Engineering Inc. - March/April 2016 - (Page 4)

MarketWatch BY G E R RY D O N O H U E Solar Market Lights Up Thanks to Extended Tax Credit and Declining Costs I n December, Congress gave the solar power industry a big-and unexpected- Christmas present, extending for another five years the Investment Tax Credit (ITC), which has been a primary driver in the industry's growth over the past decade. The ITC, in place since 2006, provides a dollar-fordollar reduction in federal income taxes equal to 30 percent of the investment in a solar system placed into service on a residential or commercial property. The tax credit was set to expire at the end of 2016, and most industry analysts predicted that Congress would let it end. Instead, Congress renewed the ITC, along with several renewable energy tax credits that were due to expire at the end of 2015, and extended it through the end of 2021. The Solar Energy Industries Association (SEIA) estimates that the ITC extension will increase domestic solar power capacity from approximately 23 gigawatts (GW) at the end of 2015 to more than 100 GW by 2020, at which point solar power will account for 3.5 percent of U.S. electricity generation. In contrast, had the ITC been allowed to expire, SEIA estimates that total solar power capacity in 2020 would have been closer to 50 GW. Regulatory Certainty Given the inaction of Congress in recent years, the early ITC extension caught nearly everyone in the solar power industry by surprise, and has radically changed industry projections. 4 ENGINEERING INC. Black & Veatch provided engineering, procurement and construction services for Arizona Public Service's Solana Generating Station in Gila Bend. The solar power plant sits on 400 acres and produces 32 megawatts of electricity- enough capacity to power 8,000 homes and businesses. This year was shaping up to be the biggest year yet for the solar power industry. Facing the need to complete all ITCsupported projects before the end of 2016, the industry was forecast to install 11.2 GW of capacity-a 45 percent increase over 2015. However, 2017 was expected to be a bust, with SEIA forecasting as much as a 71 percent decline in year-to-year solar installations. Now, with pressure to complete projects by the end of 2016 eliminated, the peak may not be quite as high, but the valley will be much shallower. "The biggest impact is the regulatory certainty provided by this latest legislation," says Jason Hoskins, chief engineering and technical officer at Ulteig. "Having a five-year-plus plan is very helpful to the industry as a whole." "We see some of the current 2016 projects slipping into 2017," says Tom Phillips, vice MARCH / APRIL 2016 president and director of renewable energy business at Black & Veatch. "We also see some of the projects that were not financially viable without the ITC being rejuvenated." Grid Parity One of the reasons many analysts did not expect Congress to extend the ITC was the increasing competitiveness of solar power. Technological advancements in recent years- especially in the photovoltaic (PV) segment-have narrowed the price gap between solar and more traditional power sources. From 2008 to 2014, the cost for installed PV modules fell from $3.57/watt (W) to $0.71/W-a more than 75 percent decline. From the second quarter of 2014 to the second quarter of 2015, module prices fell an additional 6 percent. According to GTM Research, 40 percent of the utility-scale PV projects currently under development "have been pro- cured primarily due to solar's economic competitiveness with fossil-fuel alternatives." Lay the ITC on top of that shrinking price gap and you have a bright outlook for the solar industry. "With utility-scale solar continuing to push towards grid parity without subsidies, the ITC extension will ensure solar remains an important and growing part of our energy mix," says Amec Foster Wheeler Vice President Tom Dodson, who heads the firm's solar business. At the same time, costs in the solar industry will continue to decline. "Panel pricing will continue to fall because of efficiency increases," says Phillips. "Cell technologies will continue to improve. We'll see improvements in rack designs, inverters with lower prices, and a shift from 1,000 volt systems to 1,500 volt systems." Two other important market forces are the impacts of various

Table of Contents for the Digital Edition of Engineering Inc. - March/April 2016

Engineering Inc. - March/april 2016
Contents
From ACEC to You
Market Watch
Legislative Action
Congressman Fred Upton
Public vs. Private Clients
Navigating the P3 Landscape
One Person, One Hour at a Time
Million-Dollar Clout
2016 Annual Convention Preview
Mergers and Acquisitions
Members in the News
Business Insights

Engineering Inc. - March/April 2016