We invited a few CEOs and investors to gaze into their crystal balls and tell us what they think is in store for the solar industry in 2014. Here's Clean Power Finance CEO Nat Kreamer's take:
1. Residential solar will continue to grow quickly, building on a record-breaking Q3 '13. Project finance providers will partner with fewer residential developers because major financing providers want partners that have high deal volume and strong track records. Marketing companies from outside of residential solar will enter the market, driving growth up and customer acquisition costs down. Competition and cost structure will push existing solar sales and installation companies to focus on their strengths.
2. The debate over net metering will intensify, but many traditional power companies, which operate both regulated and deregulated businesses, will begin to invest in distributed solar, both outside and inside their territories. Solar is too profitable a business for utilities to ignore.
3. Federal government agencies will buy more solar electricity to support the President’s Climate Policy. Tight budgets in Washington will make third-party financing the most popular way the government buys solar electricity. The Department of Defense, especially the U.S. Navy, will continue to be a leading buyer of renewable energy in general and solar power in particular. Distributed solar saves the military money, which it can invest in key defense programs, and it also increases operational security.
4. Solar project investors will closely watch interest rates, which affect their returns. If the Federal Reserve increases rates, then project investors will demand higher returns. Similarly, higher reserve requirements for banks may drive up the cost of project financing. The increasing use of debt instead of expensive tax equity may mitigate potential rising capital costs. Specifically, developers that can securitize and investors with direct access to the public debt markets (i.e., utilities) will have an advantage over other finance providers.
5. Hardware manufacturers will pursue incremental innovation that drives down soft costs. For example, Enphase’s new microinverter is self-grounding; this and other technological innovations will help save on balance-of-system costs and installation labor costs in 2014.
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Nat is the President, CEO and member of the board of directors of Clean Power Finance. He is also the Vice Chairman of the Board of Directors of SEIA (the Solar Energy Industries Association), the national solar trade organization. Nat’s original idea to finance solar for consumers led him to co-found Sunrun, which he led as the company’s President and Chief Operating Officer.