Environmental October 14, 2015

Is the Solar Industry’s Crazy Growth Going to Come to a Crashing Halt? A Report From the Trenches

This is from Porch.com
Posted by Jon Meyer on 10/10/15

The Solar Industry is at an inflection point. We explore whether the growth can continue by talking to Markus Virta, a sales tech in the middle of it all.

Although Porch doesn’t have more than a gaggle of solar panel installers on our network, it’s still a product and trend that we’re interested in tracking. Alternative energy is continuing to gain movement, moving past a few rebels who had the idea (and means) to initially suck up the sun.

More recently, the industry is maneuvering itself for a big move if a few dominoes fall right. Should the solar investment tax credit (ITC) not get renewed by the current federal administration to continue after end of year 2016, homeowners and businesses will no longer receive a 30% discount on their installation (percentage than subtracted from tax bill).

Solar installations and the industry, with help from the ITC, have been going gangbusters (also due to wind energy) since the start of the 21st century. Consumption and installation have go hand in hand, both growing over 1000% this century.

As happens, states get to specialize along with the national agenda as well, which can double down on benefits for consumers. Hawaii for instance, although one of the smaller states, has the most solar panels installed due to being the state with the highest cost for electricity.

To gain greater scope of the conversation, I grabbed time with Markus Virta (Mar-koos Vee-air-tay), a technical salesmen and project designer for Western Solar out of Bellingham, Washington to discuss what’s happening both in his backyard and the rest of the country.

Jon Meyer: What trends are you seeing in solar?

Markus Virta: The solar industry is still pretty variable nation wide. This was illustrated to me most recently as I walked the rows of the Solar Power International Convention in Anaheim California September 14th-17th. While Washington’s market is dominated by small residential installations, the rest of the country tends to be scaling towards much larger commercial/utility scale systems.

The main driving force here locally is the Washington State Production Based Incentive. This incentive is also capped at a residential level with no commercial incentive in place.

The most obvious trend we are seeing in Solar at the moment is storage. Battery storage is somewhat of the holy grail when it comes to many industries, especially Solar. Power generation and distribution may be the most focused on this problem. With a utility grid that is seeing consistent increases in demand, we see more and more questions being raised about the viability of solar being added to this grid system.

Grid operators need a way to manage solar production in a way that is safe for the grid and beneficial for their customers. Large scale battery deployment has emerged as one of the solutions to this problem. There are companies like Panasonic, Juicebox Energy, and Tesla who are working on small and larger scale Lithium Ion battery storage components that could be sold or leased to homeowners and potentially managed by grid operators. We are already seeing incentives being awarded to customers installing “Smart inverters” which allow grid operators to interface with small and large scale solar deployment at the source.

JM: How’s the industry looking for the next five years?

MV: The industry has seen tremendous growth in the last 5-10 years. We see the next 5 years being the proving grounds for both the Washington State market and industry as a whole. One of the key pieces of legislation that has spurred such growth in the Solar industry has been the 30% Federal income tax credit (ITC).

This tax credit is set to expire December 31st 2016. Despite Joe Biden’s speech at the Solar Power Convention claiming our country needs a permanent ITC for Solar, we see this tax credit expiring and not being renewed for at least four years. On top of that, Washington State has an annual performance based incentive which is capped at .05% of each corresponding utility districts annual taxable revenue. There are reports coming in now that two of the state’s main utilities (Seattle City Light and PSE) have reached these caps.

What does this mean for solar power moving forward? It means you will begin to see different business models emerging to replace the standard grid tie system that is being purchased and leased to home owners around the country. Unless a legislative push is made to provide some economic relief to customers purchasing solar equipment here in Washington State, it is difficult to see Solar penciling out. This may change, however, as batter technology comes on line that is cheaper, smaller (but scale-able), and integrated into grid operations.

As is always the case, the solar industry is tumultuous. There have been cases made all over the country where solar is now outpacing coal, natural gas, and diesel generation in cost effectiveness. The main deterrent in Washington State from Solar taking hold without incentives to help is not, believe it or not, our climate, but rather the cheap hydro power we have. As much as it pains me to admit it, we may need to get used to the warmer (snowless) winters that climate change is ushering in which means solar will have a larger role to fill when meeting the states energy needs.

Finally, I should mention the role electric vehicles are playing in the solar industry. The two often go hand in hand. Recharging an electric car’s (or motorcycle for those inclined) battery with solar production is a lovely idea. What more auto manufactures (with TESLA leading the charge) are talking about is integrating an EV’s battery into the electric system of a house. This would potentially give a homeowner the benefit of load shedding and battery back up from their vehicle. This is definitely coming down the pipeline, and will absolutely increase the demand for solar on residential roofs.

JM: Would you recommend for a contractor to get certified in solar installation?

MV: Washington State has a large array of contractors who are registered to install solar equipment. I always recommend home and business owners looking to install solar to contact their utility first. Verify that their utility district is participating in the State solar incentive programs. Next, ask for a list of qualified solar contractors and how many installations they have made in this utility district in the past 12 months. This is often a good barometer of the contractors’ experience.

JM: What are some difficulties you see on the horizon for solar, if any?

MV: Washington State has deployed so much solar in the past five years that we are starting to see utility districts hit their allotted incentive caps. Without a legislative push, this could weaken the industries momentum considerably. It is coincidence that this is happening in tandem with the Federal income tax credit expiring.

It is no secret that for solar to pencil out utility incentives are still necessary. However, with more R&D going into battery development and grid storage hybrid systems coming online, you will begin to see solar being deployed with a four-to-six year payback.