The rapid growth of rooftop solar

We are living in a new age. When I was growing up, Los Angeles was so choked with smog, you could hardly breathe. But due to emission control legislation, the air in L.A. is now tolerable despite millions of vehicles on the roads. Now the Trump administration wants to roll back clean air laws. Almost everyone recognizes the need to adopt renewable energy sources immediately. The latest climate reports are even more alarming than the dire reports that preceded it. Will this generation be content to leave a contaminated earth to the next generations of earth dwellers? There is no chance of us winning this battle at the rate we are going. Our only chance, according to the experts, is to go solar in a huge way. Other alternative energy sources like wind power are excellent for certain applications, but mass, individual windmills have yet to be developed. That leaves us with few efficient clean energy alternatives. Solar energy has a number of appealing advantages and is by far the most efficient of all our renewable energy options. Rooftop solar's growth has slowed nationally, but its price to customers continues to decrease, leaving market watchers challenging its future.

Tariffs on imported solar products

In 2017, the installed price of residential photovoltaic (PV) solar maintained its 20-year price decline, but at a more leisurely pace than the 2009 to 2013 glory years. Tariffs on imported solar commodities and the rising cost of finding customers slowed the price slump and flattened growth, leaving installers, policymakers and utilities inquiring if the price will keep diminishing and, if it does, how low it will go. Changing solar incentives make this question especially significant. The 30% federal investment tax credit will begin phasing down in 2021, which could offset any gain from tariffs being lifted. In addition, retail rate net energy metering is already slowly being supplanted with successor tariffs that provide lower payment for the exported solar generation.

"Utility executives say they can wait out the growth of PV, now that incentives are being reduced and the price is leveling," Yale University Associate Professor of Economics Kenneth Gillingham told Utility Dive. "But a lot depends on technology costs and it would be a mistake to write rooftop PV off just because of incentive changes."

Research notes expiring incentives can drive new strategies for customer acquisition, new methods to install solar and new utility engagement, Gillingham said. "If prices keep dropping, adoption will continue and a smart utility CEO would watch the market and think about ways utilities can have some control over distributed resources."

The installed price of solar continues to drop

The U.S. solar industry is bouncing back after being slowed by the 30% tariff on imported solar modules and cells, imposed in 2018. Utility-scale solar procurement returned to record levels in H1 2018, but residential PV was basically flat year-over-year, the Q3 Wood Mackenzie-Solar Energy Industries Association market report found.

That was "an encouraging sign of market stabilization" after installation of residential PV plummeted 15% from 2016 to 2017, according to the report. But seven of 2017's top 10 markets remain low from highs in 2016. Emerging markets, including Nevada and Florida, will partly offset residential solar's stagnation, but 2018 is assumed to be another zero-growth year, despite PV's still-falling installed price. The installed price differs by state, system size, installer and customer characteristics, according to September's Tracking the Sun, the yearly report on price trends from the Lawrence Berkeley National Laboratory (LBNL). The national average installed price of residential PV at the end of 2017 was $3.70/W and had fallen to $3.50/W by Q2 2018.

Other analysts reported even cheaper prices. Wood Mackenzie Power and Renewables found the national average Q2 2018 residential PV installed cost was $2.89/W. Across the largest national online marketplace for residential solar, the average installed price dropped to $3.12/W in June 2018, according to September's Solar Marketplace Intel Report from EnergySage. The price rose when the import tariff was proclaimed by U.S. International Trade Commission (ITC) in late 2017 but the price decline "restarted" at a slower pace early in 2018, according to EnergySage.

Across these various statistical calculations, the trend is a consistently declining price But the big questions unanswered by the statistics are how far down the rate can go and what that means to the solar and electricity markets. Two key LBNL findings suggest answers.

Hard costs, soft costs, and game-changing solar programs

There are factors that can influence prices and drive them significantly lower, according to analysts, installers, and utilities that circulate solar programs. Installers everywhere face similar costs for modules, inverters, and other residential solar hardware, LBNL reported. Yet the U.S. installed price was double that of Germany's $1.50/W and significantly greater than Australia's $1.80/W, although both countries are comparable to the U.S. in other factors, like labor and safety criteria. This reinforces findings in "numerous other studies" that "soft costs" of PV installation "tend to be considerably higher in the U.S.," LBNL added. But these soft costs, including permitting, interconnections and locating customers, can be overcome, according to a number of solar experts who spoke to Utility Dive.

"If panels and inverters were free, we would still be seeing total installed costs of about $2/W because of high soft costs," Barry Cinnamon, president, and CEO of Cinnamon Energy systems told Utility Dive in an email. They add "a pernicious factor" to U.S. projects, but other places "have reduced these cost factors to effectively zero," he said.

The solar industry originated major initiatives this year to address soft costs. The Installation Best Practices Guide for Residential Portfolios is directed at cost-effective installer standardization. The Solar Automated Permitting Process is aimed at showing authorities how processing and issuing permits can be streamlined.

Another effort to address high soft prices is channeling customer acquisition through quote platforms, which improve market transparency, installer competition and result in cheaper prices, according to a landmark October 2017 National Renewable Energy Laboratory (NREL) paper.

