“When I consider this checklist, we’re pretty close.”

The U.S. solar industry has come a long way in a very short timeframe. After decades of slow but steady growth, the last 2.5 years have brought an explosion of new installations in America — with two-thirds of all total distributed solar installed since just 2011. By 2015, installations will likely double.

At only half of a percent of U.S. electricity capacity, it would be hard for anyone to call solar a “mainstream” contributor to the broader energy mix. However, there are a number of other factors to consider when looking at the impact of the technology.

Shayle Kann, GTM’s vice president of research, outlined four of those indicators at this morning’s Solar Market Insight conference. (The data can also be found in GTM Research’s newest report on the U.S. market, released today.) When considering this broader range of factors, Kann concluded that the industry is “pretty close” to becoming a mainstream energy source.

Here’s Kann’s mainstream solar checklist.

1. Primary source of new electricity capacity: check

In 2012, solar was the fourth-largest source of new capacity in the U.S. This year, it is the second largest, according to the Federal Energy Regulatory Agency.

“This year will be the first year that there will probably be more solar in the U.S. than in Germany,” said Kann. “The U.S. market was slower [than Germany] and still has a long way to go, but is strong and consistently growing overall.”

According to GTM Research, there was 23 times more utility-scale solar installed in the third quarter of 2013 compared to the third quarter of 2012. And although the residential solar market started from a very small base, it has grown 230 percent over the last 15 quarters.

“That’s remarkably consistent growth,” said Kann. “That’s the beginning of the hockey stick — we’re very bullish on residential solar.”

2. Cost-competitive without fickle incentives: half check

There’s no doubt that the solar industry is still dependent on state-level incentive programs, many of which foster boom-bust cycles. More than 80 percent of solar installations are concentrated in five states, not because the fundamentals there are necessarily the best, but because “those are the states that have the right incentives in place,” said Kann.

“As long as that’s the case, it’s going to be hard to check that off the list,” he said.

However, there are signs that the market is shifting. In the third quarter of 2013, more than half of all residential solar installations in California were deployed without any assistance from the state’s solar initiative. That number has continually grown every quarter.

“California is a great example of watching this happen. I do think it’s the beginning of a monumental shift in solar in the U.S.,” said Kann.

3. Solar taken seriously by the electricity industry: check

This year marked a noticeable change in the way utilities, regulators and analysts are talking about the impact of distributed generation on the grid. This spring, the Edison Electric Institute issued a report warning that utilities could face serious financial losses as more customers invest in solar and efficiency. The report sparked a more serious look at the “utility death spiral” that is already underway in Germany.

“If you look at the conversations that have taken place, I think it’s clear that something fundamental has changed in the collective mindset of U.S. utilities. They are taking solar seriously, and that’s both a good and bad thing for the industry,” said Kann.

The “bad” could come as more utilities worried about shifting T&D costs look to end or weaken net metering laws. That is already a contentious issue in a handful of states, and the net metering battleground is expanding.

However, the “good” impact may come as utilities start buying solar companies, make venture investments in developers and directly invest in projects. That trend is also growing.

“It seems clear to me that the utility industry is taking solar seriously in the U.S. in a way that absolutely was not true two years ago,” said Kann.

4. Solar must be bankable: check

In order for solar to be mainstream, it must be treated as such by investors. The increased interest in solar on Wall Street is another positive sign.

According to GTM Research, residential solar finance grew from $1.2 billion in 2012 to $2.3 billion this year. And as new forms of securitization and yield co models pop up to help leverage retail investment in projects, new sources of capital continue to flow into the industry.

“Solar projects have to be a mainstream source of investment, and 2013 has been big year in this progression,” said Kann. “We’ve seen some big precedent-setting events.”

GTM Research projects that solar will make up about 10 percent of U.S. electricity generation by 2027 based on current growth rates. When compared to traditional forms of fossil generation, some may still not think that makes the technology “mainstream.”

But when looking at the whole ecosystem of investment — the participation of Wall Street, the attention paid by utilities and steadily improving project economics — solar may become more influential than previously thought.

“I didn’t think solar was all that close to being there. But when I consider this checklist, we’re pretty close,” concluded Kann.

Watch all of our sessions at the Solar Market Insight conference live here. Download the SEIA/GTM Research Q3 report here.

Stephen Lacey
December 10, 2013