U.S. Solar Markets ‘Will Fail’ Or Install 1 Terawatt By 2040: BNEF
In 2040, solar installations will account for 30% of U.S. installed energy generation, Bloomberg New Energy Finance analyst Hugh Bromley predicted Wednesday during SunPower ‘s ( SPWR ) Sustainable Energy Symposium in San Francisco. That would be 1.6 terawatts — an as-yet unneeded metric for the solar industry. In 2015, cumulative U.S. solar installations hit 24.7 gigawatts, and industry tracker IHS expects the U.S. to add 5.6 GW before the end of the year. Worldwide, the installed base is expected to surpass 310 GW in capacity. To reach the 2040 target, the U.S. will have to transform the way it funds solar, Bromley said. Navigating The Regulatory Flux Last year was a landmark year for the U.S. solar industry. Congress extended the Investment Tax Credit (ITC) — a key subsidy underpinning the solar industry — and President Obama unveiled his Clean Power Plan in an effort to combat global warming. California set a goal of 50% renewable energy by 2030. On the other hand, net-metering debates spooked potential customers and became fodder for lawsuits. In Nevada, regulators cut payments to solar customers for energy fed back to the grid, prompting residential installers SolarCity ( SCTY ) and Sunrun ( RUN ) to exit the state. “If the economics go the way we think they will, what that would suggest is the energy markets we have today at the wholesale level trickling down to retail simply won’t work as they do today,” he said. “They will need to change. They will fail.” And therein lies the risk, Bromley says. Customers buying or leasing solar systems for 15-20 years, on average, have little to no visibility into the future of the solar industry which SunPower CEO Tom Werner earlier called “turbulent.” Customers are “exposed to several layers of price risk,” Bromley says. “What is your energy bill going to look like? Will there be increased fixed charges and demand tariffs? How is your asset going to be positioned in whatever retail billing looks like in 10 to 20 years’ time?” That’s where SunPower shines, Werner argues. Unlike rival developer SunEdison which “went bankrupt in spectacular fashion,” and SolarCity which is growing rapidly but not profitably, SunPower is diversified and has cash on hand to make it long term. SunPower reported a 30-cent per-share loss ex items for its Q1. It was SunPower’s first quarter in the red in three years vs. residential installers like SolarCity and Vivint Solar ( VSLR ), which have never been profitable. Top rival First Solar ( FSLR ) reported a loss once in the past three years. Solar: ‘A No Brainer’ Balance sheet aside, SunPower’s tech innovations — which combine hardware with software — will weather the upcoming regulatory flux, Werner says. The company’s Helix product isn’t a “cut and paste solar system,” it’s a complete solution that includes storage and energy management. Wall Street often considers solar storage a pie-in-the-sky ideal that could allow solar customers to entirely cut ties with the electrical grid, thereby avoiding net-metering and other regulatory pain. As it is, the grid fills in at nighttime and on cloudy days. Already, software-run energy management allows customers to see “in dollars and cents” the crux of their energy usage and then manipulate it for better economic value, Werner said. Adding storage is a game changer. “Solar is becoming a no brainer because it makes economic sense,” he said. Companies like Google ( GOOGL ), Amazon ( AMZN ), Microsoft ( MSFT ) and Facebook ( FB ) have figured that out, Bromley says. The quartet is among the country’s top solar users. Investor pressures will continue to push the Fortune 500 to renewable and sustainable futures, he said. Now, Bromley is waiting on a new tech that can gap up on renewable leaders solar and wind. Between 2016 and 2021, Bromley expects those sectors to install 18 GW and 19 GW, respectively, by far outpacing other renewables. But any new renewable innovation faces a steep uphill battle. “Any new tech needs to lobby support from the government and come up with an argument as to why we need a third cheap, clean tech,” he said. “Unless, it’s something that deals with intermittency issues.”