The U.S. solar industry experienced its biggest boom yet this year, with a record-breaking 4,143 megawatts (or million watts) of solar generating capacity added in the third quarter of 2016, according to a new report. And the fourth quarter is on track to surpass it, with continued growth expected through the rest of the decade.
The optimistic new report, published by the Solar Energy Industries Association and market analysis firm GTM Research, comes at a time of mounting uncertainty for the future of renewable energy and environmental policy in the United States. President-elect Donald Trump has recently sparked major concern about among environmentalists with his nominations for heads of the federal energy and environment agencies.
Last week, Trump named Oklahoma Attorney General Scott Pruitt, who has expressed skepticism about human-caused climate change, as his choice to head the Environmental Protection Agency. Pruitt is suing the EPA over its proposed Clean Power Plan and regulations aimed at curbing methane emissions from the oil and gas sector.
And Tuesday, Trump announced former Texas governor Rick Perry, who also has expressed doubt about climate change, as his choice for secretary of the Department of Energy. While wind power in Texas did expand under Perry’s tenure as governor, he also said in 2015 that he opposed extending the federal tax credit for wind, preferring instead to leave such decisions to the states.
For now, the new report is assuming no major changes in the pace of wind and solar expansion over the next few years as a result of the presidential transition.
“We’re always assuming business as usual in terms of national politics,” said Tom Kimbis, interim president of the Solar Energy Industries Association.
The new report finds that total installation in the third quarter of 2016 constituted a 99 percent increase over the second quarter, and a 191 percent increase over the third quarter of 2015, with one new megawatt coming online every 32 minutes on average. These gains were mostly the product of additions in the utility-scale solar sector, the report notes.
One reason for the boom likely involved uncertainty over the future of the federal solar investment tax credit, which was slated to terminate at the beginning of 2017. With this in mind, many solar companies planned to push through as many projects as possible in 2016. At the end of 2015, the tax credit ended up receiving an unexpected extension, which has now given companies the freedom to allow some of these projects to spill over from the end of 2016 into 2017.
On the other hand, residential solar fell by 10 percent from the previous quarter, an outcome Kimbis says is likely due to a variety of factors. For one thing, several states have made notable policy changes that may have affected their markets in significant ways. Nevada, for instance, decided to cut its net metering rates at the end of 2015 — this is a practice that allows solar customers to sell excess electricity they generate to their local utilities at a retail, rather than wholesale, rate. (The state later restored retail-rate net metering for its existing solar customers.)
A phenomenon known as “customer fatigue,” may have also played a role, Kimbis said.
“As you gain more and more customers within a marketplace, each additional customer is a little more difficult to obtain,” he said. “The customer acquisition costs increase because the very early adopters, the more interested customers, you’ve already sold to.”
But he added that the residential decline is not a “big concern,” and that as the market continues to adjust, he expects the residential sector to bounce back to more typical levels of growth.
Overall, the report predicts that more than 14 gigawatts (or billion watts) of solar capacity will come online in 2016, an 88 percent increase over 2015. And it indicates that more leaps will be made in the next five years. By 2020, for instance, this number should be up to 20 gigawatts annually.
Provided there are no unexpected changes to the federal tax credit for solar, many experts predict that the industry will continue to expand, driven mainly by market forces and individual state policies. And that’s a bright spot at a time when many other national environmental policies may be at risk of curtailment under the incoming administration.
“We do not anticipate the Trump presidency impacting negatively or positively the growth of solar,” Kimbis said. “In fact, we think that no matter who’s in the White House, the solar industry is going to continue to grow tremendously.”