Daniel Englander
Live @ Intersolar: Niche Market or Frontline? July 16, 2008 at 12:51 PM
I’m sitting in the hallway outside the fifth floor bathroom in the InterContinental trying to come up with a creative answer to this question. In about three and half hours I’m scheduled to talk at and moderate a panel on residential solar finance along with reps from Akeena, SunRun, SolarCity and SunPower, and I’m still not quite sure the direction the panel’s going to take. In some respects, residential solar is the frontline of the solar industry - where the rubber meets the road, er, where the silicon meets the rooftop. It’s the most visible part of the solar industry, and gives consumers a direct connection to renewable energy - something that’s virtually impossible with any other kind of technology. And yeah, we’re still holding out hope on the Bloom Energy fuel cell. Distributed residential solar is also where the industry as we know it today got it’s start, all the way back to Jimmy Carter’s panels on the White House pool.
On the other hand, though, the relatively small scale of residential solar may make it destined for niche market status. While 30 percent of the grid tied PV installed in the U.S. last year was residential solar, a whopping 15 percent of last year’s installed capacity was utility scale - from two projects. There were thousands of residential systems installed in 2007. Southern California Edison, which is moving ahead with its 250 MW plant (the news broke this week that SCE will fill the first 2 MW with First Solar panels), has said repeatedly that 20 MW or so into the build, they’ve projected installed costs to average roughly $3.80 per watt. Thin film or no, residential solar won’t reach that price point until 2010 or 2011. And that’s an optimistic perspective taking into account an ITC extension and a healthy level of state subsidies. Still, utility scale solar has obvious cost compression possibilities, which may be replicable on the residential side, but only if residential service and installation companies begin acting like their commercial or utility scale cousins.
The idea here is that we should stop thinking about residential solar as inherently residential. Instead, residential companies should leverage their rooftop experience and turn those individual rooftops into what is essentially a distributed PV array. Residential PPA companies like Sun Run (and SunPower, or so I’ve heard…) or leasing companies like SolarCity buy in bulk anyway, and are able to take advantage of the commercial version of the ITC - 30% uncapped rebate, accelerated depreciation, fluffy bunnies, etc. So why can’t they sell in bulk as well? Leasing residential roof space, installing distributed systems, and selling that power to utilities instead of homeowners would still allow those homeowners to reap the benefits of distributed solar power: reliance on low voltage, neighborhood distribution networks, lower long-term rate structures, the goodness factor from having panels on the roof, and worry-free operations and maintenance.
Policy uncertainty going into the second half of 2008 will have an impact on the the direct ownership market. Demand here is relatively elastic, and it’s a pretty easy assumption that homeowners most likely to install panels have either done it, or are in the planning stages. They’ve only got five months left to get that going. The same goes for the commercial installers, but the difference is the guaranteed cash stream on the commercial install that may - possibly - overcome some of the price increases likely to happen following the failure to extend the ITC. Most estimates I’ve heard on the ITC’s impact place it on the order of $0.03/kWh to $0.05/kWh. SCE was able to drop installed costs by almost 50 percent without the tax credit, because they installed at scale. Residential solar companies can bring the battle to the streets by thinking big. I guess we’ll find out if they are in a couple of hours.
Or, in the word’s of SEIA Rhone Resch, “it’s not a revolution until some blood gets spilled.“
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