The residential solar industry was down about 15% in 2017, but rebounded in 2018, with a growth of 7%, according to the US Solar Market Insight Report. The U.S. residential solar market has now seen five consecutive quarters of modest growth, and the fourth quarter of 2018 was the largest quarter for residential solar in two years. Nearly 315,000 households added solar in 2018.
"After the residential solar freefall of 2017, growth in 2018 was driven by a more diverse mixture of national and regional installers than in previous years,” said Austin Perea, senior solar analyst at Wood Mackenzie Power & Renewables. “With a pivot toward more efficient sales channels, both national and regional installers exceeded expectations in California and Nevada, which drove the lion’s share of residential growth in 2018.”
Who goes solar?
In a study conducted by Stanford University, scientists used satellite imagery, which located 1.47 million installations in the United States. They examined more than a billion images with a machine learning algorithm, and then integrated US Census and other data to identify factors that lead to solar adoption. The data could be useful to utilities, regulators, and solar installation firms.
The researchers found that household income is very important, but only to a point. Above $150,000, income ceases to play much of a role in people’s decisions. On the other hand, low- and medium-income households do not often install solar, even if doing so would be profitable in the long term. Upfront cost appears to be an impediment for low- and medium-income households, which may give rise to new financial models to satisfy this unmet demand.
Explaining the cost solar
Potential solar customers are often leary of the pricetag associated with going solar, and oftentimes laying out the cost and benefits will make it obvious that a residential solar installation not only pays for itself, but can generate some income.
The average cost of a residential solar system in the US is currently approximately $20,000 before rebates and other incentives. If installed by the end of 2019, the federal investment tax credit will reduce that cost by 30%, or approximately $14,000 for the average installation. States often have some kind of incentive, which may reduce costs further. After installation, many homeowners will owe nothing on their electric bill, except for the cost of interconnection, and assuming that the panels will continue to produce electricity for nearly 40 years, that’s 40 years’ worth of free energy.
Furthermore, depending on system size and energy use, the homeowner may be able to generate additional income by selling solar renewable energy certificates (SRECs). Many states have a mandate to get a certain percentage of its electricity from renewable energy sources, so the local utility will give you credit for the solar power that you have sent to the grid. This money is returned to you when you sell the credits. And yet another plus is that solar power adds to the value of your home. A recent report from Zillow estimates that residential solar will add about 4% to the home’s resale value.
There are several ways to pay for a residential solar installation, beginning, of course with paying cash. Because that doesn’t work for many homeowners, they can essentially take what they would normally pay to the utility for electricity and turn that into payments toward a lease or a loan. A lease or power purchase agreement is similar to renting the system. While there may be no money paid up front, a third-party owner installs the panels on your property in an agreement where you pay them a below-market rate for the electricity for a period of years. Often after that time period, you are given the option to purchase the solar system. One downside of this arrangement is that the homeowner does not get the rebates or credits.
There are also solar loans from companies such as Mosaic or lending institutions such as EnerBank USA. Both Mosaic and EnerBank offer attractive options, assuming that the homeowner makes a payment within 18 months in the amount of the full investment tax credit.
Residential solar goes mainstream
According to the Wood Mackenzie/SEIA report, growth in installations and market penetration indicate that residential solar has gone beyond early adopters and is now mainstream in many states. States that offer incentive programs and allow net metering have higher penetration. Nevada is an example, where residential solar grew three-fold when net metering was reinstated in 2017. When net metering was revoked in 2016, the market contracted 61%.
The next hurdle for the industry is to streamline the permitting and inspection processes, which can reduce soft costs of installations. Ensuring that net metering policies remain in place is also important. And a further boost to residential solar will be seen in states that adopt 100% renewable policies or solar building mandates, as was recently passed in California. Further opportunities lie in solar + storage, and while cost is still prohibitive for many homeowners, a potential investment tax credit for energy storage systems could this market a needed boost.
Written by Anne Fischer, Managing Editor, Solar Novus Today