What Will Happen to Long Island’s Solar Industry?

Annual US Grid-Tied PV Capacity Additions

Solar energy is growing strong in the United States. Despite the deep recession, installations grew 38% in 2009. On Long Island solar installations have surged. Solar has been successful in the region because of a good solar resource, high electric rates, and great Long Island Power Authority (LIPA) rebate program. The growth of the industry has brought decreased system costs as manufacturers and installers achieve economies of scale. LIPA carefully gauges installation costs and decreases its rebate accordingly in order to maintain a relatively constant solar investment rate of return.

LIPA solar rebates started at $6/watt in 2001. Its sustained support over the past 9 years has been instrumental to the local industry’s growth. In January of this year LIPA announced a 4 MW rebate program comprised of 4, 1-megawatt (MW) blocks to provide a degree of visibility to the industry. The first block started at $2.50 / watt; the rebate decreases $0.25 / watt after 1-MW of solar rebate applications has been received. LIPA also committed to posting the real-time rebate allocation information on its website. We were pleased to have some degree of visibility.

Yesterday (May 3rd), LIPA lowered the solar rebate by $0.25 to $2.00 /watt, meaning that 2 MW of the 4 MW is already allocated. The first 2 MW were gone in just a few months – faster than expected – which shows that there is strong solar demand even at the lower rebate levels. However, it is cause for concern because this implies that funding for the solar program could be gone by late summer.

There is uncertainty right now and we understand that might make some feel uneasy. There has always been a notable amount of risk in this business because, despite decreasing equipment costs, we are still heavily dependent on subsidies. There are many questions: Is the solar business viable on LI without rebates? Does this mean companies should be more cautious about additional investment in the business and growth? Will there be cut backs and layoffs in the Long Island solar industry?

While there is cause for concern, we are confident that the solar industry will remain strong, especially on Long Island. Here is why:

Macro Trends

The macro solar trends are positive. According to SEIA, against the powerful tide of the deep recession, grid-tied solar electric installations int he US grew 38 % in 2009 (graph pictured above). SEIA’s 2009 Year in Review report explains many of the key industry trends. Some salient points from SEIA’s report:

1. Solar equipment prices and installation costs are coming down significantly. We believe we are in the midst of a virtuous cycle of increasing scale and decreasing costs. Upstarts and major established manufacturers are investing heavily in capacity expansion and R&D. Installers are scaling up and increasing productivity.
   • Module prices have declined 30 % in the past year.
   • From 1998 to 2008, solar installation costs decreased on average by 3.6% per year, or $0.30, according to this DOE report, and the trend is accelerating b/c of module price declines.
   • Industry is laser focused on achieving grid parity – the point at which solar is competitive without subsidies.
2. Public awareness of the technology is increasing dramatically. Grid-tie solar electric have a successful track record, and there is an expanding positive reputation.
3. The public at large supports moving away from fossil fuels because of environmental and national/economic security reasons. Polls suggest that the majority of the populace supports the country going solar above all other technologies.
4. Political leaders support solar. President Obama is one of our greatest champions. After healthcare, the administration is more focused on energy issues.
   • Last Thursday a representative from the white house called me to ask if the stimulus funding was helping our business and solar in general. He initiated an ongoing dialogue.
   • Locally, Congressman Israel and numerous state supporters are key.
5. Prices of fossil fuels remained high during the recession, and from our point of view are poised to spike again once the economic recovery gains steam.
6. Federal tax incentive for solar of 30% is in place until 2016.
7. Impressive solar advocacy leadership.
   • National level: SEIA is exceptionally well organized and has a notable track record.
   • NYS level: LISEIA, NYSEIA, Vote Solar, ACE NY, RELI, Etc. As a group they have a successful track record.
   • We and our allies are gaining critical mass.
8. Critical for LI: LIPA CEO Kevin Law is a true supporter.
9. SEIA identifies more than 6,000 MW of solar projects in the pipeline for 2010 and beyond in the U.S.

US PV Project Pipeline

There is no rosy picture here of guaranteed success indeed there are no guarantees in life. There are going to be ups and downs in the solar industry at large. It is up to us to shape our future. We have come far, and we have a long way to go. Through hard work and ingenuity, we believe that there will be a bright future for solar and specifically for solar on LI. Soon we will post specific ways for solar advocates to ensure solar’s success on Long Island.