Solar photovoltaic (PV) panels are an increasingly common sight on the roofs of homes across the U.S. Solar energy has moved from a niche interest to a mainstream method of electricity generation, largely due to federal and state subsidies. But these incentives may not be around for much longer. If you’re considering investing in solar for your home, now is the time to act.
According to the latest U.S. Solar Market Insight Report, 43 percent more PV was installed in the second quarter of 2016 compared to the same period in 2015. While utility PV accounts for the majority of new capacity, the demand for residential PV is also growing by 29 percent year over year.
All this is positive news for solar growth. And with electricity costs rising, making use of ‘free’ energy from the sun is an attractive proposition. But solar capacity is unlikely to increase exponentially.
Put simply, there is a growth curve for residential solar PV installations. At first, incentives and subsidies are provided to encourage take-up of the new technology. After all, being a first mover is risky: new technology is expensive and may have unforeseen operational issues.
But as take up increases and the cost of installation decreases, there becomes a point where residential solar reaches grid parity. This means that generating electricity from PV panels is as cost effective as getting power from the electricity grid. In 20 states, including D.C. this has already happened.
At this point, or even earlier, the financial incentives to choose solar energy over grid energy for residential investors are likely to be reduced or removed altogether. In effect, we’re reaching the crest of the wave, where the combination of incentives and low technology cost mean that the return on investment for solar in many states is high. If you hang on too long, the wave may break.
This doesn’t mean solar energy won’t still be viable, it just may not be quite as good a deal as you’d get now. Here are some of the main things you’ll want to consider if you’re thinking about investing in solar for your home.
Is solar energy right for me?
First thing’s first. Solar is not for everyone. There are certain requirements your home needs to meet for the technology to be a viable option. These are:
- Clear, unobstructed access to sunlight throughout the year
- Sufficient roof space or ground which isn’t shaded to mount the size of system you need. Ideally, this will be south or southwest facing
- Local permits and covenant requirements.
Your decision may also be based on your local climate and electricity requirements. A reputable solar technology specialist will be able to model the potential for solar energy generation based on these factors.
Why should I invest in solar now?
Residential PV is rapidly approaching the crest of the investment wave. Here are three good reasons you should be looking to invest in solar now.
In December 2015, Congress approved an extension of the federal Investment Tax Credit. This means you can take 30 percent off the price of your solar energy system from your income tax. The catch? It’s only around until 2019, after which it will reduce to 26 percent in 2020 and 22 percent in 2021.
Local solar subsidies
Depending on where you live, you may be eligible for additional subsidies or incentives for solar technologies. You can find information on what’s in place in your state from the DSIRE database or the Office of Energy Efficiency & Renewable Energy.
One of the key factors influencing your decision will be the net metering program available from your local utility company. This allows you to ‘sell’ the excess power you generate back to the utility company, typically at the retail rate.
Almost all states have net metering arrangements in place, but some are starting to pull back. In December 2015, Nevada’s Public Utilities Commission approved a rollback of solar subsidies and policies and they’re not the only utility company to get cold feet.
Furthermore many states are at or near the solar capacity limit allowed under their net metering programs, meaning that these programs may not be open to residential installations in the future.
Decreasing cost of installation
According to National Renewable Energy Laboratory figures, U.S. solar photovoltaic costs fell by 52 percent between 2009 and 2013 and costs have continued to decrease although at a slower rate.
This is good for consumers. “So why not hold out longer?” I hear you ask. Because the key to getting the best bang for your buck is to take advantage of both decreasing costs and federal and local incentives. And as we discussed above, many of these subsidy programs are on borrowed time.
The lesson from this is clear: if you’re holding out for the cost of PV to decrease, don’t wait too long. But what is the future of domestic solar energy once the incentives are gone?
Combined solar-storage systems
The Achilles’ heel in solar power is the issue of storage. It’s all very well generating kilowatts of electricity when the sun’s beating down, but what if you’re not around to use it?
The solution is a combined PV and battery storage system. Rather than generated electricity going into the grid, it’s stored until you need to use it. Simple right? Not quite – the technology associated with making storage a practical option is complex and has been largely sidelined in the past.
But things are changing. Advances in technology and reductions in the cost of lithium-ion batteries mean that storage is once again at the forefront of solar. Companies such as SunPower and Tesla are trialing home energy storage solutions with a view to wider rollout.
Time to invest in solar
An effective, integrated home solar storage system may be the future of solar technology, but for now the incentives on offer make solar energy on its own a viable option for many households. It’s time to take up the invitation to join the solar party – before they close the doors.