Ten years ago, Clean Edge, a research and advisory company, published their first report on the clean energy industry. Recently they released their 10th annual Clean Energy Trends report, which highlighted strong growth in several renewable energy fields such as solar, and also predicted trends for the next decade. This report represents an opportunity to reflect on the progress and future of the solar market.
Clean Edge leads off the report by highlighting that global solar and wind markets have displayed growth rates similar to other technology revolutions like computers or telephony. For example, the global solar photovoltaic (PV) market has expanded from just $2.5 billion in 2000 to $71.2 billion in 2010, which corresponds to a compound annual growth rate of 39.8 percent. Clean Edge’s projections in 2000 for the growth of the solar market turned out to be 300 percent short, underscoring the fact that this booming decade in the solar market has surpassed predictions considerably.
In 2010 alone, new solar photovoltaic installations reached more than 15.6 GW worldwide, which is more than double the amount of new installations from 2009. Looking to the future, Clean Edge projects that the global solar market will increase to $113.6 billion by 2021.
Clean Edge also selects five key trends that will shape the clean-energy markets over the next decade, two of which directly include the solar market. Clean Energy projects the increase of partnerships between natural gas and solar, such as solar-gas hybrid systems. These plants would produce the environmental benefits associated with solar but with the integration of natural gas they can also address solar intermittency issues and use already existing infrastructure. Another trend that Clean Energy predicts for the coming decade is the increase of green buildings across the world, many of which will install solar panels in an attempt to drastically reduce the amount of grid-electricity they require. These trends are part of the reason Clean Energy is predicting continued growth by the solar industry and a 63% overall increase in industry size in the next decade.
These numbers and trends are all positive for the developing solar market. However, it is important to understand why the solar market is becoming more robust. The primary reason is the continual improvement in solar PV technology. Photovoltaic prices dropped by approximately 30 percent in 2009, and an additional 10 percent in 2010. Due to increased research and development in solar technology, the average cost to install a solar PV system decreased from $9 (per peak watt) in 2000 to $4.82 (per peak watt) in 2010. Government funding and legislation aimed at strengthening the solar industry during its infancy have also been vital to the sector’s growth.
Leading countries in the solar market, such as China, Germany, and the U.S., all established programs that helped fund solar R&D and deployment or guarantee a buyer for solar electricity. In Germany, a solar feed-in-tariff allows anyone generating electricity from solar PV to receive a guaranteed payment higher than the market rate, which guarantees that solar projects will be a profitable investment. China, who is projected to surpass Germany in 2013 as the world’s solar largest market, identified the solar sector as having the most potential in the energy industry and projected 5 million kWh of solar capacity by 2015.
The U.S. has a Federal Tax Investment Credit or Grant program that will cover 30% of a solar system’s initial cost, and this has been an invaluable financing tool. However, without a federal Renewable Portfolio Standard (RPS), solar system owners and developers have turned to states with solar carve-outs in their RPS as an ideal location to deploy solar. These solar carve-outs mandate that energy suppliers procure a certain percentage of solar-generated electricity or pay an alternative compliance penalty (ACP), which makes Solar Renewable Energy Credits, or SRECs, valuable. An SREC is a tradable credit that represents all the clean energy benefits associated with 1 megawatt-hour of solar energy. Selling these SRECs to energy suppliers allows solar system owners to decrease the payback period. These carve-outs, many in place until 2025, will help foster the continued growth of the solar market as the price per watt continues to come down due to further R&D.
While technical improvements in PV technology have been and continue to be a primary driving force in solar growth, supportive government policies and SREC markets are essential in terms of incentivizing the industry and creating ripe conditions for solar investment. With effective government incentives, the solar industry will continue to be an economic powerhouse in the next decade.
About Sol Systems
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit www.solsystemscompany.com.