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The game has changed for solar energy

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Solar PanelI’m just going to come right out and say it. We think that the U.S. government and many U.S. utilities are out of synch with reality when it comes to expectations for renewable generation – particularly regarding the potential for solar distributed generation. The U.S. Energy Information Administration estimates a solar photovoltaic generation growth rate of only 7.5% from 2012–2040 and projects that renewables will supply only 16% of U.S. energy use in 2040.

But these numbers are based on annual PV shipments from 1989 through 2012. Their estimates are built from a trend that doesn’t reflect recent PV sales growth.

The U.S. Federal Energy Regulatory Commission reports that 647 new MW of solar capacity were installed in the first four months of 2014 alone, in 59 new or expanding U.S. projects. Ninety-one new or expanding projects producing 977 MW were added in the same time period in 2013.

Based on an analysis of the top 20 solar manufacturers, which account for two-thirds of global shipments, industry tracker Solarbuzz projects a 30% growth rate in solar PV shipments in 2014.

Based on these and other more recent trends, some industry analysts project that renewable energy sources in the U.S. could reach or exceed 16% of the energy supply by 2018.

Why? Because the game has changed. In a custom client study five years ago, we estimated that a 5 KW rooftop residential PV system would run $37,500 in an “average” cost scenario for solar installation. And our client estimated that the payback period would run between 10 and 20 years on such a system, depending on electricity rates.

Since then, the cost of solar has dropped dramatically. According to a recent Triple Pundit article, PV panel costs declined 20% in both 2011 and 2012, and last year solar generation costs again dropped a little, to $2.50 per watt (installed). Solar module prices, in particular, have fallen to around 10% of the overall installation cost.

New leasing options make solar even more affordable. Major industry player SolarCity, for instance, promises homeowners an overall cost reduction from day one with their solar leasing program.

Power purchase agreements, leases, new financing options and new models for individual or community participation/ownership are making solar affordable for (almost) everyone.

Our new, soon-to-be-released Eco Pulse study, which was fielded in April, finds that 40% of Americans say they are searching for “greener” electricity (renewable energy, green power, solar panels, etc.). Will they all act? No. We consistently see a huge gap between interest and actual purchase in this category. Only 4% report they’ve actually purchased solar panels.

But Americans are engaged and beginning to actively investigate – and many will be pleasantly surprised at the new options. Five years ago, we found that the target buyer for solar was a middle-aged, conservative white guy earning $150,000 or more per year. Our Pulse research shows that the distributed generation target audience is no longer this small, extremely affluent niche. It’s younger and more ethnically diverse, and it earns a more moderate income ($50K+).

New solar options are viable for moderate incomes. The potential is huge. Utilities who aren’t actively facilitating solar options for their customers could find themselves irrelevant in the future.

It’s easy to scoff at aspiration. But momentum is a hard thing to stem. One of my Facebook friends recently posted a link to a video about a new solar roadway technology, and I watched it spread like wildfire. As I write this, the page has received almost one million likes. What makes the link so sharable isn’t just the information or the jaw-dropping technology – it’s the laugh-out-loud Saturday Night Live tone that is absolutely perfect for the new, increasingly Gen Y target audience for solar. Is this technology viable? I don’t know. Do I want a “solar freakin” driveway? You better believe it.

Solar panel image by Andreas Demmelbauer via Flickr

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Lee Ann Head

About Lee Ann Head

Lee Ann started Shelton Group's research department 12 years ago and now oversees all custom and proprietary research. She directs a staff that designs quantitative and qualitative studies, and she oversees secondary analyses, digging deep to find the nuggets of information that pave the way for successful insights, strategies and creative. She regularly presents findings to clients and industry groups around the country, as well as in her posts on the Shelton Insights blog.

View all posts by Lee Ann Head →

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2 thoughts on “The game has changed for solar energy

  1. “The U.S. Federal Energy Regulatory Commission reports that 647 new MW of solar capacity were installed in the first four months of 2014 alone, in 59 new or expanding U.S. projects. Ninety-one new or expanding projects producing 977 MW were added in the same time period in 2013.”

    This represents a major *decrease* in installations year over year – are these numbers correct?

  2. Hi Mike,
    The stats are correct. I searched for full annual figures from FERC, but YTD was all I found. I think that these numbers indicate that there is a lot of large solar project work underway, as well as residential rooftop. Without a full year trend, I wouldn’t conclude that this represents a decline. It could simply be about the timing of new projects coming online. And momentum seems to be strong, with a lot of new generation under construction. I guess we’ll see. Thanks for your comment!
    Lee Ann

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