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Published on May 22nd, 2015 | by John Farrell


Solar Parity Coming Faster Than Expected

May 22nd, 2015 by  

Originally posted at ilsr.org.

Back in 2012, ILSR released a pair of reports on the solar Rooftop Revolution, noting that one-third of Americans would live in a metropolitan area where the cost of solar energy from their roof would be less than the cost of power from the utility by 2021. When combined with our analysis of non-residential property, we estimated that 287 gigawatts of solar would be at price parity with grid electricity across the country by 2021.

It turns out we were wrong, and that the rapidly falling cost of solar is making solar more economical in more big cities than many people expected.

For example, in our original analysis looking for parity between solar and grid electricity prices on residential property in 2015, residents were expected to save money by going solar in only 2 of the largest 42 U.S. metro areas, New York and San Diego.* According to a recently released report by the North Carolina Clean Energy Technology Center, however, grid parity was coming much quicker. A review shows that their study included all applicable federal, state, and local incentives (instead of our no-subsidy analysis), but it gave us a reason to revisit our 2012 analysis.

As it turns out, solar parity––without incentives––has been accelerating.

population at solar parity in top 40 metros 2015 ILSR

In 2015, six of the largest metropolitan areas are already at solar parity, representing over 30 million Americans. That’s one-third more people living with solar at parity with utility electricity prices than in our original analysis, when we calculated that 2015 would bring parity to just two metro areas, totaling 22 million people. The following table lists the metropolitan areas where electricity from solar installed at $3.50 per Watt––with no incentives––matches the average electricity rate, and a comparison to our original 2012 analysis.

Cities at Solar Parity in 2015

Metro Area Original Analysis Revisited Analysis
New York 2015 2016
Boston 2020 now
San Francisco 2017 now
San Diego 2013 now
San Jose 2017 now
Los Angeles 2017 now
Riverside, CA 2017 now

In 2017, the five-year point in our original, the population at parity is likely to be 71 million instead of 51 million. By 2021, 109 million Americans will be at parity, instead of our original prediction of 95 million.

Cities at Solar Parity in 2021

Metro Area Original Analysis Revisited Analysis
New York 2015 2016
Boston 2020 now
San Francisco 2017 now
San Diego 2013 now
San Jose 2017 now
Los Angeles 2017 now
Riverside, CA 2017 now
Chicago 2023 2018
Dallas 2019 2019
Philadelphia 2020 2018
Houston 2021 2020
Miami 2021 2020
Detroit 2023 2020
Phoenix 2018 2017
Tampa 2020 2021
Baltimore 2023 2021
Denver 2020 2021
Pittsburgh 2024 2020
Sacramento, CA 2018 2019
Las Vegas 2019 2018
Providence, RI 2020 2021
Jacksonville, FL 2022 2021

As you may notice in the above chart, some cities have reach parity sooner, and some later. The following map illustrates the changes by city for all 40 metropolitan areas.  What’s not captured in the table above or the map is that the acceleration of grid parity seems to be concentrated in the largest metropolitan areas, pushing up the population at parity despite nearly as many cities losing ground toward parity as gained between our new and original analysis.

comparison of city parity year 2012 v 2015 ilsr

In the future, we’ll add a bit more, by examining the net present value of a solar investment in each city. This accounts for the fact that an investment in solar can make sense even if the cost of solar electricity is currently higher than retail prices because, in the long run, solar prices are fixed, but electricity prices tend to rise. Early results suggest that nearly 150 million Americans––33% more than a simple parity analysis reveals––will live in a city where a solar investment––without subsidies––pays back over 25 years by 2021. More to come…

Data and Assumptions

*We picked these 42 because half the U.S. population lived in those 42 metropolitan areas in 2012.

  • The installed cost of solar for this analysis is $3.50 per Watt in 2015, estimated to decrease 7% per year
  • The price of electricity is expected to increase by 2% per year
  • Electricity prices for each metro area were taken from the Bureau of Labor Statistics or Energy Information Administration
  • Solar insolation data comes from the National Renewable Energy Laboratory’s PVWatts system

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter or get the Democratic Energy weekly update.

