Engineering Inc. - November/December 2014 - (Page 6)

MarketWatch BY G E R RY D O N O H U E Solar Power Heats Up as Pricing Divide Narrows F or most of its history, solar power has been the technology with the big "but," as in "Solar power is great, but it's too expensive" or "We'd love to install solar, but it's not cost competitive." Despite its many benefits, solar power remained a periphery power source because it couldn't bridge the pricing divide-until now. In the past few years that dynamic has dramatically changed, thanks to a combination of federal and state incentives, improved technologies and rapidly falling component prices-the cost of crystalline silicon modules has decreased 80 percent since 2008. "In markets with high energy costs, such as the Northeast, certain parts of the West Coast, and Hawaii, photovoltaic [PV] solar systems are extremely competitive for everyday electricity," says Tetra Tech Senior Vice President Craig MacKay, who leads the firm's electric generation practice. "And in a lot of other markets, the gap has narrowed." As a result, solar power installations have soared. According to GMT Research: * Solar power accounted for 74 percent of all new electricity generating capacity installed in the U.S. in the first quarter of 2014. * The 6.6 gigawatts of photovoltaic solar power projected to be installed in 2014 is an increase of 39 percent over 2013 and almost double the market size in 2012. * The 340 megawatts (MW) of concentrating solar power 6 ENGINEERING INC. (CSP) scheduled to come online in 2014 marks the largest single year for CSP installations. Despite the recent growth, solar power remains one of the smallest segments of the U.S. power industry, contributing just 1.13 percent of U.S. power generation. According to analysts, three key market forces need to play out just right for the market to continue its breakneck growth pace. Public Incentives Solar power market growth has been largely dependent on financial incentives from both federal and state governments. The federal 30 percent investment tax credit (ITC) for residential and commercial solar systems began in 2005 and was extended in 2008 for eight years. At the end of 2016, the incentive is scheduled to drop to 10 percent. Analysts differ on the impact of that looming change. "It will be similar to what the wind industry saw with the Production Tax Credit expiration, a little bit of a cliff, if you will," says Tom Dodson, AMEC vice president of renewables/ transmission and distribution. "It may take six months or a year for the pipeline to replenish itself, but long-term, solar will be a key part of the U.S. energy portfolio, even without the 30 percent incentive." Gretchen Dolson, solar and wind practice leader at HDR, says that while the ITC has been important for the industry, "It is not the end-all-and-be-all. Our most successful clients are NOVEMBER / DECEMBER 2014 the ones who have mastered the state incentive system. That's where they're making their bottom lines." Twenty-nine states have renewable portfolio standards that require specific amounts of clean electricity to be consumed each year. In several states, these goals have prompted significant solar investment. According to a recent report from the California Public Utilities Commission, the state is on pace to meet its goal of generating 33 percent of its electricity from renewable energy sources by 2020. Solar is a big part of that effort-of the 1,330 MW of PV installations nationally in Q1 2014, California accounted for 959 MW. States not historically connected to solar are also getting into the act. Georgia Power recently announced it will develop 540 MW of solar capacity. In 2013, Minnesota mandated that solar power must generate 1.5 percent of electricity in the state by 2020. Because of the benefits of clean energy generation, most analysts expect more states to institute RPS systems, and those that already have them to raise the targets. And, says MacKay, "While the future of the ITC is still to be determined, the industry is hopeful that it will be renewed." Tariffs and Charges What the government gives with one hand, it takes away with the other. In response to U.S. solar panel manufacturers complaining about unfair pricing practices by Chinese manufac- Net Generation from Solar Power (Thousands of Megawatt Hours) Year Megawatt Hours 2004 6 2005 16 2006 15 2007 16 2008 76 2009 157 2010 423 2011 1,012 2012 3,451 2013 8,327 Source: U.S. Energy Information Administration Top 10 States' Cumulative Solar Electricity Capacity (Megawatts) State California Arizona Megawatts 5,661 1,821 New Jersey 1,211 North Carolina 557 Nevada 450 Massachusetts 442 Hawaii 341 Colorado 331 New York 250 New Mexico 236 Source: Solar Energy Industries Association turers, the U.S. government has slapped tariffs on imported materials, ranging from 23 percent to 35 percent. "These tariffs are creating unnecessarily high pricing for panels," says Dodson. "As an industry, we are constantly being challenged to bring the price down, and the module cost is a key piece of what we're trying to do." The U.S. Commerce Depart-

Table of Contents for the Digital Edition of Engineering Inc. - November/December 2014

Engineering Inc. - November/december 2014
Contents
From ACEC to You
Legislative Action
Market Watch
Meet the Millennials
What a Deal
Savings in the Sky
Guest Column
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - November/December 2014