By: Tyler Lancaster, Connexion Energy Team Intern
As the solar industry matures, particularly photovoltaic (PV) technology, the cost of solar panels has plummeted. PV module prices have dropped from $1.78/W in Q1 2011 to $0.94/W in Q1 2012, spurring a record amount of PV installations for Q1 2012 at 506 MW. This figure shouldn’t be taken out of context—the solar industry faces challenges over the next few years as political climates influencing subsidies, financial incentives, and raw material supplies lack consistency. Nonetheless, the resiliency of solar PV is unquestioned as it continues to ramp up installation despite harsh economic times and the growing pains intrinsic to a maturing industry. For years, owners of residential and small- to medium-sized commercial facilities have balked at implementing solar energy solutions due to high initial investments and long payback times. With the material cost of PV technology quickly falling, creative financing and advanced project management techniques have emerged to accelerate the proliferation of PV technology beyond utility deployments and into the residential and commercial spheres.
Recent news from companies seeking to reduce the “soft cost” of solar—permitting, commissioning, labor, etc.—indicates continued reason for optimism regarding the availability of solar PV to residential and commercial building owners. Recently, Clean Power Finance was awarded $1.5 million in grants from the Department of Energy’s SunShot Initiative to reduce the soft costs of solar. Clean Power Finance will apply these grants to two unique projects to improve communication amongst the denizens of the PV industry. One project seeks to develop an online marketplace for operations and maintenance service providers to connect with owners of installed PV systems. Such a marketplace will ensure cost efficient maintenance of installed PV systems, most which will continue producing electricity for at least 30 years. In addition, Clean Power Finance plans to develop an online brokerage to connect solar installers with companies specializing in finding end users. This brokerage also focuses on improving the communication channels within the PV industry, while simultaneously introducing the sort of competition that will cut the unnecessary fat out of PV sell prices.
The engineers and researchers driving the rapid commercialization of PV technology are superb technologists but have encountered difficulty in effectively marketing their products and developing robust business models to match robust PV technology. Clean Power Finance’s initiatives represent one method of strengthening the PV marketplace through the virtue of the Internet, but the problem remains—how can homeowners and small to medium sized business owners on tight budgets install PV systems on their facilities? SolarCity is one company making solar PV accessible to residential and commercial building owners. SolarCity funds the purchasing of solar panels and the installation of the PV system, while customers pay for discounted electricity compared to their usual utility rate. SolarCity and U.S. Bancorp recently announced an additional $250 Million in funding for residential and commercial projects, an affirmation of SolarCity’s model for brining solar PV to the average Joe as the amount of available seed money continues to grow. With utility electricity rates increasing annually from 5-10% on average, future returns for enterprising building owners who install solar PV today could prove enormous indeed.
The graph below demonstrates the increasing importance of the commercial and residential spheres in relation to installed PV. Despite a rocky political climate and turmoil amongst PV manufacturers due to looming trade wars, U.S. residential and commercial installations carried PV to Q1 highs in 2012.
Residential and commercial applications continue to grow despite the variability in utility installations and serve as a physical reminder of distributed generation’s true spirit. As American businesses gain confidence in the viability of PV as a means to reduce energy consumption and provide energy security for years to come, companies like Clean Power Finance and SolarCity lead the charge in making PV available to capital poor entities like homeowners and small margin businesses. Solar PV technology must drastically increase its energy efficiency and utilize economies of scale to reduce manufacturing and material costs, but creative business solutions will certainly help in reducing the significant soft costs of solar to bring leaner PV products to consumers. Fortunately, the Sun’s energy is free and will remain free for the foreseeable future.