22111E Solar Power in The US Industry Report

Solar Power in the USDecember 2014 1
WWW.IBISWORLD.COM
Sunny days: Government incentives will

support revenue growth as demand heats up
IBISWorld Industry Report 22111e
Solar Power in the US

December 2014
Darryle Ulama
2 About this Industry
16 International Trade
31 Key Statistics
Industry Definition
17 Business Locations
31 Industry Data
Main Activities
Similar Industries
19 Competitive Landscape
Additional Resources
19 Market Share Concentration
31 Annual Change
19 Key Success Factors
3 Industry at a Glance
31 Key Ratios
32 Jargon & Glossary
19 Cost Structure Benchmarks

21 Basis of Competition
4 Industry Performance
22 Barriers to Entry
Executive Summary
23 Industry Globalization
Key External Drivers
Current Performance
24 Major Companies
Industry Outlook
24 NextEra Energy Inc.
11 Industry Life Cycle
27 Operating Conditions
13 Products & Markets
27 Capital Intensity
13 Supply Chain
28 Technology & Systems
13 Products & Services
28 Revenue Volatility
14 Demand Determinants
29 Regulation & Policy
15 Major Markets
30 Industry Assistance
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
WWW.IBISWORLD.COM
About this Industry

Industry Definition
Operators in this industry own and

operate solar-power-generating
facilities in the form of either
photovoltaic panels or solar thermal
Main Activities
The primary activities of this industry are
power stations that make use of mirrors

or lenses to concentrate the suns
energy. Operators then sell the energy
to downstream customers.
Solar-fueled power generation
The major products and services in this industry are

Concentrating solar power
Photovoltaic power
Similar Industries
22112 Electric Power Transmission in the US

Operators in this industry transmit and distribute electricity.
22111a Coal & Natural Gas Power in the US
Operators in this industry generates electricity from fossil fuel, such as coal and gas.
22111b Nuclear Power in the US
Operators in this industry generates electricity in nuclear power stations.
22111c Hydroelectric Power in the US
Operators in this industry generates electricity from large water dams.
22111d Wind Power in the US
Operators in this industry generates wind power using turbines and sets up wind farms.
Additional Resources
For additional information on this industry

www.ases.org
American Solar Energy Society
www.seia.org
Solar Energy Industries Association
www.census.gov
US Census Bureau
www.energy.gov
US Department of Energy
WWW.IBISWORLD.COM
Solar Power in the US December 2014
Industry at a Glance
Solar Power in 2014
Key Statistics
Snapshot
Revenue
Annual Growth 09-14
Annual Growth 14-19
Profit
Wages
Businesses
$491.9m 70.0%
7.6%
$65.0m 91
$83.6m
Price of semiconductor and electronic

components
Revenue vs. employment growth
Market Share
NextEra Energy
Inc. 1 2.0%
160
80
70
80
Index
% change
120
40
60
50
0
40
Year 06
08
10
Revenue
12
14
16
18
20
40
Year 06
08
10
12
14
16
18
20
Employment
SOURCE: WWW.IBISWORLD.COM
p. 24
Products and services segmentation (2014)

Tax credits for
energy efficiency
35%
Price of semiconductor
and electronic
components
Electric power
consumption
World price of
steaming coal
65%
Photovoltaic power
World price of natural gas
p. 4
SOURCE:
WWW.IBISWORLD.COM
SOURCE:
WWW.IBISWORLD.COM
Industry Structure
Life Cycle Stage

Revenue Volatility
Growth
Very High
Regulation Level
Technology Change
Heavy
Medium
Capital Intensity
High
Barriers to Entry
Industry Assistance
High
Industry Globalization
Medium
Concentration Level
Low
Competition Level
Medium
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31
High
WWW.IBISWORLD.COM
Industry Performance
Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage
Executive
Summary
The Solar Power industry has

experienced clear skies over the five years
to 2014, propelled by favorable
government incentives in the form of
renewable portfolio standard (RPS) laws
and tax credits. RPS legislation, currently
implemented in more than 30 states and
territories, requires local utilities to
generate a percentage of their total
energy portfolio from renewable sources.
Meanwhile, increased public support for
green energy has led to tax incentives and
grants to encourage investments in solar
power. Additionally, semiconductor input
Continued
state mandates for renewable

energy will translate into higher revenue
costs have continued to fall during the
period. In light of these trends, industry
revenue is expected to grow at an
annualized rate of 70.0% to $491.9
million in the five years to 2014,
including growth of 90.3% in 2014 alone.
Federal and state government
assistance for renewable energy has led
to strong growth in solar power. The
increase in projects over the past five
years exemplifies a triumph for industrial
policy in solar power, which historically
struggled to compete with established
energy sources, such as coal and natural
gas. Credits, grants and tax exemptions
Tax credits for energy efficiency

Tax credits for energy efficiency
incentivize solar energy generation by
lowering industry operators cost of
production and subsequently increasing
profit margins. These tax credits also
allow solar energy generators to compete
on the price of electricity with other and
more established energy sources, such as
coal and natural gas, and thereby
encourage entrance into the growing
have helped mitigate the high

investment costs of solar power
generation, encouraging industry
activity. Furthermore, a decline in the
price of silicon, an essential
semiconductor input in solar panels, has
lowered the operational costs incurred
by industry operators. Falling input
costs have accelerated the number of
photovoltaic (PV) panel projects and
widened profit margins. In 2014,
industry profit is expected to account for
17.0% of total revenue.
In the five years to 2019, industry
revenue is expected to increase at an
annualized 7.6% to $710.0 million.
Government support will continue to
help the industry compete with other
energy sources, at least in the first half of
the next five years. State mandates for
renewable energy power and lower input
costs will continue to translate into high
revenue growth. Electricity consumption
is projected to pick up in the next five
years, and operators are poised to meet
the growing demand for cleaner energy.
PV solar power generation is also
anticipated to achieve grid parity during
this time period, whereby the cost of
solar-generated electricity is equal to or
less than the retail rate of grid power.
These trends suggest that the industry
will become more viable in the next five
years, lowering its dependence on
government assistance.
industry. Tax credits for energy efficiency

are expected to remain the same in 2015.
Price of semiconductor and
electronic components
Semiconductor and electronic
components are essential inputs in the
production of solar panels, which are
major purchase costs for industry
operators. Thus, price movements of
semiconductor components generally
WWW.IBISWORLD.COM
influence industry profit; when

semiconductor input prices decrease,
solar panels become less expensive, in
turn increasing profit margins for solar
energy generators. The price of
semiconductor and electronic
components is expected to decrease in
2015, representing a potential
opportunity for the industry.
Electric power consumption
Electric power consumption drives
overall demand for energy, including
solar energy. An increase in electric
power consumption will typically lead to
an increase in demand for solar energy
from industry operators; conversely, a
decline in electric power consumption
will lower demand for solar energy,
dampening industry revenue. Electric
power consumption is expected to
decrease slightly in 2015, representing a
potential threat to the industry.
World price of steaming coal
Solar energy competes with other energy
sources such as coal, which currently
generates the largest share of US

electricity. Thus, an increase in the price
of coal will typically lead to an increase in
demand for substitute energy sources
such as solar energy, which becomes
relatively more affordable to electricity
generators; as a result, industry operators
benefit. Conversely, a decline in the price
of coal will typically lower demand for
solar energy from industry operators. The
world price of steaming coal is expected
to decrease in 2015.
World price of natural gas
In addition to coal, solar competes with
natural gas in providing energy to
American consumers. Thus, the price
movement of natural gas generally moves
in line with demand for substitute energy
sources, such as solar power. If the price
of natural gas increases, there is typically
a greater demand for substitute solar
energy; if the price of natural gas
decreases, demand for solar energy will
also likely decrease. The world price of
natural gas is expected to increase
slightly in 2015.
Electric power consumption
Price of semiconductor and electronic

components
4200
Billion kilowatt hours
80
70
Index

continued
60
50
40
Year 06
08
10
12
14
16
18
20
4100
4000
3900
3800
3700
3600
Year 06
08
10
12
14
16
18
20
WWW.IBISWORLD.COM
Strong government
support
The Solar Power industry has been

