U.S. Solar Industry Shines Through in Q1 2011

While Europe's photovoltaic (PV) industry seems to be losing glitter, with first-quarter demand in Germany dropping below half of what was recorded in the first quarter of 2010, a new market insight report outlines an impressive first quarter for the U.S. solar industry.

"A slowdown in major European markets (most notably Italy and Germany), combined with the continued strength of the US market, has already led most PV manufacturers and developers to seek opportunities in the US. We anticipate an exciting, if volatile, year in the US PV market," the Solar Energy Industries Association (SEIA) says in the insight report.

Grid-connected PV installations in the US totalled 252 MW in January-March 2011, marking 66% year-on-year growth. Cumulative grid-connected PV capacity in the US has now reached over 2.3 GW.

Domestic PV module production rose 17% quarter-on-quarter and 31% on the year to 348 MW.

"With analysts predicting the U.S. to become the world's largest solar market within the next few years, manufacturers are increasing looking to the U.S. to site their facilities," commented Tom Kimbis, SEIA vice-president of strategy and external affairs.

Given the pipeline of projects and recent module price declines, the U.S. PV market is expected to continue growing fast and double in new installations in 2011.

Moreover, the association predicts that the US is poised to become the global market leader in concentrating solar, which includes both concentrating solar power (CSP) installations and concentrating photovoltaics (CPV). Over 1.1 GW of such installations are currently under construction.

The question that inevitably comes is: "What's spurring this spectacular growth?".

"In large part, the U.S. market is growing because conditions have improved. Prices for modules, inverters and other balance of systems (BOS) components have decreased, new business models such as the residential solar lease have been expanded, and state markets have introduced new incentives to promote installations," SEIA says.

However, there is one more thing that currently shapes the U.S. solar power market. It is important to also consider the impact of the 1603 Treasury grant, which will expire on December 31, 2011.

The 1603 program, introduced as part of the American Recovery and Reinvestment Act, allows commercial businesses to receive a cash grant instead of the 30% Federal Investment Tax Credit. Essentially, it means businesses receive a 30% refund off the gross cost of their solar systems.

Just as businesses in Europe rushed to complete PV system installation before cuts in feed-in tariffs take effect, it is quite possible that the market in the USA is mirroring Europe in this respect.

"We are likely to see a mid-year boom in incentive applications, a late-year boom in module and inverter shipments, and a Q1 2012 boom in non-residential installations," SEIA projects.

But will ending the 1603 Treasury grant end solar growth in the U.S. as well?

That's unlikely. It will slow down the market growth but will not kill it, for sure.

Historically, the U.S. market has been driven primarily by the non-residential sector (commercial, public sector and non-profit), which comprised over 50% of total installations through 2008. However, the utility sector has been gaining ground, reaching a 28% market share in 2010, while residential remained relatively steady, accounting for around 30% of total installations.

In the U.S., soaring utility demand is redefining end-market, product mix and channels to market for solar PV, says another solar market research firm Solarbuzz.

"With the U.S. utility segment projected to soar to 54% of the total market in 2012, significant changes in module supplier, inverter manufacturer, project developer, distributor, and system integrator market shares are likely to occur over the next five years," commented Craig Stevens, president of Solarbuzz.

Solarbuzz expects the USA to account for 9% of world solar PV demand in 2011, rising from 5% in 2010. The solar PV market share of the USA is projected to increase steadily to reach at least 14% by 2015.

To sum it up, it seems that although long-term stability in federal policies backing renewables is still a mirage, the U.S. market will be a very interesting place for solar power companies, at least in the next few years.

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