"Customers that receive seven quotes may save as much as $0.48/W more than customers that receive a single quote," the paper concluded. That could save as much as $2,500 on an average residential installation. The second LBNL insight on price is that California data shows residential PV installed in new construction is appraised significantly lower than PV retrofitted onto existing homes. The median price was $2.30/W in new residential construction and $3.90/W for retrofits.

Solar savings through efficient planning

The savings likely originate from economies of scale, shared installation costs and diminishing customer acquisition costs, LBNL reported. Incorporating solar into new construction and roof replacements could be the most practical way to lessen costs, Eric O'Shaughnessy, a research scientist at NREL and co-author of the 2017 paper, told Utility Dive, based on a January 2018 research-based NREL thought exercise. Researchers predict a potential 30 GW/year U.S. rooftop solar installed capacity through 2030. Cost modeling expected the installed price for that increase could be lessened to between $1.21/W and $1.82/W for replaced roofs and between $1.10/W and $1.62/W for new builds in 2030.

"Integrating new construction and re-roofing with solar is normalizing solar," O'Shaughnessy said. The objective is to "treat solar as one element of a home energy management system in a broader array of smart, customer-owned products designed to save people money on energy."

That idea "could be a game changer," Gillingham agreed. "But the NREL research, through careful, was based on extrapolations of cost declines which may not be as precipitous going forward," he added. "On the other hand, there easily could be a surprise like those that have changed the pace of price declines in the recent past."

A practical, cost-effective integrated solar roofing product would be necessary to get to the numbers in the NREL study, Bettenhausen said. "That is an aspirational assumption. Tesla, DuPont, and others have made good efforts to do it, but their products' market share is almost zero."

How low will solar prices go?

Rooftop solar advocates across the country agree the installed price will continue to fall and three major regulated utilities that administer rooftop solar programs agree. Driven largely by falling hardware costs, the price could go "as low as $2.15/W in a couple of years," Stew Miller, president of North Carolina-based Yes! Solar Solutions emailed Utility Dive.

At that low price, "more utility customers will self-generate with solar and storage to reduce electricity costs," Miller said. In response, utilities should focus on "supporting more distributed generation, providing additional services, reliability and customer support, and possibly offer some form of revenue sharing."

The installed price can "fall by around half," Institute for Local Self-Reliance Energy Program Director John Farrell told Utility Dive in an email. By decreasing the soft costs of permitting and financing, rooftop solar prices can be "competitive with retail electricity prices," he said.

Arizona Public Service (APS), the largest of the three regulated utilities that administer rooftop solar programs, sees the NREL thought exercise as the best evidence on future installed prices, spokesperson Anne DeGraw told Utility Dive in an email.

"Rooftop solar generation is still far from being cost-effective compared to natural-gas resources" and is "more than 2X the levelized cost of energy of grid-scale solar," APS's most recent 15-year integrated resource plan reported. However, the plan also details the expansion of APS's capabilities to manage a "nearly 200 MW" increase in rooftop solar through 2032.

CPS Energy in San Antonio, which has a utility-administered 5 MW rooftop solar offering, recognizing that a lower rooftop installed price would be "more attractive" to its consumers, spokesperson Nora Castro emailed Utility Dive.

Its retail load forecasting now "includes an hourly rooftop solar forecast that simulates the extent and timing of the rooftop solar output." Additionally, the utility has refined its peak need planning to recognize when rooftop solar is and is not available. Tucson Electric Power has managed its 3.5 MW rooftop solar program at approximately $2.25/W and should be able to "approach $2.00/W or less" through leveraging utility advantages, Director for Emerging Technology and Innovation Ted Burhans emailed Utility Dive. Utilities' large-scale purchasing power, administrative capabilities, and enduring customer relationships all offer pathways to reduced costs, he added. But even at that low price, rooftop solar "may not be attractive" compared to the less than $0.03/kWh cost to utility ratepayers for larger-scale solar plans, he added.

NREL's most aggressive projections of $1.21/W for solar with roof replacement and $1.10/W for solar in new construction brought the levelized prices to only $0.055/kWh and $0.05/kWh, respectively. "Rooftop solar is not a critical path to a renewable energy transformation, and if it is too expensive, we should be honest about it and pursue more economic alternatives," Burhans said.

Energy Sage's Bettenhauser disagreed. "Utilities should not bet against technology but leverage it," he said. "New technologies and rate designs and the falling cost of solar will soon enable a distributed network universe, built on a home energy management system. A utility executive's biggest challenge that might be getting a piece of that action."

Science tells us to wake up to the wisdom of solar power

Climate scientists agree that the push to incorporate solar power should have begun many years ago, but many factors conspire to keep renewable energy options limited. But science doesn't lie. We are polluting the planet at a terrifying rate and many climate experts believe we are already past the "point of no return." Now that we understand that fossil fuels will soon be depleted, will we make better energy decisions? Why has it taken so long to get on the solar bandwagon?

Solar prices are remaining steady and incentives remain making the investment in solar power a wise financial decision. However, there are many other factors that drive individuals and corporations to investigate the solar option. Many solar customers report a feeling of great liberation because of generating their own power. These folks serve as an example the world needs if we are to avert the worst of climate change's repercussions. The climate scientists suggest that radical changes are necessary to avoid the climate-related disasters that continue to plague the earth. The choice is ours and succeeding generations will have to live with our decisions.

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