basking in sunlight over the past five
years, spurred by strong government
incentives and falling input costs.
Industry performance is dependent on
the volume and price of solar generation,
which is driven by overall electricity
consumption. However, extremely high
capital costs and competition from
established energy sources have
historically hindered solar energy
generation. Recently, industry operators
have benefited from attractive tax credits
and requirements for downstream
utilities to diversify energy holdings and
integrate renewable energy into their
portfolio. In addition, falling prices of
solar photovoltaic (PV) installations have
propelled the industry forward since
2010. As a result, solar power plants have
been built at accelerating rates over the
past five years. In light of these trends

and financial incentives, industry revenue
is expected to grow at an average annual
rate of 70.0% to $491.9 million in the five
years to 2014.
Government legislation has been an

essential force in the Solar Power
industry in the past five years. As an
emergent energy source, solar and its
associated technology could not compete
with established energy sources, such as
coal and natural gas, even as public
support for renewable energy gained
traction. High initial capital costs,
continued research and development
efforts made solar uncompetitive with
other energy sources, prompting the
government to step in and enact
legislation that would catalyze the
industry. The role of the government was
particularly crucial in the aftermath of
the recession, when private investors cut
back their investments in solar. To
counter investment losses, the
government provided grants and tax
incentives to solar companies so that they
remained operative.
The US government has enacted
several key laws and incentives that have
benefited the industry over the past five
years. The federal investment tax credit

(ITC), first introduced in 2006 and
extended into 2016, has allowed solarpower-generation operators to write off
30.0% of the taxes associated with
building a plant, which has encouraged
investment in the industry.
Furthermore, to promote renewable
energy during the tough economic
conditions following the recession, the
government provided cash grant
equivalents to the tax write-off for the
construction of new projects. This
incentive has spurred significant
investment in solar power plants over
the past five years, especially in 2009
and 2010. According to the Solar Energy
Industries Association (SEIA), the
multiple-year extension of ITC has
helped annual installation grow
1600.0% since 2006. As a result, many
operators entered the industry with the
hopes of using the incentives to start
selling solar-generated power. In the five
years to 2014, the number of industry
Industry revenue
160
120
% change
Current
Performance
80
40
0
40
Year 06
08
10
12
14
16
18
20
WWW.IBISWORLD.COM
Strong government
support
continued
Innovative financing
mechanisms
enterprises is forecast to grow at an

annualized 7.0% to 91 operators.
The renewable portfolio standard
(RPS), another important incentive,
requires utility companies to generate a
percentage of their energy from a
renewable source in states that have
passed the mandate. According to the US
Energy Information Administration
(EIA), 29 states, Washington, DC and
Puerto Rico, have passed RPS laws,
reflecting the growing government
support for renewable energy. For
example, California requires 33.0% of its
generated energy to be renewable by
2020. The penalties vary from state to
state with regard to violation of the
requirement, but most are in the form of
compliance payments. This regulatory
trend has facilitated solid renewable
energy growth in states with RPS laws.
RPS legislation has also resulted in job
growth within the Solar Power industry,
as more employees are required to
initiate and operate solar projects.

Consequently, industry employment is
expected to grow at an annualized 14.2%
to 486 people in the five years to 2014.
At the state and local level, solar tax
incentives exist in the form of property
tax and sales tax exemptions. Property
tax exemptions allow businesses to
exclude the value of a solar system from
the valuation of their property for tax
purposes. According to the SEIA, there
are currently 38 states that offer property
tax exemptions for renewable energy.
Furthermore, 29 states currently offer
sales tax exemptions for purchase of
solar-energy systems.
The rise of innovative financing

mechanisms such as power-purchase
agreements (PPAs) also contributed to
revenue growth in the past five years, as
they facilitated the sale of energy from
solar-power producers to downstream
customers. The industry differs
markedly from its competitor industries
of coal and gas power generation in
terms of ownership. In the Solar Power
industry, independent power producers
that sell power to the wholesale market
rather than distributing it through their
own retail network generate the highest
percentage of solar power. These
independent power producers generate
revenue by entering into a power
purchasing agreement (PPA) with the
interested buyer. A PPA offers revenue
opportunities for small producers by
allowing them to generate power
without a large investment. The
agreement allows the producer to sell

its energy to any customer, given that
the electricity infrastructure is
favorable. Typically, these customers
are large utilities companies that are
required to buy and sell renewable
energy as a result of the RPSs.
Industry operators that have joint
ventures with utilities tend to decrease
risk by owning a small share of the
project. Utilities companies often
employ this strategy to lower the risk
of the overall project.
Solar energy can also be used for
power-plant-electricity generation and in
homes and businesses. Each of these
segments uses the PPA as a contract to
deliver and generate energy at a specified
point and location. They are generally
supported by government incentives that
lower the cost of initial investment and,
thus, the cost of electricity generation.
RPS
laws require utilities

to generate a minimum
amount of energy,
benefiting the industry
WWW.IBISWORLD.COM
Falling panel prices

spur growth
Dawn of solar
In addition to attractive government

incentives and financing options, the
declining prices of solar panels have been
a significant contributor to the industrys
rapid growth over the past five years.
Underlining this trend is a fall in the
price of semiconductor devices, essential
inputs in the production of solar panels.
In the five years to 2014, the price of
semiconductor and electronic
components has declined at an average
annual rate of 2.2%, leading to lower
panel costs. According to a joint-research
study conducted by the SEIA and GTM
Research, solar panel costs in the second
quarter of 2013 were down 60.0% from
the first quarter of 2011. Solar-panel
prices are expected to continue to drop in
2014 as production costs continue to fall.
According to Solarbuzz, the average cost
for tier-1 photovoltaic (PV)
manufacturers is anticipated to drop
6.0% throughout 2014. Lower costs have
allowed solar-power generators to
expand their production capacity. In
2012, 3,364 PV systems were installed,
surpassing the combined total of 2010
and 2011 installations. As a result,
industry revenue increased 133.9% in

2012 alone.
The drop in solar-panel prices has
also resulted in widening profit margins
over the past five years. Due to declining
semiconductor prices, a surge in the
market for silicon allowed industry
operators to purchase panels at lower
prices. Domestic and foreign
manufacturers produced too many
panels for too few projects during the
recession, during which the ability to
finance solar projects became
increasingly difficult. Oversupply caused
prices for solar equipment to drop
during that period. Additionally,
manufacturers are increasingly using
less silicon per solar module and panel
to decrease costs and meet growing
demand from industry players.
Electricity production from solar power has

expanded broadly over the past five years,
yet solar accounts for only 0.23% (2013,
latest data available) of total electricity
generated in the United States.
Nevertheless, the industrys rapid growth,
spurred by government policy and
augmented by strong public support,
suggests that solar will secure its place in the

domestic energy sector. In 2013, the SEIA
projected that the United States would
surpass Germany in solar installations for
the first time in 15 years. The industrys
explosive growth will continue through
2014, as revenue is anticipated to grow
90.3% to $491.9 million.
Declining
prices of solar
panels have been a
significant contributor to
industry growth
WWW.IBISWORLD.COM
Industry
Outlook
The Solar Power industry is poised for

additional growth over the next five
years. During this time, favorable
government legislation is expected to
continue making solar power cost
competitive with other energygeneration sources. Moreover, the price
of silicon (the industrys main input)
will continue to decrease, lowering
panel costs and driving growth. General
economic conditions are anticipated to
strengthen, as consumer income and
business investment increase. As these
trends prevail, electricity consumption
is expected to increase. Demand for
solar power will rise in tandem with
general electricity demand, as
companies seek to diversify energy
Push for solar energy
Throughout the next five years, more

states are expected to introduce
ambitious renewable energy targets with
specific requirements for solar power.
Currently, 29 states, Washington, DC
and Puerto Rico have mandated RPS
legislation, requiring utilities to generate
renewable energy as part of their energy
mix. Utilities companies are anticipated
to meet these goals, thereby providing
more opportunities for solar-generation
companies to put solar on the map. As
the mandated RPS goals approach the
deadline, more utilities companies will
scramble to reach the target. Several
RPS goals are set for 2015, and states
under these programs will experience
the fastest growth for solar generation.
These states are expected to contribute
to growth of 19.2% in industry revenue
over 2015. Most other states have RPSs
goals set for 2020.
Additionally, the US Bureau of Land
Management (BLM) has enacted
sources and green energy becomes

