According to the Solar Energy Industries Association (SEIA) a national trade group, 1,855 megawatts (MW) of photovoltaic capacity (solar power) was added in the U.S. in 2011. This is an increase of almost 110% from 2010, more than double! For reference, one megawatt is equal to the amount of energy produced by approximately ten automobile engines. Below are several reasons for this dramatic increase:

The falling price of photovoltaic panels
Government subsidies and grants
Improved installation efficiency

The price of photovoltaic (solar) panels is falling drastically and, according to the SEIA, has decreased by as much as 25 percent in the past 6 months alone with further price decreases expected. Some reports have the price of panels decreasing by as much as 50 percent by the end of next year (as compared to 2009 prices). Much of the decrease in price is attributed to over-production in China, which has resulted in the closure of several large manufacturing facilities there.

The U.S. government has been supporting the solar energy industry for quite some time now through tax incentives and grants. Although there has been a lot of positive growth in the industry as a result, some projects, including the $500 Billion Solyndra debacle funded by the 2009 stimulus package, have not been successful. Government support for solar energy is not limited to the U.S. The United Kingdom subsidizes homeowners and business for the purchase of solar energy equipment through its “feed-in-tariff” program which reimburses property owners for the renewable energy they generate. Germany has a similar program for those interested in converting to solar energy. Despite the rising popularity, without government assistance, conversion to solar energy currently does not make financial sense for most people.

It is clear that solar energy equipment is becoming more popular as it becomes less expensive to purchase and install. The demand for solar equipment has generated a boom for installers. It has also resulted in many individuals and businesses joining the installation business which has created more competition in the industry. As a general rule, installers do not make the equipment they install. Therefore, the only things that differentiate them are installation price, quality and their level of experience. The last thing a home or business owner wants is a less than qualified installer on their roof drilling holes for solar panel installation. When considering your solar purchase, it is just as important to check out the reputation of the installer as it is the quality and price of the panels being installed.

So, what is ahead for 2012 and beyond? First and foremost it is important to know one of the most popular federal programs fostering growth in the industry, the Department of Treasury’s 1603 program, ended in 2011 and is no longer available. According to many in the industry, in the unlikely event it is reinstated, it will most likely not happen until after the 2012 elections. Even with the loss of this incentive, the SEIA predicts another 2,800 MW will be added in the U.S. in 2012 (mainly due to decreasing panel prices). This would be more than a 50% increase over 2011’s record. For 2013, the SEIA predicts there will be three gigawatts of solar energy generated in the U.S, which is enough to power more than half a million homes. Many experts in the field say the future of solar energy appears to be bright. However, assuming the price of electricity stays where it is, prices need to continue to fall on both equipment and installation costs for solar energy conversion to make economic sense (without government assistance).

For questions or more information regarding solar energy tax credits and government assistance please contact Robert A. D’Andrea, CPA at 888-KLR-8857 or email TrustedAdvisors@kahnlitwin.com.