With Policies as Key Drivers, Rooftop Solar Growth Is Poised to Accelerate

NREL solar.PNG

In less than the time it takes you to read this post, a home or business may have installed solar panels on their rooftops - a new system was installed every 2.5 minutes in 2014. Some studies have even found that rooftop solar could be considered "contagious" - you are more likely to catch the solar "bug" if your neighbors have solar on their roof.


Now, a new study released by researchers at the Department of Energy's National Renewable Energy Lab (NREL) confirms that the growth of rooftop solar isn't expected to slow down any time soon. With the recent extension of the investment tax credit (ITC) in place, distributed solar capacity is forecasted to grow 8-fold, increasing from 11 GW at the end of 2015 to 92 GW by 2030. The combination of the tax credit extensions, continued declines in technology costs, and rising retail electricity prices all mean that rooftop solar is becoming an increasingly attractive option for homeowners and businesses across the country.


Rooftop solar generation can provide many benefits, including helping to meet our clean energy and climate goals; however, a robust and flexible grid is also critical to maximizing the benefits of distributed solar. NRDC, as part of a broader effort on transforming the utility business model, recommends that "rate structures and utility policies fairly capture rooftop solar's full value to owners and the grid, ensure that customer-generators pay utilities volumetrically for using grid services when solar energy is unavailable, and ensure that all customers have access to the benefits of rooftop solar installation." More details and our full set of recommendations can be found in our issue brief on the electric utility business model. With the industry poised for rapid growth, as this analysis demonstrates, it's important that policymakers and stakeholders work together towards developing policy and market structures that enable smart, sustainable, and equitable growth.

Photo credit: Massachusetts Clean Energy Center via Flickr

The analysis was conducted using NREL's dSolar model, which calculates the economics of installing solar and models customer decision-making, taking into account certain non-market factors (i.e. some customers may not install solar panels even when it is a sound financial decision, and vice versa). NREL's model only focuses on customer behavior and does not attempt to examine the interactions between rooftop PV installations and the bulk power system, which will be an important area of future studies as the rooftop market continues to grow. With that background in mind, let's look at some of the key takeaways:


Rooftop solar is becoming an increasingly attractive option for homeowners and businesses, and is projected to reach 92 GW by 2030. Installing solar panels is becoming an increasingly attractive option for homeowners and businesses, and the solar growth projected in the report could amount to solar panels on over 7 million homes and 40,000 businesses. (I'm assuming a 50/50 split between the residential and commercial sectors, and adjusting for average system size - a business is likely to have a much larger available rooftop than a homeowner).


Climate policies can play an important role in spurring further growth in the rooftop solar industry. Relying on the Energy Information Administration's analysis of the retail rate impacts of polices that place a price on carbon emissions, NREL found that climate policies could result in 20-30% increases in capacity by 2050, above a case with no price on carbon pollution.

NREL national chart.PNG

Source: NREL

Extending on the report's findings, I estimate that the growth of rooftop solar under the climate policies analyzed could result in up to about 120 million tons of carbon emissions reductions in 2030 - or the equivalent of taking up to 23 million cars off the road. Although the Clean Power Plan (CPP) was not explicitly modeled, the growth of rooftop solar generation can help reduce emissions in the power sector and accelerate progress towards meeting the CPP goals, and our longer-term climate goals. As states around the country analyze the Clean Power Plan and their broader transition to clean energy, they should be sure to consider rooftop solar and its potential role in their climate portfolios.


The highest growth case resulted in nearly 120 GW of installed capacity by 2030 and ~275 GW by 2050, driven by significant technology cost reductions. In separate research, NREL has projected that the solar industry is likely to meet the Sunshot goals by 2030, and this scenario provides an interesting view of potential market growth if the industry continues to beat expectations. The report did not attempt to determine the feasibility of these cost reductions, as this was outside of the scope of the study.


Changes to net metering have significant market impacts, highlighting the importance of smart, careful policy design. The report examines several net metering scenarios, using Delaware as a case study. In the Reference Case, excess generation from new installations is credited at the wholesale electricity price after the net metering cap is reached. A 10-year, linear phase-down or 10-year extension of net metering would lead to 36% or 75% increases in Delaware's 2030 capacity, respectively. The set of scenarios examined can serve as illustrative, bookend cases, and they illustrate the importance of net metering and the need for a careful and thoughtful approach to evaluating and designing/modifying net metering policies in a way that creates sustainable market growth.


Clearly, net metering can continue to be a powerful driver for rooftop solar for many years to come, and as a result NRDC continues to support its broad adoption and increasing the caps when states achieve them. We also support additional policies to increase solar access to all customers, and to encourage more solar customers near stressed parts of the grid that stand to benefit the most.




This report has significant implications for policymakers across the country. With many net metering policies under examination, it's critically important that we develop smart policies and utility rate structures that promote and enable this market and job growth opportunity, while ensuring that all customers have access to the benefits that rooftop solar can provide.