mainstream. However, because the
industry depends heavily on
government incentives, political
uncertainty threatens industry
performance, at least in the short-term.
Legislators indecisiveness could hinder
investment in solar technology,
dampening operational efficiency and,
ultimately, limiting more accelerated
revenue growth. Nevertheless, industry
operators will rely less on government
incentives in the latter half of the next
five years as they become more viable
and financially sustainable. As a result,
industry revenue is forecast to rise at an
average annual rate of 7.6% to total
$710.0 million in the five years to 2019.
More
states are expected

to introduce ambitious
renewable energy targets
policies aimed at speeding up the
development of solar energy on public
lands. Since 2010, the BLM has
approved 25 utility-scale solar projects
with a potential to generate 8,000
megawatts of energy (enough to power
2.5 million US households). Recently,
the Secretary of the Interior finalized a
program to facilitate solar-energy
development on public land in six
southwestern states (Arizona,
California, Colorado, Nevada, New
Mexico and Utah). Government-backed
solar expansion will require a larger
labor force going forward; consequently,
in the five years to 2019, industry
employment is expected to increase at
an annualized 6.5% to 667 workers.
WWW.IBISWORLD.COM
In favor of PV
In the past, concentrating solar power

(CSP) technology proved more
competitive in large-scale energy
generation than PV panels, which
required high purchasing and installation
costs. Recently, declining semiconductor
input costs and a glut of solar panels in
the world market have driven down the
price of PV panels, encouraging industry
operators to favor PV installations.
Falling silicon prices will continue
allowing operators to pay less for PV
panels over the next five years, lowering
operational costs and boosting profit.
In addition to falling prices, vertical
integration in the Solar Panel
Manufacturing industry (IBISWorld
report 33441c) will reduce prices for
solar-related equipment. The movement
of solar-panel-manufacturing factories to
Favorable market
conditions
Solar-power generators will benefit from

favorable market conditions over the next
five years, buoyed by solid growth in
demand for electricity and an ongoing
focus on green energy. As the US economy
strengthens and growth resumes, overall
electricity consumption will pick up. In
the five years to 2019, electric power
consumption is expected to increase at an
annualized 0.8%, resulting in a moderate
rise in prices. Solar power capacity and
output will likely continue expanding
strongly during the same period and is
poised to meet demand for electricity.
According to CleanTechnica, a leading
countries with lower production and labor

costs will also keep prices for solar
equipment low. As the Solar Panel
Manufacturing industry matures, PV
panels will achieve greater efficiency in
converting solar energy to electricity.
According to the Rocky Mountain
Institute, improving efficiency could make
distributed solar energy financially and
logistically accessible on a large scale.
These trends will exert a downward
pressure on the industrys operational
costs, leading to healthy profit margins.
As profit margins increase, more
operators will enter the industry to take
advantage of solar powers robust growth.
IBISWorld forecasts that the number of
industry operators will increase at an
average annual rate of 5.2% to total 117
companies in the five years to 2019.
Falling
silicon prices will

lower operational costs
and boost profitability for
operators
news source for clean-technology news,
PV solar power is expected to hit grid
parity (which occurs when an alternative
energy source can generate electricity at a
cost that is equal to or less than the retail
rate of grid power) in the United States
between 2014 and 2017.
WWW.IBISWORLD.COM
Industry output is growing much more
rapidly than the economy as a whole
Life Cycle Stage
Solar cell technology is continuing to advance

The industry is home to a substantial
number of small, innovative firms
% Growth in share of economy
Solar Power
20
Maturity
Quality Growth
Company
consolidation;
level of economic
importance stable
High growth in economic

importance; weaker companies
close down; developed
technology and markets
15
Key Features of a Growth Industry

Revenue grows faster than the economy
Many new companies enter the market
Rapid technology & process change
Growing customer acceptance of product
Rapid introduction of products & brands
10
Quantity Growth
Many new companies;

minor growth in economic
importance; substantial
technology change
Aluminum Manufacturing
Steel Framing
Coal & Natural Gas Power
Nuclear Power
Decline
-5
Shrinking economic
importance
-10
-10
-5
10
15
20
% Growth in number of establishments

WWW.IBISWORLD.COM
Industry Life Cycle

This
industry
is G
rowing
Solar power production in the United

States is growing strongly, underpinned
by a combination of favorable
government incentives and technological
advancements. Furthermore, solar power
falls into the emergent green energy
sector and benefits from rising public and
private support. Industry value added,
which measures the industrys
contribution to the overall economy, is
anticipated to increase at an annualized
rate of 30.9% over the 10 years to 2019,
significantly outpacing GDP growth of
2.5% during the same period.
Most states have enacted mandatory
or voluntary targets relating to energy
production from renewable resources.
These targets, which force utilities
companies to diversify their energy
portfolio, have contributed significantly
to industry revenue growth in the past
five years. Public pressure to improve US
energy self-sufficiency and concerns
regarding climate change are also likely
to spur continued growth in solar power
generation into 2019. Strong government
and public support for the emergent
renewable energy market will encourage
the private sector to invest in solar
technology. The new frontier will
encourage entrance, characteristic of a

growing industry: in the 10 years to 2019,
the number of solar power generators is
expected to increase at an annualized
6.1% to 117.
Rapid technological change is keeping
the industry in a growth phase of its life
cycle. New technologies that more
efficiently convert sunlight to electricity
are constantly being introduced. Although
the industry does not actively take part in
manufacturing the technology, industry
operators use this technology to transmit
energy to downstream customers. An
example of such technology is
concentrating solar power (CSP), which
uses mirrors to focus sunlight on a surface
to create electricity; large-scale
deployment of CSP is anticipated to
continue into 2019. The industrys
technological shifts have focused on
reducing initial costs, with the hopes of
mainstreaming solar energy. Photovoltaic
(PV) panels have consistently achieved
greater efficiency in converting sunlight
into usable energy, and manufacturers
worldwide are competing to drive down
the price of these panels. These trends
have lowered the operational costs of
industry operators.
WWW.IBISWORLD.COM
Products & Markets
Supply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES

22112
Electric Power Transmission in the US

This industry distributes electricity to end users.
33131
Aluminum Manufacturing in the US

This industry is a major consumer of electricity.
KEY SELLING INDUSTRIES
Products & Services
23812
Steel Framing in the US

This industry assists with the construction of solar power generating facilities.
33441c
Solar Panel Manufacturing in the US

This industry supplies solar cells and panels for solar power generation.
Products and services segmentation (2014)
35%
65%
Photovoltaic power
Total $491.9m
The products and services provided by
the industry depend on the firm and
the location of the project. Different
locations might require different types
of technology, depending on the
amount of sunlight available
(measured as sunlight density).
According to SEAI, in the second
quarter of 2013 (latest available data),
cumulative operating photovoltaic
(PV) installations totaled 8,858
megawatts; according to the US
Department of Energy, operating
concentrating solar power plants
currently generate more than 800
megawatts, with four additional
projects underway.