Photo Credit: Dennis Wilkinson, via Flickr (BY-NC-SA 2.0 license)

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About the Author

directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.

  • Leola Delgadillo

    Great Article. Thanks for the info. Does anyone know where I can find a 2015 Estimated form?

  • $3.50 per Watt in 2015

    That is more than double the current cost in Europe, where import duties have been imposed on PV cells and panels fabricated in China. Why is this difference so wide?

    • Hans

      google/ixquick/qrobe: “photovoltaics soft costs” There are several article on CT on this issue as well.

    • Bob_Wallace

      As Hans says, soft costs. One of the largest is “customer acquisition” – the cost of putting salespeople out there looking for customers.

      Germany used a better subsidy approach. FiTs made it possible for people to not only cut their electricity costs but also to make some money. That meant that people went looking for someone to install solar for them. And they shopped for best price because lower price meant more profit.

      The US subsidy approach hasn’t created the same desire and has not brought down prices as rapidly.

    • UKGary

      This is mostly down to soft balance of system – more costly and time consuming permitting, inspection etc together with the US tendency to lease rather than buy solar arrays (adding to financing costs).

      The US may well see substantially faster cost reductions than the rest of the world if the authorities remove some unnecessary costs!

      • Bob_Wallace

        A major cost factor for US solar appears to be customer acquisition cost. Solar companies have to go out seeking customers.

        In Germany the FiT was high enough to create potential profits and people sought out installers. No customer acquisition costs. Plus the ability to make more profit caused buyers to seek out the lowest installed rate.

        In Australia the cost of electricity was very high. Buyers sought out installers in order to save significant money starting on the day the panels were connected.

        In the US (Hawaii excepted) retail electricity prices are much lower than Germany and Australia. The potential savings are low and might not create an appreciable savings for years.

        When the subsidies go away in the US installed prices will almost certainly fall. Few people are going to install at current prices which aren’t lowered by subsidies. Installers will be forced to drop their rates in order to keep their businesses afloat. But I’m not sure that rates will drop enough to get homeowners excited enough to eliminate customer acquisition costs.

  • tomgnh

    One obvious limiting factor I never see mentioned is how many- or few- homes are properly oriented to collect solar power. Many homes were built with roofs facing east and west to avoid the worst- or best- of the sun’s effect. Has there been research on builders’ plans for orienting new homes?

    I was lucky enough to have a good roof 27 degrees from solar south, but there are only a handful of others in my neighborhood as suitable.

    • Bob_Wallace

      East and west facing roofs work for solar. The total amount of power produced is likely to be 80% to 90% of south facing panels so adding another 10% to 20% in panels is not a cost killer considering the cost of panels today.

      A three kW array at $0.75/watt would cost $2,250 for panels. Adding another 20% would increase the cost $450. Racking and labor costs would also increase about 20% but other costs (inverter, permitting, inspections, etc.) would stay the same.

      In addition that east/west panel placement has a lot of value to the grid. The east-facing panels are going to start producing earlier than south-facing and west-facing are going to extend the solar day later into the late afternoon demand peak.

      I’d like to think that going forward we’ll see house designs which consider mounting solar. We should be able to create designs that allow almost all houses to mount solar panels. And avoid panels on the street-facing side which some find objectionable.

      • tomgnh

        I think mine look great, and my wife has come around. The objections will subside with familiarity. The issue I see here (NH) is that builders like gables and peaks that cut up available footage.

        I read somewhere that there is a proposed zoning regulation that all new construction included a specific square footage of roof oriented for solar, but haven’t seen where or who is proposing it.

    • Ronald Brakels

      In Melbourne, which is about the same distance from the equator as Richmond, Virigina, south facing panels produce about 75% of the electricity as north facing panels. And east or west facing panels produces about 13% less electricity than north facing ones.

      • tomgnh

        good to know; I’d like to be able to convince my neighbors.

  • Shiggity

    Here we go up the S-curve. Check those stock portfolios, fossil fuels will be riding the down slope of said curve.

  • Matt

    There would have been a bigger positive change, if not for the trade war. Which has push price in the USA.

