Solar energy is becoming a generation resource so ubiquitous that utilities are looking beyond simply contracting for new capacity and are increasingly moving into the sector themselves.
Solar added a record-breaking 14,762 MW of capacity in 2016, nearly doubling its 2015 growth. The resource added 39% of all new U.S. generation capacity in the year, making it the leader among all resources for the first time.
Growth was dominated by utility investment in 2016, a trend that’s expected to continue, according to a new report from the Solar Energy Industries Association and GTM Research.
Utilities will provide two-thirds of the 13.2 GW of solar capacity forecasted for 2017, estimates the U.S. Solar Market Insight 2016 Year In Review.
The expected new capacity is about 10% lower than what was deployed last year, but experts say it doesn’t herald the end of the solar boom. GTM reports that deployed capacity in the U.S. “is expected to nearly triple over the next 5 years.”
Solar’s cost competitiveness will continue to drive growth, particularly with utilities, said Shayle Kann, report co-author and vice president at GTM Research.
“Our projections are that solar will get 8% to 10% cheaper than its present $1/watt each year for the next few years,” he told Utility Dive. “It will likely fall to the low $0.80/watt range in 2020 and be competitive with natural gas and other generating resources without the federal tax credit.”
As solar has gotten more cost competitive, voluntary procurement — solar investments not driven by a government mandate — has become a more significant part of the market for utilities and corporate customers alike, Kann said. As prices fall further, the procurements are expected to increase.
Lower prices are also attracting utilities to previously-unfamiliar parts of the solar market, analysts say.
Since 2010, utilities have invested more than $2.9 billion in private providers of distributed energy resources (DERs), according to Utility Investments in Distributed Energy, a GTM report. That includes not just solar, but demand management, behind-the-meter batteries and other DERs.
“Utilities understand the utility-scale space well and will continue to invest in it, but are attracted to the relatively faster growth in the DER space and see its potential for long term value,” said Andrew Mulherkar, a senior research analyst and co-author of the report. “It is also an opportunity to capture customer relationships and brand and position themselves as a utility of the future.”
As solar’s price continues to decline and utilities gain familiarity with the distributed energy technologies, analysts see these strategic investments in the solar and DER sectors as a key strategies for companies to diversify their businesses and access new markets for growth.