Concentrating solar power (CSP) involves
directing heat from sunlight, often via
large curved dishes, onto a solar cell or
panel. The heat is then converted into
electricity through processes with
different levels of efficiency. For example,
some CSP processes rely on mirrors to
reflect sunlight onto a large tower to
generate heat, which is then turned into
steam to power a turbine-generator. On a
large scale, CSP technology converts
energy from sunlight more efficiently per
kilowatt-hour than photovoltaic devices.
Firms that take advantage of CSP
technology enjoy lower costs over the life
of the project. In addition, CSP is strictly
WWW.IBISWORLD.COM
Products & Markets
Products & Services

continued
Demand
Determinants
used for utility-scale electricity

production because of the technologys
large scalability. Although CSPs higher
efficiency has attracted industry
operators, photovoltaic power has
outpaced CSP in the past five years, due
largely to the rapid decline of panel prices
and increasing its increasing efficiency.
Photovoltaic power
Photovoltaic (PV) power relies directly on
solar cells to generate electricity from the
suns energy. PV panels are suitable for
individual and commercial use because
they are easily attached to buildings and
offices; however, large scale PV systems
are also capable of generating energy for
use in utilities and industrial activities. In
the past, the relatively high cost of solar

photovoltaic technology and its
dependence on weather conditions have
restricted its use in the United States.
However, the price of silicon has dropped
significantly over the past five years,
decreasing the production cost of solar
panels. Additionally, PV panel
manufacturers are producing panels with
greater energy efficiency. The industry
owes much of its explosive growth to PV,
a trend that is expected to continue in the
following years: the EIA currently
projects that utility-scale solar capacity
will increase by about 40.0% between
year-end 2013 and year-end 2015, with
PV capacity accounting for about 85.0%
of that growth.
Demand for solar power is based on a

variety of different factors including
government legislation and assistance,
interest in green technology, and the price
of solar power. All of these determinants
tend to interact with each other as well.
For example, favorable government
legislation might lower the price of solar
power by providing a tax rate to solar
power generation firms. In the past, this
has occurred at the state level, via
mandates that require states utilities
provide power from renewable energy as a
certain percentage of their total energy
portfolio. Different types of legislation can
influence demand for solar energy.
Public interest in green technology and
renewable energy has increased demand
for solar power. The movement toward a
sustainable energy infrastructure has
encouraged consumers and businesses to
demand and lobby for renewable energy,
such as solar power. Several states have
programs where consumers can buy
green energy from a utility at a premium

price. The extent to which this option is
exercised is very limited; only about 0.5%
of electricity customers have chosen to
purchase power generated from
renewable energy sources, but this is set
to grow over the next five years.
Industry demand is also driven by
price; the lower the price of solar, the
higher the demand for this type of
energy. In the past, solar struggled to
compete with established coal and
natural gas because solar energy
generation proved too costly.
Government legislation was key in
lowering the cost of production and
allowing solar energy generators to
compete with other energy sources.
Furthermore, technological progress in
the industry has decreased the price of
solar per unit of energy generation. As
technology continues to advance and the
production of solar power gains traction,
prices will fall due to economies of scale.
WWW.IBISWORLD.COM
Products & Markets
Major Markets
Major market segmentation (2014)
30%
36%
Industrial users
Utilities
34%
Total $491.9m
Commercial sector
The major markets in this industry are

utilities, commercial customers and
industrial customers. Utilities buy solar
energy from solar producers or generate
solar power themselves to retail
electricity to their end customers.
Industrial and commercial consumers
typically generate electricity onsite, or
buy large amounts of energy from a
utility or independent power producer.
Firms in this industry provide
downstream customers with a power
purchasing agreement (PPA), which
enables the firm to provide electricity to
an end user under specific terms. A PPA
is also typically used as a financing
mechanism when the downstream
customer chooses not to pay for the
system outright. In this scenario, the
customer pays the firm for the power
produced. The PPA can be provided to
any downstream customer of electricity,
although it is much more profitable for
industry operators to sign PPAs with
larger customers, such as utilities.
Utilities
Some of the largest solar projects sell
generated power to utilities firms. Many
states have renewable portfolio standards
(RPS) that require utilities within that
state to sell renewable energy as a
segment of their energy portfolio. As a

result, solar power generators are
increasingly relying on utilities and other
power producers for revenue. These
customers tend to buy large amounts of
energy, given the renewable energy
mandates set by state governments, and
enter secure commercial contracts. This
segment has been growing over the past
five years, as utilities seek to meet RPS
goals and public support for renewable
energy strengthens. Also, it is often more
cost-effective to sell solar energy to
utilities because of the large size of the
project, allowing solar power generators
to achieve economies of scale: the greater
the production scope, the lower the
marginal cost of the solar power plant.
Commercial
Many commercial entities have been
interested in supplying solar energy to
facilities. For example, Walmart has
made it a priority to power their stores
with solar energy. Firms that sell
energy to commercial users often sign
a PPA with solar power generators.
This segment has increased over the
past five years, as more businesses
push to become greener in efforts to
market to a consumer public interested
in sustainability.
WWW.IBISWORLD.COM
Products & Markets
Major Markets
continued
Industrial users
Industrial users enjoy lower prices than
households and, to a lesser extent,
commercial users of electricity. In part, this
reflects large-scale purchase of power by
industrial users. These users typically use
other types of generation in addition to

solar power. Because industrial production
typically require large amounts of energy,
the high price of solar relative to other
types of energy sources has deterred many
industrial users over the past five years.
International Trade
This industry is not engaged in

international trade, as the generation of
solar energy occurs within US borders.
Upstream suppliers of solar panels do
import and export products, but this
activity is not accounted for in this

industry. For more information on solar
panel production, please refer to the
Solar Panel Manufacturing industry
(IBISWorld report 33441c).
WWW.IBISWORLD.COM
Products & Markets

Business Locations 2014
West
New
England
AK
0.0
Great
Lakes
WA
ND
MT
0.3
Rocky
Mountains
ID
OR
0.8
West NV
5.9
0.1
SD
0.0
WY
0.0
MN
0.0
0.0
Plains
CO
0.0
0.0
0.0
0.1
KY
67.1
OK
0.0
AZ
NM
2.9
0.1
Southwest
TX
0.5
HI
1.6
Additional States (as marked on map)

1 VT
2 NH
3 MA
4 RI
5 CT
6 NJ
7 DE
8 MD
0.1
1.2
0.0
7.6
1.0
0.2
NC
0.7
SC
Southeast
MS
AL
0.0
0.0
GA
0.0
0.0
LA
0.0
FL
2.3
Solar power capacity (%)
0.0
0.3
0.0
0.0
TN
AR
WV VA
0.0
0.1
CA
West
OH
0.0
MO
KS
3.5
0.0
0.3
0.4
IN
IL
0.0
UT
PA
0.0
0.0
0.0
1 2
3
NY
2.0
5 4
MI
0.3
IA
NE
0.0
WI
ME
MidAtlantic
9 DC
0.1
Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
WWW.IBISWORLD.COM
Products & Markets
Distribution of solar power capacity vs.

population
80
60
40
20
Southwest
Southeast
Rocky Mountains
Plains
New England
Mid-Atlantic
Great Lakes
0
West
Favorable state legislation with regard to

renewable energy and sunlight
availability typically determine business
locations in the Solar Power industry.
Furthermore, the availability of land in a
certain area is also a factor, as solar
plants can require large physical spaces.
Higher abundance of land can encourage
firms to locate in those regions.
More than three-quarters of US solar
power capacity is located in the West.
California accounts for about 67.4% of
capacity, leading in terms of both
photovoltaic capacity and thermal solar
capacity. Not only does the state have
favorable landscape and climate for solar
power generation, but the states
government has been a long-term
supporter of solar power. Nevada (also
located in the West) accounts for nearly
6.0% of solar capacity, also due to a
favorable climate and adequate land.
The next major solar powerproducing region, although at a distant
second to the West, is the Mid-Atlantic,
particularly New Jersey. All solar power
generation in this region comes from
photovoltaic panels. Other regions
account for only small shares of solar
power capacity, although some
individual states are significant.
Business Locations
Solar power capacity

Population
Colorado (Rocky Mountains) and

Arizona (Southwest) are home to 3.5%
and nearly 3.0% of US solar capacity,
respectively, mainly in the form of
photovoltaic power. Florida (Southeast)
has about 2.3% of capacity and is home
to the largest photovoltaic power facility
in the United States, the DeSoto Next
Generation Solar Energy Center, which
has a capacity of 25 megawatts.
WWW.IBISWORLD.COM
19
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration
in
this industry is L ow
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
Cost Structure
Benchmarks
The Solar Power industry has a low level

of concentration. The four largest
industry participants hold a combined
market share of 22.5% in 2014. There is
currently only one major player, NextEra
Energy Inc., with a market share of
12.0%, but this will likely change in the
near future. In a climate of high growth,
companies are more willing to expand
their operations to gain market share,
and many companies are finalizing solar
projects that will increase their solargenerating capacity. However, industry
concentration remains low because of the
lack of economies of scope in the

industry. While individual solar power
facilities are getting larger, there
appears to be little movement toward
owning facilities across many areas.
Over the five years to 2014, market share
concentration has increased, albeit
marginally, as many players enter the
industry to benefit from the growing
opportunities and existing operators
scale their solar energy production.
Market share concentration is expected
to continue to increase in the five years
to 2019.
Ability to pass on cost increases

