Solar Grid Parity Infographic, + An Important Addendum
Originally published on Cost of Solar.
The Institute for Local Self-Reliance (ILSR) has published some wonderful reports on the solar rooftop revolution. It has also published numerous articles, charts, and graphics on this. Below is its Solar Rooftop Revolution infographic focused on when we’ll see solar panels cost less than grid electricity across the US (without subsidies). It’s a great infographic based on a great report… but it has one notable messaging flaw that I will discuss in depth in the text below it. (Hint: it has something to do with the italicized words above, and it’s a very important matter for homeowners.)
The Item This Solar Grid Parity Infographic Leaves Out
Solar grid parity and the solar panel cost projections in the infographic above are based on a lot of assumptions (e.g. how long the solar panels will be working and in use, the projected drop in the cost of solar, the projected rise in electricity prices, etc.). ILSR would be happy to tell you this, and does right up front in its Rooftop Revolution report [PDF]. One of the key assumptions (and points) in the analysis above, however, is that these solar cost and solar grid parity projections are for unsubsidized solar.
It’s mentioned in the infographic there, but you could have easily missed it, and what that actually means is not explained at all. Basically, the ILSR study is a look at the big picture and a look at what is likely to happen as solar tax incentives or subsidies are removed. However, nationwide, that isn’t scheduled to happen until 2016… and there are also many local and state solar subsidies across the country. In other words, while solar power is projected to hit “grid parity” on average nationwide by about 2017, with subsidies available today, most of you reading this are probably already at grid parity, and certainly at “economic parity” — the point where it makes more financial sense to go solar than to keep paying the electric company for your electricity. Solar panels cost less already (if you take these important incentives into account) than buying electricity from the grid. Seriously. Look into it.
Solar Panels Cost At Least 30% Less Than On The Price Tag
The federal solar panel subsidies in place right now (which are scheduled to end in a few short years) are quite considerable. In that Rooftop Revolution report, John Farrell writes: “The cost of these incentives is not insignificant. For example, the federal tax credit allows solar projects to get back 30% of the installed cost. Claimed by nearly all solar projects, in 2010 the tax credit amounted to nearly $1.6 billion (for 878 megawatts of solar at an average price of $6.20 per Watt).”
Yep, 30% of the cost of a solar power system can be regained from the federal government. You’ve got a 30% discount dangling before your eyes. This is one key reason solar power saves the average American who decides to go solar today over $20,000 over 20 years. (Also, given the advantages of solar, it’s a good federal investment.) There are also tons of state and local incentives that help to make going solar even cheaper.
Solar Panels Cost Less For Solar Leasing Companies
Importantly, the 30% tax credit isn’t the only federal incentive, but it’s the only one that is really of use to residential solar customers… well, it was, until solar leasing came along. There is also a depreciation incentive that large, 3rd-party solar companies can take advantage of that let them lease solar panel systems to you for a deal competitive in many cases with buying your own solar power system (though, this is a hotly debated topic, and it again depends on the assumptions you use regarding solar power system lifetime, electricity price increases, etc). To simplify, 3rd-party solar companies like Sunrun and SolarCity can take advantage of this extra incentive and use it to cover their inherent need for profit while still offering you a good deal on solar (often at close to $0 down).
In John Farrell’s words: “Solar leasing allows residential property owners to have solar installed with no or low upfront cost, and typically means they will see an immediate reduction in their electricity bill, even when factoring in the lease payments to the third party. The third party is able to capture the federal tax incentives (including depreciation, otherwise not available to residential users) and therefore can compete favorably with those making cash purchases of solar power for their homes.”
Solar Panels Cost Less…
The take-home point: while the cost of solar is dropping, solar incentives available today make now an excellent time to go solar. Solar panels cost less than grid electricity for many or possibly even most of us. In other words, get a solar quote today!
