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U.S. PV Industry in 2016 and Beyond Post ITC and Presidential Election SOLARWORLD Installer Summit August 25-27, 2015 Portland, Oregon
U.S. PV Industry in 2016
and Beyond
Post ITC and Presidential Election
SOLARWORLD Installer Summit
August 25-27, 2015
Portland, Oregon
Points for Discussion
• IF the residential Tax Credit is not renewed by
2017, what happens to the residential
installation business?
• How do we plan for business with so many
uncertainties following 2016?
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• Perspective on the effect of the loss
of the Residential Tax Credit
• Understanding the importance of key trends
• Introduction to the breadth of uncertainties
describing the D-PV market and business
environment after 2016
• Awareness of a method for planning for this
uncertain business environment
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Take Aways…
First, a Reminder
200
250
300
350
400
450
500
1960 1970 1980 1990 2000 2010 2020
CO
2 C
ON
CE
NT
RA
TIO
N I
N P
PM
YEAR
ANNUAL CO2 CONCENTRATIONS IN PPM
SOURCE: http://co2now.org/Current-CO2/CO2-Now/noaa-mauna-loa-co2-data.html4
• SolarTyme (NC): “It will substantially reduce
the commercial installations and virtually
eliminate the residential side.”
• C-TEC Solar (CT): “Commercial development
will suffer greatly.”
• Standard Solar (MD): “Still a viable market.”
SOURCE: “The Big Question,” July 22, 2015. www.Renewable Energy World.com 5
Opinions Abound
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Note most of the decline is Utility Scale– not residential and commercial
One Forecaster Anticipates a 57% Drop
in 2017 from an Extraordinary 2016
SOURCE: US Solar Market Insight, Q12015. Executive Summary. Greentech Media and SEIA, 2015
Another Anticipates Only a
30% Drop in 2017 from 2016
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Green Bars are Annual Installations. “By 2017, the drop in utility installations
will be mitigated by the strength in distributed generation.”
https://www.db.com/cr/en/docs/solar_report_full_length.pdf, p. 76
Residential Average Installed Cost now
$3.50/W; an Annual 10% Reduction
SOURCE: US Solar Market Insight, Q12015. Executive Summary. Greentech Media and SEIA, 2015 8
NREL and RMI are Bullish on
Cost Reduction Opportunities
SOURCE: Non-Harware (“Soft”) Cost Reduction Roadmap, 2013 - 2020, NREL, TP-7A40-59155 , August 2013. NREL and Rocky Mtn. Institute
THIS ANALYSIS ANTICIPATES COST DECLINES EXCEEDING 15% PER YEAR!
(Colors indicate level of confidence)
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SolarCity Forecasts More
Modest Reductions
https://www.db.com/cr/en/docs/solar_report_full_length.pdf
THIS REPORT ANTICIPATES COST DECLINES OF 5% PER YEAR
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Comparisons with Germany
Inform Cost Reduction Opportunities
SOURCE: Why are Residential PV Prices in Germany so Much Lower than in the United States? LBNL, February 2013 for SunShot
Total soft costs for residential PV in Germany, including margin,
are just 19% of the implied soft costs for U.S. residential PV
($0.62/W vs. $3.34/W)
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Agencies Seek to Identify the
“Problem” to Target
SOURCE: Why are Residential PV Prices in Germany so Much Lower than in the United States? LBNL, February 2013 for SunShot12
Let’s Conduct an Exercise
• Residential Tax Credit eliminated; prices rise 30%
• Price of Electricity: increases 5% per year (typical analysis number)
• Residential PV system costs (prices): decline 5% per year (conservative based on preceding pages)