Generators must cover their cashoperating costs and also substantial
capital charges.
Access to financing
Firms in this industry that have access to
financing will fare better than others
because of the large capital cost for solar
generation technologies.
Optimum capacity utilization

Higher capacity utilization is generally
associated with lower unit costs.
Superior financial management
and debt management
Borrowing and interest rates have a major
impact on an operations profitability.
Ability to negotiate contracts

with downstream customers
Industry firms must be competent at
dealing with a range of contractual issues
regarding the power purchase agreement
(PPA) and be able to secure profit with
proper contracts.
The Solar Power industrys cost

structure depends on the size of the
firm and the type of solar technology
used. Larger solar power generators
typically have higher profit margins due
to their ability to leverage scale, while
smaller operators incur high initial
investments, and therefore higher
operational costs. Photovoltaic
technology is typically used for smallerscale production, although the rapid
decline of panel prices have encouraged
their use in large-scale utility
operations as well. Concentrating solar
power (CSP) is used on larger utility-
scale projects and can results in

cheaper electricity per unit.
The payment for energy ultimately
depends on the PPA signed by both the
firm and the customer. The PPA locks in
the rate that the customer pays for the
solar electricity generated. The rate
under the PPA contract might not be as
profitable as another PPA signed by a
competing firm. The cost structure
below represents a typical firm using
photovoltaic technology, as the vast
majority of the firms in this industry use
photovoltaic technology to generate
solar power.
WWW.IBISWORLD.COM
20
Profit
Earnings before interest and taxes (EBIT)
are high in this industry, accounting for
about 17.0% of industry revenue in 2014.
Profit margin is generally a critical factor
when industry operators consider the
viability of a potential project. If the
project is risky or could prove to be
unprofitable, then it is usually not
executed. Strong government incentives
in the form of tax breaks and grants,
along with declining silicon input costs
and greater operational efficiency, have
led to significant profit margin growth
among industry operators. Although the
emergent industry remains risky,
renewable energy sources such as solar
have accumulated strong public support,
and investors are flocking to support
companies in solar generation and solar
technology. As a result, industry profit
has grown since 2009, when margins
accounted for about 11.5% of revenue.
Depreciation
As a capital-intensive emerging
industry, solar power generators
report substantial depreciation, which
is expected to represent 29.0% of
industry revenue in 2014. A large
outlay of capital is required for solar
power infrastructure and the selling of
power to a customer. Solar power
generation firms purchase the
technology used in the project as an
upfront cost. Often, the viability of a
project is dependent on the cost of the
technology and whether the customer
will buy enough of the energy to make
it a profitable venture in the long run.
Due decreasing solar panel costs,
buoyed by falling semiconductor
prices, and investment in research and
development, depreciation as a share
of revenue has decreased from 2009,
when it accounted for 39.0% of
industry revenue.
Sector vs. Industry Costs

Average Costs of
all Industries in
sector (2014)
Industry Costs
(2014)
100
80
Percentage of revenue
Cost Structure
Benchmarks
continued
20.1
17.0
9.2
13.2
Profit
Wages
Purchases
Depreciation
Marketing
Rent & Utilities
Other
19.3
60
45.9
40
20
29.0
8.0
4.7
11.5
0.6
2.3
2.0
17.2
WWW.IBISWORLD.COM
21
Cost Structure
Benchmarks
continued
Wages
Salaries and wages absorb a substantial
share of industry revenue, reflecting the
industrys growth phase. Accounting for
about 13.2% of industry revenue in 2014,
these costs have decreased over the past
five years, due mainly to the explosive
revenue growth that has outpaced wage
increases. Although wages as a share of
revenue has decreased since 2009,
they remain a significant segment of
the industrys cost structure, as a
highly skilled labor force is required in
solar power generation. Wages as a
share of revenue is expected to
decrease slightly in the next five years,
as the industry approaches maturity
and the steady flow of new workers
standardizes wage costs.
Purchases
Representing 19.3% of industry revenue in
2014, general purchases relate to services
such as maintenance and items such as
spare parts; other expenses include
administrative and transport costs. These
costs have grown over the past five years
because firms have been aggressively
campaigning to gain customers.
Furthermore, because many industry
operators moved to the United States from
Europe, where solar markets are more
established, they need to purchase a wide
variety of materials to resume operation.
These costs do not fall under the category of
depreciation and include set-up costs once a
project is underway. These costs are set to
increase in the five years to 2019, as firms
continue to enter the industry from abroad.
Basis of Competition
Firms generating solar power not only

compete for sales, but also against
traditional power plant generators, such
as natural gas, fossil fuels and nuclear
power. Additionally, solar power operators
must also compete against other green
technology, including hydroelectricity and
wind power. Consumer and business
preferences are a major component of
demand, but so are costs, as traditional
power generation is much cheaper than
solar power and other green technology.
As a result, the industry must compete for
government subsidies and other
incentives designed to lower the cost of
solar power production.
Electric-power generators compete on
price, but the different types of capacity
(base load, intermediate and peak load)
have different cost structures that dictate
price levels. On average, a base-load plant
has the lowest cost structure. Competition
between electricity producers using
different fuel sources is blurred by the fact
that some producers generate electric
power using a range of plant types. Such
diversification provides a means of

reducing reliance on a particular type of
plant, thereby reducing risk.
Solar power typically provides
intermediate power, which can be
switched on or off to meet seasonal
fluctuations in demand. The energy
source itself is also somewhat erratic,
depending on the climatic conditions and
the seasons. As such, the main
competitors in this sector of the
electricity market are technologies that
are switched on and off to meet demand.
These technologies include wind farms
and power stations fuelled by natural gas
and oil that can be powered up or
powered down fairly readily. These types
of electricity-generation technologies
serve the same purpose for electricitygeneration firms: they provide power
when needed. Because they serve the
same function, these technologies
compete on price as electricity generation
firms seek the most inexpensive
technology to produce power. Coal-fired
and nuclear power stations, which
Level & Trend

ompetition
C
in
this industry is
Mediumand the
trend is I ncreasing
WWW.IBISWORLD.COM
22
Basis of Competition
continued
operate around the clock and in all

seasons to base-load power, provide only
limited competition to solar power.
Solar electricity producers also
compete with other energy sources,
such as gas. This competition is
particularly marked in applications
such as space heating and water
heating. Factors such as the availability
of natural gas via a reticulated system
and the relative prices of electricity and
Barriers to Entry
The Solar Power industry is capital

intensive: high capital costs are incurred
to set up the necessary solar
infrastructure before power generation
can commence. As such, new entrants
need to secure a significant amount of
capital and investments to enter into the
industry. The industry does benefit from
growing concern over greenhouse gas
emissions associated with fossil fuel-fired
power plants, and strong public support
has produced tax incentives o mitigate
the large initial costs. However,
production costs for solar power remains
higher than those associated with fossil
fuels like coal.
Finding firms and experts who have
extensive knowledge of the industry is
a barrier to entry. Most industry
participants have experience
developing solar projects abroad,
where favorable government legislation
has led to dramatic increases in solar
output. New US firms that lack the
Level & Trend

arriers to Entry
B
in this industry
are H
ighand
Decreasing
gas tend to determine the type of

energy chosen.
Weather and climate are a basis of
competition for solar producers. If an
area does not have as much sunlight,
the amount of energy created by the
solar technology might not be enough
to warrant the project. As a result, firms
tend to locate in regions with
significant sunlight and favorable
weather conditions.
Barriers to Entry checklist

Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
Level
Medium
Low
Growth
High
Medium
Heavy
High
expertise of firms from overseas will

have a hard time navigating how to
start a firm in this industry.
The relative remoteness of solar power
facilities from major demand centers also
acts as a barrier to entry. Buying and
leasing land in remote areas is a high risk
for firms that have not generated solar
power before. Additionally, transmission
costs might be too high for a firm to
undertake the initial capital spending
associated with the solar project.
WWW.IBISWORLD.COM
23
Industry
Globalization
Level & Trend
lobalization
G
in
this industry is
Mediumand the
trend is S
teady
The Solar Power industry has a medium

level of globalization. The majority of
industry participants are also based in
other countries, where favorable legislation
for renewable energy created a boom for
solar energy. Spain and Germany are two
notable examples of countries where solar
power firms have flourished. These firms
have brought or are bringing their expertise
to the US in pursuit of a growing solar
energy market. However, new firms that
are entering the industry tend to be

