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March 03, 2009

Solar Expected to Maintain its Status as the World's Fastest-Growing Energy Technology
    by Robert Kropp

Decreases in cost of installation and favorable regulatory environment should protect the continued growth of solar in the US from effects of the economic crisis. -- Photovoltaics (PV) is a solar power technology that converts light from the sun directly into electricity. Photovoltaic production worldwide has been doubling every two years, increasing by an average of 48% each year since 2002, making it the world’s fastest-growing energy technology. 90% of this generating capacity consists of grid-tied electrical systems, in which PV panels generate electricity and interconnect with a utility's power line.

According to a recent report by GlobalData, a business information company providing global business information reports and services, the US is the fourth largest solar PV market in the world. The market has grown from 168 megawatts (MW) in 2001 to around 1,111 MW by the end of 2008. Grid-connected solar PV grew to 61% of all solar PV installations, accounting for 677 MW in 2008.

One reason for the rapid growth in solar power can be found in a recent report by the Lawrence Berkeley National Laboratory, entitled Tracking the Sun: The Installed Cost of Photovoltaics in the US from 1998-2007. According to the report, average installed costs prior to receipt of any direct financial incentives or tax credits declined from $10.50/Watt in 1998 to $7.60/Watt in 2007. This equates to an average annual reduction of $0.30/Watt, or 3.5% per year in real dollars.

The GlobalData report, entitled "The US Solar PV Market Analysis and Forecasts to 2013," finds additional reasons for the growth of solar power. The report credits growth in the solar market to supportive policy frameworks by federal and state governments for solar PV technology, as well as high-end investments by major solar companies.

GlobalData credits the increase in share of on-grid capacity to incentives provided by the federal and state governments like the Renewable Portfolio Standards (RPS), Feed-In Tariff laws, and the California Solar Initiative.

As defined by the Clean Energy States Alliance (CESA), RPS is the most popular state policy tool to support renewable energy. It requires that a certain percentage of utility generation portfolio or sales be derived from renewable resources. According to CESA, legislation for a national RPS is being considered.

Feed-In Tariff (FIT) laws require energy companies to buy renewable energy from producers, and set the price which these companies pay per unit of electricity, thus ensuring that renewable energy remains a sound long-term investment. According to the Policy Action on Climate Toolkit, a project of the World Future Council, FIT laws are the best available mechanisms for accelerating the uptake of renewable energy in grid-connected areas.

Overseen by the California Public Utilities Commission, the California Solar Initiative provides rebates for solar construction to facilities in investor-owned utility territories. The Initiative offers financial incentives for solar installations based on the expected performance of a given solar installation.

GlobalData credits much of the growth in US solar installations to California, where 70% of the PV installations in the country can be found. In 2008, California accounted for 468 MW of the grid-connected solar PV in the US.

The GlobalData report predicts that the ongoing financial crisis will not have a significant negative impact on the growth of the solar PV industry in the US. The extension of the Investment Tax Credit (ITC) program included in the recent economic stimulus legislation will boost future development of solar PV and drive further investment into the sector by encouraging states to invest in efforts such as solar loan programs and renewable portfolio standards.

The stimulus also removes all caps on renewable energy tax credits, which equal 30% of the cost of qualified solar energy systems, and eliminates a reduction in credits for installations that utilize subsidized financing.

"The growth of solar in the US is policy-driven," said Pavan Vyakaranam, a GlobalData analyst, "And the ITC and other initiatives should encourage growth in the manufacturing side of the solar sector."

"Until now, the solar market in the US has been primarily an installation market, not a manufacturing one," added Shruti Desai, an analyst for GlobalData.

The symbolic importance of solar in the energy future of the US was underscored by the venue chosen by President Obama when he signed the economic stimulus bill in Denver on February 17. Before signing, he toured the Denver Museum of Nature and Science, which has solar panels on its roof. At the signing itself, the President was introduced by Blake Jones, president of Namaste Solar, the leading solar electric provider in Colorado.

As policies encouraging the implementation of solar power become more entrenched, it is expected that the construction of large solar parks and power plants will increase. At present, the largest such establishment is the solar park at the Nellis Air Force Base in Nevada, with an installed capacity of 14.2 MW. In comparison, when completed in 2013 the Topaz Solar Farm in San Luis Obispo County, CA will have an installed capacity of 550 MW.

Referring to a solar park under construction in Oregon, Besai of GlobalData said, "Investment in Oregon is being driven by a number of policy initiatives that should help make it one of the country's largest producers of solar energy."

GlobalData anticipates that annual solar PV installations in the US will increase from 280 MW in 2008 to 1,515 MW by 2013. The cumulative solar PV installed capacity is expected to reach 5,293 MW by 2013.

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