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Since they are insisting on “unsubsidized” solar energy, the ILSR should also include direct and indirect subsidies into the price of the mostly fossil-fueled electrical grid as well. Coal and natural gas benefit from several direct subsidies like accelerated depreciation and the “Domestic Manufacturing Tax Credit” that is just pure pork since you can’t ship an oil reservoir overseas in the first place. As for indirect subsidies, multiple studies put the annual cost of coal power pollution to the U.S. Economy at between $100B and $500B. The best estimate for the damage that a tonne of CO2 emitted will do over its dwell time in the air is between $40 – $50. Add all this together into the price of grid electricity and ONLY THEN can we have a REAL discussion about grid parity of renewable energy without subsidies.
I doubt we will ever have an honest discussion about the subsidies fossil fuels receive.
Most likely we’ll see the cost of renewables continue to drop to lower and be cheaper than fossil fuels. With no subsidies for renewables.
Driving an EV is already cheaper than driving with oil.
Wind and solar are already cheaper than new coal and new nuclear.
Wind is already cheaper than natural gas in some markets.
Yep cost me 80 cents week to ride my EVmc to work
why is it ILSR is promoting subsides for oil coal nuke, corporations
totally opposed to subsidies for taxpayers receiving
a subsidy for solar?
Exon 100% to 110% tax credit is wonderful PERMANET.
Taxpayer solar 30% tax credit is terrible, temporary should end
Whose money is this tax money ?
Let’s see Exon pays NO tax
Average person pays 30% tax on income
Why looks like it is my money.
Solar tax credit is only subsidy where just regular
people get some of their money back.
I think it the greatest subsidy of all time.
It seems to me we should start promoting to
extend the Solar federal tax credit Now.
Make it Permanent just like Fossil fuel subsidy.
Oh that would be fair so that’s no good.
How about zero percent financing from the FED?
Just like Nuke plants and banks?
Another terrible idea we shouldn’t get the same deal.
Subsidies 2002-08
Fossil fuel subsidy $72.5 Billion
Corn Ethanol $16.8 Billion
Renewable $12.2 Billion traditional hydro geo. Etc.
Renewable $12.2 Billion wind solar. or less
Fossil fuel 6 times the subsidy
http://www.grist.org/article/2011-02-07-what-obama-should-know-about-ending-oil-subsidies
If you are going to compare you have to
compare subsidized to subsidized or just is not apples to apples.
California
Electricity costs October 2013 – 722 Kwh monthly usage
Consumer Price
US Utility average 12.2 cent Kwh $88 month
CA Utility power 18 cent Kwh $130 month
Utility Solar disguised as a lease 15 cent Kwh $108 month .
Solar Producer Price
Buy system Installed 6 cents Kwh $43.32 month $85 profit a month
With 5 year loan 8 cents Kwh $120-$140 month for 5 years
DIY Solar Generator 3 cents Kwh $21.66 month, $108 profit a month
looks way past grid parity 3 cent Kwh appears less than 18 centKwh
Solar- based 30 year production, value divided by system cost
. 6.7% utility Historical yearly increase, 5 Kw DC system
End of 2013 CA average has risen to 20 cent Kwh. 10% increase.
I challenge any solar lease or PPA company on the planet to offer their rented 4.75kW systems to any customer, anywhere for as low as $2.04 per watt, installed, after incentives, because that’s what it costs the consumer to buy and own, an installed, name brand, high quality 4.7kW solar system after incentives in today’s low cost PV market.
The recent solar lease quote that I have in my hand, for a 4.75kW system, shows 20 years worth of lease payments at $117.00 per month. That equates to $5.91 per watt.
So $2.04 a Watt after incentives to own for 25-35+ years or $5.91 after incentives to rent for 20 years ? Which would you choose ?
Is that price available in all markets? (I’m assuming ~$2.90 before the 30% federal subsidy.)
That pricing would include sales tax and permit costs in California or shipping and permit costs out of state with an install rate of $1.00 to $1.30 per watt which is fairly common throughout the U.S.