Plugging Into the Untapped Potential of Residential Solar Power

Of the total solar generating capacity in the United States, approximately one third of all currently operating capacity was installed in 2019 and 2020. Moreover, 2020 saw a 43% increase in installations over 2019, and 42% of all 2020 additions to the electrical grid were solar (with solar and wind making up over 80% of all additions). Unsurprisingly, installations of utility scale and residential solar in the US in 2020 reached a record high with total new generating capacity of 19.2 GW. Given this trend, Wood Mackenzie, an energy research and consulting firm, anticipates that total US solar capacity will increase to 400 GW by 2030, a fourfold increase over the current 100 GW. For reference, 400 GW would fully power approximately 76 million homes at current consumption rates.

Given the interrelated climate and ecological crisis looming ever nearer, these record solar numbers are a welcome trend. Climate change is one of the primary drivers of biodiversity loss, both of which are having detrimental economic and social impacts that will accelerate if we are unable to course correct. All forms of solar power are therefore key tools in building long-term sustainable prosperity. That said, not all solar is created equal. Residential solar (a primary form of Distributed Energy Generation, or DEG) is distinct from utility scale solar in terms of biodiversity impact, social equity, and cost of electricity generation.

Residential solar refers to rooftop or on-premise solar installations that provide electricity directly to the home and the grid through use of electricity credits. Utility scale solar refers to large solar power plants ranging from several acres to several thousand acres in size that generate electricity which is then distributed through the electrical grid. As noted recently by the Wall Street Journal, some of these huge utility scale projects have received opposition from mainstream environmental activist groups for their direct land impact. According to the Journal, “[t]he Sierra Club, which describes itself as ‘a relentless advocate for the decarbonization of the electric grid via renewable energy sources,’ is one of several environmental groups opposing a 690-megawatt solar plant on prime desert tortoise habitat…northeast of Las Vegas.” And this is not the only utility scale project of its kind: there are hundreds of other utility scale solar projects under contract, set to generate nearly 70 GW of new capacity, enough to power the state of Texas. So, as utility scale solar plants are driving solar growth in the US, they are also the more land intensive, less biodiversity-friendly option.

In addition to the biodiversity advantages of rooftop solar, there are also resiliency and social equity characteristics to the residential business model that are preferable to utility scale solar. In terms of resiliency, owning one’s own rooftop solar installation can allow for some degree of energy generation in the event of a grid outage – the amount, of course, depends on the generating capacity and degree of sunlight. Moreover, as residential solar solutions are increasingly paired with in-home batteries, energy can be stored and used even when there is no sunlight. Solar + storage installations can also mitigate electricity price surges by allowing homeowners to use grid electricity when prices are low and stored electricity when grid prices are high. In effect, this also enhances grid resiliency as a whole by reducing demand at critical periods. Unsurprisingly, EnergySage, an online solar equipment platform, reported a 200% increase in traffic during the recent snowstorm and resulting power outages in Texas. Some Texans, it would seem, or others who observed the chaos, would prefer not to rely entirely on powerplants for their electricity. Per the same ethos of self-reliance, the social value of individually-owned sources of power generation is similar to the value of home ownership: it provides people the option to buy into a primary, societal asset, and reap the rewards directly. With a proliferation of new solar financing options, point-of-sale technologies, and pricing promotions, more people than ever are taking advantage of this opportunity in the US.

Utility scale solar in the US does have one, big advantage over residential: at $.78 per Wdc (watt in direct current), it generates electricity at less than one third of the cost of residential solar, which averages $2.83 per Wdc. This is less of an issue for consumers than it first may appear, as installing and maintaining solar panels on one’s house (which can include regular cleaning and repairs) is still often cheaper than paying a utility bill for the 25 to 30 year average useful lifespan of a residential solar installation. Still, the high relative cost of residential, as compared to utility scale, solar power is a major factor in limiting the number of residential solar installations in the US. However, this is not an inevitable cost differential due to efficiencies of scale, although those certainly do play a role. For a comparative example, the current cost per watt for residential solar in Australia is US $0.70, which is lower than the utility average in the US. Australia has various advantages that have led to a higher market penetration and lower cost of residential solar that cannot be overlooked, including more sunlight. But Australia’s more streamlined regulatory regime for residential solar installations has also played a significant role when compared to the many state and local jurisdictional rules in the US that installers must be aware of and comply with to put panels on rooftops. Ultimately, it remains to be seen how much these regulatory “soft costs” can come down in the US, but there are already efforts to streamline the permitting process. For example, the software application SolarApp, which allows companies to identify and submit the necessary permitting for installation, recently completed a testing period and will go live this spring. With concerted, similar efforts, we may well see a more biodiversity friendly, equitable, and resilient solar industry in the next decade.