Solar as an Asset Class: It's About More than Technology
By Dirk Michels (Palo Alto)
Today, the promise of solar PV is not about technology, but rather about creating the financial, legal and regulatory frameworks that allow for significant cost reduction, especially for the residential and commercial distributed solar sectors. Together with the utility-scale solar sector, significant growth in the distributed solar sector may be the game changer that makes solar power a viable alternative to traditional fuels.
According to GTM Research, the U.S. solar PV market was at an installation pace of 878 MWp (DC) with 636 MWp (DC) in residential and commercial distributed installations in 2010. The research also indicated that the U.S. solar PV market will grow to annual installations of more than 5,000 MWp (DC) by 2015. If the majority of new installations are utility-scale solar facilities, the residential and distributed commercial/municipal sectors could fall behind in overall growth.
To prevent that loss of market share, the sectors will need to address the most significant factor affecting their success: cost competitiveness. The installed costs for residential and distributed commercial/municipal installations are rather high, at approximately US$5.71~US$6.98. That compares to utility installations, which are already at a much lower price point of between US$4.05 and US$4.80 for the year 2010. Further, it is expected that a large number of the currently available state and federal incentives will terminate, which further complicates ‘small-scale’ solar’s attempt to achieve cost competitiveness. In the coming years, the residential and distributed commercial/municipal sectors still have some catching-up to do before they can claim their fair share of future growth in the market.
