The U.S. is expected to become the third largest solar PV market in the world in 2011, after Germany and Italy. GTM Research forecasts that new installations in the U.S. this year will reach 1.8 gigawatts, nearly doubling from 2010.
As the U.S. scales, however, there is considerable debate about the form this growth will take. Will a few national players dominate the project development and installation market? Which segments will be the most vibrant and sustainable into the future: residential, commercial, or utility installations? Perhaps most importantly, what form of growth would create the most valuable PV industry for the economy and for society?
We just returned from a weeklong visit to New Jersey, where we visited with media, real estate developers, solar project developers, and EPCs (Engineering, Procurement, and Construction) and gained some valuable insights. New Jersey is the second largest market, behind our home state of California, in terms of total volume of installed photovoltaics (PV) -- but the Garden State is home to the most PV per capita in the nation. Undoubtedly, they are doing something right.
In fact, New Jersey is doing a lot of things right. The state has embraced PV not because it is the sunniest state in the lower 48 or because solar is sexy in the political sphere. New Jersey is a no-nonsense state. New Jersey gets that solar is valuable.
Home to the most commercial roof space per capita in the U.S., New Jersey has been the pioneer and leader of distributed generation production. Unlike other leading states whose market sizes are often driven by large, typically ground-mounted, utility-scale installations, New Jersey has focused on rooftop commercial installations. This market trend has created value for New Jersey residents in a variety of ways.
First and foremost, the trend toward distributed generation has helped build a local PV industry. According to the National Solar Jobs Census for 2011, there are over 100,000 solar jobs in the U.S. -- and over 40 percent of those jobs are in installation. Create a locally driven, locally owned industry, and you create local jobs. Not only that, but you generate wealth for the local businesses who own solar installations. For instance, real estate owners that put solar on their buildings can help differentiate themselves in the market, offer tenants more stable and reduced electricity charges and create an additional revenue source. All of this increases local economic viability. It helps the bottom line of the local businesses that operate in New Jersey and increases the value of the real estate assets. This is a tangible but not often discussed virtue of PV.
With larger-scale utility projects, the benefit to local job and wealth creation are less clear. A notable example would be a recent 5-megawatt project in New Mexico, where a portion of construction workers were brought in from out of state, the electricity is owned by the utility, and only a handful of permanent O&M jobs were created. This model leaves a bad taste in the mouth of those who encourage the development of solar as a means of economic growth. A more recent 20-megawatt project completed in New Mexico touted employing 200 people. This project did create jobs during the 9-month construction period, but failed to contribute to the local economy in a way that created permanent jobs.
Distributed generation has several other potential benefits. Distributed generation requires less infrastructure development, saving taxpayers money and reducing NIMBY objections. Arguably, distributed generation ends up increasing the reliability and robustness of the electricity grid, as it reduces the peak load demand and can thus prevent or reduce the risk of grid failure due to over-demand. Finally, distributed generation may be more price competitive than utility-scale projects. A recent report published by the Institute for Local Self-Reliance attests that distributed generation is approaching grid parity versus retail rate electricity in the sunnier areas of the U.S.
A market driven by small distributed generation installations can reach a viable scale, and we believe that this approach is more sustainable in the long term. Other markets have succeeded at growing a scalable market in just this fashion. In 2009, the German Solar Energy Industry Association estimated that roughly 80 percent of the total installed capacity was roof-based. Furthermore, they estimated that two-thirds of all the volume installed in Germany consisted of installations under 100 kilowatts. As the solar market in Germany has shown us, commercial and residential PV can create a large market and contribute to a vibrant economy. We hope to encourage a similar market dynamic in New Jersey.
Distributed generation is a stronger option for local business growth and wealth generation than large, distantly owned utility-scale PV farms. Photovoltaic technology is uniquely suited to small- and medium-sized generation installations due to its small footprint and modular nature. We need to evolve the conversation from the cost of PV to the value of PV. New Jersey has the potential to demonstrate the true value of a local distributed PV industry. New Jersey should provide the template for the rest of the country to follow.
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Elliott Gansner, works for pvXchange. pvXchange works directly with project developers in New Jersey to aid them with procurement of major photovoltaic components. pvXchange has recently brokered several MWs of components destined for the New Jersey market.