2015 Year in Review

State and Future of U.S. Solar

April 2016

Cory Honeyman

Senior Analyst

[email protected]

1Honeyman - U.S. Solar Market Insight 2015

Contents

1. U.S. Solar Market to Date: Key Drivers 2

2. Looking Ahead: Rundown by PV Market Segment 10

3. Putting It All Together: 4 Predictions for 2016 22

Honeyman - U.S. Solar Market Insight 2015

U.S. Solar Market to Date: Key Drivers

Just how much has U.S. solar grown over the past several years?

1.


U.S. Solar: Growing by impressive strides at the national level

0.3 0.5 0.8 1.2 2.0

3.9

7.3

12.1

18.3

25.6

0

5

10

15

20

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30

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cu

mu

lati

ve In

stal

lati

on

s (G

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c)

95% of U.S. solar PV installations have come online this decade

Source: GTM Research/SEIA, U.S. Solar Market Insight

Cumulative U.S. Solar PV Installations by Year: 2006-2015


And according to Doctor Emmett Brown from Back to the Future…

2 3 6

10 15

21

34

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80

98

-

20

40

60

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100

120

-

20.0

40.0

60.0

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100.0

120.0

140.0

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

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PV

Cap

acit

y (G

Wd

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Total Capacity (GWdc) Time Travel:# of Roundtrips on the Dolorean Powered by Solar

Source: Doctor Emmett Brown and GTM Research

If it takes 1.21 gigawatts to perform time travel…cumulative installed solar PV could currently power MORE THAN 20 trips back and forth into the future.


In large part, U.S. PV growth stems from meaningful cost reductions across all segments

$11.30

$3.54

$9.56

$1.56

0

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$0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

An

nu

al PV

Installatio

ns (M

Wd

c)Ave

rage

Inst

alle

d P

rice

($

/Wd

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Total U.S. PV Installations Residential PVAvg Installed Cost

Utility Scale PV - Fixed TiltAvg Installed Cost


Average Installed Cost by Segment vs. Total U.S. PV Installations: 2000-2015


-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

CA

MA HI

NJ

AZ

VT

NM NY

DE

NH SC DC CT

LA MD

CO RI

UT

MN

MO PA

NV FL IL

OR

MI

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KY TX IA AR

NC

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TN SD KS IN MS

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Year

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ill Im

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(%)

At Grid Parity: 20 states (including Washington, D.C.)

Leading to more and more states (especially for residential solar) reaching grid parity

Note: Grid parity metrics account for all NEM and rate reforms currently in effect for modeled utilities.

Number of States at Grid Parity in 2016

Source: GTM Research, U.S. Residential Solar Economic Outlook


And a 20 GW+ pipeline of utility scale projects increasingly driven by cost competitiveness

$0.00

$25.00

$50.00

$75.00

$100.00

$125.00

$150.00

$175.00

$200.00

PPA

Pri

ce (

$/M

Wh

)

PPA Contract Execution Date

2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: U.S. Utility PV Market Tracker

Utility PV PPA Prices by Contract Execution Date


Despite growing levels of cost competitiveness…80%+ of 2015 demand came from the top 10 states in each market segment

45%

41%

14%

California

Rest of Top 10 States

All Other States

45%

52%

3%

California

Rest of Top 10 States

All Other States

Source: GTM Research/SEIA U.S. Solar Market Insight

Distributed PV Installations: California vs. Rest of Top 10 States vs. Rest of U.S.

Source: GTM Research/SEIA U.S. Solar Market Insight

Utility Scale PV Installations: California vs. Rest of Top 10 States vs. Rest of U.S.


And within each market segment… distinct drivers and risks shape how the market is growing (or struggling) at the state level

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2010 2011 2012 2013 2014 2015

Share o

f An

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Installatio

ns (%

)

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(MW

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Utility PV Installations Share of National PV Installations

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(MW

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Residential Non-Residential


Utility PV:Market Drivers Evolving Beyond Renewable Portfolio Standards


Residential vs. Non-Residential PV:A Tale of Two Segments Amidst Incentive Volatility


Looking Ahead: Rundown by PV Market Segment

What are the key questions shaping U.S. solar in both distributed and

utility scale PV?

2.


Utility Scale Solar Market Outlook

Where and why is demand emerging beyond Renewable Portfolio

Standards?


