2012 -- The Best of Times or Worst of Times for Solar Energy?
This post first appeared at PV Solar Report.
Solar Predictions of 2012 Reviewed
Yogi Berra might have been referring to the solar industry when he said, “It’s tough to make predictions, especially about the future.” But that never stops people from trying! As we look back at the many predictions about the solar industry for 2012, it’s instructive to see how they stacked up to reality.
The beginning of the year brought a mixed bag of forecasts, as the industry looked forward to continuing growth coupled with serious risks -- an oversupply of panels, diminishing subsidies in the U.S. and Europe, and a trade war with China.
Predictions for 2012 were numerous and all over the map. But some clear trends emerged.
We’ll see consolidation as the industry matures. One thing everyone from GigaOM to Renewable Energy World to the New York Times seemed to agree on for 2012 was that the solar industry was due for a lot of consolidation -- which was only to be expected in a competitive emerging industry. This bid for survival of the fittest, many argued, would lead to a stronger industry with clear winners, those who could provide the best products at the best prices.
VERDICT: Predictions were close. Bankruptcies and consolidations have indeed continued in 2012. But the shakeout is far from over. A Green Tech Media report released late last year predicted that another 180 solar panel makers will likely go out of business or be bought by 2015. In fact, at the end of 2012 China announced it’s encouraging consolidations and letting some of its weaker manufacturers go out of business. That’s likely a positive move on the part of China, one that will result in a stronger manufacturing industry overall. Consolidation is also expected to continue with downstream players. And we’re seeing panel manufacturers get into the development business, either on their own or with partners -- which some consider key to the future of Western solar manufacturing. We’ll watch these trends in 2013, as the industry’s evolution continues to play out.
19 - 29 GW will be installed globally, 2.8 GW in the U.S. While Energy Trend forecast only 19 GW in global installations for 2012, most others had higher expectations. HSBC predicted a flat market with 25.5 GW of global solar installations in 2012, down from 2011’s 27.4 GW, while IMS Research expected 26–29 GW of new PV capacity in 2012. A good year was expected in the U.S., with total installations forecast at 2.8 GW. CleanTechnica didn’t provide specific figures but predicted record amounts of solar installations in the U.S., for both homes and businesses.
VERDICT: Predictions were mostly off -- but in a good way! Solar installations both worldwide and in the U.S. exceeded expectations. The SEIA/GTM 2012 Q3 report forecast 31 GW in global demand, and as more information became available IHS reported that totals reached 32 GW. For the U.S, the SEIA/GTM report forecast a total of 3.2 GW of PV installed in 2012, up from 1.9 GW in 2011.
CleanTechnica was likely not surprised that numerous stories appeared last year about well-known corporations like IKEA, Walmart, Costco, FedEx, Kohl’s, Crayola, Apple, and Google going solar in the U.S. Schools and government agencies, including the Department of Defense, also increasingly found that solar made sense for them.
What does this all mean? We’re talking 70% growth in the U.S. installation market over 2011, with an expected growth rate of 14% worldwide. That’s not too shabby for an industry experiencing so many challenges.
We’ll face an oversupply of panels. An oversupply has been predicted since 2009, and last year was no exception. This wasn’t a controversial prediction, given that it was really about a continuation of an already existing situation. By the middle of 2012, Bloomberg New Energy Finance was forecasting that demand for solar will not match supply until at least 2014.
VERDICT: Predictions were spot-on. The end of the year found us with a continued oversupply, which many feared would weaken the industry. There’s a bright spot, though, in addition to cheaper prices for installers and consumers: China’s response to the oversupply has been a decision to add 10 GW of solar generating capacity in 2013 and possibly get to 40 GW by 2015, in part to help their manufacturers. One thing to watch will be how successful they are in connecting all that solar to their grid. But in any case, the huge supply of panels has lowered the cost of solar, already resulting in more installations worldwide -- that’s a good trend to keep going.
Asia and other markets will become more important. Speaking of China, that country was expected to add between 2.8 and 5 GW of solar as Asia’s role increased in 2012, making up for declines in European markets. Some predicted that India would also become a major solar player. Outside of Asia, other markets such as the Middle East and Latin America were predicted to grow.
