Solar Beat Natural Gas for New Electric Generation Capacity in 2015

The U.S. Solar Market Insight 2015 Year in Review report was just released and is full of good news for the industry. Solar energy had another record-breaking year in 2015, installing nearly 7.3 gigawatts of new capacity. Meanwhile, pricing for U.S. solar systems decreased by 17 percent from 2014.

For the residential market, average prices were at $3.50 per watt for installed solar energy generation capacity in the fourth quarter of 2015. For those who aren't familiar: Price per watt is a way to compare the capital costs of different forms of electricity generation. It refers to the ability to produce a watt of electricity compared to the investment dollars spent, and doesn't refer to how much homeowners will pay for a watt of energy from their system once it's installed.

"Material costs for panels and equipment have dropped, while energy production has increased due to greater solar panel efficiency," said Nir Maimon, CEO of Sol Reliable, a solar installation and green-energy solutions company headquartered in Los Angeles that services residential and commercial customers throughout California. 

The residential solar market had an amazing year in 2015, with 2,099 megawatts installed. This represents a 66 percent increase from 2014. Again in 2015, California led the market with nearly half of the residential solar PV installations. Relatively high electricity costs, a variety of financing options and utility-rebate programs make this an ideal market.

Technological advances have made solar more appealing to consumers, Maimon pointed out. For instance, Sol Reliable employs solar-system monitoring for its residential solar PV systems, allowing homeowners to know exactly how much power their system is generating. Microinverters and power optimizers increase the efficiency of solar systems, especially when shading is an issue. Overall, solar panel efficiency is increasing, which is why Maimon believes it is crucial to always have the most technologically-forward systems currently available for buyers seeking the highest return on investment.

“There are higher-efficiency solar panels available on the market now, which come at a slightly lower price [per watt],” Maimon noted. "Average panel efficiency is now 17 to 21 percent, while previously, it was closer to 16 to 17 percent efficiency. Higher energy productions mean great [utility bill] savings and the reduction in price allows us to offer buy options with a higher cash flow."

This is because the more energy the solar system produces, the greater the savings for residential customers. Higher-efficiency solar panels also enable homeowners to generate a larger total percentage of their electricity use.

Even though average solar equipment costs fell by 17 percent overall, soft costs for the residential market, including design, permitting and on-site labor, actually went up by 7 percent. This is largely because customer acquisition costs have increased.

Non-residential solar PV installations, however, didn't follow the same trends as residential and utility PV, and actually declined 5 percent from 2014 numbers to 1,011 megawatts of installed capacity in 2015.

Perhaps one of the most surprising bits of news is that solar energy beat natural gas for new electric generation capacity in 2015, for the first time ever. "With PPA prices for utility-scale solar already ranging between $35 per megawatt-hour and $60/MWh, utility PV’s value proposition is evolving beyond simply meeting renewable portfolio standard (RPS) obligations," states the U.S. Solar Market Insight 2015 Year in Review. "On top of RPS-driven demand, centralized PV is proving to be an economically-competitive resource to meet utilities’ peak power needs. This is especially true in regions like Texas and the Southeast, where utilities are retiring their aging coal fleets and replacing them with utility PV, alongside combined-cycle natural gas plants."

Although solar incentives, including the renewable energy tax credit, certainly help the industry develop, the significant drop in solar panel and equipment prices is beginning to allow solar energy to compete on its own merits. With a five-year extension of the federal tax credit, the future of solar energy looks bright.

Image Credit:Flickr/Oregon Department of Transportation