US-based, which has only marginally
counteracted the trend of overseas
companies dominating the industry
landscape. The net effect over the past five
years has been that foreign firms still
command a strong hand in this industry.
Over the next five years, this dominance is
set to change as US firms increasingly seek
to enter the industry. US producers do not
trade solar energy internationally.
WWW.IBISWORLD.COM
Major Companies
NextEra Energy Inc. | Other Companies
Major players
(Market share)
88.0%
Other
NextEra Energy Inc. 12.0%
Player Performance
NextEra Energy Inc.
Market share: 12.0%
NextEra Energy Inc. is a leading cleanenergy company headquartered in Juno

Beach, FL. The green-energy giant has
nearly 42,500 megawatts of electricitygenerating capacity and employs more
than 13,900 people in 26 states and four
Canadian provinces. NextEras main
subsidiaries are NextEra Energy
Resources, one of the largest solar-energy
generators in North America, and Florida
Power & Light Company (FPL), an
electricity utility firm. NextEras most
significant source of renewable energy is
wind, and the company currently owns
and operates about 17.0% of the installed
base of US wind-power-production
capacity. However, the company plans to
ramp up production of solar-power
generation over the next five years, as the
prevailing low price of silicon decreases
production costs. In 2013, NextEra
generated $15.1 billion in total revenue.
NextEra has 477 megawatts of solarpower-generating capacity as of
December 2013, most of which is

operated by its subsidiary, NextEra
Energy Resources. The company co-owns
and operates seven solar plants in
Californias Mojave Desert; collectively,
these comprise one of the worlds largest
solar sites. In October 2009, NextEra
commissioned the 25-megawatt DeSoto
Next Generation Solar Energy Center,
one of the largest solar photovoltaic
power plants in the United States during
the time. In April 2010, FPL
commissioned its Space Coast Next
Generation Solar Energy Center, a
10-megawatt solar photovoltaic facility at
NASAs Kennedy Space Center. FPLs
Martin Next Generation Solar Energy
Center, the worlds first hybrid solarthermal facility to connect to an existing
fossil fuel plant, was completed in late
2010. This project is producing about
75.0 megawatts of solar power.
In June 2012, NextEra acquired the
Blythe project, a 1,000-megawatt solar
NextEra Energy Resources (US solar segment) financial performance*

Year
Revenue
($ million)
(% change)
Net Income
($ million)
(% change)
2009
4.7
N/C
0.8
N/C
2010
7.7
63.8
1.6
100.0
2011
9.2
19.5
2.0
25.0
2012
17.1
85.9
3.9
95.0
2013
35.3
106.4
8.5
117.9
2014
59.0
67.1
13.6
60.0
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
project located in Riverside County, CA.

In 2013, the company revised the plan by
shrinking the project by more than half of
its initial target and swapped the design
from concentrated solar thermal to PV
technology due to the sliding prices of
panels. Throughout 2013, NextEra added
125 megawatts of capacity to the Genesis
solar-thermal project and 550 megawatts
of capacity to the Desert Sunlight solar
PV project in California. In October 2013,
First Solar Inc. announced that it entered
into an agreement with NextEra to
construct a 250-megawatt solar power
plant in southern California. The project,
named the McCoy Solar Energy Project,
is set to commence construction in late
2014. These expansions will secure
NextEras position in the Solar Power
industry in the next five years.
Financial performance
NextEra Energy Resources industryrelevant data is estimated, as the
company does not release revenue figures
generated specifically from solar-energy
operations. Only a small portion of
NextEra Energy Resources revenue and
profit can be attributed to solar-power
Other Companies
The other companies in this industry

produce revenue from solar-power
generation by selling it directly to
utilities, wholesale electricity providers
and retail electricity users. Various
entities, including utility companies and
government agencies, have approved
funding for new solar power plants. Once
these systems become fully operational,
new prominent players will likely emerge.
The other players below have significant
projects being built and are likely to
become major players once the projects
are completed.
generation; solar power accounts for less

than 1.0% of the electricity generated by
the business. Nevertheless, solar power is
a priority for the company and it has
secured the rights for large projects in
solar-friendly states such as California.
In the five years to 2014, NextEras
solar-power-generation revenue is
expected to increase at an annualized
65.9% to $59.0 million, including growth
of 67.1% in 2014 alone. NextEra entered
the Solar Power industry in 2009, and
has since secured its position as the
industrys top player. The high revenue
growth during the past five years is in line
with the industry as a whole, which is
currently in the growth phase of its life
cycle. During the past five years, tax
credits and government grants
encouraged the expansion of the
companys solar projects, particularly in
California. In addition to government
assistance, declining silicon prices led to
a drop in the purchasing cost of PV
panels. This allowed for solid profit gains;
in the five years to 2014, industryrelevant profit is estimated to have
increased at an annualized 76.2% to
$13.6 million.
Sempra Energy
Estimated market share: 4.9%
Sempra Energy, based in San Diego, CA,

is an energy-services company with more
than 17,000 employees worldwide. It
provides a wide spectrum of value-added
electric and natural-gas products and
services to a diverse range of customers,
operating in both regulated and
unregulated energy markets. Sempra
Generation (SG) is the most relevant
business segment for this industry. SG
develops, owns and operates natural-gas
power plants, wind farms and solar-
WWW.IBISWORLD.COM
Major Companies
Other Companies
continued
energy facilities. It currently owns and

operates solar facilities with more than
565 megawatts of solar energy, including
the Copper Mountain Solar 1, Copper
Mountain Solar 2 and the Mesquite Solar
1 plants. In December 2011, the
California Public Utilities Commission
approved Pacific Gas and Electric
Companys 25-year contract to purchase
150 megawatts of renewable power from
SGs Copper Mountain Solar 2 project in
Boulder City, NV. The first 92 megawatts
of solar panels at Copper Mountain Solar
2 were installed in late 2012 (in the
process of obtaining Eligible Renewable
Energy Resource certification), with the
remaining 58 megawatts slated for
completion by 2015. Solar energy
represents 6.7% of SGs total generation
capacity. In 2014, Sempra Energy is
expected to generate $24.1 million in
industry-relevant revenue.
SunEdison Inc.
MEMC Electronic Materials Inc., a

US-based solar wafer manufacturer,
acquired SunEdison Inc. in 2009,
signaling the companys entry into the
solar-power-generation industry.
SunEdison is headquartered in Belmont,
CA and operates solar projects in North
America and Asia, with plans to expand

into South America and Africa. In the
United States, SunEdison has completed
16 projects in Texas, Nevada, Arizona,
California, Delaware and North Carolina.
Additionally, SunEdison operates in
solar-electricity generation through
solar-power service agreements in
Massachusetts, Maryland, New Jersey,
California, Ohio and Colorado. In 2014,
SunEdison is expected to generate $16.2
million in industry-relevant revenue.
Iberdrola Renewables LLC

Iberdrola Renewables (IR) is a renewable

energy owner and operator, and is
currently generating power from about
40 renewable energy projects. IR is a
member of a group of companies headed
by Iberdrola SA, the companys largest
shareholder. Iberdrola SA is based in
Spain and employs more than 33,000
people. IR currently operates about 50
megawatts of solar energy in the United
States, primarily located in the southwest
region. IRs renewable portfolio is highly
concentrated in wind power, making it a
strong competitor in the Wind Power
industry (IBISWorld report 22111d). In
2014, IR is projected to generate $11.3
million in industry-relevant revenue.
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is H
igh
Solar power generation is a capitalintensive process and the efficiency with

which capital is employed has a major
influence on the cost of energy generation.
As such, initial as well as ongoing capital
costs tend to be high among industry
operators. For every dollar spent on
wages, solar power generators are
expected to spend about $2.19 on capital
instruments. The industrys generating
facilities, concentrating solar plants and
photovoltaic cells, have a long economic
life, although high initial investments are
required. Because of this, depreciation as
a share of revenue has consistently been
high in this industry, and currently makes
up the largest segment of the industrys
cost structure. Nevertheless, labor
continues to be an important factor for
Capital intensity
Capital units per labor unit

