Last year was record-setting for solar energy, both in the United States and the world at large. In 2010, global solar capacity stood at around 50GW. By the end of 2016, there was 305GW of solar power capacity, with the U.S. and China contributing much of the expansion. The U.S. increased its solar capacity by 95 percent in 2016 and total solar capacity is expected to reach 410 megawatts (DC) in 2017.
This growth is attributable in part to a 30 percent drop in the price of solar cells. As prices fall, clean energy supporters are increasingly pointing to solar as a cost-effective, long-term source of renewable energy. Continuing last year’s astronomical growth would have been difficult. Already 2017 has seen weakening demand, exacerbated by an American tariff squabble with foreign suppliers of solar cells. Still, solar power is an increasingly large part of America’s power supply and will likely remain so for years to come. Despite its important role in America’s energy fuel mix, elements of solar energy are still misunderstood by many Americans. Here are a few of the myths of solar power.
1. Solar power is less consistent and reliable than other electricity generation methods.
This summer, when the American eclipse made its way across large swaths of the country, critics of solar power pointed out that for the two minutes of totality solar power would come to a halt. It was merely a more dramatic example of a realistic critique of solar power: when the sun isn’t shining, solar panels are not generating any electricity. In a brief period, the eclipse demonstrated the cyclical nature of solar energy markets and how, with flexible pricing and storage capacity, weather fluctuations can be mitigated.
In California, solar production dropped about 3,500 megawatts from 9 a.m. to 10:30 a.m. During this period, prices spiked from about $25 to more than $50 per megawatt-hour. However, as the eclipse passed, power supplies surged again, creating a glut of energy that rapidly pushes prices down. The eclipse mimicked the swings that solar energy often sees over the course of an average day. In states like California, where solar energy is an increasingly large part of the generation mix, utility companies are phasing in rate shifts to encourage customers to use energy saving measures when solar power is ebbing.
To mitigate the effects of events like a solar eclipse or even cloudy days, solar panels need to be supported by either net metering or outside storage. Net metering means that panels can be connected to the broader electric grid, feeding power into the grid when production is high, and pull it out again when production slows. In essence, this approach uses the preexisting grid like a large battery to store power.
Increasingly, however, individuals and companies turning to solar power are using battery storage as a backup for solar panels. Although production drops on cloudy days, it does not stop altogether. With the addition of battery backup for evenings and periods of slower production, solar power is a feasible option in many areas.
2. Solar energy is not economically feasible without subsidies.
For years, solar energy struggled to compete with the price of coal or natural gas powered generation. This was mostly due to the cost of installation for the panels, since solar energy does not have any fuel costs and low operation and maintenance costs. However, technological advances in 2016 have dramatically narrowed the gap and prices are continuing to fall.
At present, solar, like other renewable energy generation facilities, is eligible for federal tax credits. In 2017, these credits include a 30 percent investment tax credit on capital expenditures related to the construction of a new solar plant, which tapers to 10 percent by 2022. These subsidies are included in the analysis when researchers crunch the numbers to determine what is called the Levelized Cost of Electricity (LCOE). This value spreads out the cost to build and maintain a power source over its lifetime and adds this to the wholesale price of power produced. Analysts use this number to compare power generated through different means.
Today, the average LCOE price for solar power is around 1.2 cents per kWh. This price includes federal subsidies which decrease the price about 20 percent and in some states local incentives. With these caveats, solar power has reached price parity in 20 states. Given the fluctuation in consumer rates across the country, the point when solar energy will reach price parity without these benefits will vary. Solar has already reached this point in parts of the sunny southwest. If adoption rates continue, analysts predict that 42 states will reach grid parity by 2020.
3. Solar energy will be difficult to integrate into the conventional electric grid.
Today’s electric grid is designed to bring power from generation facilities, generally coal or natural gas-burning plants, to consumers. While this simple model has been in effect for more than a century, residential solar power threatens to turn it on its head by inverting the roles of provider and consumer. In theory, a household with solar panels on its roof could draw from the grid when it needs additional power and sell it back during period of surplus, for example, on sunny days.
At this point, solar power is growing as a part of America’s energy mix, but is still a long ways from unseating coal or natural gas as a fuel. Looking forward, however, industry analysts think that widespread adoption of solar power could dramatically reshape the utility company model by increasing the uncertainty of long term demand. One forecast by Bloomberg Energy Finance estimates that by 2020, solar power could reach up to 10 percent of the energy load in certain areas and customers without solar energy of their own will see rates rise 20 percent. Utility companies rely on these projections when building new plants, which generally have cost-recoveries of 30 years or more. Growth of solar power will require them to rethink how they build out infrastructure and how these costs are passed along to end customers.
The growth of solar use makes these long term projections less certain. Currently, the cost of new plants and equipment is spread among ratepayers. If large numbers of customers switch to personal solar panels, these costs would increase for remaining utility customers. A market report by GTM Research found that 51 percent of all U.S. residential solar capacity installed next year will be purchased directly by customers. This is a dramatic shift from even 2015, when the majority of solar installations were owned by third parties, generally utility companies.
Even as solar panel users are drawing less from the grid, they need different technology in order to connect their houses to it. This will require utility companies to rethink their own infrastructure needs, a large innovation for an industry generally accustomed to slow technological changes.
Energy is a dynamic market, with sources and demand constantly in flux. In the coming years, solar will likely play an increased role in meeting America’s energy needs. Its growth will not happen in a vacuum, though, and many other industries, including utilities, are likely to see dramatic changes as well.
