Is Solar Power About to Go Through the Roof?

Credits to: By Steven Johnson | ECT Staff WriterPublished: October 14th, 2014

The outlook is positively sunny for solar energy, at least in the short run.

An expiring tax credit and lower costs should be boons to solar installation in the next two years, a CoBank report says. (Photo By: Andy Gehrig)

A report from CoBank says the United States could experience a jump of more than 70 percent in solar installations by 2016, thanks to a federal tax break and lower system costs.

“A record amount of solar capacity will come on-line over the next two years,” said CoBank economist Taylor Gunn, author of the report.

“Over the longer term, however, the industry will need to adjust to the pending reduction in the [solar tax credit], which will significantly impact the economics of solar installations,” Gunn said.

The study, “Elevated Expectations for the U.S. Solar Industry,”projects that solar installation will increase from 7 gigawatts in 2014 to 12 GW in 2016.

Electric cooperatives are among utilities banking on solar—several co-op representatives participated in a White House summit on the issueearlier this year.

A major force behind the boom is the Solar Investment Tax Credit of 30 percent. That will drop to 10 percent in 2017, so solar investors are likely to move ahead with their projects in the next two years.

Gunn said overall solar system costs are likely to fall, despite U.S-imposed tariffs on Chinese and Taiwanese manufacturers that will push up the price of individual photovoltaic panel prices in 2014.

The panel price hikes will be more than offset by decreases in other system parts, such as wiring, switches, mounting systems, inverter, battery bank and chargers. Those parts, known as the balance of system or BoS, account for about one-half of total solar system costs.

“For systems in the U.S. that are greater than 100 kilowatts, BoS costs are projected to decrease by 30 percent in 2024, relative to 2013,” Gunn said.

Gunn added that the cost of financing is also on the wane because of greater certainty about the production capability of photovoltaic systems and their ability to generate steady cash flows. Before 1987, a typical PV module carried a 5-year warranty; by 2015, that likely will run about 30 years, he said.

After the tax incentive rollback, the future of solar is less certain. The report said the solar industry will need to continue to drive down costs by perhaps 30 percent from today’s levels to break even with a 10 percent tax credit.