3.0
2.5
2.0
1.5
1.0
0.5
0.0
Economy
Utilities
Solar Power
Dotted line shows a high level of capital intensity

solar energy generators: in 2014, wages

are expected to account for 13.2% of
industry revenue.
Tools of the Trade: Growth Strategies for Success

Solar Power
Investment Economy
Recreation, Personal Services,

Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Traditional Service Economy

Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Steel Framing
Aluminum Manufacturing
Coal & Natural Gas Power

Nuclear Power
Solar Panel Manufacturing

Change in Share of the Economy
Capital Intensive
Labor Intensive
New Age Economy
Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
WWW.IBISWORLD.COM
Level
The level
of
Technology Change
is M
edium
Revenue Volatility
Level
The level
of
Volatility is
Very High
Most technological progress in this

industry comes from solar-panel
manufacturers, and the industry is
working to make them more cost
competitive with other types of energygenerating technology. The solargeneration firm chooses the appropriate
technology for the project, which could
range from PV panels to concentrating
solar power technology. Firms in this
industry are able to use technology that
converts sunlight into energy more
effectively, thereby reducing the cost of
generating energy.
Technological change in this industry
can be measured by the efficiency with
regard to turning sunshine into energy.
Concentrating solar power (CSP) devices
use direct heat from the sun,
concentrating it (often in large curved
dishes) to produce heat at useful
temperatures. This technology has
progressed significantly over the past five

years, but is currently being outpaced by
increasingly lower-priced PV panels.
Firms have been using different ways to
concentrate solar power on a surface to
create heat and eventually electricity.
New methods have paved the way for
higher conversion efficiencies.
Photovoltaic devices use semi-conducting
materials to convert sunlight directly into
electricity. Additionally, silicon wafers is
a newer technology and accounts for
almost half the cost of todays solar
photovoltaic (PV) panels.
Other technological upgrades were
implemented by Abengoa Solar; these
advances include superheated solar
towers and parabolic trough
technologies. Both additions allow the
company to increasing the efficiency of
converting solar energy into electricity
and consequently bring down its costs.
The Solar Power industry has a very high

level of revenue volatility. Although the
market for electricity is relatively stable,
the installation of solar-generating
capacity is expanding strongly. Favorable
government incentives are pushing
growth rates up significantly. Since
certain government incentives expire and

only provide a subsidy for a specified
amount of time, revenue jumps will occur in
response. Also, a drop in silicon prices has
substantially aided the increase in solar
project completions as many firms were able
to put their products out at lower costs.
A higher level of revenue

volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
Volatility vs Growth
1000
Revenue volatility* (%)
Technology
& Systems
Hazardous
Rollercoaster
100
Solar Power
10
1
0.1
Stagnant
30
10
Blue Chip
10
30
50
70
Five year annualized revenue growth (%)

* Axis is in logarithmic scale
WWW.IBISWORLD.COM
Revenue Volatility
continued
Furthermore, the prices of other types

of energy-generating commodities
influence industry revenue. The higher
the volatility of these commodities, the
more likely electricity-generation firms

will use solar power. As a result, revenue
volatility can occur from fluctuations of
other energy generating technologies.
Regulation & Policy
Increasing levels of regulation and policy

are generally beneficial for the Solar
Power industry. More than 30 US states
and territories have renewable electricity
standards (also called renewable
portfolio standards or RPS) that require
electric providers to gradually increase
the amount of renewable, typically
non-hydroelectric energy sources in their
power supplies. Target levels for
renewable energy vary from 7.5% in
Florida to 40.0% in Hawaii, but most
commonly are about 20.0%.
For example, Washingtons clean
energy initiative requires electricity
providers to generate 10.0% of their
power from renewable energy sources
by 2020. In February 2007, Minnesota
lifted its existing renewable
requirements for its largest electricity
generator in the state, Xcel Energy,
from 19.0% by 2015 to 30.0% by 2020,
and placed a 25.0% by 2025
requirement on all other electricity
providers. Several other states,
including Arizona, California, Nevada,
New Jersey, Pennsylvania, Wisconsin,
New Mexico and Colorado have also

increased or accelerated their
standards. Eighteen of the states with
renewable electricity standards have a
solar or distributed generation carveout and five provide extra credits for
solar or distributed generation.
Most states with RPS programs have
associated renewable energy certificate
(REC) trading programs. RECs provide a
mechanism to track the amount of
renewable power being sold and to
reward eligible power producers. Energy
supply companies are required to redeem
RECs equal to their obligation under the
RPS program. A credit is issued for each
unit of renewable power produced and
can be sold to energy supply companies,
either in conjunction with the underlying
power or separately. Depending on the
program, RECs can be banked (for use in
future years) or borrowed (to meet
current year commitments). There is a
great deal of variety among the states in
the handling and functioning of RECs.
The various proposals for a federal RPS
program have not come to fruition.
Level & Trend

he level of
T
Regulation is
Heavyand the
trend is S
teady
WWW.IBISWORLD.COM
Industry Assistance
Level & Trend
he level of Industry
T
Assistance is H
igh
and the trend
is I ncreasing
The Solar Power industry is not protected

by either tariffs or non-tariff barriers.
However, it does receive considerable
industry assistance. The American
Recovery and Reinvestment Act of 2009
provided funding for energy efficiency
and renewable energy programs,
including $8.5 billion to subsidize loans
for renewable energy projects, $2.0
billion for advanced battery systems and
$13.0 billion in tax credits for renewable
energy production.
The Energy Policy Act of 2005 also
provides some incentives for electricity
from renewable sources. Section 206 of
the act established a rebate program for
renewable energy. The installation of
renewable energy systems in dwellings or
small businesses attracts a 25.0% rebate
of spending on qualifying equipment, or
$3,000, whichever is less. According to
the legislation, renewable energy sources
include energy derived from solar,
geothermal, biomass and wind for nonbusiness residential purposes, as well as
any other form of renewable energy that
the Secretary of Energy specifies by
regulation for the purpose of heating or
cooling a dwelling or providing hot water
or electricity for use within a dwelling.
Annual funding for this program
authorized in the Act started at $150.0
million for fiscal year 2006 and ended
with $250.0 million for fiscal year 2010.
ITC
The federal government provides
investment tax credits (ITC) for
renewable energy. This credit is

