Solar Perspectives: Data from the CSI Reinforces that the U.S. is "The Land of 500 Markets"

by Al Velosa

2010-02-23

Al Velosa is a Research Director at Gartner Inc. focused on the photovoltaic solar market

I’ve spent some time lately reading the tea leaves you can find in the data from the California Solar Initiative (CSI).  This data, while no means perfect, continues to highlight the fragmented nature of the US PV solar market. It also reflects on the core differences between the U.S. and other national PV markets.
First, lets go into the good news. The CSI market reached 169 Megawatts installed. Figure 1 shows how the market evolved on a monthly basis in 2009 and shows how January of 2010 shaped up so far.

Figure 1: CSI Market Monthly Data (Megawatt basis) - Source: CSI  (February 2010)
Figure 1: CSI Market Monthly Data (Megawatt basis) - Source: CSI (February 2010)

Remember that everyone was uncertain about the market in 2009. This data shows that the market was able to leverage the financing that occurred at the end of 2008 and kick off the year on a strong foundation.  Then the effects of the credit crisis and the uncertainty of the process for funding under the ARRA stimulus bill in the U.S. slowed the market down.  What saved the California market was the continued strength of the residential market. It was 43% of the CSI market in 2009, compared 28% in 2008. The even better news is the pipeline.

Figure 2: CSI Market Data (Megawatt basis) - Source: CSI  (February 2010)
Figure 2: CSI Market Data (Megawatt basis) - Source: CSI (February 2010)

Figure 2 shows the CSI data for the pipeline in addition to installed systems in 2009 and in 2010 for through February 10. Assuming a 70% completion ratio, as well as additional business that will emerge over the course of the year, we can predict that 2010 should at worst be flat relative to 2009 in the core CSI market. 
Now you may say that does not sound so good for the U.S. market as a whole, but we do expect more in the core CSI territory.  Furthermore, we see major drivers in the U.S. from the emerging utility-scale market as well as the growing market for federal, particularly military PV solar projects. These of course, are not part of the CSI data.

Now that I have showed you some the positive things about the U.S. market, I’d like to remind you of the reasons that make the U.S. “The Land of 500 Markets.”

Figure 3: CSI Market Data by Program Administrator (Megawatt basis) - Source: CSI  (February 2010)
Figure 3: CSI Market Data by Program Administrator (Megawatt basis) - Source: CSI (February 2010)

From my perspective, Figure 3 gets to the central point.  Even within the common CSI framework of incentives, the programs administered by the different utilities have achieved very different results. 

Let us start by admitting to the fact that in different regions, different sales forces will achieve different results. 

see very different numbers of installed systems in 2008 and 2009 in the PG&E territory versus the SCE territory and the CCSE territory. You cannot even focus on the impact of solar insolation with this data.  After all, the southern San Diego centered CCSE territory has much lower results than the northern San Francisco centered PG&E territory. 

The issue here is transaction costs. In the mature German market, you can see a consistent approach from the government, the utilities, the installers and the financiers.  This helps lower the transaction costs.  In the U.S. we do not have consistent policies.  Figure 3 highlights the issue at the utility level, and its concomitant impact on the development of the PV solar market.  But let me clarify that this is not a unique circumstance.  

The transaction costs in the U.S. market are also raised by inconsistent requirements for building permits and environmental analysis.  This occurs in each state, in each utility territory, and in each city or municipality.  This is a central and fundamental requirement for local knowledge on the part a PV vendor’s sales force. 

Expect the winners in the U.S. PV solar market to be the ones who have invested the time and developed local expertise and contacts as well as a local brand.


Alfonso Velosa is a Research Director at Gartner Inc. focused on the photovoltaic solar market