We promise this post won’t focus on the recent election turmoil. Instead, let’s speak to a particularly important bright spot that is central to our work.
There has been an incredible amount of change to the economy over the past few months. Industries have been upended and society continues to work towards normalcy during a time of volatility. As the economy continues to pivot back to its regular drumbeat of production, we should use this as an opportunity to invest in some of the areas that can bring us back faster: solar energy is one such area. There are simply too many good reasons to ignore, and we’ll focus on just a few here.
If you want to create jobs, you need look no further than the solar industry. According to The Solar Foundation, the number of U.S. workers employed in the industry stands at close to 250,000, increasing by 167% over the past decade. A particularly interesting statistic: between 2014 and 2019, job growth in this sector expanded by 44%, nearly 5 times the national job growth average. That’s hard to ignore.
And while the majority of these jobs are in system installation and project development, there are plenty of other opportunities across multiple sectors, all serving a critical component within the supply chain and driving efficiencies.
Jobs in solar continue to grow at a rapid pace due to steep declines in cost, which continue posting impressive reductions year-on-year.
THE COST OF SOLAR
In October the IEA released their World Energy Outlook 2020 publication, historically outlining that solar can generate electricity at a rate of $20/MWh in utility scale projects which benefit from low-cost financing and high-quality resources.
Cutting-edge manufacturing processes are reducing the number of defective cells produced, while simultaneously increasing the cells’ efficiency. These conditions make solar power the cheapest form of energy in history, with further reduction capabilities in the coming years. As the suppliers of renewable energy technology mature, the barrier to entry is lowered for new entrants as technology risks are mitigated. With new entrants, market participants have growing competition in achieving cost leadership, driving costs down for the consumer.
Source: Lazard. https://www.lazard.com/perspective/levelized-cost-of-energy-and-levelized-cost-of-storage-2020/
While we’re at it, let’s not forget energy storage, a growing component and enabler of installed solar systems. The average lithium-ion battery cost decreased from $650 per kilowatt-hour (kWh) in 2013 to $176 per kWh in 2018, according to Bloomberg New Energy Finance. As the cost of storage continues to be pushed downward, investment is expected to expand considerably. Global investment in all energy storage technologies is set to reach $1.2T by 2040 as technology costs continue to fall. This prediction is based on a forecast that lithium-ion batteries will have an upfront cost which is 52% less in 2030 than it was in 2017.
THE SOLAR REGULATORY LANDSCAPE
There are a variety of Federal and State level regulations that influence solar energy and a variety of other digital, decentralized, and decarbonizing technologies being developed by US companies.
US Federal regulatory trajectory is heavily dependent on this week’s election outcome. However, states are independently defining solar energy standards and forward looking goals. Here are 4 regulatory items to watch over the coming 3-months:
Investment Tax Credit (ITC): The ITC has proven to be the most important Federal policy incentivizing investment into the US solar energy industry. For solar projects that begin construction in 2020 the ITC is a 26% Federal dollar-for-dollar income tax reduction for either a person or company. The ITC begins stepping down to 22% ITC for 2021 projects and 10% ITC for 2022 C&I projects. The Trump Administration plans to let this program phase out on its normal schedule while a Biden Administration plans to extend the program as part of a plan to train workers for “green economy” jobs.
Source: Solar Energy Industry Association
Renewable Portfolio Standards (RPS): State level RPS initiatives in support of increased renewable energy have continued to increase even without additional Federal support over the last 4 years.
Source: National Conference of State Legislatures
FERC Broadview Ruling: FERC Commissioners recently re-defined the meaning of a “Qualified Facility”. A solar “Qualified Facility” (QF) is required to report its maximum capacity as a DC rating while other forms of QF technologies can report as an AC rating. This adds potential downside risk for existing C&I facilities that installed solar power to support normal operations while also delaying new construction. A Biden Administration has pledged to return to the previously established definition of a QF under PURPA.
FERC Order 2222: This rule allows solar Distributed Energy Resources (DERs) to aggregate together and participate in wholesale market energy sales. FERC’s order concluded in September and largely agreed with solar energy advocates on the benefits that this technology brings to the electrical grid as a whole. This order will lower costs for customers through enhanced competition, increase grid flexibility & resiliency, and will promote private investment that will help innovate, optimize, and modernize the US electrical grid.
There is no better time to get involved in solar whether it’s on the technology, project development, or supply chain side. Have questions and want to learn more? Don’t hesitate to reach out to us at email@example.com or to one of us directly.