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Residential Tax Credit Provides
Significant IRR and Payback Benefit
0%
5%
10%
15%
20%
20152016
20172018
201930% TC: 6 YR
NO TC: 8 YR
WITH TAX CREDIT
NO TAX CREDIT
20-YEAR ANALYSIS USING A 5 KWdc SYSTEM IN SAN FRANCISCO WITH EXISTING PG&E RATES; 20% TILT;
5% ELECTRICITY ANNUAL COST INCREASE; 5% ANNUAL PV SYSTEM COST DECLINE FROM $3.50/W14
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NO TAX CREDIT
WITH TAX CREDIT0%
5%
10%
15%
20%
20152016
20172018
2019
30% TC: 6 YR
NO TC: 8 YR30% TC: 6 YR
NO TC: 8 YR
And Next Year
20-YEAR ANALYSIS USING A 5 KWdc SYSTEM IN SAN FRANCISCO WITH EXISTING PG&E RATES; 20% TILT;
5% ELECTRICITY ANNUAL COST INCREASE; 5% ANNUAL PV SYSTEM COST DECLINE FROM $3.50/W
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NO TAX CREDIT
WITH TAX CREDIT0%
5%
10%
15%
20%
20152016
20172018
201930% TC: 6 YR
NO TC: 8 YR NO TC: 7 YRNO TC: 7 YR
NO TC: 6 YR
30% TC: 6 YR
NO TC: 8 YR
Declining Costs and Rising Electric
Rates Replace the Tax Credit in 3 Years
20-YEAR ANALYSIS USING A 5 KWdc SYSTEM IN SAN FRANCISCO WITH EXISTING PG&E RATES; 20% TILT; 5%
ELECTRICITY ANNUAL COST INCREASE; 5% ANNUAL PV SYSTEM COST DECLINE FROM $3.50/W
Is the Tax Credit Really Dead ?
• In 5 states, the Tea Party has
aligned with the Solar Industry to
support incentives (employment and
the economy)
• The US Senate Finance Committee
(July) by a 23 – 3 vote extended other
renewable energy tax credits till end
of 2016.
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As businesses, how do we
respond to all this
uncertainty?
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Scenario Planning
Scenario AScenario B
Scenario C
Scenario D
Single-Point Forecast
“Envelope of Uncertainty ”
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Scenarios Allow Business Decisions
to be Tested Against Alternative Events
The Process Starts by Identifying
Numerous Influence Factors
• ITC and Tax Credit
extensions
• Reasonable NEM policy
• State / Local subsidies
• Community Solar growth
• Panel cost reductions
• BOS cost declines
• Soft cost reductions
• Storage costs and benefits
• Republican vs Democratic
White House
• Strong economic growth;
no recession
• Attractive Financing
options / alternatives
• Growing importance of
O&M
• New panel technologies
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After Sorting and Grouping, Identify
Alternative Futures and Responses
SCENARIO NAME
GOVERNMENT
POLICY IOU RELATIONS
PV INDUSTRY
DEVELOPMENTS YOUR RESPONSE ?
“Houston, we’ve
got lift-off”
Strengthened
Environmental
and RE Policies;
TC extension
Favorable NEM
and other
Strong Cost
Reductions; New
Financing
Models
Hire staff.
Double down on
the residential
installation
business
Muddle Along
More or less
Status Quo- no
TC. Some New
State Support
Changes Tend to
Favor IOUs, but
Maintains D-PV
Competitiveness
Steady Cost
Reductions;
Continued
Support
Increased O&M &
Monitoring.
Cost Reduction
Hold On !
Less Favorable
Policies,
Subsidies and Tax
Environment
Deteriorating
Competitive
Position of D-PV
Modest Cost
Reductions;
Price Cutting;
Little Interest
from Financial
Community
Increased O&M &
Monitoring.
Expand Storage
installs for
Commercial
Customers22
• Do you survive (prosper) in only one scenario?
• Can you identify business investments that position
you for more than one possible future (eg, O&M skills;
Cost reduction plans; Storage business; Increased
commercial work)?
• What do you need to do to broaden your
opportunities / position?
• What do you do differently tomorrow morning?
How Robust is Your Strategy?
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