The solar market heated up in 2013. Annual solar installations increased 43% to 2,936 MW according to the Federal Energy Regulatory Commission. These figures, which focus on utility-scale systems and exclude net-metered systems, provide a metric for comparison with new coal, wind, and natural gas installations of a similar scale.

More importantly, this represents the first year solar surpassed coal and wind in new capacity. As stricter environmental regulations take effect, only 1,543 MW of new coal capacity came online in 2013. Meanwhile, the wind industry installed 1,120 MW of capacity after a late extension of the federal production tax credit. Consequently, solar was the second largest source of new capacity in 2013. Natural gas was the most prominent resource, with the addition of more than 7,200 MW of new capacity.

Outlook for 2014 and 2015

ScottMadden expects a bright outlook for solar in the coming years. The industry will continue to drive down panel costs and reduce soft costs, such as permitting and installation expenses. In addition, the 30% investment tax credit will support new investment in solar through the end of 2016.

As a result, solar is likely to continue to outpace coal in the coming years. However, we believe that wind will experience a strong rebound, easily surpassing solar and rivaling natural gas additions in 2014. This resurgence of wind will come from more than 12,000 MW of wind currently under construction that will likely come online in 2014.

The outcome for 2015 is less clear. With a pipeline of 5,200 MW of wind with signed PPAs that have not yet started construction, 2015 is sizing up to be a good year for wind. But with continued growth of utility solar installations projected to exceed 4,600 MW, the likely result is a close horse race between wind and solar.

ScottMadden understands the changes occurring in the energy industry. We assist clients in navigating through this dynamic landscape. For more information or to provide comments on this topic, please contact us.