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There's a Big Energy Story Unfolding and It's Not About Cheap Oil

US solar production has exploded in the past several years as panel prices have plummeted, but the government policies that have supported the sector's growth are under attack, say industry observers.

by Matt Smith
Dec 9 2014, 11:20pm

Image via Flickr

A few hundred solar panels here, a few hundred there, and pretty soon you're talking about a bona fide source of electricity generation. While most consumers have been eagerly watching oil prices plummet in the last several months, little attention has been given to the potentially even more significant developments in the solar sector. 

With utility-scale projects leading the way, the US solar power industry grew sharply in the past quarter and is on track to see a 36 percent jump in new capacity in 2014, according to the latest report from the Solar Energy Industries Association (SEIA), the industry's major trade group.

By year's end, the trade association predicts, Americans will have installed enough solar generation to produce 6.5 billion watts of electricity by the end of December, bringing the total US solar capacity to about 17.5 gigawatts. That's enough energy to power about 3.5 million homes, SEIA spokesman Ken Johnson told VICE News.

"In terms of carbon emissions reductions, that's the equivalent of 19.8 metric tons a year that's not being spewed in our environment," Johnson said. "That's the equivalent of taking about four and a half million cars off the road or shuttering a half-dozen coal-fired plants."

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Although impressive, the solar sector accounts for only a tiny share of the overall US energy market. Even with the record growth, solar is expected to represent just over one percent of US electric capacity by the end of the year, Johnson said. By comparison, wind power makes up four percent. And coal, the most common fuel for US power plants, sits at 39 percent, according to the US Energy Information Administration (EIA).

But the entire solar industry produced less than 100 megawatts of power in 2008, according to the EIA. While one percent may be a small number, "It's a huge accomplishment," Johnson said. And while the national figure is just moving to the left of the decimal point, in some states — particularly California — solar usage is much higher."

In March, said Johnson, solar met 18 percent of California's 22,700-megawatt demand. "That set a record," he told VICE News.

Homeowners installed more than 300 million watts of solar between July and September, the first time that benchmark has been topped. And more than half of that amount was in states where there are no subsidies or other incentives for solar installation, SEIA reported.

Utilities added 825 megawatts of solar in the same period, up from 540 million in the third quarter of 2013. Another 25-megawatt solar plant just came online this month in the Mojave Desert of California, according to the report.

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And as capacity has shot up sharply, in the past decade, solar prices have plummeted. The average price of installed home systems has dropped from about $9 per watt in 2007 to $4.69 in 2013, the Department of Energy reported in September. Utility-scale project costs fell from about $4 per watt to about $3 over the same period.

China, too, has invested heavily in solar power and ramped up production of solar panels — prompting a trade dispute with US manufacturers that Johnson says the SEIA is trying to defuse.

Meanwhile, Australian researchers announced this week that they have managed to produce solar cells that turn more than 40 percent of the light energy they absorb into electricity — a milestone that points to still-cheaper solar installations in the future, Johnson said. Most of the solar cells currently in the market are between 20 to 30 percent efficient. The researchers predict efficiency could rise to 45 percent in just another couple of years. 

The solar boom depends heavily on government support. The Obama administration's 2009 economic stimulus program devoted $31 billion in direct spending, tax breaks, and other steps to boost clean energy, including solar power. States have added their own measures, including setting renewable energy standards for utilities and "net metering" policies that let consumers sell electricity back to the grid.

"You really have lots of supportive trends, both on the utility side and on the home side," Mark Muro, a Brookings Institution analyst who studies renewable energy policy, told VICE News. "I think it's a confluence of a number of related factors, and we've managed to have relatively stable policy conditions in place now for four or five years."

But the future of those policies is uncertain.

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"We've had a lot of change in state legislatures coming after the last elections, and there are interests that wanted to make a run at attacking renewable power standards," he said. "I think the policy environment can't be taken for granted."

A federal tax credit for solar investments is scheduled to be reduced from 30 percent to 10 percent at the end of 2016, and some large-scale projects are rushing to finish before that deadline, Johnson said. In Florida, utility regulators voted in November to roll back renewable energy standards and killed a rebate for solar system installation.

But Johnson said states like North Carolina and Nevada have been bright spots — and New Jersey now ranks behind only California and Arizona for installed capacity.

New Jersey has large numbers of accessible rooftops. And the Brownfield and Superfund sites that made the Garden State an environmental punchline for years turn out to be good places to set up solar panels.

"There are a lot of places to install solar systems," Muro told VICE News, "and New Jersey has made it a priority and it's paying off."

Follow Matt Smith on Twitter: @mattsmithatl

Image via Flickr