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Small-Scale Solar Panel Installations Soar Through Subsidies, While Solar Cell Costs Plummet, Business and Industry Trends Analysis

What could be more appealing than generating electricity from sunshine?  Ever since scientists at the famed Bell Laboratories first demonstrated a solar cell based on silicon in 1954, solar power has been seen as one of the most desirable, if technically challenging, means of creating electricity or heat. 
Solar power accounted for about 1,501 trillion BTUs (British thermal units), or 3% of all renewable energy (of all types) consumed in the U.S. during 2021, up from 1,246 trillion BTUs during 2020, according to the U.S. Department of Energy.  Installed solar power capacity on a global basis rose from only 0.39 gigawatts in 2010 to 843.1 gigawatts in 2021, according to BP.
Solar power capacity may skyrocket over the long term, according to the Solar Futures Study released by the U.S. Department of Energy (DOE) in 2021.  The study forecasted that 37% of the nation’s electricity could be produced from solar power by 2025 and 44% by 2050.  To reach these goals, spending on new solar projects, both public and private, would have to increase by $562 billion between 2020 and 2050.  Solar power was already experiencing rapid growth in 2020, when a fifth of America’s solar power capacity was installed according to the DOE.
In 2022, the U.S. Inflation Reduction Act established a tax credit of 30% of total investment in clean energy production (including solar) as well as stand-alone energy storage projects regardless of the energy source.  Previously, the credit applied to energy storage paired with solar only.  The credit can increase if the project is built with at least 40% U.S. manufactured components (which tacks on another 10% tax credit); and if the project is located in certain communities (another 10% credit).
In addition to federal government incentives and tax credits, the fact that solar panel costs plummeted also fueled extreme growth in solar power during recent years.  While firms in the U.S. and EU that install panels or finance their purchase have benefited from the solar boom, much of the demand for the solar panels themselves has been to the benefit of manufacturers based in China.  Chinese manufacturers took vast amounts of global market share for solar panels away from makers based in the U.S., Germany and Japan.
China continues to dominate the world’s solar panel industry, controlling more than 80% of the global solar panel supply chain.  In addition to serving the export market, China is using large quantities of these solar panels domestically.  The U.S. government-imposed tariffs on solar panel imports under both the Obama and Trump administrations, which spurred investment in domestic panel production.  American manufacturer First Solar, Inc. (www.firstsolar.com) completed a $680 million panel factory in Ohio in 2023, gambling on the Biden administration’s promise to make the U.S. electric grid carbon free by 2035.  The plant is First Solar’s third solar panel plant in Ohio and has an annual capacity of 3.3 gigawatts (enough to power approximately 570,000 homes).  In September 2023, the firm broke ground on its fifth manufacturing plant in Louisiana.  The $1.1 billion facility will have a capacity of 3.5 gigawatts, and completion is expected in 2026.
The Biden administration established, in 2022, tax credits for renewable power projects that use American-made equipment (as part of the Inflation Reduction Act).  U.S. solar equipment manufacturer First Solar, Inc. announced plans to increase its investment in U.S. manufacturing capacity by 75%, spending up to $1.2 billion.  Hanwha Solutions Corp., a subsidiary of South Korea’s Hanwha Group, plans to invest billions of dollars in creating a solar supply chain in the U.S.  Qcells, another unit of Hanwha Solutions, has been scouting potential locations in Texas, Georgia and South Carolina for solar component manufacturing plants.
Texas is seeing remarkable growth in solar power generation, as well as other renewable energy sources.  Between 2012 and 2022, the state saw approximately 44,000 megawatts of new renewable energy and storage capacity.  BloombergNEF forecasts as much as 16,000 megawatts of additional solar power installations in Texas by 2026.
At one time, 40+ U.S. states offered a generous version of a credit system called net metering, which pays commercial and residential customers for unused renewable energy that consumers or businesses sell back to utilities.  This is primarily for rooftop installations of solar panels, so the customer can be as small as a single-family home, or as large as a shopping mall.  If the property owner doesn’t need all of the solar power that is being generated on-site at any time, then that excess power can be sold back to the electric grid or electric utility.  This has historically been at very generous prices, so net metering has been one of the key drivers of new solar installations.
However, many states are reining in their net metering allowances, as some observers believe these property owners are gaining unfair advantage, while many electric utilities claim that they are being forced to overpay for the power—thus driving up the total electric bill of all customers who do not happen to own solar panels.  (That is, forcing all other electric customers to subsidize solar panel owners.)  While net metering is often remaining in place, state legislatures are, in many cases, cutting the rates that utilities must pay to buy the excess power.
The average cost of residential solar installations in the U.S. (including hardware, permits and labor) dropped from $9.00 per watt in 2006 to an estimated $1.34 per watt in 2020, per the Solar Energy Industries Association (SEIA).  In the utility-scale fixed-tilt sector, costs fell to about $1.00 per watt.  In 2022, typical single-family home costs, including the panels, labor, etc., were generally in the $15,000 to $30,000 range, but could vary widely based on the total solar generation capacity.
Large solar finance companies enable homeowners to enjoy solar panels at no cash outlay to the homeowner.  Companies such as SolarCity Corp. provide turnkey deals, with lease financing for the equipment and installation, and packaged services that apply for government grants and rebates, and then monitor the ongoing operations of the systems.  This makes SolarCity and similar firms into de facto solar power generation companies.  The homeowners benefit through net metering, the process by which solar power that is not used by the home goes into the grid.  While this is happening, the home's electric usage meter literally goes backward, reducing the final monthly bill for the home.  SolarCity calls its service SolarLease.
In May 2018, California became the first U.S. state to require solar panels on all new homes.  Starting in 2020, residential buildings of up to three stories, including single family homes and condominiums, must be equipped with solar panels.  By late 2020, solar power accounted for 15.43% of the state’s electricity supply.
Europe has been quick to install rooftop systems due to generous government subsidies (however, some governments have cut those subsidies as part of recent austerity programs).  Germany leads the world in rooftop installations.  However, this renewable energy is driving total energy costs significantly higher.  The German government’s subsidies for wind and solar power were cut, resulting in skyrocketing electric power prices for consumers.
Germany has announced plans to wind down all of its nuclear power plants over the mid-term.  However, traditional coal- and gas-fired power plants are still required in large numbers, particularly since neither wind nor solar can be counted on for full time output.  Likewise, only traditional power plants can be called on to fill surges in need during peak periods of demand.  The entire world is attempting to learn from Germany's grand experiment.  Meanwhile, German consumers are suffering higher prices and Germany's carbon output has not decreased to the extent expected.
In the UK, solar capacity has skyrocketed.  In 2010, capacity was under 100 megawatts.  By late 2023, the UK had 14 terawatt hours of solar capacity, according to Carbon Brief.

Internet Research Tip: Solar Power
To find out more about solar power and the Solar America Initiative, visit the U.S. DOE, SunShot Initiative at


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