MAINSTREAMING RESIDENTIAL SOLAR PHOTOVOLTAIC ADOPTION IN THE UNITED STATES: DRIVERS, TIMING AND THE PRIVATE SECTOR
Abstract
A central question of this research report is whether households will lead a major
change in the way electricity is generated and used in the United States. The residential
sector is the largest consumer of electricity generated and accounts for 39% of consumption
and 21% of CO2 emissions. Unlike coal, solar does not deplete a fuel source nor contribute
to emissions in the process of generating electricity. Scholars have shown the resource
scale of solar is orders of magnitude greater than fossil fuels. Yet, solar photovoltaics
(PV) have suffered from considerably less research and development and resultant higher
costs relative to fossil fuel generation. This report analyzes the rapidly changing
and emerging market of distributed, behind-the-meter generation of solar PV electricity
for households with a focus on timing, drivers, and private sector strategies. Methods
include a literature review, fieldwork, and a primary research survey instrument administered
to 73 renewable energy professionals of varying backgrounds in the spring of 2012.
Industry trend data and survey opinion confirm that dropping residential PV costs,
increasing PV efficiency and a wider array of financing options are the main drivers
of adoption. Technological limitations or regional solar capacity in the U.S. are
not limiting factors overall. Although installed costs vary greatly by location, residential
PV installed costs have dropped exponentially from $9.7 per watt in 2000 to an average
of $6.2 per watt in 2010 before any federal, state or local incentives. Some markets
now show installed residential PV costs of $5 per watt. A critical tool for evaluating
residential PV systems is the monthly cost of financing relative to monthly utility
bill savings from the grid, rather than the often cited levelized-cost-of-energy (LCOE).
Companies with expanded financing options such as PV lease and power purchase agreements
(PPA) are currently leading installations by demonstrating immediate monthly cash
flow savings and utilizing a turnkey service model. Policy comparisons are made between
California, New Jersey and Texas. California and New Jersey lead PV installations
with commensurate policy support and financial incentives, while Texas by contrast
has much less PV installation and relatively little policy support. Federal and state
financial incentives are reviewed including tax credits and cash rebates; as well
as the role of other incentives such as net metering, system benefit charges, and
solar renewable energy credits. Though not widely used, a 0% interest financing option
may produce immediate monthly utility savings and serve as another financing tool.
Based on installation and cost trends, incentives are working by supporting growth,
reducing payback times by nearly 50%, and closing the cost gap between PV and conventional
power. Diffusion models, growth trends and tipping points relative to residential
PV growth are analyzed. Residential PV installed capacity shows 49% compounded annual
growth (CAGR), growing from 27 megawatts (MW) installed in 2005 to 297 MW as of 2011.
Based on approximately 250,000 known residential installations, market penetration
is approximately 0.3% - a surprisingly low number. Seventy percent of survey professionals
indicate residential PV will shift from innovator to early adopter stage and achieve
at least 10% market penetration and reach retail grid parity in most markets within
10 years. To reach 10% of the estimated U.S. single family home market will require
approximately 41% CAGR for 10 years or 19% CAGR for 20 years. When analyzing concepts
of grid parity and levelized-cost-of-energy (LCOE), assumptions and definitions must
be clearly stated while noting subsidies and externalities. Leading policy, practice
and opinion indicate the following are essential to mainstreaming: 1) fund federal
and state financial incentives for 10 years, 2) support lease, PPA and other financing
models 3) set installation goals like state Renewable Portfolio Standards (RPS), 4)
continue government support for research and development, and 5) increase awareness
and education of the benefits of residential PV.
Type
Master's projectPermalink
https://hdl.handle.net/10161/5351Citation
Fowler, Erik (2012). MAINSTREAMING RESIDENTIAL SOLAR PHOTOVOLTAIC ADOPTION IN THE UNITED STATES: DRIVERS,
TIMING AND THE PRIVATE SECTOR. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/5351.Collections
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