Research Question: Will the falling costs of solar energy production pave the way for solar to become the go-to energy source in the U.S. in the next 5-10 years?
Companies Covered: Vivint Solar (VSLR), Solar City (SCTY), First Solar (FSLR), SunPower (SPWR), NRG Energy (NRG)
Report Available: November 13, 2014
Blueshift’s initial research shows solar energy production and installations climbing at a steep rate as price falls, yet there are plenty of financial, practical, and political roadblocks which could stand in the way of solar realizing its true market potential.
- Residential and utility scale solar energy projects continue to skyrocket as costs of solar production continue to fall.The U.S. installed 13 GW of solar PV in the second quarter of 2014, up 21% over Q2 2013, the third consecutive quarter in which more than 1 GW was installed in the U.S. These record-setting trends are fueled by the continued distributed generation boom in which residential and non-residential installations added more than 500 MW for the second time ever. In addition to the “green” movement, economics alone are incenting energy consumers to choose solar. The unsubsidized levelized cost of PV solar energy has dropped 78% in the last five years and now ranges from $72 to $86 per MW hour. This figure is far less than the wholesale price of daytime peak power and has begun closing in on the wholesale price of base-load power, the underlying power throughout the day and night provided primarily by coal and natural gas.
- In addition to solar energy production costs falling, efficient solar energy storage solutions closes in on viability as battery prices continue to decline and storage per gram capability increases. The falling storage costs will be roughly1/10th of their current level once renewable energy reaches 20% grid penetration. At that point, costs will allow a mix of solar, wind, and storage to undercut current base-load energy costs in many parts of the country and world. A handful of financial and insurance firms have accurately predicted solar as an imminent part of energy’s future and invested billions. Companies like GOOG and BRK-A are reporting 15% returns on solar investments. On October 1, private equity firm BRX and a few of its partners realized a $1.1 billion paper gain on a $195 million investment when taking VSLR public. The valuation is astronomical given VSLR’s paltry $10 million in sales for the first six months of 2014.
- Despite clear evidence that solar PV sales are soaring and the cost to produce solar energy is falling below grid costs,challenges to the solar industry abound. Electricity is still less expensive than residential solar, the 30% federal investment tax credit is slated to drop to 10% in 2017, and it is uncertain if home buyers will be willing to assume the lease on existing solar installations. There is limited access to solar data, preventing a true risk assessment. Data needed to determine risk include solar manufacturer quality and bankability, future project performance, actual versus calculated results, consistent operational costs and ROI of solar farms, interfleet performance, ROI on distributed assets, and quality control over a distributed base. Solar’s growth has also been impacted by politics. Many power companies are pushing for changes at the state level in net metering laws that will charge solar panel owners a grid connection fee, or at least lower the rate paid to panel owners for their excess electricity.
To determine if falling solar production costs will cause solar power to become the go-to energy source in the next 5-10 years, Blueshift will gather data and issue a market research report from independent sources in the following areas: Electricity generators, retail electricity executives, energy regulators, solar energy executives, energy storage specialists, solar panel manufacturers, and industry specialists.
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