Isra-Mart srl:BarCap predicts 20-year US solar boom as European market slows

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A leading clean tech analyst yesterday predicted it would take 20 years for the US to reach market saturation for solar energy, adding that policy incentives will keep North America's renewables industry booming over the next couple of years, even as over-supply risks emerge in Europe on the back of cuts in subsidies.

The Barclays Capital Clean Technology Outlook 2011 published on Tuesday said that demand from Germany would drop in 2011 while North America would become more important from a global solar demand perspective.

Vishal Shah, the analyst who wrote the report, told BusinessGreen that the North American solar market was catching up with Europe.

"We think that in 2011 at some point demand in Northern America, US and Canada is going to surpass demand from the German market because the incentives in the US are not coming down, whereas incentives in many European countries are coming down rapidly," he said. "So we do think that there is going to be a new shift towards North America for a lot of the manufacturers.

"The US market has not even started to reach saturation point. You could continue to invest and install solar at a run rate of 3GW to 5GW for 20 years and it would still not be flat in the US. There's potential to install 60GW to 80GW of solar in the US."

US incentives include a Department of Energy loan scheme, the Treasury Grant Programme "1603", and state-based initiatives such as the Renewable Portfolio Standard. But the report says that the most significant incentive is a 30 per cent tax credit on installations.

Solar installations in the US increased 111 per cent last year, with the addition of an estimated 1GW of solar power, and is predicted this year to increase another 125 per cent, equivalent to 2.25GW, according to research from Barclays Capital and renewables consultants Solarbuzz.

By contrast, the same report predicts that although Germany added an estimated 7GW of solar power in 2010, rates of installed capacity will drop 36 per cent in 2011, and remain flat at about 4GW a year through to 2013.

Vishal also said that for the first time this year the return on solar investments would be higher in the US than in Europe.

"If you get a 30 per cent tax credit on a $4 (£2.54)-per-watt installation, that's a $1.20-per-watt subsidy," he said. "If you are getting on top of that a revenue stream from the electricity payment you generate for 20 years at 18 cents per kWh, that amount is going to be a lot greater than feed-in tariffs for Europe."

The latest report builds on a previous Barclays Capital study released in September last year, which also warned the European market was likely to slow during 2011.

"Policy outlook would be the key factor determining solar demand in 2011," it stated. "Solar may be nowhere close to approaching saturation levels from an overall demand mix standpoint. Having said that, we see saturation risks increasing in 2011, at least from a policy standpoint in Germany, Italy, France and other smaller European markets. Unless demand from markets such as the US, China, India and other non-European markets pick up, concerns about policy saturation in Europe would likely keep a lid on sector valuation multiples, in our view."