U.S. Solar: Record Year in 2014, Brighter Prospects in 2015 and 2016

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The U.S. solar power industry had a record year in 2014, and it may have an even better one this year, as developers work hard to close deals with an eye on the calendar. New-build utility-scale solar power plants--both photovoltaic (PV) and concentrating solar power (CSP)--are eligible for a federal investment tax credit (ITC) of 30% if they are operating by yearend 2016. Homeowners and businesses that install solar units also are eligible for a 30% tax credit, providing those units are operating by yearend 2016. After that date, unless Congress modifies the law, the tax credit will fall to 10%.

Industrial Info is tracking 76 active utility-scale solar projects scheduled to kick off this year, with an aggregate value of $15.3 billion. As is usually the case, California, Nevada and Arizona are the states with the largest dollar value of solar projects scheduled to kick off this year. North Carolina is the state with the fifth-largest value, outpacing Texas, New Mexico and Colorado.

Click on the image at right to view a graphic on U.S. utility-scale solar projects scheduled to kick off this year, organized by state.

Although developers would love to begin turning dirt on all 76 utility-scale projects this year, Industrial Info does not believe all of these projects will begin according to schedule. In fact, if history is any guide, about $8.5 billion of these projects will actually kick off this year, Industrial Info forecasts.

Looking ahead to 2016, solar developers plan to begin construction on another 73 utility-scale projects valued at $17.6 billion, according to Industrial Info's North American Industrial Project Database. Once again, California and Nevada garner the largest dollar value of scheduled projects, but Florida, Idaho, Virginia and Iowa appear on the Top 10 states for solar project kickoffs, measured by value. In both years, most of the solar projects are PV.

Click on the image at right to view a graphic on U.S. utility-scale solar projects scheduled to kick off construction in 2016, organized by state.

Of the 149 utility-scale solar projects scheduled to begin turning dirt by yearend 2016, 20 have a total investment value (TIV) of $500 million, indicating developer plans for mega-projects remain alive and well. Industrial Info expects developers will redouble their efforts to close deals as soon as possible to ensure they are completed by the end of 2016, to reap the full 30% ITC. Without that 30% tax credit, it is doubtful many of these utility-scale projects will be economic.

Solar developers are battling more factors than the calendar and the tax code. Many, if not most, utilities operating under a renewable power standard (RPS) have achieved their near-term renewable energy goals. As utilities near or hit their goals, they have less reason to sign power purchase agreements (PPAs) with solar developers. Also, as many of these projects are remote, they may require transmission projects--which often are opposed by the public, increasing the cost and difficulty in siting those projects. Renewable projects scheduled to be built on, or cross, federal lands in the West also face a daunting gauntlet of federal agencies whose approvals are required before dirt can be turned.

And while the renewable industry cheered California Governor Jerry Brown's pledge to boost his state's renewable power mandate from 33% by 2020 to 50% by 2030, other states are taking steps to freeze or roll back their RPS requirements. There is no federal RPS, but state-wide renewable-power mandates exist in 29 states, two territories and the District of Columbia. Renewable projects in the other 21 states can be developed, but without a state or federal mandate, those projects face a particularly steep climb. For more on California's plan to increase its renewable energy mandate, see January 27, 2015, article - California Governor: 50% of Electricity from Renewables by 2030.

Still, with 149 solar projects scheduled to kick off by yearend 2016, with total value approaching $33 billion, the industry appears to have a bright near-term future. Last year, according to the Solar Energy Industries Association (SEIA) (Washington, D.C.), developers and utilities brought a record 6,968 MW of new solar generation online. That sum consists of 6,201 MW of PV and 767 MW of CSP. According to "U.S. Solar Market Insight 2014 Year in Review," a recent study from GTM Research and the SEIA, that sum also includes more than 1,000 MW of residential rooftop solar and more than 1,000 MW of rooftop solar panels on commercial establishments.

The study noted that solar accounted for 32% percent of U.S. generating capacity additions last year, trailing gas-fired generation but exceeding wind and coal.

"We expect 2015 will be a robust year for solar power construction, but not all of it will take place at the utility-scale level," predicted Brock Ramey, Industrial Info's North American power specialist. "At the utility-scale level, we expect a fair amount of these larger proposed projects to be pushed back or cancelled. The cost to build those types of generation, the ability to finance it and securing a PPA with a utility remain significant challenges to developers."

"We don't see a federal RPS on the horizon, but the Obama administration's Clean Power Plan is placing a dollar value on carbon dioxide (CO2) emissions," Ramey said. "That could give a dramatic boost to renewables--providing the plan survives court challenges. Aside from future project activity in utility-scale solar, we see no dimming of interest in solar by residential and commercial customers, who also are eligible for the 30% ITC on systems installed by December 31, 2016."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.