Utah, USA — For decades, solar has been like the Rodney Dangerfield of renewable energy. Rarely has it received the respect it has deserved. But by all accounts, 2013 was a watershed year in that respect. In Q3 alone, 930 megawatts of PV were installed in the United States — and in the last two and a half years, total global PV capacity grew from 50 gigawatts to over 100. Sure, 2013 saw its share of failures and disappointments. But according to some of the best and brightest minds in the solar industry, the coming year may play itself out as the dividing line between past and future.
2014’s Dark Horse: The U.S. Solar Market
According to clean energy expert Jigar Shah, one of the most heavily underestimated solar markets in the world today is the United States. “I think you’re going to see extraordinary growth in the U.S. next year, through 2016,” Shah confidently stated. “Many are projecting somewhere in the neighborhood of 7,000 to 8,000 megawatts in 2016. But that number could easily be doubled to 14 gigawatts in 2016 alone.”
Looking beyond 2014, Shah sees even further robust industry growth — one aided, not hindered, by the looming expiration of the federal investment tax credit (ITC). “Everybody expects the 30 percent tax credit to expire and to move to a 10 percent federal tax credit in 2016,” Shah said, adding that the majority of solar industry players are actually looking forward to that expiration.
“Most people in the solar industry recognize that the financial innovations we’ve had in 2013 are actually helped by the tax credit sun-setting in 2016,” Shah said. He explained that presently, approximately 40 percent of investment capital is required to come from tax equity. The remaining 60 percent can come from debt or sponsor equity. Shah said once the 30 percent tax credit drops to 10 percent, the depreciation can be used by the sponsor equity to shelter their own gains. “You could actually do without tax equity altogether and just be 100 percent sponsor equity,” Shah said. “It’s much easier to raise that kind of money than it is to raise tax equity.”
Edwin Feo, COO for Coronal Management LLC, agreed. “Ultimately, the industry has to deal with the demise of the ITC,” he said. He added that what is needed is “improvement on balance of system costs and financing costs to effectively replace the credit with cheaper sources of capital. That amount of leverage can negate the loss of the full ITC.”
Paula Mints, founder and chief analyst for SPV Market Research, expects the impending expiration of the ITC to drive robust growth in U.S. solar demand through 2014 and into 2015. “We’re going to see a mad rush to take advantage of the ITC,” Mints said, “but that will probably come to an abrupt halt at some point.”
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