On my admissions application for my MBA in 2005, the entrance essay question asked me to analyze an industry I thought would grow over the next 20 years. I wrote about the renewable energy industry and ended up and starting my first solar business in an entrepreneurship class the following year. Having been in the solar industry now for nearly 20 years, I have ridden the solar coaster through a few boom and bust cycles. Sure there are likely to be more booms and busts, but to me, the upside outlook for the next 20 years feels different in scale.
According to IREC's most recent Solar Jobs Census, solar jobs grew in 42 states and Puerto Rico in 2022. More interestingly, 44% of solar industry employers said it was “very difficult” to find qualified applicants, which is the highest percentage ever recorded by the census. Residential solar jobs grew by 11%, or about 9,500 jobs while utility scale jobs shrank by over 6,000 jobs bringing the total solar jobs in the U.S. to 263,883 solar workers. Keep in mind that 2021-2022 was a tumultuous time for solar, with supply chain issues and threats of new solar tariffs weighing down large scale installations.
2023 appears to be off to a huge start according to the latest Quarterly Solar Industry Update from the U.S. DOE, released in August 2023, the United States installed 5.7 GWac of PV in Q1 2023, which is the largest Q1 on record.
Why am I so optimistic about the next 20 years after living through two stomach churning drops on the solar coaster? Primarily two reasons: solar economics and climate action.
According to IREC's most recent Solar Jobs Census, solar jobs grew in 42 states and Puerto Rico in 2022. More interestingly, 44% of solar industry employers said it was “very difficult” to find qualified applicants, which is the highest percentage ever recorded by the census. Residential solar jobs grew by 11%, or about 9,500 jobs while utility scale jobs shrank by over 6,000 jobs bringing the total solar jobs in the U.S. to 263,883 solar workers. Keep in mind that 2021-2022 was a tumultuous time for solar, with supply chain issues and threats of new solar tariffs weighing down large scale installations.
2023 appears to be off to a huge start according to the latest Quarterly Solar Industry Update from the U.S. DOE, released in August 2023, the United States installed 5.7 GWac of PV in Q1 2023, which is the largest Q1 on record.
Why am I so optimistic about the next 20 years after living through two stomach churning drops on the solar coaster? Primarily two reasons: solar economics and climate action.
Solar Economics
Swanson's law is the observation that the price of solar photovoltaic modules tends to drop 20 percent for every doubling of cumulative manufactured volume. At this rate, costs drop by 75% about every 10 years. The graph below shows this trend in cost reduction since 1976.
Swansons law is considered an "experience curve" where economies of scale are gained through size and experience manufacturing a product. The more solar modules that get manufactured, the cheaper it gets to manufacture each one, which allows the price point to slide down the demand curve. More demand at lower prices means more solar modules manufactured, which makes them cheaper still and the cycle continues to gain steam and self-perpetuate.
Another economic force supporting the growth of solar is grid parity, which is achieved when the levelized cost of electricity (LCOE) from solar matches or beats the LCOE from fossil fuels. Defining exact grid parity is a complex nut to crack as it depends on many factors including solar manufacturing and installation costs, subsidies, baseline power requirements, fossil fuel costs and net metering. Based on this grid parity calculator using a solar cost of $3/watt, 25 states (half of the U.S.) are already at or below grid parity. Cost competitiveness with fossil fuels will continue to spur demand both on the consumer side where it becomes more attractive to install solar at your home or business and on the utility side, where it becomes cheaper to build a new solar PV power plant than to build (or someday even just operate) a coal or natural gas plant.
This increased demand will continue to feed the experience curve further dropping costs. On the other side of the equation we have solar subsidies like the ITC.
Swansons law is considered an "experience curve" where economies of scale are gained through size and experience manufacturing a product. The more solar modules that get manufactured, the cheaper it gets to manufacture each one, which allows the price point to slide down the demand curve. More demand at lower prices means more solar modules manufactured, which makes them cheaper still and the cycle continues to gain steam and self-perpetuate.