  • vensonata

    What I would like to see is Solarcity sponsor 10 off grid city homes in Arizona. pv, battery and generator back up. Just as a public statement as to what might happen to retro utilities if they don’t start listening. A nice little website where you can see live consumption production etc. So easy to live well off grid there.

    • Mike Dill

      From the numbers I have seen recently, those homes would net out at around $0.10 per kwh for solar, $0.25 per kwh for the stored solar, and about $0.50 per kwh for those hours (less than 100 hours per year) where you needed to run a generator.

      There is a change in the usage profile if you are off-grid, as Vensonata is already off gird knows. There is a significant incentive to use the power when it is cheapest, and avoid using power when it is expensive.

      If Nevada Energy adds too much to my bill because i have a solar system, I will eventually join Vensonata in living off-grid, even though I am in the middle of Las Vegas.

  • Michael G

    The problem with this general aggregation is it misses tiered pricing which is the norm in N. CA (PG&E). For people with a lot of usage in the highest tier it was cost effective years ago. For people in the lowest sector (like me) it may take another 10 years.

    On a business basis, I have to think hold-out states will have to go with the flow and allow solar or manufacturers there will be at a competitive disadvantage because of higher electric rates.

    In any event, good news. So what is holding up mass adoption in all the “now” states?

    • Tom Kabat

      In the SF Bay Area there’s a non-profit installer with a focus on customers in the lower two rate tiers. Sunwork dot org does installations while also providing training to a couple of volunteers. The systems go in at a cost about 30% below the for-profit installers and have a cost of energy around 7-8 cents per kWh after 30% tax credit, well below my 14 cent first tier retail rate. And the systems help volunteers get solar experience. win-win.

  • Kyle Field

    It’s an interesting exercise…I just looked at it based on the ROI which for me was ~18 years for the first 5 panels that I had an installer put on the roof in 2011 and 5.1 years for the 7 that went up in 2013. I have 15 more going up in the next 6 mos of so which I project to payout in ~6 years. I’m waiting for a transition at work to finish up before locking in the money for the install on those. Also, my projects are based on flat pricing then adjust based on actual production vs actual retail pricing. I expect they will payout at around 5 years per system average across all my panels by the time it nets out. I’ll put this stuff all together as an individual case study after I get my next set up and running.

  • JamesWimberley

    One year is probably less than the margin of error of the model. If you leave out all the one-year changes, John’s new prediction is that 9 cities are brought forward and 7 pushed back. But the former are much bigger.

    Cynically, I wonder how far the socket parity concept can be applied in the US states without competitive markets. Where you still have silo utilities, the administered rates will adjust so as to prevent distributed solar from destroying the incumbents. There is some much lower price of rooftop-plus-storage where this strategy fails because grid defection beats any tariff compatible with the survival of utilities in their present form. At that point bankruptcy will be avoided by de jure or de facto nationalisation.

    • Kyle Field

      I’m curious how long it will take Tesla Powerwall and similar technologies + solar to fully push suburbanites off the grid completely. I hadn’t really considered it but after watching an episode of survivorman where he put his property off grid, I started thinking more seriously about it. I’m considering adding a small wind turbine to our roof to help mellow our our production curves…

      • newnodm

        small wind turbines don’t work

        • Kyle Field

          This is an odd statement. I have seen several under 1mw that “work”…what are you basing this?

          • Bob_Wallace

            Cost per kWh produced is very high.

            There are a few companies such as Bergey that make small wind turbines which can make financial sense for someone who is off the grid but I know of none which get anywhere close to grid parity (excluding places with very expensive electricity).

          • newnodm

            Home windmills are a product that we intuitively think would work well, especially considering the success of commercial wind.
            But try to find a long time small windmill users with a positive ROI. 99% of people don’t live places where near ground level winds are good enough. Small windmills are a hobby, not normally part of a real generation strategy. If everyone had access to a fifty foot tower on top of our roofs, residential windmills would work better.
            Almost all small windmills sold to date are broken and residing unused at the back of a garage. If small windmills actually worked in real life, the models sold would be more expensive and durable.
            There is little reason to sell well made small windmills since few people have access to good wind.

  • jburt56

    We have until 2017. . .

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