Experts Expect Strong Year for Solar in 2016

Every year about this time experts start offering up what to expect in the coming year—in just about everything. Solar is no exception, usually. This year the plethora of prognostications is lower. Perhaps that's because the three-year extension of the the Investment Tax Credit (ITC) in the U.S. in waning days of 2015 surprised many in the industry. Still some experts had foreseen an extension and others made their prognostications known. The bottom line is expect a healthier industry going forward for the next few years—at least.

The length of the extension leads to much needed stability in the solar (and wind) industry in the U.S. Everyone can agree on that. But an unintended consequence of the extension coming earlier than its ultimate sunset may actually slow down the amount of solar power that's installed in 2016, according to some experts. Forecasts for the U.S. solar industry's installations in 2016 had reached up to 12 gigawatts of new solar power. Now it's more like 9 gigawatts for 2016, according to at least one analyst.

Now it's changed. "Developers were in a massive pipeline growth mode and shifting into a massive pipeline completion phase," said Colin Smith a Solar Research analyst with GTM research. "With 9 gigawatts still to come on-line in 2016, they will not only have to make sure they complete their projects by the contracted commercial operation date, they will now have to shift back into capturing an additional 3 gigawatts of utility PV that is now on the table for 2017. I think we are going to see some dead projects come back with a bit more life and see some early-stage developers selling off more pipeline."

In a research note posted Dec. 15, 2016, (a day before the ITC extension) Mercom Capital forecast 64.7 gigawatts of new solar across the world. That's up from 57.8 gigawatts forecast for 2015. Mercom noted that it's figures could be revised with the extension of the ITC in the U.S. Yet, it said, "The largest markets in 2016 will again be China, the United States and Japan; the United States is set to overtake Japan as the second largest solar market behind China. These three countries will account for about 65 percent of installations next year," said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.

Regarding rooftop solar predictions, Barry Cinnamon, Founder of Cinnamon Solar, offered his annual predictions for solar power for GTM Research. In it, he reaffirmed that solar would slow down in 2016 because of the ITC extension. "A quick look at GTM's forecasts indicates about a 300-megawatt drop in residential demand between the two scenarios—but steadier growth in subsequent years," he said.

Because of the change in the U.S. module prices might be lower in 2016, Cinnamon said. "Until mid-December, rumors of shortages in all market segments implied steady or even higher prices. Now, with slightly higher supply and lower demand levels in 2016, we can expect continued module, inverter and BOS price reductions," he explained.

Smaller installers will continue to gain market share, according to Cinnamon. "Although smaller installers pay more for equipment, their lower overhead and customer acquisition savings enable them to operate profitably. Companies that operate with a hybrid business model—such as financing, customer acquisition or simply installation wrench work—will also gain market share in 2016," he said. He also anticipated that solar companies "will clean up their act" in terms of marketing practices in 2016.

In addition, soft costs will become a bigger percentage of a solar system's cost since, as mentioned, module prices will be lower. "Germany has demonstrated that national standardization of financing, permitting, interconnection and equipment requirements will reduce soft costs."

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