What Should We Expect of Solar?

I was pleased to see our fellow contributors give voice to the promising outlook of solar energy in a recent post. There is no doubt that this technology will be a game-changer for utilities in the coming century, and I’m excited to be a part of it. Last month, I was thrilled to start my first full-time position at SunPower Corporation, one of the largest solar cell manufacturers in the United States. Tempering that excitement was the knowledge that, at least for the short term, I wouldn’t be traveling to India to work with Crist and some of his wonderful staff. But let’s back solar.

This is every solar installer’s dream: a perfectly tilted, south-facing, non-shaded, sun-bathed roof.

Raxa’s latest post on solar referred to a video that expressed optimism about the growth and cost-effectiveness of this renewable energy source. And so it should. Solar energy’s per-watt price has dropped dramatically over the past five decades, and demand in the United States is certainly growing. Competition between a variety of firms (e.g., SolarCity, Sun Run, SunPower, etc.) is likewise driving prices down, while government rebate programs have made solar more attractive for homeowners to purchase. The efficiency-related benefits of solar are also clear: it removes the need for fuel transportation, energy transmission, and extensive infrastructure. For commercial uses and installations, solar is a strong player.

But when it comes to residential solar (i.e., solar panels installed on homeowners’ roofs), I submit that we should temper our expectations. Working in the residential leasing team at SunPower, I often hear–and worry–about the future of something called net-metering.

Net-metering is a consumer-friendly utility structure that allows those who have renewable energy generation at their house to use that energy whenever they want. Imagine that you have a solar panel array atop your home’s roof. If your utility allows net-metering, then your solar electricity generation will offset your electricity usage during other parts of the day when you’re not generating any at the same retail rate at which you’d buy energy. If your utility does not allow net-metering, then the solar energy you generate will be greatly devalued because it’d likely be fed back into the grid at a much lower, non-retail rate.

Net-metering is crucial for solar–and for homeowners who have onsite solar–because of the way electricity generation works with PV arrays. Why? For two reasons: solar electricity generation happens during the day, and most people are out of the house (e.g., at work and at school) during the day). Therefore, household electricity usage is lower during the day and elevated in the evening. Net-metering allows you to apply the excess electricity you generated during the day to what you pull from the utility at night. With non-net-metered rate structures (e.g., value of solar tarriffs), if you don’t use the energy at the moment it’s generated, you feed it back into the grid for pennies on the dollar for what it’s worth.

It should therefore come as no surprise that net-metering is under fire from utilities. Residential solar is a direct competitor with your utility company, and installing a system will mean lower electricity bills for you–and lower revenue for your utility. Without net-metering rate structures, residential solar would be unfeasible for the majority of homeowners. This is probably a fight that will come to head soon: rate structures are already being changed in Arizona, and a variety of utilities in other states are looking to reduce the incentives for solar.

So what should we expect of solar? We should expect encouraging growth in government, commercial, and utility-scale installations. We should expect per-watt prices to continue falling. But those expectations should be tempered by the changing landscape of utility rate structures.

2 thoughts on “What Should We Expect of Solar?

  1. Pingback: Arizona Utilities: A Thorn in the Side of Distributed Generation | Raxa Collective

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