VERDICT: Predictions were close. Of note was that China installed even more solar generating capacity than expected, coming in at 7 GW, more than double the 2011 figure. India’s solar industry, meanwhile, is experiencing some growing pains -- that doesn’t mean that growth won’t continue, but it may have been slower than expected for 2012. Other Asian countries are adopting feed-in tariffs and other programs to accelerate solar adoption, while Latin America is still talked about in terms of potential. 2012 brought some surprises, among them Saudi Arabia -- a country whose desire to make profits from importing oil rather than using it at home is leading it to invest $109 billion in solar, with the goal of generating a third of its power from solar by 2032.
The trade war with China will adversely affect the market. As a decision was awaited on the trade complaint filed by some American manufacturers, analysts pointed out that the trade war could hurt the solar industry, that there’s no winner in a trade war, and that there might be more cons than pros to imposing tariffs.
VERDICT: Predictions were off, at least for 2012. While cheap panels from China have certainly fueled much of the industry’s growth, the November imposition of tariffs by the ITC happened too late in the year for many effects to be felt yet -- plus some Chinese panel makers have thwarted the objectives of the tariffs by routing exports through Taiwan and other locations. Tensions mounted late last year amid rumors that Europe was also getting into the trade war action with China, but as of early this year, an EU trade war seems to be off the table. This will be one to watch in 2013. The question remains whether the industry can continue its upward trajectory without an infusion of cheap panels. But other factors will play into that, such as attempts to reduce soft costs, and additional feed-in tariffs in some areas.
The financial scene
Diminishing grants and subsidies will hurt the industry. In the U.S., the 1603 Treasury grant program was not extended into 2012, causing concerns that without this incentive, many solar projects would not happen. Meanwhile, feed-in tariffs in Europe were facing reductions, leading many to wonder about the fate of solar in Italy and Germany.
VERDICT: Predictions were off. The expiration of the 1603 program hasn’t yet had far-reaching effects -- that may be because projects qualified for the grant if panels were purchased in 2011, as some astute observers noted even early in 2012. In addition, many other factors, including the decreasing costs of solar, might mitigate this effect. That can also be said of areas where feed-in tariffs are on the decline. While feed-in tariffs have been shown to quickly boost an area’s solar industry, some countries that once strongly supported them are moving to broader adoption of other models, such as PPAs. In addition, other markets have taken up the slack for Europe, as noted above, and some countries are still introducing feed-in tariffs.
The solar market will be flat at best, with shrinking revenues likely. Oversupplies and price declines, coupled with weak economies and cuts to tariffs and subsidies in some regions, were expected to shrink revenues or keep them flat in spite of growth in megawatts installed. EnergyTrend expected no rapid growth till 2013.
VERDICT: Predictions were spot-on. While this year brought considerable growth in terms of GW installed, revenues (system prices multiplied by total GW installed) did not fare so well. According to IHS research, revenues fell from $94 billion in 2011 to $77 billion in 2012. The good news is that they’re expected to pick up by 2014 -- this will be another trend to watch.
Solar will get cheaper, helping more areas achieve grid parity. Most expectations were that prices of solar technologies would drop, and that falling prices coupled with rising electricity rates would encourage installations even where subsidies were ending. SunRun put numbers to this, predicting a 20% drop in price. And according to John Farrell of the Institute for Local Self-Reliance, solar has already reached grid parity in many areas, a trend that he expected to continue in 2012 and beyond.
VERDICT:Predictions were spot-on. A report by the Lawrence Berkeley National Laboratory showed that costs of solar systems in the U.S. continued to decline in 2012. And the SEIA Solar Market Insight Report found a decline in average installed costs of 19.3% -- making SunRun’s prediction quite close. While this is great news for installers and consumers, lower costs are putting pressure on manufacturers. But many analysts believe that this will help the industry in the long run -- and when you look at the increases in installations worldwide, it’s hard to disagree with that.
Solar will get more expensive. Okay, this one may be an anomaly, but it just shows how hard it is to find “agreement parity” when it comes to analyzing solar. A forecast for the year in Renewable Energy World strayed from the crowd, arguing that prices have to increase to a healthy level and predicting that they would do so by the end of 2012.
VERDICT: Predictions were off. As noted above, prices continued to fall in 2012. It will be interesting to see if 2013 brings a price increase in the U.S., as tariffs are imposed on Chinese panels. On the other hand, decreases in soft costs could offset that. Time will tell!
