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US Solar Industry A Year in Review: 2008

Report

Executive Summary

The U.S. solar energy industry grew to new heights in 2008 and many industry observers expect thatgrowth to continue in 2009. Total capacity grew by 1,265 megawatts (MW)1 in 2008, up from 1,159 MW installed in 2007.2 This brings the total installed capacity up by 16 percent to 9,183 MW. Capacity in both photovoltaic (PV) and solar water heating systems grew at record levels. And while no new concentrating solar power (CSP) plants were completed in 2008, projects totaling more than 6,000 MW are in the pipeline most with signed purchase power agreements. Solar pool heating capacity grew at a slower rate than in 2007, reflecting conditions in the residential real estate market.

The industry saw some of the most significant national solar policy victories ever in late 2008. The Emergency Economic Stabilization Act of 2008 (EESA), enacted on October 3, extended the 30-percent solar investment tax credit (ITC) for eight years, lifted the cap for residential PV installations, allowed application of the tax credits against the alternative minimum tax (AMT) and removed the prohibition against utilities’ use of the ITC. This long-term policy stability will help companies in the U.S. solar market make longer-term investment decisions and attract better financing. This will support solar energy’s crucial contributions to the shift to clean, renewable
power. Many state and local governments also adopted innovative policies to speed the adoption of solar energy.

There were a few setbacks. The Bureau of Land Management announced a moratorium on applications for solar development on federal lands, which was repealed after an outcry from the industry and renewable energy advocates. The solar industry has not been immune to the global economic crisis. Many companies are encountering problems accessing sufficient credit; a few have announced significant layoffs. Several major institutional investors have decreased their involvement in renewables in response to global credit pressures.

Introduction: 2008’s Growth Amid Financial Crisis

The solar industry demonstrated its ability to grow despite a wave of economic setbacks last year. Grid-tied PV capacity increased 58 percent in 2008 and solar water heating capacity increased 40 percent. At the same time, solar was not spared from the global economic meltdown that has hit all sectors of the economy. As a result of the continuing housing crisis, solar pool heater shipments remained below record levels set in 2006. In a broad survey of the solar industry, conducted before the passage of the American Recovery and Reinvestment Act of 2009 (ARRA), 86 percent of companies reported some kind of negative impact as a result of the poor economy. Of the employees represented in the survey, 31 percent worked at companies that had already downsized or were expecting to downsize. 

Many companies report that, while consumers continue to express interest in solar, concerns about personal finances and tight credit have reduced sales. Several installers report that they still get the same number of calls about their products, but the conversion rate is down as consumers adopt a “wait and see” attitude about the economy. Making matters worse, today’s tighter credit means that even customers with excellent credit scores, who are ready to buy, may be unable to secure financing at a reasonable price. The ARRA should mitigate some of the pain that broader economic pressures are inflicting on the solar industry.

The ARRA established a temporary grant program that will allow commercial solar customers to receive a cash payment to cover 30 percent of the cost of installing solar equipment. Companies can elect to take advantage of the new grant program whether or not they have sufficient tax liability to use the full ITC. The Act also created a fund to guarantee up to $60 billion in loans, specifically for renewable energy and transmission projects. These provisions should help alleviate recent constraints on project financing.

Read the full report here.

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