Solar Stepping Into The Spotlight

In our previous analysis of the US renewables industry we have tended to focus on the wind sector, given the vast size of the market, the precarious nature of the subsidy scheme for wind projects and the high-levels of debate surrounding the offshore market. However, the US solar market should not be overlooked, as we are witnessing significant growth in the sector, supported by a strong pipeline of large-scale commercial projects, technology advances which are improving the viability of projects and increased numbers of high-profile corporations making plays within the solar market.

Our long-held view on the US wind industry is so far playing out, whereby we have seen a cycle of boom and bust over 2012 and 2013, in line with the country's subsidy scheme expiration - the Production Tax Credit (PTC) ( see 'Investors Warming To Renewables', December 5 2013). In 2012, wind capacity surged by 27.9% from the previous year, and then dropped to 1.8% during 2013. In recent months we have tended to focus our analysis of the US renewables industry on the wind market, owing to the sheer size of the industry, which dwarves the other renewable energy sub-sectors (wind power contributes nearly 70% to the total non-hydro renewables capacity in the country), the shifting dynamics of the PTC and the high-levels of debate and contention surrounding the US offshore wind market.

However, the solar segment is emerging as a contender for the limelight as we continue to witness high levels of growth in the industry, and numerous positive announcements over the beginning of 2014 suggest that growth will remain robust. Indeed, we are forecasting that the solar sector will register the highest growth of any renewable segment between now and 2020, highlighting that there are still ample opportunities for investment into the market.

Solar Surging
US Total Non-Hydro Renewables Capacity By Type and Growth, 2014 and 2020

Solar Stepping Into The Spotlight

In our previous analysis of the US renewables industry we have tended to focus on the wind sector, given the vast size of the market, the precarious nature of the subsidy scheme for wind projects and the high-levels of debate surrounding the offshore market. However, the US solar market should not be overlooked, as we are witnessing significant growth in the sector, supported by a strong pipeline of large-scale commercial projects, technology advances which are improving the viability of projects and increased numbers of high-profile corporations making plays within the solar market.

Our long-held view on the US wind industry is so far playing out, whereby we have seen a cycle of boom and bust over 2012 and 2013, in line with the country's subsidy scheme expiration - the Production Tax Credit (PTC) ( see 'Investors Warming To Renewables', December 5 2013). In 2012, wind capacity surged by 27.9% from the previous year, and then dropped to 1.8% during 2013. In recent months we have tended to focus our analysis of the US renewables industry on the wind market, owing to the sheer size of the industry, which dwarves the other renewable energy sub-sectors (wind power contributes nearly 70% to the total non-hydro renewables capacity in the country), the shifting dynamics of the PTC and the high-levels of debate and contention surrounding the US offshore wind market.

However, the solar segment is emerging as a contender for the limelight as we continue to witness high levels of growth in the industry, and numerous positive announcements over the beginning of 2014 suggest that growth will remain robust. Indeed, we are forecasting that the solar sector will register the highest growth of any renewable segment between now and 2020, highlighting that there are still ample opportunities for investment into the market.

Solar Surging
US Total Non-Hydro Renewables Capacity By Type and Growth, 2014 and 2020

Robust Project Pipeline

Last quarter we revised up our solar generation and capacity forecasts, as installation rates over 2012 - and the data that has so far been released for 2013 - surprised to the upside. Over 2012, over 3GW of solar capacity is estimated to have been added to the country's grid, taking total installed capacity to nearly 7.8GW. Positive data over the course of 2013 showed that the solar sector experienced robust growth during Q113 and Q213, and in October alone, reportedly 530MW of solar capacity was installed.

Furthermore, already in 2014, the world's largest solar thermal plant was brought online - the 392MW, US$2.3bn Ivanpah solar project in California's Mojave Desert, which was developed by a joint-venture (JV) between BrightSource Energy, NRG, and Google. Additionally, the solar project pipeline is reasonably strong and a number of large-scale projects are in planning, have entered into the construction phase or began partial operation over the beginning of 2014, including:

  • MidAmerican Solar started partial operation at its 579MW Solar Star project in California in January 2014, reported to be the world largest PV power project under construction. The project, being developed by US solar panel manufacturer SunPower, is currently 10% operational.

  • In February 2014 Duke Energy issued a request for proposals for 300MW worth of solar projects in North Carolina. The solar projects are scheduled to start generating power by end-2015 and interested bidders can provide power and associated renewable energy certificates or deliver a turnkey solution in which case Duke will become the new plant owner.

  • The US Bureau of Land Management (BLM) cleared the proposed 550MW of solar parks to be built on federal land by renewable energy company First Solar near the Nevada-California border in February 2014. In fact, a total of 50 utility-scale renewable energy projects totalling 14,000MW have been approved by the US Department of Interior since 2009.

New Technology Improves Viability

Advanced solar technology, in the form of energy storage techniques, is helping to increase the viability of solar power in the US, by extending the daily operating life of a solar facility. For example, it was announced in early October 2013 that a 280MW solar CSP plant in Arizona known as the Solana Generating Station is able to generate power for up to six hours after the sun has set, by using energy storage technology. The plant, developed by Spanish company Abengoa, is using a molten salt storage system and cost nearly US$2bn to build ( see 'Sun Down, But Lights On For Solar', October 15 2013). Furthermore, it has been reported that another utility-scale project using this technique is in the pipeline - the 110MW Crescent Dunes project at Tonopah in Nevada. We expect to see more of these projects being developed over the next few years.

Corporates Making Solar Plays

We have previously commented on the increased role high-profile corporations are having within the US renewables industry, and this is not just confined to the wind sector ( see 'Corporates Looking To Make Renewables Investment', November 5 2013). Non-utility companies such as KKR & Co, MetLife Inc, Microsoft, Warren Buffet and Google (the latter of which was part of the Ivanpah project JV) have all recently entered the US renewables market, seeking stable long-term returns in the form of Power-Purchase Agreements (PPAs).

Despite this positive rhetoric, we do expect growth to moderate slightly over our 10-year forecast period as the industry becomes increasingly saturated, reaching nearly 21GW in 2023. That said, we will be monitoring the market closely over the coming quarters, and potentially upwardly revise our forecasts again if momentum continues to build.

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