The solar boom taking place in the U.S. has led to some very interesting installation trends. It's no surprise that California leads the way in solar; the state has always had a soft spot for the environment, and the state's politicians have made solar a priority.
But the other area where solar is taking off may surprise you. The states of New England have become huge fans of solar, especially the state of New Jersey.
A nation of solar
A recent IMS Research report said that PV installations grew 120% in the first half of 2012 to 1.7 GW. For the full year, the report predicted 4.3 GW would be installed, making the U.S. the third-largest solar installer in the world.
In a year when Germany and other European countries are expecting to see a slowdown in solar installation, the U.S. is leading the charge forward. This may surprise some who thought the market would slow down after the expiration of the 1603 Treasury Grant Program at the start of the year.
Solar on the East Coast
Surprisingly, New Jersey was the biggest installer of solar in the first quarter of the year according to the Solar Energy Industry Association's "U.S. Solar Market Insight" report. Massachusetts, Pennsylvania, and New York are also among the top 10 solar installers.
The trend of growth should only continue as policymakers make it easier for people to install solar. In New Jersey, solar was installed so fast over the past year that the price of Solar Renewable Energy Credits fell rapidly, making solar installations less attractive. Governor Chris Christie recently signed a bill that moved up the state's Renewable Portfolio Standard for solar by about four years, helping to bring back demand for SRECs. At the same time, officials think the bill will slowly reduce subsidies to the solar market.
In New York, Governor Cuomo recently signed legislation that exempts commercial solar equipment from sales tax, introduced tax credits for power purchase agreements, and extended property tax abatement for solar in New York City. New York has been home of the most famous blackouts in America, and distributed solar in particular could go a long way toward helping the state.
Going back to Cali
California installed 542 MW of solar in 2011 and 148 MW in the first quarter of 2011 alone. This is far and away the largest potential market for solar, not only because of political will, but because of the state's sun-soaked climate.
Last week the state also passed a big landmark, generating 1,029 MW of solar power on Aug. 20. What is also interesting to note is that solar nicely filled in the trough left by wind on the 20th, as shown below.
Source: California Independent System Operator.
Distributed solar has been so successful in California that utilities are saying that net metering unfairly puts the cost of grid infrastructure and maintenance at the feet of non-solar customers. This has led the California Public Utilities Commission to take a step back and ask if the current rate structure is appropriate for a state filled with solar cells.
This is one of many debates the solar industry will have in coming years as solar supplies more power to the market. Solar has advantages, like generating power at peak times and the ability to be installed on homes, but it also has drawbacks, like intermittency. As the California solar market grows it will likely be the first state to confront some of these issues.
What to do about solar's growth
The big question for investors is what to do about the growth of solar in the U.S. Solar stocks have been pummeled and investing in them now looks like a risky proposition. Here are a few solid options.
First Solar (Nasdaq: FSLR) took a beating yesterday, but don't dismiss this company because of one day's bad news. First Solar is quickly becoming the largest systems builder in the world and in five years we may talk about its thin-film modules only in the past tense. This may lead to a rough transition, but it takes a lot of risk out of the business if it doesn't have to compete with other module makers. For more information on First Solar, check out our premium report on the stock by clicking here. This report will offer both the bull and bear scenarios for First Solar, as well as updates with more insight when the company is on the move.
Ameresco (NYSE: AMRC) is another play on the installation market. The company hasn't grown recently and some customers have pushed out projects, but with a total backlog of $1.3 billion, a growing renewable energy revenue stream, and a forward P/E of 13.5, this company has a big opportunity ahead.
Most of the growth in the U.S. is going to the residential solar market, which favors high-efficiency module makers because consumers get more bang for their buck. SunPower (Nasdaq: SPWR) is the market leader in the U.S. with 18.3% of the residential market in Q4 2011 according to GTM Research. Suntech Power and Yingli Green Energy (NYSE: YGE) are also in the top five solar suppliers for residential systems.
Another play on the Chinese solar market is GT Advanced Technologies (Nasdaq: GTAT), a company that makes solar equipment for manufacturers. The company's HiCz technology should be another major step forward for solar manufacturers, and the stock only trades at four times trailing earnings, a price that is usually reserved for companies going out of business.
