It’s December… almost the new year, and what a year. George W. Bush said solar power would reach grid parity (price matching) in 2015. Let that sink in: former oilman/Texas governor Bush, said back in his presidential administration that solar power would cost no more than “regular” electricity by this coming year. By the way, he was speaking in a broad, national sense. Grid parity of solar has already happened in several states, including a few not in the desert Southwest.
Oh, and by the way by the way, this includes a few states where parity has already been reached with no incentives and subsidies counted. However, it doesn’t include the costs of polluters passing their externalities onto everyone- socialized costs but privatized profits. Nor, of course, are we counting the fiscal loss: valuable, exportable goods being burnt up here, instead of helping our trade deficit, and thus defending the dollar.
Aaand by the way by the way by the way, that’s parity of solar electricity vs. grid electricity. If you’re comparing solar versus gasoline, i. e., in efficient electric vehicles, then parity was reached in almost all 50 states, years ago. So, why are we still debating? Because there are still issues, and it’s not as simple as ordering a few panels; it was never going to be that easy. Nothing insurmountable though, just implementation hassles, except for people actively resisting change, like ideologues who won’t (or can’t) do the math.
First, the good news. Continued competition among panel manufacturers, other component groups, and wholesalers and installation companies, had already halved solar prices, and they’re on track to fall by half again. Meanwhile, the “regular” grid prices rise, despite gas fracking and a fabled “nuclear renaissance.” Fracking led to a bubble which cannot be sustained. And for every nuclear project now in planning, one got shut down as unprofitable and bad for business. It doesn’t take a genius to see this is a collision course: at some point, the solar rate will meet your grid rate- “parity.” It will then continue falling, and you’ll lose money by not installing a solar system. In other words, solar will win that collision.
At least, you would lose money if paying cash. Solar is a significant investment, like paying up your electric bill for years in advance. Like all investments, there’s a time cost of money, and that’s interest charges, plus the associated financing fees. If nothing else, your money (either cash or “virtual money,” your overall credit situation) is tied up for years in advance, until that solar investment pays off versus grid payments. A utility, on the other hand, can absorb a lot more debt, and at lower interest rates than homeowners can get. Which is why they invest in building traditional power plants, not you, and definitely not me.
Fortunately, there’s a light at the end of this collision course. I am hardly the first person to notice this financing issue, and multiple solutions have been devised. For starters, solar has turned out to be a good investment, and most banks look kindly upon loans for it. When a person enters financial difficulty, they’ll cut back or eliminate lots of things. But electric power? Hardly. You can give up vacations and other niceties, you can take the bus instead of driving, but living without electricity is hardly living, by our societal standards. Banks have learned this, and do not see electric power as a default risk comparable to car loans, RVs, boats, etc. Besides, a domestic solar system is the mark of a conscientious person. Panels are warrantied for decades, and homeowners who plan that far ahead aren’t seen as money risks.
Of course, rates for solar installations could be lower still; they’re significantly higher than mortgage rates, despite being connected. Really connected. In sunny areas like the Southwest, though, some developers may offer (or even include) preinstalled solar with their new homes. In that case, your system may literally be in a lump sum with the overall mortgage.
Second came solar leasing. Here, just like apartment rental and auto leasing, you don’t own the goods (in this case, solar panels). A solar company owns them, and basically rents your roof. Instead of rent payments to you, though, the company pays down your electric bill. The profits go to the leasing company, of course, which is how they got panels to you. The net effect is still a lower monthly bill, just in a different way. Obviously this is still leasing, and like auto leasing you might find better terms elsewhere. For people without upfront cash, though, solar leasing becomes enabling, just like auto leasing or apartment renting.
We now see another option: community solar loans. These loans argue that solar panels benefit the greater community. With solar on rooftops, making power where it’s needed, the grid is more reliable. If nothing else, the utility can defer upgrades, since it has less strain on its distribution network. More generally, solar rooftops keep more money in the community. Monthly payments aren’t going to a power plant in some other part of the state, another state, or a few states over. That’s worth money, and some communities are putting up money for this. In Korea, this has been a traditional financing technique called a “kye,” though of course it was established long before solar panels.
Yes, non-homeowners can get these benefits. Renters and other “un-roofed” can buy power credits or shares of electricity co-ops. Again, you technically don’t own your own panels. Instead, you put up some money for panels somewhere else; in exchange the grid utility gives you power credits on them. The more money you put in, the more of a fraction you claim from those panels. The electricity fraction the panels put out then pays your monthly bill. Even though the electrons in your sockets didn’t literally come from the panels, you still get a benefit. Consider those (real) panels to be on a “virtual roof.”
