My mentor and cohort at Grid Optimization Paul Mauldin wrote a thought-provoking article on residential solar about 18 months ago entitled “5 Reasons Why I Don’t Have Solar Panels on My Roof…Yet.” Due to overwhelming interest in this piece, Grid Op decided to do an update. My research led me to the above conclusion and title. Some of my reasons outlined below may not be what you expect or may not be the correct conclusion for your situation.
1. Not the Right Location
The first rule when buying real estate, location-location-location, may be the most important factor when determining the value proposition for a residential solar installation. It is a lot more complex than simply deciding if you have good southern exposure or the home owner’s association allows solar panels. The solar radiation of your location determines the amount of usable solar energy, measured in KWh/m2/day, which you receive. While my home in Pennsylvania felt like Death Valley this summer, the solar resource is not that good. NREL has tons of material to help one determine their usable solar energy (see http://www.nrel.gov/gis/solar.html). Even though solar panel costs have dropped by about 15% since Paul wrote his article, I would still be facing a levelized solar energy price of $0.28/KWh based on a fairly aggressive residential installed solar panel cost of $3.50/ W. That raises the second location issue of prevailing power prices. The average cost of power in my area is just below the national average of $0.12/KWh. Even with panels priced at $1.50/W, I could not reach grid parity in my area. Note that the U.S. DOE SunShot Initiative has a goal of $1.00/W by 2020 (for utility-scale applications), and some areas of the country with a much better solar resource may already be at grid parity.
2. There May be Better Options
Actually, I can think of two. Let me start with the residential solar theme. Some folks with a good solar resource are put off by the aesthetics of solar panels on their home or have local zoning restrictions that don’t allow them. Enter the growing trend of building integrated photovoltaics (BIPV). The best examples are solar shingles and tiles. These materials attach directly to the roof and serve a dual purpose-roofing material and solar production. While these products are still about 10% to 20% more expensive than the equivalent capacity in solar panels, the fact that they are also a substitute for that replacement roof which will inevitably be needed helps their case. Further, since they are not elevated from the roof and are similar in weight to roofing material, extra footings, rafter reinforcement and snow removal issues, all seen with some panel installations, are not as much of an issue.
However, before I will be sold on the solar single roof, I would want to see more information on heat dissipation and O&M cost. Also, in some locations where the tilt of the solar collector is very important, solar roofing may be at a disadvantage. Last, while all the wiring is neatly tucked under and integrated into the shingles, I would want to know faulty shingles or tiles could be easily replaced without major disruption. The DOW PowerHouse Solar System 2 shingle system, a second generation product, actually incorporated replaceable panels, thereby addressing this issue. Unfortunately, DOW Solar just announced it is discontinuing this business segment.
The second potentially better option than my own personal solar facility could very well be participation in a community solar project. Community solar projects have taken off around the country with the decline in panel costs. Companies like First Solar, Inc. are seeing record bookings of new utility-scale community projects. Community solar has a number of advantages over the personal rooftop alternative, including economies of scale, which helps lower the impact of development, transaction and building costs. Community-scale systems are more likely to be able to economically support enhancements like one and two axis tracking systems which, depending on location, can increase PV generation an astounding 12% to 45% over fixed mount PV systems. And, importantly, they shift the risk of technology improvements, operations and maintenance to experts. Finally, one might argue community solar is more socially acceptable since renters, non-profit organizations and others who cannot afford to purchase their own system can still avail themselves to solar energy. Community projects may also be tied to a microgrid that also services essential services such as police, fire, hospital or university needs.
3. Regulatory Uncertainty
This may be the toughest nut to crack. As rooftop solar and other forms of distributed energy take off in areas around the country, there are more and more regulatory proceedings focused on changing the rules for those deciding to self-generate. The changes come in the form of eliminating or altering the terms for net energy metering and new or increased fixed and demand charges. The N. C. Clean Energy Technology Center tracks policy change proposals in a report entitled “50 States of Solar.” In the second quarter of 2016, 79 of the 121 policy actions raised dealt with net metering or fixed charges for distributed PV.
Utilities argue that significant penetration of distributed PV erodes revenues and under traditional ratemaking this shifts costs to non-participating customers. PV advocates argue that there are many cross-subsidies inherent in ratemaking design and distributed generation (DG) should not be singled out. Potentially moving these arguments in a constructive direction, proceedings in several jurisdictions are focusing on value of solar investigations with the goal of quantifying all of the benefits and costs of DG.
Unfortunately, in the meantime, the regulatory uncertainty makes it less than prudent to consider a long-term investment like rooftop solar without a better understanding of how it will affect one’s electric bill.
4. The Boom-Bust Volatility of Federal and State Tax Credits and Solar Renewable Energy Credits (SRECs)
The federal tax credit for renewable energy has long created a roller coaster effect in the development of renewable energy projects. Each time the credit is about to expire there is a rush in development with accompanying stress and price pressure all along the implementation chain. This makes it difficult for developers, manufacturers and utilities to create and maintain a reasonable and predictable business plan. The impacts are most apparent in utility-scale renewable energy projects.
States that adopted solar energy incentives are causing additional market pressures. Some states have implemented generous incentives for residential solar and subsequently had to cap or curtail the incentives due to over-subscription. The boom-bust development of solar projects also has a huge impact on states with renewable energy credit programs. When supply is limited, the price of SRECs skyrocket. This is bad for utilities that are obligated to purchase them. High credit values lead to a bubble in development, and then the value of the credits tank. Residential solar project owners may be severely impacted if the economics of their project was dependent on the SREC income stream.
Some might argue that tax and renewable energy credit incentives are overall beneficial, but if one is developing a project where the solar resource is not that great (which is the logical place for incentives to be used), one needs to know they can be counted on until the cost of the project is amortized. That certainty may not exist in many places for the amortization of a significant rooftop solar project.
So there you have my logic for saying I may never install solar panels on my roof. I truly appreciate the value of renewable energy, but I definitely believe there are better alternatives for harvesting the benefits of renewable energy in my region of the country. In other areas, solar may be near or at grid parity, but one has to consider all the factors that make it so to be sure the equation works for the 10 or so years it might take to recover one’s investment. What is your view?