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Solar energy has been gaining popularity in the United States over the last few years on increasing usage of renewable energy sources. Per a recent report of the U.S. Energy Information Administration (EIA), solar energy usage has increased from 0.427 quadrillion btu (British thermal unit) in 2015 to 0.951 quadrillion btu in 2018. It is expected to touch 1.073 quadrillion btu in 2019 and rise another 20% to 1.293 quadrillion btu next year.
Given the bullish prospects, we believe the Zacks Solar industry has scope to expand. Advancement of technology allows solar panels to generate energy even during low sunlight conditions. Along with this, declining cost of solar panels and higher conversion rate of the latest solar panels are bringing down the cost of installing and operating utility-scale solar plants.
Sunlight is available in abundance and for free, which is the key reason why solar energy is used for electricity generation. To encourage consumers to use more solar power, the federal government provides a solar tax credit for solar systems installed in residential and commercial properties. The credit can be applied to both customer-sited commercial solar systems and large-scale utility solar farms. Governments also provide grants to homeowners to encourage the purchase and installation of a solar photovoltaic (PV) system.
Environmental awareness has resulted in the development of infrastructure which helps drive usage of renewable energy sources like wind, solar and hydropower. EIA forecasts that these sources will collectively produce 18% of U.S. electricity in 2019 and 19% in 2020.
U.S. states like California, Florida and Texas are leading the way with utility operators setting up solar plants in the states with the assistance of local administration.
To safeguard the interest of domestic solar panel producers, additional tariffs were imposed on the import of solar cells and panels in January 2018. The tariff imposition will protect the interest of domestic producers but might also decelerate the speed of development of new of solar projects as cheap solar panels will be no longer available.
The primary drawback of solar-powered generation units is their inability to produce electricity 24x7 like those based on conventional fossil fuel. However, with the ongoing development of battery storage units across the United States, renewable sources will be able support the demand for electricity around the clock.
Per a recent report of The United Nations Environment Programme (UNEP), global investment in new renewable energy capacity is set to reach $2.6 trillion by the end of 2019. Solar power alone is estimated to draw half of the investments. Moreover, some oil super majors have been investing billions of U.S. dollars considering the prospects of the industry. For instance, ExxonMobil XOM plans to invest up to $100 million over 10 years to research and develop advanced lower-emissions technologies with the U.S. Department of Energy. In the past 12 months, The Solar industry has returned 41.5% while the S&P 500 Index has returned 2.5%.