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September 17, 2012
US Solar Installations Set Records Despite Insufficient Government Action
    by Robert Kropp

The Solar Energy Industries Association reports that solar installations in the US totaled 742 megawatts in the second quarter of 2012, but Ernst & Young warns that policy gridlock prevents lawmakers from making the necessary long-term investment decisions.

On Friday, September 14th, Republicans in the House of Representatives passed the No More Solyndras Act, the primary aim of which—aside from election-year grandstanding, as the bill stands no chance of passing in the Senate—appears to be preventing the US Department of Energy from issuing loan guarantees to solar and other renewable energy companies.

But if House Republicans had bothered to read a report issued four days earlier by the Solar Energy Industries Association (SEIA), they would have learned that during the second quarter of 2012, installation of solar power in the US totaled 742 megawatts (MW). It was the second-best quarter in the history of the US solar industry.

Apparently, Republicans would prefer to reserve the $34 billion in authorized funds remaining in the loan guarantee program for nuclear energy and unproven carbon capture projects by the beleaguered coal industry. That they would take such a position in the face of incontrovertible scientific evidence on climate change is not surprising, given that Party leaders such as Fred Upton and James Inhofe have publicly denied the role of human activity in global warming and extreme weather events.

Yet despite the stalemate on addressing climate change by policymakers, the solar industry in the US manages to grow. The SEIA report states that the US now has 5,700 MW of installed solar capacity, enough to power more than 940,000 households.

"System prices continue to fall," the report continues, "Bringing the market ever closer to the point where residential and non-residential demand is driven more by solar radiation and retail electricity prices than state-level incentives." It forecasts that 3.2 gigawatts (GW) of photovoltaic (PV) solar will be installed in the US in 2012, a 71% increase over 2011.

With the decline in prices, however, a global overcapacity has occurred, leaving manufacturer margins "severely compressed" and leading to a slowdown in major markets such as Germany and Italy. The most significant growth in solar capacity has occurred in China, where installations are expected to more than double to over five GW in 2012.

In fact, China has far grander plans for its solar capacity by 2020, according to the Renewable Energy Country Attractiveness Indices recently published by Ernst & Young. The Indices rank China first in the world. "Having quadrupled its solar capacity target to 50GW by 2020 and begun an accelerated domestic installations program to tackle the oversupply of solar panels, China looks set to continue its domination of the global renewable energy market," the report observes.

And the US? It dropped into a tie for second place with Germany, having lost 1.5 points from its previous score. "The upcoming November elections have led to policy gridlock in the US," the Indices state. "With voters weary of recession and squeezed by ever-increasing demands on their finances, policymakers have yet to demonstrate the appetite to make long-term investment decisions that would necessitate short-term cost increases."

Meanwhile, "Germany is pushing ahead with its ambitious renewable energy agenda," Gil Forer, Ernst & Young’s Global Cleantech Leader, said, "Including the introduction of a new solar PV tariff and compensation for offshore grid connection delays."

Keeping in mind that the uptake of renewable energy technologies in the US and elsewhere is a critical component in efforts to avoid the further worsening of the effects of climate change, the situation in the solar market aligns with recent reports published by the Carbon Disclosure Project (CDP). Despite the absence of meaningful government action in the US, CDP's executive chairman Paul Dickinson observed, American corporations are increasingly aware of the business imperative of addressing climate change.

But in the absence of meaningful government action, efforts by businesses and other stakeholders are likely to remain insufficient. At a press conference announcing the publication of CDP's reports on carbon management by companies in the Global 500 and the S&P 500, Fatih Birol, Chief Economist of the International Energy Agency (IEA), warned, "In 2011, carbon emissions reached a record high, despite the slowing down of economic activity. This put us perfectly in line with a temperature increase of six degrees Celsius, which puts us on a very dangerous path."

In fact, as the IEA reported in 2011, governments are not only failing to meet their responsibility to address climate change. In some respects, they remain complicit in its worsening effects.

"Subsidies that encourage wasteful consumption of fossil fuels jumped to over $400 billion" in 2010, the IEA reported. The role of governments is critical, the report continued, "to define the objectives and implement the policies necessary to shape our energy future."


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