The dream of rooftop generation isn’t limited to home roofs, or even roofs at all. Commercial roofs are often bigger than homes; commercial power companies (including independent power sellers) can get bigger loans at lower rates, and use that to buy bigger acreages. Bigger is better here; one big roof (preferably flat, like the gas station above), gets more panels in fewer installation processes and connection steps. One big roof then reaches and exceeds price parity faster than its equivalent in many, smaller roofs. Many small roofs require many installation jobs, and many landowner negotiations and haggles. That gas station above has 22 panels per row, or 1 to 3 homes’ worth… and it has ten rows. Another way to think of it is that once you have a solar system running, the marginal cost of one more panel is tiny compared to the overall investment. So why not add it? It then makes sense to have big systems with lots of panels (“scalability”), which doesn’t happen on tiny, single-family roofs.
For these reasons, commercial solar (including store/factory roofs, and plain ol’ plots of land with panels sitting on them) has kept pace with home systems. Conversely, you might say that people with normal-sized roofs haven’t reached “installation parity” with owners of big roof areas and acreages. Note that ground mounts are typically a few feet up, and you can still grow some plants or rear certain livestock even with a solar spread.
And of course, mortgage rates, and to a lesser extent interest rates in general, are low anyway. Still. Even I as an individual can get rates only marginally above their 2009 lows. All in all, I see financing as a solvable problem. A problem that does exist, I’ll admit, but not a showstopper. If people are investing in a potato salad, then money’s out there for keeping the lights on.
No, the real problem, while still solvable, is much more difficult: conservatism, both little-c and big-C. Little-c, we have the homeowner issue. A home is the single biggest investment most people will ever make; the roof then protects that investment from rotting where it stands. You can imagine then that solar is like asking people to drill holes in their roofs, and pay for it at that. Yes, solar installers have dealt with the issue of roof penetrations, but good luck convincing people of that for money. Yes, solar installations are common in Germany, hardly a dry country, let alone Japan and Britain. So it’s obviously a solvable problem, you could say… assuming your prospective customers haven’t already tuned you out.
Ultimately, solar power is new, and some people just don’t like new things. This mental barrier won’t crumble with any reasonable amount of money; it certainly won’t fall to evidence and logic. Another layer of people are the leaners. Some people like the concept of solar energy and local generation, but they want to be the second house on the block to try it. This mental barrier will clearly fall in time, but time’s a-wastin’.
For these reasons, commercial solar generator entities will still keep installing. Commercial roof owners are a bit more rational and calculating. They are willing to do Total Cost of Ownership spreadsheets and other math, where homeowners would stop at ‘…why?’ Gas station canopies don’t worry as much about hole sealing and possible leakage; open field mounts don’t care at all.
I thus anticipate a transition era of “photon pharmers:” people and groups installing solar on large, non-residential roofs and acreages. Not only are their homes not at stake, but neither is the concept of “the environment,” at least not directly. Photon pharmers are installing in places where parity has been reached, and are doing it for the money. This includes regular farmers: near me is a spread with dozens of panels on their big barn. Eventually, when it is clearly shown that solar is no longer new, and not even weird, will the leaners decide to take the plunge. And after that, solar won’t be new and different, just another house feature.
Big-C, we have actively anti-solar people. Lawmakers, legacy utilities, and of course pundits may oppose solar because it’s solar, and thus “hippie.” Again, no evidence and logic works on these people, let alone Total Cost of Ownership spreadsheets.
Conventional utilities don’t like having their revenue encroached, and may levy extra fees or lobby their politicians. At least, until they go solar themselves. One state that hit grid parity is New Jersey- yes, New Jersey. Here, utility PSE&G is installing what may become the world’s largest solar-panel system overall. And they’re doing it because they did the math, and liked it, as a for-profit company. The panels will also delay or even prevent costly grid upgrades. We’ll see if that convinces the legislators and pundits.
Still unconvinced: a few states, including sunny ones. Several states in the South do not allow independent generation (including leasing) and power co-ops, a policy that predated solar and hasn’t been updated. What was that about ‘deregulation’ and ‘government interference’? Some of these states, in fact, put up barriers to solar- Terry Hershner was told he could not disconnect his Florida utilities no matter how many panels he got. This, despite the fact that solar and a homeowner-scale wind turbine fully met his power needs, including an EV. What was that about ‘no government mandates’?
At all of these levels, we still hear the same whine: ‘solar is unreliable, we need coal.’ Not only is this obvious cover, but the math shows it’s not even good cover at that…