The incredible shrinking solar plant

By Jeff Postelwait
Online Editor

In the U.S. solar power market, developers are looking for access to the cash they need to build large, utility-scale solar projects, but that money is proving hard to find. If this keeps up, makers of solar farms in excess of 20 MW could be eclipsed by firms who put solar panels on rooftops.

In the first quarter of 2012, there were 506 MW of new solar projects that went online — accounting for some $1.9 billion in spending. This is a drop from the last quarter of 2011, which saw $3.1 billion worth of investment.

One factor? Shrinking and disappearing subsidies. Government funding is fading fast, and it's hard to say when Washington might feel like investing in solar power again — particularly with elections looming. It goes without saying that any whiff of uncertainty isn't good for upstart solar companies and their projects.

However, where the industry has recently favored big solar projects like the 290 MW Agua Caliente Solar Project being built by First Solar and NRG Solar in Yuma County, Arizona, we could soon see an uptick in small and medium solar power projects.

A huge undertaking like Agua Caliente was once thought to represent an industry sea change toward big solar power, but even proponents of solar power as a generation source can't deny that Agua Caliente would still be a patch of bare sand out in the desert without the Department of Energy loan guarantee that made it possible.

It's much easier at this point for solar developers to pursue smaller projects, like say teaming up with a big-box electronics store and installing some solar panels on the rooftops of a few stores. The chain gets good press, the solar manufacturers sell equipment, the projects are easier to approve, nobody has to worry about harming the desert tortoise's habitat, and generally everyone goes home happy.

But is this the way for the solar industry to finally get off what I've heard energy analysts describe as "the crack cocaine of public subsidies" once and for all and stand by themselves as their own industry? It's hard to say yet because there are still too many factors to consider.

Cheap natural gas is still a fierce competitor to just about any other generation technology, whether it's coal-fired plants or a solar farm. On the other hand, many state governments still have renewable portfolio standards to think about. On the other, other hand, there's the problem of incorporating too much solar energy onto the grid too soon without infrastructure upgrades. On the other-other-other hand, solar still has the advantage of being "sexy," meaning companies who want to look hip or forward thinking are still going to want to invest a little in solar — like Google, Inc. for one example.

Whether solar as an industry is ready to take off the training wheels and pedal without extensive tax breaks and subsidies is too large a question for me to answer. But from the way things are looking now, I expect to see fewer mega-sized solar projects going up in the U.S.