available for eligible renewable energy
put in service before December 31, 2016.
Solar is included among the renewable
energy technologies covered in the tax
credit and receives a 30.0% tax credit.
The ARRA has amended the ITC to allow
industry operators to receive a grant
equal to the tax credit if the construction
solar plant started in 2009 or 2010.
Cash grants are more attractive because
these would cut down the cost of
investment directly before the project
has started. As a result, the risk of the
project is lessened.
Renewable energy production incentive
Designed to complement the production
tax credit (PTC), which is available for
other technologies besides solar, this
incentive provides a production credit
equal to a 10-year, 1.5-cents per kilowatthour inflation-adjusted production for
solar projects. It also provides the credit
for other entities besides those that pay
corporation tax, as required by the PTC.
However, the incentive is subject to the
availability of funds in the program. If
the funds run out during a certain year,
then the production credit must be
addressed the next year.
Several states provide incentives for
renewable energy technologies. For
example, the California Public Utilities
Commission and the Wisconsin Public
Service Commission have consistently
developed state energy plans that favor
the use of renewables.
WWW.IBISWORLD.COM
Key Statistics
Industry Data
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank
Revenue
($m)
19.3
19.0
22.8
33.7
34.6
46.4
68.7
160.7
258.5
491.9
586.2
638.0
672.7
696.0
710.0
10/10
1248/1324
Annual Change
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank
Revenue
(%)
-1.6
20.0
47.8
2.7
34.1
48.1
133.9
60.9
90.3
19.2
8.8
5.4
3.5
2.0
1/10
2/1324
Key Ratios
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank
IVA/Revenue
(%)
89.12
91.05
91.67
83.98
84.68
75.22
77.73
64.47
63.95
59.22
54.86
63.12
60.50
61.03
61.06
2/10
132/1324
Industry
Value Added Establish($m)
ments
17.2
53
17.3
57
20.9
60
28.3
63
29.3
67
34.9
70
53.4
73
103.6
80
165.3
87
291.3
95
321.6
101
402.7
107
407.0
116
424.8
122
433.5
126
10/10
10/10
1166/1324 1187/1323
Wages
Enterprises Employment Exports Imports
($m)
51
100
--7.3
55
120
--7.5
58
140
--9.4
61
190
--11.6
65
250
--11.9
68
295
--12.5
71
340
--19.6
78
385
--35.0
85
420
--50.0
91
486
--65.0
98
532
--73.7
105
560
--78.7
111
587
--83.0
115
629
--88.7
117
667
--93.5
8/10
10/10
N/A
N/A
10/10
1144/1323 1313/1324
N/A
N/A 1270/1324
Industry
Value Added
(%)
0.6
20.8
35.4
3.5
19.1
53.0
94.0
59.6
76.2
10.4
25.2
1.1
4.4
2.0
1/10
4/1324
Enterprises Employment
(%)
(%)
7.8
20.0
5.5
16.7
5.2
35.7
6.6
31.6
4.6
18.0
4.4
15.3
9.9
13.2
9.0
9.1
7.1
15.7
7.7
9.5
7.1
5.3
5.7
4.8
3.6
7.2
1.7
6.0
1/10
1/10
77/1323
25/1324
Establishments
(%)
7.5
5.3
5.0
6.3
4.5
4.3
9.6
8.8
9.2
6.3
5.9
8.4
5.2
3.3
1/10
50/1323
Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.
Exports/
Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Revenue per
Employee
($000)
193.00
158.33
162.86
177.37
138.40
157.29
202.06
417.40
615.48
1,012.14
1,101.88
1,139.29
1,146.00
1,106.52
1,064.47
5/10
115/1324
Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Wages/Revenue
(%)
37.82
39.47
41.23
34.42
34.39
26.94
28.53
21.78
19.34
13.21
12.57
12.34
12.34
12.74
13.17
5/10
892/1324
Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Employees
per Est.
1.89
2.11
2.33
3.02
3.73
4.21
4.66
4.81
4.83
5.12
5.27
5.23
5.06
5.16
5.29
9/10
967/1323
Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Wages
(%)
2.7
25.3
23.4
2.6
5.0
56.8
78.6
42.9
30.0
13.4
6.8
5.5
6.9
5.4
1/10
9/1324
Electric Power
Consumption
(Billion kilowatt hours)
3,811.0
3,817.0
3,890.0
3,865.0
3,724.0
3,886.0
3,883.0
3,823.0
3,845.0
3,904.0
3,951.0
4,001.0
4,047.0
4,101.0
4,152.3
N/A
N/A
Domestic
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Average Wage
($)
73,000.00
62,500.00
67,142.86
61,052.63
47,600.00
42,372.88
57,647.06
90,909.09
119,047.62
133,744.86
138,533.83
140,535.71
141,396.93
141,017.49
140,179.91
1/10
33/1324
Electric Power
Consumption
(%)
0.2
1.9
-0.6
-3.6
4.4
-0.1
-1.5
0.6
1.5
1.2
1.3
1.1
1.3
1.3
N/A
N/A
Share of the
Economy
(%)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
10/10
1166/1324
WWW.IBISWORLD.COM
Jargon & Glossary
Industry Jargon
IBISWorld Glossary
CONCENTRATING SOLAR POWER (CSP)A technology that

uses mirrors to focus sunlight on a surface to create energy.
PHOTOVOLTAIC CELLA specialized semiconductor

diode that converts sunlight into electricity.
INTERMEDIATE POWERElectricity from sources that

can be switched on or off to meet seasonal demand.
RENEWABLESAll types of renewable energy.
BARRIERS TO ENTRYHigh barriers to entry mean that

new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
INDUSTRY REVENUEThe total sales of industry goods

and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
CAPITAL INTENSITYCompares the amount of money

spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
US Bureau of Economic Analysis implicit GDP price
deflator.
INDUSTRY VALUE ADDED (IVA)The market value of

goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
EMPLOYMENTThe number of permanent, part-time,

temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
LIFE CYCLEAll industries go through periods of growth,

maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
ENTERPRISEA division that is separately managed and

keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
NONEMPLOYING ESTABLISHMENTBusinesses with

no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
ESTABLISHMENTThe smallest type of accounting unit

within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
PROFITIBISWorld uses earnings before interest and tax

(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
DOMESTIC DEMANDSpending on industry goods and

services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EXPORTSTotal value of industry goods and services sold

by US companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in the
United States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
VOLATILITYThe level of volatility is determined by

averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
At IBISWorld we know that industry intelligence

is more than assembling facts
It is combining data with analysis to answer the
questions that successful businesses ask
Identify high growth, emerging & shrinking markets
Arm yourself with the latest industry intelligence
Assess competitive threats from existing & new entrants
Benchmark your performance against the competition
Make speedy market-ready, profit-maximizing decisions
Who is IBISWorld?
We are strategists, analysts, researchers, and marketers. We provide
answers to information-hungry, time-poor businesses. Our goal is to
provide real world answers that matter to your business in our 700 US
industry reports. When tough strategic, budget, sales and marketing
decisions need to be made, our suite of Industry and Risk intelligence
products give you deeply-researched answers quickly.
IBISWorld Membership
IBISWorld offers tailored membership packages to meet your needs.
Disclaimer
This product has been supplied by IBISWorld Inc. (IBISWorld) solely for use
by its authorized licensees strictly in accordance with their license
agreements with IBISWorld. IBISWorld makes no representation to any
other person with regard to the completeness or accuracy of the data or
information contained herein, and it accepts no responsibility and disclaims
all liability (save for liability which cannot be lawfully disclaimed) for loss or
damage whatsoever suffered or incurred by any other person resulting from
the use of, or reliance upon, the data or information contained herein.
Copyright in this publication is owned by IBISWorld Inc. The publication is
sold on the basis that the purchaser agrees not to copy the material
contained within it for other than the purchasers own purposes. In the event
that the purchaser uses or quotes from the material in this publication in
papers, reports, or opinions prepared for any other person it is agreed that
it will be sourced to: IBISWorld Inc.
Copyright 2014 IBISWorld Inc

22111E Solar Power in The US Industry Report

Diunggah oleh

Informasi Dokumen

Judul Asli

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

22111E Solar Power in The US Industry Report

Diunggah oleh

Hak Cipta:

Format Tersedia

Solar Power in the USDecember 2014 1

Sunny days: Government incentives will

IBISWorld Industry Report 22111e

Solar Power in the US

2 About this Industry

19 Market Share Concentration

19 Key Success Factors

32 Jargon & Glossary

19 Cost Structure Benchmarks

Key External Drivers

24 NextEra Energy Inc.

11 Industry Life Cycle

28 Technology & Systems

13 Products & Services

29 Regulation & Policy

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

Solar Power in the USDecember 2014 2

About this Industry

Operators in this industry own and

The primary activities of this industry are

power stations that make use of mirrors

Solar-fueled power generation

The major products and services in this industry are

22112 Electric Power Transmission in the US

For additional information on this industry

Solar Power in the US December 2014

Annual Growth 09-14

Annual Growth 14-19

Price of semiconductor and electronic

Revenue vs. employment growth

Products and services segmentation (2014)

Key External Drivers

Concentrating solar power

World price of natural gas

Life Cycle Stage

Solar Power in the USDecember 2014 4

Executive Summary | Key External Drivers | Current Performance

The Solar Power industry has

state mandates for renewable

Key External Drivers

Tax credits for energy efficiency

have helped mitigate the high

industry. Tax credits for energy efficiency

Solar Power in the USDecember 2014 5

influence industry profit; when

generates the largest share of US

Price of semiconductor and electronic

Billion kilowatt hours

Key External Drivers

Solar Power in the USDecember 2014 6

The Solar Power industry has been

past five years. In light of these trends

Government legislation has been an

years. The federal investment tax credit

Solar Power in the USDecember 2014 7

enterprises is forecast to grow at an

initiate and operate solar projects.

The rise of innovative financing

agreement allows the producer to sell

laws require utilities

Solar Power in the USDecember 2014 8

Falling panel prices

In addition to attractive government