There’s a reason it’s called the solar coaster. And while we’ve had a number of difficult years over the past decade, 2018 took the cake for pure drama. But against all of that the slings and arrows that it has suffered, the solar industry has shown remarkable resilience, and is coming out of 2018 not only swinging, but stronger than ever.
So today we’re taking a moment to reflect on what we’ve come through, with our list of our top stories from 2018.
1) Tariffs, and rumors of tariffs
A year ago there was one big story that overshadowed everything in the U.S. solar market: pending tariffs on imported PV cells and modules under the Section 201 process. And while SEIA, SunPower and much of the global solar manufacturing sector threw everything they had at trying to stop the runaway train of the Trump Administration’s economic nationalism, in the end things were not nearly as bad as they could have been.
The 30% tariffs which were imposed on cells & modules were lower than the worst-case scenario. Additionally, while it took seven months, SunPower managed to gain an exemption from these tariffs for its back-contact technology, which is believed to be a quid pro quo for its buying SolarWorld America’s Oregon factory and promising to start U.S. manufacturing.
The Section 201 tariffs did impact the U.S. solar market, which could be seen clearly in Q3 results. However, the effect was more often a delaying of project timelines than the outright cancelling of deals, with the result that a boom is expected in utility-scale solar completion during Q4.
But the pugnacious trade action of the Trump Administration didn’t stop there. In addition to the Section 201 tariffs on cells & modules, the Trump Administration enacted three other sets of tariffs that affected U.S. solar: tariffs on steel and aluminum under Section 232, additional tariffs on Chinese solar cells and modules under Section 301, and tariffs on Chinese inverters, also under Section 301.
While these other tariffs did little on their own to affect PV system economics or the larger market, they absolutely affected individual businesses and forced a reshuffling of global supply chains.
It is notable that while the Trump Administration pushed a number of other policies to affect energy markets, including attempting a bailout of coal and nuclear power plants, unlike the tariffs none of these had a big impact on solar markets in 2018.
2) U.S. Solar manufacturing takes off
If there was one thing that both market analysts and SEIA were sure about, it was that following the Section 201 tariffs there would not be substantial new manufacturing in the United States.
A year later, they are wrong. pv magazine USA has confirmed 3.9 GW of new module manufacturing capacity that is currently underway in five new factories, as well as a few hundred megawatts more in several smaller factories and upgrades. Here are the big ones that are expected to come online in early 2019:
- Hanwha Q Cells – Georgia – 1600 MW
- First Solar – Ohio – 1200 MW
- LG Solar – Alabama – 500 MW
- JinkoSolar – Florida – 400 MW
- Mission Solar – Texas – 200 MW
However, aside from Panasonic’s cell production at the Tesla Gigafactory in Buffalo, which will supply its own products, there is still no substantial cell capacity planned.
Also, it is likely that there is much more to this new expansion than just the tariffs. Every single manufacturer who pv magazine spoke with cited last fall’s tax reform as a critical factor in its choice to build manufacturing in the United States.
It is also unclear how long these new factories will remain profitable. Analysts state that is still more expensive to make modules in the United States, and the Section 201 tariffs decline every year.
As a footnote to this story about U.S. manufacturing, SunPower is currently retooling to make its shingled P-Series at SolarWorld America’s factory in Oregon – the same factory that was at the center of the trade disputes. However, the capacity SunPower is planning is only around 200 MW per year, which will only require a few hundred workers. This means that this is mostly a symbolic move, and not a major investment.
3) Investors get comfortable with solar power
It is without a doubt that solar power plants are coming into their own as a powerful asset class that will be worth trillions of dollars, generating many billions in annual electricity revenue for decades on end. And this year, we saw major progress on that front.
Of course, the sophisticated utility space has plenty of large projects and long term buyers, but these days the sector is landing very conservative pension fund types that have access to many many trillions to invest.
Stepping beyond the big scale, it is now the default that residential lease and loan securitizations will be rated as investment grade with examples from all of the big players – SunRun, Vivint Solar, Mosaic Solar, Sunnova, SunPower, and Dividend Finance.
And we’re now seeing big funds move into the riskier commercial & industrials space, while individual projects are being included in broader high grade asset packages, and community choice companies gaining investment grade status as well.
As more financially innovative groups like kWh Analytics are able to underwrite the risks with ever more subtle tools, expect the solar project “wall of money” problem to only grow.
4) Elon Musk’s $40 million tweet
No recollection of clean energy in 2018 would be complete without the drama that unfolded around Elon Musk. The billionaire celebrity CEO’s seemingly impulsive tweet claiming that he was going to take Tesla private at a price inspired by marijuana slang set in motion a series of events that would lead to his being barred from serving as board chair and fined $40 million by the Securities and Exchange Commission.
But this was chump change for Musk, and it’s not clear that he is going to lose any real power at Tesla, despite the appointment of a new chair (who is not a member of the Murdoch clan, by the way).
And this soap opera largely obscured much more serious developments. During Q2 Tesla turned its first quarterly profit on the back on a massive expansion of Model 3 production. During this time Tesla has scaled back its residential solar ambitions and even its energy storage division seems to be playing second fiddle to EVs, but that should not take away from the enormous success that the company is seeing.
As noted by one former short seller, “while everyone is focused on Elon smoking weed, he is quietly smoking the whole automotive industry.”
5) Energy Storage
Paul Denholm of NREL said it best at an EIA hosted conference this year, noting that we’re now deploying what he’d seen only in NREL labs in past years.
And the real world is definitely deploying, with the residential market, particularly in California and Hawaii, making a hard mark. In Q1 this market grew 9x over the prior year, and 10X in Q2 as it became the largest energy storage segment.
Elon Musk said Tesla was seeing mad growth in energy storage – projecting 300% more Powerwalls and Powerpacks going out the door, even as the company switched battery lines to feed the Model 3 ramp up.
With Hurricane Maria, and broader climate complexity consciousness, solar+storage has become the topic of the day. 74% of customers are expressing a desire to know more, California extended its SGIP incentive, and research groups are projecting that 9 of 10 home energy storage systems will come with solar.
This year the utilities have also begun to drop future capacity bombs. PG&E signed deals totaling 567 MW / 2.27 gigawatt-hours, including possibly two 1 GWh systems, Warren Buffett signed up for 1 GW of solar paired with 400 MWh of batteries, and Colorado said solar+wind+storage was strong enough to shut down coal plants early.
Energy storage came back from summer camp tall and strong.
And that’s not all that happened this year. Stay tuned for part 2 of our solar power year in review, which will be published tomorrow morning.
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You might want to reach out to Mission Solar and find out if they still plan on a 200 MW expansions?
They did last time I spoke with them in September – though of course they are not public about it.