Newsbrief Archive

Electric Currents News - November 2015

The Solar Energy Boom and Its Impact​

As the solar energy industry has matured over the past decade, providing more efficient systems and less expensive equipment, the cost of residential solar has fallen. According to the Solar Energy Industries Association (SEIA), the cost of a home solar installation has dropped more than 73 percent since the federal solar Investment Tax Credit (ITC) was instituted in 2006.

In addition, the solar installation industry now offers a multitude of creative financing options–such as power purchase agreements and leasing provisions–that make residential solar arrays affordable to more homeowners than ever before.

For electric utilities, this trend has both positive and negative implications.

New Challenges

Some companies view it as a threat because the popularity of residential solar systems is reducing sales of their product. This also affects fossil-fuel providers since many power plants are dependent on oil, gas, and coal. 

Some organizations claim that residential solar is causing an unfair shift in the cost of providing electricity since homeowners with solar panels receive the benefit of the electric grid (on cloudy days and at night) without having to pay for it. Utilities collect less revenue while infrastructure costs—such as building and maintaining power plants and transmission equipment—remain the same.

Another utility expense is net-metering, the process by which excess residential solar generation is monitored and sold back to the electric utility.

The California Public Utilities Commission released a report in 2013 that estimated the cost of net-metering by the state’s privately owned utilities at $254 million. This figure is expected to rise dramatically as a half-million more homes are projected to go solar in the next five years.

A research paper commissioned by the solar industry, however, countered with information revealing that net-metering costs are actually quite minor in comparison to the overall revenues generated by major utilities. This report, Evaluating the Benefits and Costs of Net Energy Metering in California, was prepared by Crossborder Energy, an energy conservation consulting group, in support of the state’s Vote Solar Initiative.

Utility Surcharges

Earlier this year, some utilities in the Midwest and the Southwest imposed a surcharge for customers who used net-metering. These measures may discourage some homeowners from going solar.

Nonetheless proponents of solar energy say that the benefits far outweigh the added costs. They note that electricity generated by solar panels reduces the strain on the grid during hot summer days when demand is high and utilities need to purchase power at higher rates.

Lower demand also diminishes the need to build new power plants and transmission equipment, thus avoiding large capital outlays that will ultimately be passed on to all  customers.

Another benefit is helping states comply with federal regulations that mandate a reduction in greenhouse gases. The solar installation business also creates jobs that stimulate the local economy. Approximately 174,000 people now work in the residential solar industry nationwide.

A Business Opportunity?

Some utilities are turning the solar boom into a business opportunity. A municipally-owned utility in the Southwestern United States is actually paying customers, through a monthly credit on electric bills, to install solar panels.

The utility is brokering deals with local solar companies to purchase and install solar panels. The installation companies own the panels and receive the associated tax credits while agreeing to sell the generated electricity back to the utility. Thus the issue of losing customers is mitigated and homeowners can earn about $30 a month without having to invest any money.

Environmental Benefits

Regardless of which side of the debate you support, this one fact is indisputable: The solar industry is helping to reduce greenhouse gas emissions.

A 2015 report by Bloomberg New Energy Finance revealed that electricity demand remained flat from 2007 to 2014 and carbon emissions attributed to the energy sector over that period decreased by 9 percent.

Thus the energy industry, as a whole, is headed in the right direction. At this point, it’s a matter of working out the details so the residential solar business and electric utilities can co-exist in a mutually beneficial system.

Call us at 800-428-5837, or email solutions@culverco.com, for more information about consumer education resources that address renewable energy and energy efficiency, including:

  • Your Renewable Energy World (#37030)
  • Energy and Your Environment (#37640)
  • Energy Efficiency World (#36940)
  • Energy Efficiency Booklet (#41050)