By Jim Kurtz
No matter how you analyze 2016—the falling module prices, the accelerating pace of installation, and the ongoing development in new materials and efficiencies—it was a groundbreaking year for solar. The solar industry today is made up of nearly 8,000 companies across the US that employ more people than the coal industry, providing good paying jobs for tens of thousands of people
More and more people understand the economic benefits that come from solar energy, and it is exciting to be at the forefront of this industry. Perhaps most telling when we look at our firm’s history and growth, is the number of our customers who are providing us with repeat business. In fact, 50% of our sales last year were with customers who already had one array. What does that mean? Simply: businesses that do solar, do solar because they see the cost savings, reliability and goodwill these systems provide.
Obviously, it takes more than repeat business to achieve the kind of growth we have been seeing. Here are a few key trends that we expect will make an impact in 2017 and beyond.
The Cost of Natural Gas
Today businesses are particularly attracted to solar as a hedge against future energy cost increases now that the U.S. has become a net exporter of natural gas for the first time in 60 years. Because natural gas prices (which are the core driver of electricity costs) are significantly higher outside our borders, U.S. producers of natural gas will seek to sell in those markets, leading to an increase in U.S. natural gas prices this year, a trend that is only expected to accelerate in the coming years.
The graph below provides important data on recent cost trends that experts are predicting will have a significant impact on electrical costs going forward. Specifically, this graph shows that the price of natural gas has gone up by 22% in the last 12 months.
Utilities are Beginning to be Part of the Solar Solution
One trend we find particularly encouraging is utilities embracing solar as part of their generation portfolios. Many of their customers are asking for solar, and we think that trend will continue. At the same time, utilities across the country are learning that it is better to offer their own solar solutions than try to buck the trend of rapid solar growth.
There is significant experimentation with the ways utilities offer solar solutions to their customers. We partnered in 2016 with the Cedar Falls Utilities (CFU) in Iowa to create the largest community solar project in that state. The utility purchased the array and offered the resulting savings to customers who participated in their solar program. The model made sense for all: the utility, the customers and the environment, and we think CFU’s model will work in many other locations as well.
While the benefits of solar are easy to understand, getting a project from idea to execution requires a wide range of expertise. RER excels at overcoming hurdles and managing the complexity of these projects, with deep competence in design, engineering, financing, legal, and project management, our team brings projects over the finish line. This turnkey capability has allowed us to grow by serving our clients, and also partnering with other developers to help them complete projects that have gotten stalled along the way.
Aerial Photo of Cedar Falls Utility’s Largest Community Solar Array in Iowa
Click here for a short video on Cedar Falls Utility Solar Project
What about the Change in Administration?
The major federal incentive is the Investment Tax Credit (ITC) that was passed with broad bi-partisan support at the end of 2015, and is set to decline over time already. As over 80% if the public believes the country should use more solar energy, it would seem unlikely that the administration would have much appetite to change this core incentive. Having said that, the cost of solar has fallen so far, that even the ITC were to go away, this would not likely meaningfully interrupt the rapid pace of solar growth. Indications are that the effective cost of energywithoutfederal tax credits would increase from $0.03~$0.04 per kWh to just $0.04~$0.05 for the next 20 to 30 years. If you consider that most businesses are paying $0.05~$0.10 today, and remember that their current electric price is likely to increase over that same time period, it is pretty clear that solar is here to stay.
2016 was an incredibly exciting time, and we expect to see even more of that excitement in 2017 as so many organizations realize—and act on—the benefits that come along with free fuel from the sun.
Jim Kurtz, President, RER Energy Group