According to a recent report from Navigant Research, 220 GW of distributed solar photovoltaic capacity will be installed worldwide between 2013 and 2018. The total, which includes solar generation in residential, small commercial and industrial settings, will represent $540 billion in revenue during this time.
The report, ‘Distributed Solar Energy Generation,’ analyzes the global market for distributed solar PV systems less than 1 MW in capacity. The report outlines the most important market drivers, technology trends and challenges that the growing distributed solar PV industry will face.
One market driver, the report notes, is that module prices are decreasing – a factor that is helping growth in the U.S., China, Japan and other countries.
Mike Hall, CEO of Borrego Solar Systems Inc., a designer, installer and financier of PV systems, says the rapidly declining system price is the single biggest factor driving growth.
‘The all-in cost of a commercial-scale PV system has dropped by more than 50 percent over the last five years,’ he says. ‘The price declines have been tremendous over the last three years, with solar module prices dropping by more than 50 percent during that time and system prices falling by similar amounts.’
Hall adds that solar energy is competitive with many conventional sources of energy without any state-level subsidies. ‘This happened much faster than any of us in the industry had predicted,’ he says.
Lower module prices are helping PV in general, but they are especially helping distributed generation in Europe and North America, says Aaron Thurlow, vice president of sales and marketing for module manufacturer Silevo.
‘Distributed generation systems arguably provide more value, and more importance is placed on module efficiency and performance, which has been a technology laggard for the industry,’ he says. ‘We will continue to see utility-scale installations in South America and Asia. However, in North America and Europe, it is increasingly difficult to develop large, utility-scale projects of 50-plus megawatts.’
According to the Navigant report, distributed-generation PV in the U.S. will grow from 2,475 MW in 2013 to 3,919 MW in 2018. The extension of the solar investment tax credit through 2016 is helping.
‘The industry is fully aware that lucrative financial incentives will not be around forever. As a result, many companies are looking at 2017 as the year that solar PV will be able to stand on its own, without government support,’ the research firm says in a press release.
Also according to the report, the success of the solar lease model in residential and small commercial markets will result in a 9% compound annual growth rate by installations.
One obstacle for distributed PV is utility resistance to further penetration. However, the report notes, ‘In many ways, the fear of distributed solar PV potentially wreaking havoc on the electric grid has not played out in reality.’
Hall says utility concern and resistance is a big challenge. ‘When solar was less than 0.01% of the generation, the magnitude of these issues was too small to concern the utilities,’ he remarks. ‘Now, they are increasingly becoming concerned with technical issues associated with interconnecting so much intermittent generation and financial issues concerning net metering. Our industry believes that solar actually provides a public benefit in both of these areas.’
Another challenge, he says, is that overall demand for electric power in the U.S. is not growing very fast.
‘So what that means is, generally, solar has to compete with existing generation that is already online, which is a tough competitor,’ Hall notes. ‘Renewable energy mandates or renewable portfolio standards have helped, and for the short and medium term, these regulations will continue to be drivers. For the long term, we will have to find other ways to compete.’
The Navigant report also looks at key innovations, barriers and opportunities for distributed PV, as well as forecasts by region. For more information, visit navigantresearch.com.
Nora Caley is a Denver-based freelance writer.