Starting from a very small base, distributed solar (i.e., rooftop PV, or DG) capacity has expanded rapidly over the past few years, reaching 8.4 GW by the end of 2015. Going forward, there will continue to be more activity on the utility-scale solar space—largely due to lower costs—but DG is quickly becoming a reasonable option for homeowners and businesses in a number of states.
More than a million homes already have rooftop panels, the majority of which are in California. In contrast to utility solar, which must compete in wholesale electricity markets, distributed solar most often competes on the retail market due the prevalence of retail net energy metering (NEM). Some states are challenging retail NEM due to concerns about cross-subsidization and shifting costs to non-solar customers, but in the near-term, NEM will be a major driver of DG growth throughout the U.S.
In several states, DG owners can sell special solar RECs, or SRECs, for every MWh of generation. SRECs, where applicable, are typically far more valuable than traditional RECs. SRECs, combined with net metering, make the project economics of distributed solar quite compelling in many regions.
Costs for a rooftop installation remain high compared to utility-scale solar, but customers often take advantage of third-party leasing, which requires no upfront payment. Low-interest loans for PV have also become more prevalent, as has Property Assessed Clean Energy (PACE) financing. Finally, beyond federal and state support, many cities and municipalities offer additional incentives for residents to add solar PV systems to their homes and businesses.
Given the nascent state of the DG industry, the outlook for future growth is highly uncertain. EVA closely tracks state level policy changes impacting DG and generates both long and short-term state-by-state forecasts. EVA’s suite of modeling capabilities allows it to evaluate potential solar development under multiple scenarios. This includes sensitivity runs based on different gas price curves, analyses of proposed policy changes and varying assumptions for solar PV cost/performance improvement.
If you have any questions or comments regarding EVA’s distributed solar services, please contact us at [email protected]