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28,579

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0

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10,000

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20,000

25,000

30,000

Operating Contracted (PPA Signed) Announced (Pre-Contract)

U.S

Uti

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Cap

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y (M

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In Construction

• Utility PV in 2015: Remains the bedrock driver of U.S solar installation

growth, accounting for 57% of capacity installed in 2015

• At least 50% of 2016 capacity expected to come online will come from non-

RPS market drivers:

◦ With PPA prices for utility PV now ranging between $35/MWh and

$60/MWh, utility PV demand is expanding beyond RPS obligations

◦ PURPA was the largest driver of non-RPS utility PV in 2015 accounting for

22% of all projects brought online last year

◦ And PURPA is one of a handful of emerging market drivers fueling recent

utility PV procurement…

Utility PV: Continued Growth and Diversified Demand Drivers

Utility PV Pipeline: Driven by Non-RPS Drivers


U.S. Utility PV: Operating Capacity vs. Project Pipeline


Utility PV Project Pipeline: Tapping into Emerging Market Drivers

RPS-Driven – Utilities procure due to legislated or regulatory

mandated targets for solar and renewable energy.

Voluntary Procurement – Utilities procure and own PV outside of

any obligations to meet state renewable portfolio standards.

PURPA – The Public Utility Regulatory Policy Act was passed in 1978

to promote energy conservation and renewable energy

development. Under PURPA, utilities are required to purchase

energy and capacity from qualifying facilities (QFs) at their

incremental or avoided costs.

Retail Procurement – An increasing portion of U.S. utility PV is now

being driven by non-utility entities looking to procure renewable

energy to achieve economic savings or to reach voluntary

renewable energy goals.


U.S. Utility PV Pipeline: RPS vs Non-RPS Driven Pipeline

50%

50%

22%

16% 12%

RPS Driven

Voluntary Procurement

PURPAQualified Facilities

Offsite Corporate

Non RPS Driven


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Uti

lity

PV

Inst

alla

tio

ns

(MW

dc)

Utility PV: 11,867 MWdc in 2016; 186% growth over 2015

Near Term: 2016 Utility PV Boom

• With over 20 GW in development and 6 GW of projects in construction,

2016 is on track to have more than 11.8 GW of utility PV come online.

Long term: ITC Extension Impacts and the changing landscape

• As the ceiling on competitive PPA pricing continues to drop, the utility PV

market is expected to be primarily driven by cost competitive market

drivers outside Renewable Portfolio Standards.

• The utility procurement landscape will continue to evolve too, as municipal

utilities, co-ops, and community choice aggregators drive a growing portion

of projects in the 1 MW to 50 MW range.

U.S. Utility PV Market Outlook

Annual Utility PV Installation Forecast: 2010-2021E Near Term (2016) and Long Term (2017-2021) Market Outlook



Non-Residential Solar Market Outlook

Why has the market struggled to grow over the past couple of years?

And why does GTM Research expect a rebound in 2016?


Non-Residential PV in 2015: 1,011 MWdc installed, dropping 4% over 2014

Net Metering Caps Limit Installation Growth and Customer Origination

• Massachusetts: Growth in one of non-residential solar’s primary state

markets has been limited by the waning pipeline of projects under

preexisting NEM caps. The timeline for expanding the utilities’ NEM caps in

MA remains a key policy driver of a strong national level rebound in 2016.

Weak State and Utility Incentive Levels Constrains Growth

• The Northeast remains characterized by oversupplied SREC markets, most

notably in NJ, while markets out West have seen weak demand as utility

incentive programs are eliminated or near incentive funding depletion.

• Silver linings to the 2016 outlook rely on pent-up community solar demand

and emerging market drivers for 1 MW+ development in California…

Non-Residential Solar: State incentive and policy bottlenecks constrain major state markets

National Level Trends for Non-Residential Solar

Source: GTM Research/SEIA, 2015 U.S. Solar Market Insight

Community Solar: Operating Capacity vs. Project Pipeline With 2016/2017 COD

96

512

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Cumulative Operating Capacity Capacity In Development

Cap

acit

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Wd

c)


Non-Residential PV: 1,314 MWdc in 2016; 30% growth over 2015

• Near Term: Demand Fueled by Large Scale (1 MW+) Development

◦ 2016: A rebound is expected via incremental recovery in oversupplied

SREC markets, increased dependence on CA demand via solar-friendly

rates and 1 MW+ development, and pent-up community solar demand.

