From a fringe sector with few serious companies and prohibitively expensive hardware, solar power has charted a meteoric rise within the last decade.
Now an industry worth more than $60 billion, solar is home to several publicly traded companies, consistently posts both double-digit percent drops in price and gains in growth on an annual basis, and this is only the beginning; the future of selling the sun looks brilliant.
Solar has grown rapidly since the turn of the century, as a number of factors have converged:
- Initial policy supports such as feed-in tariffs, tax credits and renewable portfolio standards that have created incentives and helped to establish demand;
- Advances in photovoltaic technology that continue to lower costs and improve performance;
- Expansion of manufacturing capacity, particularly in China, which has created economies of scale and further lowered the cost of solar panels;
- Financial and business model innovations, such as third-party leasing and power-purchase agreements in residential markets, and the recognition of solar as a legitimate, lucrative investment for investors both large and small;
- Streamlining of installation, permitting and customer acquisition processes to reduce “soft” labor costs-which is increasingly important as the price for “hard” photovoltaic panels continue to fall.
As a result, solar photovoltaic (PV) panels are far cheaper than they were only a handful of years ago, leading to the creation of thousands of new jobs, long term savings for homeowners and businesses and reductions in air, water and carbon pollution.
SolarCity is the industry leader in the United States, accounting for 36% of the residential solar market. Chaired by Elon Musk, and run by his cousins Lyndon and Peter Rive, SolarCity went public in late 2012. At that time, Chief Executive Lyndon made a bold, some might say untenable claim: that SolarCity would have 1 million customers by July 4th, 2018.
At the time of the announcement, SolarCity had a mere 48,000 customers. Since then, the company has expanded at an average rate of 98% annually, reaching 190,000 customers by early 2015. At this rate, SolarCity will far exceed its goal by 2018. Even with a more conservative outlook, it appears 1 million rooftops by the summer of 2018 is well within reach.
SolarCity’s success and ambition is emblematic of the U.S. solar market’s impressive growth as a whole.
Solar PV and concentrated solar power made up 32% of all new electricity generation capacity in the U.S. in 2014, second only to natural gas. The market as a whole grew by 30% in 2014, and is predicted to increase another 30% in 2015. Residential PV is spreading even faster throughout the nation’s neighborhoods, charting annual growth of 50% or more three consecutive years in a row.
Solar, though a fledgling industry by comparison, now employs twice as many people as the centuries-old coal mining sector and is yet to truly scratch the surface of its potential.
In his 2014 State of the Union address, President Obama praised the growth of solar, stating that on average, every 4 minutes a new solar array was being installed on a rooftop somewhere in the country. How quickly things change: one year later solar panels were being installed every 2.5 minutes, and by 2016 a new system will be installed every minute.
Even with uncertainty over the potential phase-out of government incentives, falling oil prices and looming political battles with utilities, solar appears set for even more success, according again to Deutsche Bank.
Deutsche Bank predicts that within 2 years the cost of solar per kilowatt of electricity will be equal to or less than conventional power generation in 80% of the world. Furthermore, photovoltaics will be made even more viable with the arrival of the power sector’s “killer app”: affordable energy storage.
The combination of cheaper batteries and continually decreasing module prices for solar will make power from the sun the “clear financial choice” within as few as 5 years for certain markets. Storage will also help to overcome previous hurdles like access to the grid, lack of net metering policies and the sun’s intermittency that have previously hindered solar expansion in many regions.
Deutsche Bank is not the only major bank that is bullish on solar: Citigroup recently published a report titled “The Age of Renewables Beginning”, while Swiss financial giant UBS predicted “solar will become the default technology of the future to generate and supply electricity”, and Goldman Sachs called it a “transformational moment in time” for renewable energy, backing up its talk with a $40 billion commitment to invest in renewable energy projects and companies.