IEEE Spectrum, March 28, 2013
Bright sun and high utility rates help rooftop solar energy compete with grid power. The map shows how much residential demand could be fulfilled by solar more cheaply than by the grid in 2018. Source: Institute for Local Self-Reliance
Photovoltaics are still, on average, a pricey, subsidy-dependent source of electricity. However, rooftop panels are beginning to beat the grid in a number of jurisdictions with high retail power rates—and their ranks are projected to swell over this decade. A growing number of economists say that rapidly shrinking costs have turned distributed solar generation into a disruptive technology that’s set for runaway growth. In fact, they say, it could ultimately upend the power distribution market.
“We’re completely unprepared for the opportunity that’s going to present itself,” says John Farrell, an economist and senior researcher at the Institute for Local Self-Reliance, a Minneapolis-based economic think tank.
Farrell got beyond the less-inspiring U.S. national average price of rooftop solar on homes and businesses by examining how it stacks up in each of 3100 electric utility rate zones across the country. He projected the per-kilowatt costs of generation from PV systems through 2022 by estimating the cost of installing and maintaining them over their 25-year lifetime and calculating the number of kilowatt-hours they are likely to generate under each zone’s prevailing sunlight. Dividing cost by generation gave him what economists call the levelized cost of solar energy, which he compared to the local utility’s retail power rates.
The results, presented since January as an online map, suggest that rooftop PV already delivers power more cheaply than the U.S. grid for more than 10 percent of residential demand in five states—California, Connecticut, Hawaii, New Hampshire, and New Jersey. By 2022, home panels are predicted to be the economic winner for at least 10 percent of residential demand in 49 states; the grid holds its edge only in the state of Washington, thanks to notoriously gray skies and cheap local hydropower. PV installed by businesses, meanwhile, will be competitive with at least 10 percent of total U.S. commercial power consumption in 2022.
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For their part, utilities are providing a strong signal that they recognize the distributed PV price trend, and the threat it represents to their business model: An increasing number of them are petitioning regulators for rate increases targeted specifically at solar users.
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