Each year, Shayle Kann, SVP of Research at GTM, provides the solar industry equivalent of Mary Meeker’s internet trends slide deck — providing some context for the industry and illuminating the not-so-obvious changes. This year’s presentation is called "The Evolution of Solar" — and this is a summary.
Kann suggests that the solar industry will evolve even faster in the next five years than it has in the previous five (Tom Werner, SunPower’s CEO, agrees). There is almost 20 gigawatts of solar operating in the U.S. today, and we could hit the 1-million-installations mark this year in a $15 billion market.
These numbers were almost unimaginable five years ago. And similarly, the solar market of 2020 might be unrecognizable to today’s market players.
Kann suggests that the once-static relationship between customer, utility, and project developer will be much more dynamic.
He adds that the traditional relationship between utility stakeholders is changing. One of the drivers is the sharply plunging price of solar PPAs — Kann notes that it’s now common to see PPA prices of $50 to $60 per megawatt-hour. Those numbers keep falling, according to Kann, who cited recent reports of pricing below 4 cents per kilowatt-hour pricing.
Kann points out that 5.7 gigawatts’ worth of solar PPAs have been signed outside of RPS requirements.
The GTM Research SVP also notes that utility-scale projects are not just for utilities anymore, citing the recent First Solar-Apple deal. Kann points out that this is something that has been happening in the wind market for years: large commercial customers such as data centers and campuses are all potential offtakers for utility-scale solar.
He sees this utility shift as important, but not a game-changer like the transition in distributed solar.
Kann confronted the limitations of the total available market for residential solar. Although there are 113 million households, households that own the house in strong solar markets with good FICO scores are limited to 9 million addressable homes. So far, there are about 700,000 homes in the U.S. that have gone solar.
How can this market be opened up to more homes?
How to open up the residential market? The first thing is to open up new states. Kann suggests that there are "a bunch" of new states such as Texas, South Carolina, and New Mexico that residential installers are approaching.
But for years, the "theoretical answer" to opening up residential markets has always been community solar, which appeals to utilities, according to Kann.
Kann pointed out that about 25 megawatts of community solar have been deployed, but added, "We’ll see over 400 megawatts of community solar built out in the next few years." He continued, "Talk to a municipal utility — they are thinking about how they can do community solar," adding, "It’s really attractive to them, and they are just trying to figure out the right mechanism."
Kann said there’s no reason why community solar can’t be as big a market as residential rooftop solar.
The looming distributed solar dilemma is how residential solar owners should be compensated for power production in excess of consumption. Consumers are currently being compensated at the retail rate — but that’s going to "change relatively quickly in a bunch of different ways," according to Kann.
The bottom line is that utilities will soon compensate solar owners at less than the retail rate.
Kann said that the "big existential question for utilities" is finding their role. He added that utilities won’t own the assets but instead will manage the energy network. Kann spoke of the potential for the utility to own and rate-base the inverter.
As for the combination of solar and storage, Kann pointed out the partnerships being made and territories being claimed.
Kann said that the solar-plus-storage-plus-load-control model can improve the economics of solar, even in the absence of compensation at retail rates.
Here’s the video:
Previous presentations from Kann:
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