By Junko Movellan, Senior Analyst, Solarbuzz
The US solar photovoltaic PV market grew 112% in 2011, exceeding 2 GW in size for the first time. There was growth in all three major market segments (residential, commercial, and utility) driven by sharp declines in module prices and solar incentives at the national and state levels.
The utility segment has been the primary driver of the market over the past 12 months, underpinned by state Renewable Portfolio Standards (RPS). Also, project developers rushed to install PV before the expiration of the national 30% Federal Cash Grant at the end of 2011. Utility is now the largest segment, representing 44% of the total US market.
Figure 1: US PV Annual Market (2009-2011)
Source: Solarbuzz North America PV Markets Quarterly
Like most solar markets, the US is still heavily influenced by incentive policies. Although the Federal Cash Grant was not extended beyond 2011, there was a large surge in grant awards in Q4’11. In Q4’11 alone, the Treasury Department awarded close to $450 million, up 175% from Q3’11. Between September 2009 and December 2011, over $1.8 billion had been awarded to solar—the equivalent of 1 GW of PV capacity.
In terms of states, California was the largest recipient, accounting for 37% of the total, followed by New Jersey and Arizona. California continues its dominance, accounting for one-third of the national market, with growth sustained by strong demand from utilities. As a result of its ambitious RPS goal of 33% supplied by renewables by 2020, the state installed 117 MW of utility-scale PV. Furthermore, the California Solar Initiative (CSI) Program, the nation’s largest ratepayer-funded program, supported over 300 MW of residential and non-residential PV systems during 2011.
The second largest state market, New Jersey, had a sucessful year, increasing its market share to 21% in 2011 from 17% in 2010, but there may be trouble ahead for the state. With supply of Solar Renewable Energy Credits (SREC) now exceeding demand (the state RPS solar requirement), its solar prices have started to decline dramatically, causing a disincentive to new solar installations. However, the expiration of the Cash Grant last year brought about a spike in non-residential demand in Q4, which pushed New Jersey past California in the non-residential market. At the same time, New Jersey failed to enact legislation to fix the SREC oversupply.
Pennsylvania was also impacted by declining market prices for solar, causing severe market disruptions by the end of 2011. With solar supplies far exceeding the state’s RPS requirement, no new solar is expected until 2016. Like New Jersey, Pennsylvania also failed to pass laws to fix the oversupply in 2011, which will slow the state market significantly in 2012. In contrast, Massachusetts, although growing, experienced undersupply of SRECs in 2011, which will provide opportunities for investors and stimulate more demand.
Strong growth will continue in the utility segment in 2012. The overall market is expected to grow more than 50% this year. Project development activity is intense, with many new entrants helping to generate a 23 GW pipeline that is currently under development. Across the US, demand will be stimulated in all market segments as a result of the policy push from state RPSs, the ongoing Federal Income Tax Credit, and the reduction in PV prices. California and Hawaii will be the first states to take advantage of high electricity rates and create economically self-sustaining demand.
