The outlook is hopeful for U.S. solar power as demand increases from 2020, with solar companies showing positive revenue gains as high energy prices push consumers to look for alternative energy options. Coming out of COP26, the U.S. looks set to experience a solar boom over the next decade.
Last week, Sunrun announced that its revenue had doubled this quarter, compared to the same period in 2020. The U.S. solar energy firm’s customer base has reached over 630,000, with revenues of $439 million, compared to the anticipated $414 million. The company’s acquisition of Vivint Solar in July 2020 made it the largest domestic installer of solar panels in the U.S.
And while other U.S. solar giant SunPower’s quarter three earnings were down, with revenues standing at $324 million compared to an anticipated $333 million and shares dropping around 9 percent, it is planning to undergo a restructure to meet growing demand in the domestic market. SunPower has grown its customer base by 29 percent year-on-year, with around 390,000 residential customers.
SunPower announced this month that it will be restructuring the company to focus on the residential market, following its acquisition of the solar company Blue Raven for $145 million in October. The firm is now looking for a buyer for its commercial and industrial business as it makes the shift, with Blue Raven’s expansive residential customer base, of over 20,000, in some of SunPower’s untapped markets offering significant potential for expansion across the U.S.
SunPower CEO Peter Faricy stated of the move away from commercial business, “The facts are the residential business is larger, it’s faster growing and it’s more profitable”. Adding, “[Residential] is the right place for us to focus on as we move forward, and I think we expect it to be well received by investors.”
Only 3 percent of U.S. homes, around 2.7 million, had installed solar panels at the end of 2020, showing the significant opportunity for expansion in the U.S. market, as President Biden pushes for a shift away from fossil fuels to renewable alternatives. Several new studies now suggest that the uptake of solar power over the next decade will increase significantly, across both residential and commercial markets. And the outlook for supply is hopeful, with the Biden administration’s Solar Futures Study (SFS) suggesting solar energy has the potential to power 40 percent of the nation’s electricity needs by 2035.
Other optimistic studies, such as the While Nature Communications’ report, suggest wind and solar power could meet over 80 percent of the country’s energy demand within the next decade. However, the study does also highlight the difficulty in relying on wind and solar power, as it depends on the weather conditions of the region, which can vary. For this reason, the study emphasizes the need to develop mechanisms for power-sharing, where high-wind regions can be paired with high-sun areas to ensure power provision.
However, some worry about the availability of solar power as the energy transition takes hold of the U.S. Following the restrictions of the pandemic, which created a shortage of labor and materials, the solar market is now facing rising materials costs due to the spillover effect of high energy prices meaning the manufacturing industry is facing mounting costs. While the U.S. solar market is expanding rapidly, delays in the manufacturing of parts could cause a bottleneck, in addition, consumers may be unwilling to invest in solar energy if parts and installation prices rise, as expected.
In addition, solar and wind energy suppliers are not ready to meet the significantly increased demand that follows the recent green push. Analyst Jenny Chase told Bloomberg, “We need to get to net zero as soon as possible, and to do that we just need so much solar and wind. We’re not on track; we need to ramp all this stuff up dramatically.”
Delays in solar panel installations are expected to be resolved by late 2022, as new solar plants are manufactured to meet the increasing demand. Meanwhile, the U.S. will continue to rely heavily on fossil fuels to bridge the gap, while carbon emissions continue to mount. The clear underinvestment in wind and solar power, as heads of states and international organizations push for a clean energy transition, has led to the severe under-preparedness of the international energy industry in providing renewable energy to the growing global population.
As public and private investment in solar energy steadily increases, the U.S. government is encouraging the uptake of solar power through the provision of subsidies for consumers who invest in the switch. For systems installed between 2020 and 2022, customers will receive a 26 percent tax credit, while in 2023, the anticipated peak year for solar installation over the next decade, the tax credit drops to 22 percent. It is uncertain whether this scheme will be renewed in 2024.
There is significant potential for U.S. solar power, and with strong reports from Sunrun and SunPower, as well as the prospect of higher public and private investment in solar energy following COP26, this could drive supply up to meet the steadily growing demand. But government subsidies are needed to encourage a greater uptake in line with Biden’s promise for a green energy transition.
By Felicity Bradstock for Oilprice.com
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Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More