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US solar market surges as demand from homeowners hits new high

SNL Image

Residential solar installations in the U.S. increased by about 18% year over year in the third quarter.
Source: AP Photo

Solar installations in the U.S. jumped 45% in the third quarter compared to the same period the year before despite added costs from tariffs on most imported solar panels, according to research and consulting firm Wood Mackenzie Power & Renewables and the Solar Energy Industries Association, a trade group.

The market grew by about 2,600 MW last quarter, up from about 1,800 MW of new capacity additions a year earlier, as installations in the residential sector hit a record high, the groups said in a Dec. 12 report.

Solar Energy Industries Association President and CEO Abigail Ross Hopper, a critic of the tariffs President Donald Trump imposed in early 2018, has said even more solar projects would have been built if the trade duties were not in place.

The Solar Energy Industries Association, or SEIA, is asking the Trump administration to lift the tariffs and wants Congress to extend the investment tax credit, which is scheduled to drop to 10% from 30% of eligible project costs by 2022 for commercial tax filers and to be eliminated that year for residential filers.

"This is the kind of growth and investment we could see going forward if we make smart policy moves, like extending the solar investment tax credit and stopping additional tariffs," Hopper said in a Dec. 12 news release. "Failure to make these policy moves will limit deployment potential and cost jobs."

Economics improve for residential solar systems

In the residential sector, improving project economics are driving up demand in smaller markets such as Idaho, Wyoming, New Mexico and Iowa, according to the report. Residential solar installations increased by about 18% year over year in the third quarter to 712 MW, according to information from Mike Munsell, a senior marketing manager at Wood Mackenzie Power & Renewables.

With the addition of energy storage, residential solar systems have "gone from a nice-to-have home addition to a need-to-have home resiliency system due to the ongoing power outages associated with the catastrophic wildfires in California," Jeffrey Eckel, chairman, president and CEO of Hannon Armstrong Sustainable Infrastructure Capital Inc., said Oct. 30 on the investment firm's third-quarter earnings call.

In November, TerraForm Power Inc. CEO John Stinebaugh said the power plant owner was creating a stand-alone division focused on distributed generation, which he said offers better risk-adjusted investment returns compared to larger utility-scale solar projects in North America.

"The distributed generation model works very well because you're displacing retail energy, which has a higher cost than wholesale energy," Philip Hopkins, head of Wells Fargo & Co.'s renewable energy and environmental finance team, said in a recent interview.

"The main impediment that I see to distributed generation is just the complexity of the financing," Hopkins added. "The sheer number of projects requires a more uniform approach to the contracting and the arranging of the financing."