• Long Term: Saved By the Federal ITC Extension (Especially Small Commercial)

◦ The ITC extension is expected to spur an additional 4 GW of non-

residential solar through 2020, with commercial solar economics more

reliant on the federal ITC than residential given rate design.

◦ Long term growth will increasingly be pegged to the sub 1 MW non-

residential PV market, as third party financing solutions expand into the

small and medium sized commercial customer bases.

U.S. Non-Residential Solar Market Outlook


Annual Non-Residential PV Installation Forecast: 2010-2021E Near Term (2016) and Long Term (2017-2021) Market Outlook

0

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Residential Solar Market Outlook

What does the future hold for residential solar in an evolving policy

landscape for net metering and rate design?


Residential PV in 2015: 2.1 GWdc installed, growing 50%+ on annual basis for

the fourth consecutive year

• Glimpses of demand diversification: The residential solar market is showing

signs of geographic diversification, with the number of 20 MW annual state

markets for residential solar increasing threefold over the past four years.

• But growth is still being primarily driven by the top 10 states, heightening the

impact of NEM reform across a handful of states:

◦ The top 10 states drove 88% of annual installations. But 7 of those states

have considered or approved reforms to net metering and rate design

that roll back rooftop solar savings.

– Most notably, the Nevada PUC recently approved reforms that phase

in increased fixed charges and reduce compensation for solar exports,

all of which is expected to result in a 90%+ reduction in new NV

residential installations in 2016.

Residential Solar: The Pros and Cons of a Consolidated Geographic Demand Landscape

National Level Trends for Residential Solar


Annual Residential PV Installations vs. Number of 20 MW Annual State Markets

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Annual Residential PV Installations

20 MW+ Annual State Markets


How do NEM reforms impact the number of states at grid parity in 2016?

20

0

5

10

15

20

25

Business As Usual NEM $10 Monthly FixedCharge Hike

$50 Monthly FixedCharge Hike

$5/kW demand charge $15/kW demand charge 10% Discount to SolarExport Rate

50% Discount to SolarExport Rate

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Number of States at Grid Parity in 2016: Business-as-Usual NEM vs. NEM Reform Scenarios

Source: GTM Research, U.S. Residential Solar Economic Outlook


Residential PV: 2,804 MWdc in 2016, 34% growth over 2015

• Near Term: Business-as-Usual Policy Landscape Yields Strong Growth

◦ Over ten states will install at least 40 MWdc in 2016, but growth remains

pegged to California, which is expected to add nearly 1.5 GWdc in 2016

alone.

◦ Largely favorable outcomes in NEM reform debates (i.e. California) will

support growth in most major state markets in 2016.

• Long Term: Demand Diversification (Plus NEM Reform Debates) To

Accelerate via Federal ITC Extension

◦ By 2017, more than half of all states will be at or below grid parity

(residential PV LCOE vs. year 1 electricity savings).

◦ As residential PV penetration in major state markets nears that of

Hawaii’s, residential PV demand is linked to NEM reforms that result in

incremental, rather than stark, rollbacks to rooftop PV compensation.

U.S. Residential Solar Market Outlook


Annual Residential PV Installation Forecast: 2010-2021E Near Term (2016) and Long Term (2017-2021) Market Outlook

0

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Putting It All Together: 4 Predictions for 2016

With the recent extension of the federal Investment Tax Credit, state

and utility level drivers and risks move to the forefront of the U.S.

solar market outlook.

3.


Four Key Predictions: U.S. Solar in 2016

1.Time-of-use rate structures will become the next hot topic

in debates about the value of rooftop solar

2.Community solar’s breakout year is officially 2016, just one

year later than expected

3.At least 1 GW of utility-scale solar will be procured by

customers that are not utilities

4. A majority of the utility PV pipeline will pack projects into

2016 as if the federal ITC were still scheduled to step down

Four state and utility level trends to watch in 2016 for U.S. solar

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2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

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Residential PV Non-Residential PV Utility PV



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April 2016

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State and Future of U.S. Solar · 2016-05-19 · Source: GTM Research, U.S. Residential Solar...

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