My, oh my. Much has changed for the solar industry since December 2015.
My, oh my. How much can change in a year. As we close out another year of The Sol SOURCE, we reflect on how much has changed between Q4 2015 and Q4 2016.
Last year, the solar industry was racing to a December 31, 2016 placed in service deadline, or else facing the risk of the federal investment tax credit stepdown. Because of this rush, rumors of equipment shortages were rampant.For industry veterans around during the 1603 rush, there was a familiar déjà vu feeling: get deals done quickly, or some may not happen at all.
Oh, yeah. And the Paris climate talks had just happened.
Seasonal trends in the solar industry are similar year-over-year. Every Q4, developers and EPCs rush to meet investors year-end deadlines. Deals must be placed-into-service by year-end so the tax credit can be taken in the same year. While the same rush certainly exists in Q4 2016, the national urgency is not the same as 2015 because, well, we got the ITC extension.
With the extension of the federal investment tax credit, the mentality for some developers and customers alike has been “what’s the rush?” Energy costs are at an all-time low, and may stay low for the next couple years until liquefied natural gas exports begin around 2019. Module costs have also taken a dive, down from mid 60s to low 40s (cents/W) this year alone, and this trend is likely to continue. And, of course, we have the full ITC until 2019.
Certainly, the cost of solar will be lower in a year than it is today. But, with low energy prices, it is important to remember that solar installers and developers are competing against that low cost of power and must price accordingly. In other words, the time is now for a customer to lock in a competitive, low-cost solar energy power purchase agreement (PPA).
As costs continue to fall, state-level incentives will also continue to decline in value as solar becomes a more cost-competitive resource. In fact, this is a time in which many states are finalizing multi-year declining block incentive programs, where each “block” value corresponds to a lower incentive price. Markets that are lucrative right now may not be as time goes on.
While much changed between 2015 and 2016 for the solar energy industry, one thing is for certain: state level policy continues to lead the way, no matter the make-up of Washington, D.C. Solar energy cannot be stopped; the train has left the station.
This is an excerpt from the December 2016 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar financing space. To view the full Journal, please subscribe or e-mail pr@solsystems.com.
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Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.
Over the last eight years, Sol Systems has delivered more than 500 MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.
Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com.