New financing options will become more prominent. PPAs and solar leasing options were expected to become more widespread in 2012. SunRun estimated that leases would account for about 75% of the California solar market.
VERDICT: Predictions were spot-on. In fact, Tom Kimbis of the SEIA attributes the growth in solar installations in 2012 to financial innovations. And leases and PPAs, though not new in 2012, became more widespread. By March, these options already accounted for 73.4% of residential solar installations in California. For those who can’t get solar on their own roof, we’re also seeing growth in crowdfunding and impact investing options -- another trend to watch in the coming year.
More jobs will be created in the solar industry. I was surprised not to see more predictions on solar jobs for 2012. But a few sources did note that there was bound to be an upswing, not surprising since that correlates with predictions for industry growth. The 2011 National Solar Jobs Census predicted installation firms in the U.S. would add 13,000 jobs in 2012, while manufacturing and sales would account for another 9,500 jobs.
VERDICT: Predictions were close. In spite of some layoffs last year, the Solar Foundation’s National Solar Jobs Census 2012 reported that 119,016 Americans were employed in the solar industry as of mid-November 2012, representing an employment growth rate of 13.2% over the previous 12 months -- compared to a rate of 2.3% for the overall economy. In fact, solar accounted for 1 out of every 230 jobs created in the U.S. last year.
The solar stock market will be a mixed bag, with stocks going up but solar IPOs remaining rare. GigaOM was not alone in predicting a slow year for IPOs, noting that after a rough 2011, most companies would wait to see a few successful solar IPOs before attempting it themselves. Meanwhile, some analysts expected solar stocks to be on the rise.
VERDICT: Predictions were spot-on. March saw the Enphase IPO, while Brightsource withdrew from their expected IPO soon after. But by the end of the year, solar stocks had benefited from a post-election boost and SolarCity had managed an IPO. It’s worth noting that the IPOs brought in less capital than hoped for. But it’s a start, and 2013 started with a surge in solar stocks, when a Warren Buffet company bought two solar power plants.
As hard as it is to make predictions, while we’re focused on making the attempt, events we never anticipated are in the works. 2012 brought a few interesting surprises -- and even some of the negative events of the year bode well for the future of solar.
Americans support solar and other renewables. In spite of a lot of negative media, Americans love solar! A study in May found that the average American is willing to pay 13% more a year for power to support a national clean-energy standard. And a September poll of likely voters showed that 92% of Americans support developing more solar, and a majority even want the government to support solar with tax credits and other financial incentives.
A major coal company admitted climate change is real and coal is on the outs. When even coal companies admit there’s a problem with coal, you know there’s change in the air. And that’s just what happened in 2012, when BHP Billiton announced it would retrofit one if its coal-exporting facilities against significant weather events. BHP executive Marcus Randolph even said, “In a carbon constrained world where energy coal is the biggest contributor to a carbon problem … I suspect the usage of thermal coal is going to decline. And frankly it should.”
Superstorm Sandy brought attention to climate change. And what more evidence did we need than Sandy? For those not convinced by a coal company’s pronouncement, the images of Sandy’s devastation should serve as a wake-up call. If that’s not enough, there’s the bill. With some estimates for its costs as high as $71 billion, Sandy provides further evidence that an ounce of prevention is indeed worth a pound of cure, making solar all the more attractive. And the Solar Sandy Project was just one example of how solar can come to the rescue in disasters.
Even in a rough year for solar, we saw significant increases in installations globally, and the U.S. industry is booming. People are realizing that solar makes economic sense -- the main motivation for so many businesses and schools to be jumping on the solar bandwagon. Couple that with the public’s increasing awareness of climate change, and the climate looks good for solar.
The Economist, a most rational publication, goes so far as to predict that renewables, especially solar, will become the new normal. They’re expecting that trend to start taking root this year. And of all the predictions and trends, that will be the most interesting to watch. We’ll check back in a year to see how this year’s predictions fare, and to see how far along we are on the road to solar as the new normal.
Rosana Francescato is the Communications Director for Sunible.com, an online portal aiming to radically simplify the solar buying experience for homeowners. She also combines her passions for solar power and community as a community solar advocate. Rosana is on the board of Women and Cleantech and Sustainability and the steering committee of the Local Clean Energy Alliance. She has hands-on ...
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