Quantcast
Renewable Energy

Is Rooftop Solar Cheaper Than Buying Electricity From the Grid?

The National Renewable Energy Laboratory this week said that rooftop solar panels have the potential to generate nearly 40 percent of electricity in the U.S. But what about the cost of going solar?

Many people ask when the cost of producing power from solar photovoltaic (PV) panels will be equal to or less than buying from the grid—a point called “grid parity” that could accelerate solar adoption.

Thinking of going solar? Prices are approaching the cost of grid electricity, but only in some places—so far. Photo credit: Joncallas / Flickr

But in asking the question, they often compare apples to oranges and forget that the answer varies from place to place and from one type of installation to another.

For example, electricity from utility-scale solar systems (typically large arrays where panels slowly change tilt and orientation to face the sun all day) usually costs less than electricity produced from solar panels fixed on someone’s home. Also, residential electric rates, on average about 12 cents per kilowatt-hour in in the U.S., are much higher than wholesale electric rates—the price utilities pay to power generators—which are usually less than 4 cents per kilowatt-hour.

At the same time, different states have more or less sun—solar power in Florida is typically more economic than in Alaska, for instance. All of these factors make the question more complicated than people might anticipate.

How, then, can we compare the cost of rooftop solar to the cost of buying power from the local electricity grid and thereby find when which states will hit the point of grid parity?

Putting a Number on Solar Cost

The levelized or average, cost of electricity from a solar PV array is derived from all the money spent to buy, install, finance and maintain the system divided by the total amount of electricity that system is expected to produce over its lifetime. We call this value the Levelized Cost of Electricity (LCOE) and it’s expressed in terms of dollars per kilowatt-hour ($/kWh). The same metric can be used to determine the cost for a coal or natural gas plant. Planners like it because it reduces the cost of a power plant over a span of many decades into a single number.

Despite the strengths of LCOE as a metric—it is easy to understand and widely used—it has some shortcomings, too. Namely, it leaves out geographic variability, changes with seasons and usually ignores the cost of environmental impacts such as the cost of carbon emissions. This metric is a bit too simple when comparing variable wind and solar generators to power plants that you can turn on and off at will, such as those fueled by uranium, coal and natural gas.

Today the average cost of energy from solar PV in U.S. is reported to be 12.2 cents per kWh, which is about the same as the average retail rate.

Those who keep close tabs on electricity prices might think that it is about on par with what they are paying for their own electricity at home. This number can be misleading, however, because it represents the average price of utility-scale solar across the U.S., not necessarily the cost borne to produce electricity from solar panels on our homes.

So how do we know how close residential solar is to grid parity where you live? Ultimately, that depends on two things: how much you pay for the electricity you buy from the local grid and how much can you get paid for the electricity you can produce from PV. Let’s take a look at both of them.

How Much Sun Do You Get?

The Energy Information Agency (EIA) has created a map of average electricity rates by zip code, averaged to the county level and remade by the author in the map below. The deep red (or darker) colors indicate higher average residential electricity rates.

Map of average electricity rates across the U.S. Photo credit: EIA

Electric rates vary a great deal across the country and these differences could be caused by a number of economic, historical or regulatory reasons. Likewise, the costs of solar and the availability of the solar resource (i.e., how often and how strong the sun shines) also are not homogeneous throughout the U.S. The figure below shows the LCOE of residential solar across all counties nationwide.

LCOE of residential solar across the U.S.

The data on the residential solar costs were pulled together from an ongoing large-scale campus-wide research project at the Energy Institute at The University of Texas at Austin. The main assumptions behind the data are a total cost of US$3.50/Watt for the solar PV installation for a fixed array pointing south with a tilt of 25 degrees. Solar production data are based on a 2013 National Renewable Energy Laboratory study.

That southern orientation and tilt represent a rule of thumb and might not be the optimal solar placement in every locale.

The U.S. Department of Energy SunShot Initiative has a stated goal of lowering residential solar PV system installations to $1.50/Watt. Cheap PV panels from China have driven down the hardware costs to the point where the price of a total PV system is now dominated by “soft costs”—namely, customer acquisition, installation, supply chain, permit, etc. Still, total installed system costs continue to fall.

While those cost cuts are impressive, the major driver in the cost of energy produced is the amount of solar radiation that strikes the solar panels. Obviously, some locations are sunnier than others so a solar array in Arizona will produce more energy than one in Washington state, making the system more economic for the homeowner.

And, the prevailing cost of electricity varies nationwide. Some of the areas with the lowest cost of grid power (e.g., Washington) have some of the highest solar costs because of low levels of sunshine. It will be difficult to make solar reach parity in those locations.

On the other hand, there are other locations where the price of grid electricity is high and the solar LCOE is relatively low, including New Mexico, California and Hawaii; these places are prime locations for solar to be at parity sooner.

Moving Target

To illustrate this point, we take the same information that underlies the solar cost map and reduce the total installed cost of installed solar in $0.50/Watt increments—from $3.50/Watt to $1.50/Watt (the SunShot goal). We can then subtract the electricity rate from the solar LCOE in every county. Where this difference is zero or negative (electricity rates > LCOE), we can estimate when that county will be at grid parity for residential solar PV.

Below is a GIF that shows the estimate of the point of parity as the price of installed solar falls. Note that the total installed costs include the federal investment tax credit and any local rebates and tax incentives.

These calculations and estimates come with several caveats. First, the above calculation assumes that PV owners are paid for their generation at standard electric rates in their area. This arrangement is typically known as net metering.

But there is a wide range of ways that utilities interact with customers who have installed solar PV. Some utilities may pay homeowners wholesale market rates for the excess electricity they feed into the grid from their panels, which tend to be considerably lower than retail rates. If utilities pay homeowners based on the wholesale rate, rather than the retail rate, solar is less economic.

