The Future of Solar Is…

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Ryan Pollin for Zondits. Image credit: geralt

The interdisciplinary folks at MIT could finish that sentence in quite a few ways, and that’s just the intent of their new report The Future of Solar Energy. They brought up several conclusions about the way forward for solar, including these interesting issues with our current financial and political position on the matter.

The new report makes the argument that as residential solar rolls out in increasing numbers across the country, we need find a more equitable way to pay for the transmission and distribution (T&D) infrastructure. The majority of utilities charge for T&D costs bundled in with the cost of the energy that was generated on the other end of the wires. Net metering has allowed customers with distributed energy resources (DERs) like solar to sidestep the T&D costs. It’s an effective subsidy for solar owners, because they get paid at a retail rate for their generated energy, but it’s causing political conflict across the country. If 100% of a utility’s customers had DERs and were being net metered, who would be paying for the poles and wires? A new pricing scheme was not suggested as a part of the report, but perhaps it will come in the form of bundling T&D costs with the interconnection charge, so that no matter where your energy is coming from, if you are hooked into the grid you are paying some flat rate for that service.

Another interesting point that MIT calls out in its report is with federal solar subsidies, namely the investment tax credit (ITC). The ITC gives a tax break based on money spent on solar energy installations – specifically on the investment. Due to the different economies of scale and associated soft costs, the price of solar on a cost-per-kWh basis is about 70% more in residential systems than in utility-scale systems. As a result, the ITC, which sees financial investments only, is inappropriately biased towards more expensive residential systems. Further, systems installed where solar insolation is weaker (read: places outside the Southwest), are also inappropriately biased because they cost more per generated kWh. The perfect system would incentivize the kWh itself, not the cost of creating the kWh. That step would do more to ensure that the incentive dollars are spent precisely where they are most effective.

A third issue we’ll mention here is the diminishing returns of solar adoption in the high-adoption scenarios often mapped out in low global CO2 emissions models. Low-emissions scenarios predict substantial market penetration for solar energy, but MIT researchers have identified a place where the penetration of solar is self-limiting, at least according to the current electricity pricing schemes. Solar energy is most easily available in the daytime, which currently coincides with much of the demand peak. These higher-priced generators that solar is displacing act only in the peak, and compared to these solar wins out. However, there comes a saturation point where existing solar has displaced all the cost-ineffective peak generators. The more that solar is adopted, the less incremental savings are seen compared to the displaced generator.

As what seems to be the most scalable energy solution humans have ever devised, solar energy is going to be with us for the foreseeable future. Solar accounted for about 1% of the energy generated in 2014 globally, but it made up about 30% of the new generating capacity installed in the United States in 2014, and even greater a share in many other parts of the world. None of these points are deal-breakers. In fact, answering these questions now will help smooth the way in which solar proliferates across the country and allow us to more quickly leave last century’s fossil plants in the dust.