When you subsidize the free market, things sometimes get weird. For example, combine a change in Spain’s (and a few other countries’) solar subsidies, a US-wide absence of corporate tax hunger, and a massive spike in solar module production, and now you’ve got plummeting solar panel prices. I’m talking like… half, compared to a year ago. I remember toward December 2008 my old company had to throw away a couple of giant deals just because we couldn’t get our hands on the modules we needed. Today there is cutthroat pricing from solar panel manufacturers trying to move inventory.
Big commercial solar deals in the US usually rely on tax equity financing. That means if businesses purchase systems themselves, they need to be turning tidy profits to be able to take advantage of the tax credits. Therefore, there aren’t a lot of those deals being sold now. Silicon production has ramped way up in the last few years, as has the number of companies producing solar modules from the silicon, as well as the manufacturing throughput of those companies. All this results in is a lot of supply coupled with diminished global demand, meaning you’ve got lower price. Since the market is subsidized, some common market trends are amplified and expedited.
AND THAT’S JUST INTERNATIONALLY. Break it down by country, then state or province, then to city, and even to neighborhood, and you have markedly different solar energy markets.
Here are the five most remarkable solar markets in the United States:
Not the best subsidies for photovoltaics, but Hawaiian power is EXPENSIVE! Think about it, Hawaii has to boat in all the fossil fuels to their island, making the cost per kWh of electricity higher than just about anywhere. Couple that with a lot of sun and you’ve probably got the first market to reach grid parity. A hot market here would have greater changes than other places since most of Hawaiian power is derived from pretty dirty fossil fuels. Hawaii is working hard to change this, and I expect the solar market to take off.
Here you have pretty crappy subsidies, a population that assumes solar doesn’t make sense because it’s too cloudy and rainy (not true), and pretty cheap power (over 50% of which is already clean hydro power). What you end up with is no one being able to sell solar panels.
3) Palm Desert
LA is a great solar market. The Palm Desert market is ridiculously great. Here you have a lot of homeowners who have been there a long time, and thus still have home equity. They also have magnificently large power bills and air conditioning. Add to that SCE’s tiered rate structure (the more you use, the more it costs), and selling solar energy is like shooting fish in a barrel. The only negative (which is greatly outweighed by the positives), is that heat negatively affects the voltage of crystalline silicon products. As a result, I bet you’ll see some of the first residential thin-film installs going up around places like this (even though it doesn’t make sense for everyone – thin film takes more space and a lot of people in Palm Desert are already maxing out their roof real estate).
4) New Orleans
New Orleans has the best residential subsidy in the nation. 50% Refundable state tax credit coupled the 30% Federal tax credit, means your systems are 80% off. The thing that makes this an interesting market is that the subsidy is only a year old, which means solar never made sense before. So you have a very small number of people who can install, and their experience is new. Politics are moving very quickly as well, and the new tax credits will probably soon be transferrable, allowing for both commercial installations as well as third party ownership options (like Solar PPA’s or Solar Leases).
5) Denver area
A recent pilot of California’s AB811 style municipal financing in Boulder was hugely successful, but small. The rebate from the utility there, Xcel Energy, dropped a dollar a watt, and Colorado energy is relatively inexpensive. So while the subsidy is making solar energy for homes is possible, it’s just not a slam dunk. Colorado also has lots of sun and a nice, cool, climate – ideal for solar power. As a result of the recent success of the subsidy that came online, I think, around late 05 early 06, lots of people jumped into the market with lots of success. Lately, with the pilot in Boulder complete, Xcel dropping their rebate, and a lot of the low-hanging fruit of customer base already absorbed, many installers are desperately clutching to low price as a solution for generating business to get themselves out of this economic downturn. I expect a consolidation in this market and for some to shake out, but that it will remain a robust solar market in the long run.
Last modified: October 1, 2019