But that’s not all. One could add in the cost benefits of reducing CO2 emissions and other pollutants. On the other hand, there are costs associated with “firming up” the solar power when it’s nighttime or cloudy.

Keeping these factors in mind, the answer to the question, “Does it make economic sense for me to install solar?” is: it depends. As the map demonstrates, the crucial thing to watch, apart from any changes in electricity costs, is how quickly the overall costs of solar go down.

YOU MIGHT ALSO LIKE

Clean Line Project to Deliver Wind Power to 1.5 Million Homes and Businesses

Renewable Energy Investments Set New Record, Twice That of Coal and Gas

Musk, DiCaprio and Rive Talk the Future of Solar at Tesla Gigafactory

3 Cities Disrupting the Local Electricity Market With Innovative Renewable Energy Projects

Show Comments ()
Sponsored
Abdallah Issa / Flickr

Post-Fire Landslide Problems Likely to Worsen: What Can Be Done?

By Lee MacDonald

Several weeks after a series of wildfires blackened nearly 500 square miles in Southern California, a large winter storm rolled in from the Pacific. In most places the rainfall was welcomed and did not cause any major flooding from burned or unburned hillslopes.

But in the town of Montecito, a coastal community in Santa Barbara County that lies at the foot of the mountains blackened by the Thomas Fire, a devastating set of sediment-laden flows killed at least 20 people and damaged or destroyed more than 500 homes. In the popular press these flows were termed "mudslides," but with some rocks as large as cars these are more accurately described as hyperconcentrated flows or debris flows, depending on the amount of sediment mixed with the water.

Keep reading... Show less
The most notable observation from the count was DeMartino's sighting of the golden crowned kinglet, but in general volunteers found the same species they normally do. (Photo above is of a golden crowned kinglet, but not the one DeMartino spotted.) Melissa McMasters

Birders Get a First Look at How 2017 California Wildfires Affected Wildlife

By Matt Blois

A neighbor knocked on Rick Burgess's door at about 9:30 p.m. to tell him a fire was coming towards his home in Ventura, California. When he looked outside he saw a column of smoke, and the hills were already starting to turn orange. He loaded up his truck with a collection of native plants he was using to write a countywide plant guide, and barely had enough time to get out.

Keep reading... Show less
A learning garden from Kimbal Musk's nonprofit called Big Green. The Kitchen Community

Elon Musk's Brother Wants to Bring #RealFood to 100,000 Schools Across America

Kimbal Musk's nonprofit organization, The Kitchen Community, is expanding into a new, national nonprofit called Big Green, to build hundreds of outdoor Learning Garden classrooms across America.

Learning Gardens teach children an understanding of food, healthy eating and garden skills through experiential learning and garden-based education that tie into existing school curriculum, such as math, science and literacy.

Keep reading... Show less
Drilling fluids spilled into Ohio wetlands during construction of the Rover Pipeline in April. Sierra Club

Rover Pipeline Spills Another 150,000 Gallons of Drilling Fluid Into Ohio Wetlands

Energy Transfer Partners' troubled $4.2 billion Rover pipeline has spilled nearly 150,000 gallons of drilling fluid into wetlands near the Tuscarawas River in Stark County, Ohio—the same site where it released 2 million gallons in April.

The 713-mile pipeline, which will carry fracked gas across Pennsylvania, West Virginia, Ohio and Michigan and Canada, is currently under construction by the same Dallas-based company that built the controversial Dakota Access pipeline.

Keep reading... Show less
Sponsored

Large Dams Fail on Climate Change and Indigenous Rights

Brazil has flooded large swaths of the Amazon for hydro dams, despite opposition from Indigenous Peoples, environmentalists and others. The country gets 70 percent of its electricity from hydropower. Brazil's government had plans to expand development, opening half the Amazon basin to hydro. But a surprising announcement could halt that.

Keep reading... Show less
Jim Henderson / Wikimedia Commons

World's Largest Money Manager: Companies Must Respond to Social and Climate Challenges

The world's largest publicly traded companies must take a more active role in solving social issues or face blowback from investors, the CEO of BlackRock said Tuesday.

"To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society," Laurence Fink wrote in his annual letter to CEOs of companies in which BlackRock invests. BlackRock is the world's largest money manager, with more than $6 trillion in assets.

Keep reading... Show less
Sponsored
16:9clue / Flickr

Lawsuit Filed Against Walmart for Claiming 'Cage-Free' Eggs

By Dan Nosowitz

A lawsuit has been filed in a California district court against two of the biggest companies in the country: Walmart and Cal-Maine Foods. The lawsuit claims that Walmart and Cal-Maine—the latter is one of the biggest egg producers in the U.S.—lied to customers about the treatment of hens whose eggs were sold at Walmart. The alleged lie? The packaging claimed "outdoor access," yet the birds are not permitted to go outside.

Keep reading... Show less
Ryan Zinke. Gage Skidmore / Flickr

Majority of National Parks Panel Quits in Protest of Ryan Zinke

Nearly all members of the National Park Service advisory panel abruptly quit on Monday in protest of the Trump administration's policies, which they say have neglected science, climate change and environmental protections.

"From all of the events of this past year I have a profound concern that the mission of stewardship, protection, and advancement of our National Parks has been set aside," the head of the panel, Tony Knowles, wrote in a letter of resignation addressed to Interior Secretary Ryan Zinke, who oversees management of the country's national parks and monuments.

Keep reading... Show less
Sponsored

mail-copy

The best of EcoWatch, right in your inbox. Sign up for our email newsletter!