Not quite the size of its big brother in Munich (58,000 visitors), the InterSolar U.S. in San Francisco was nevertheless one of the largest solar industry conferences in North America to date with 17,000 visitors from July 13-16. As such, it is a useful place to gauge industry sentiment, not at least because the conference came just weeks after the Obama administration’s ACESA bill (a.k.a. The Waxman-Markey Bill) passed congress, albeit narrowly.
The U.S. set to become world’s largest solar market within decade
Despite many solar technology companies losing 75-80% of their market cap over the last 12 months, there was a quiet confidence among the leading players in the industry on display in San Francisco. The main reason for this confidence is that the long-term growth prospects for the industry are promising.
Analyst Travis Bedford of The Prometheus Institute predicted that the U.S. solar market will triple in size by 2012 and that photovoltaic (PV) technology will reach grid parity for 95% of the U.S. population by 2015. By Bedford’s own admittance, these predictions were based on very conservative assumptions, meaning that they might even come through sooner if conditions change in a positive direction.
Government Regulations still no. 1 market driver
Solar markets around the world largely depend on government regulations and incentive schemes. I have previously described the successful German legislation for renewable energy, EEG, upon which many other countries have modeled their own legislation, including Spain, Italy, France, Greece and in Canada, Ontario, with its Green Energy Act. The U.S. market is different – the feed-in tariff scheme that has been so successful in Germany is perceived by many in the U.S. as a subsidy and thus politically unpalatable – and policies tend therefore to focus mainly on tax credits and quota arrangements to create incentives for utilities and investors alike to invest in renewable energy generation.
Despite that, there are examples of both states and local utility companies that use FIT schemes to stimulate private investments in renewable energy technology (i.e. California, Vermont, Gainesville, FL and Sacramento, CA).
Think the U.S. is one big market?
With every state, municipality and utility company creating their own mix of legislation and incentives, the U.S. market can hardly be seen as one single market, as pointed out to me by Alfonso Velosa III, a Research Director with analyst firm Gartner Inc. When all the different regulations at the various levels of government are taken into consideration, the U.S. has around 750 different markets. Nevertheless, there are strong indications that the various levels of government in many states are working to introduce more favorable regulation to stimulate investment in renewable energy. As with Ontario, it is the job creation potential of the industry that is driving politicians this way, with the added benefit of lowering carbon emissions and reducing dependency on coal, (imported) oil and gas.
Are you “bankable”?
From a technology perspective, the industry believes that 2009 will be a watershed year in many ways. Primarily on account of the global credit crunch – which has made the finance industry more conservative in their approach – emerging solar technologies have had a particularly rough year because they are not seen as “bankable” or “financable”. The lack of performance track records for technologies like thin film and concentrated PV (CPV) has meant that it has not been possible to obtain project financing for those technologies, although the picture is not entirely uniform across the world. While European banks at one point explicitly declined to finance thin film projects, both thin film and CPV have achieved financing in the U.S., with thin film clearly the more successful of the two due to its greater maturity. Both thin film and CPV must improve, however, to gain credibility both in North America and elsewhere. Thin film must improve both durability and conversion efficiency from today’s 7-8% level to above 10%. CPV must both lower cost, rid itself of potential heat problems and demonstrate reliability along the way.
For many solar start-ups this is too much to ask and they will fail in 2009 because their technology lacks “financability”, which also reduces their ability to attract growth capital in today’s risk-averse climate. This is unfortunate, as the solar industry need speculative money in order to reach breakthrough innovations that can make the industry sustainable globally without relying on government incentives.