Another economic force supporting the growth of solar is grid parity, which is achieved when the levelized cost of electricity (LCOE) from solar matches or beats the LCOE from fossil fuels. Defining exact grid parity is a complex nut to crack as it depends on many factors including solar manufacturing and installation costs, subsidies, baseline power requirements, fossil fuel costs and net metering. Based on this grid parity calculator using a solar cost of $3/watt, 25 states (half of the U.S.) are already at or below grid parity. Cost competitiveness with fossil fuels will continue to spur demand both on the consumer side where it becomes more attractive to install solar at your home or business and on the utility side, where it becomes cheaper to build a new solar PV power plant than to build (or someday even just operate) a coal or natural gas plant.
This increased demand will continue to feed the experience curve further dropping costs. On the other side of the equation we have solar subsidies like the ITC.
Climate Action
In August of 2022 Congress passed the Inflation Reduction Act (IRA) which includes some $370 Billion set aside for climate and energy initiatives like solar. The IRA extends the solar Investment Tax Credit (ITC) of 30% and Production Tax Credit (PTC) of $0.0275/kWh through 2025.
After January 1, 2025, the Clean Electricity Production Tax Credit and the Clean Electricity Investment Tax Credit will replace the traditional PTC / ITC and will extend through 2032, with reduced credits in 2033-34.
Additional credits are available as well to incentivize domestic production and equity for certain communities. For example, an additional 10% credit is available if at least 40% of the components and 100% of the steel are manufactured in the U.S. An additional 10% credit applies in communities with significant fossil fuel industry jobs. Also low-income community projects are eligible for an additional 10% credit up to an additional 20% credit for an economic benefit project or qualified low-income residential building.
The IRA also creates 10 years of advanced manufacturing production tax credits for domestic manufacturing of solar modules and components. These credits, which have the potential to increase as production increases, have already led to a new wave of solar manufacturing in the U.S.
After January 1, 2025, the Clean Electricity Production Tax Credit and the Clean Electricity Investment Tax Credit will replace the traditional PTC / ITC and will extend through 2032, with reduced credits in 2033-34.
Additional credits are available as well to incentivize domestic production and equity for certain communities. For example, an additional 10% credit is available if at least 40% of the components and 100% of the steel are manufactured in the U.S. An additional 10% credit applies in communities with significant fossil fuel industry jobs. Also low-income community projects are eligible for an additional 10% credit up to an additional 20% credit for an economic benefit project or qualified low-income residential building.
The IRA also creates 10 years of advanced manufacturing production tax credits for domestic manufacturing of solar modules and components. These credits, which have the potential to increase as production increases, have already led to a new wave of solar manufacturing in the U.S.
According to Rewiring America, an electrification non-profit, the United States will need 1 million more electricians to install all the solar photovoltaics, energy storage, heat pumps and electric vehicle charging stations required to help the country meet its climate goals incentivized by the IRA. The same demand surely applies to all jobs within the solar industry and the tide is only starting to turn just now. The growth and momentum are just getting started and anyone entering the industry right now is getting in at just the right time.
If I were to re-write that essay again today and analyze an industry that would grow over the next 20 years I would certainly double down on my pick of the solar industry. When my son and daughter start thinking about careers and jobs in the next few years, you can be sure I will be guiding them toward solar as the place to start a business or join a growing company. Not only to join an expanding industry that possesses the opportunities for career advancement and financial return but also to do something truly worthwhile with their time to make a positive impact on the climate future of the world, their children and their grandchildren.
If I were to re-write that essay again today and analyze an industry that would grow over the next 20 years I would certainly double down on my pick of the solar industry. When my son and daughter start thinking about careers and jobs in the next few years, you can be sure I will be guiding them toward solar as the place to start a business or join a growing company. Not only to join an expanding industry that possesses the opportunities for career advancement and financial return but also to do something truly worthwhile with their time to make a positive impact on the climate future of the world, their children and their grandchildren.
