What recent events may dramatically slow the adoption of solar moving forward?
In the first half of 2023 Wood McKenzie estimates that residential solar installs totaled about 21% of total installs. Add to that the small commercial segment – which is also vulnerable to current economic conditions – and the total grows to a third of the market.
California – the largest residential solar market – recently slashed its net-metering rates dramatically reducing the financial attractiveness of such systems.
Because they believe that ratepayers who can’t afford solar are unduly subsidizing those that could. In other words – lower income people were paying for higher income people to reap the benefits of solar.
The solar industry contends that the mechanism to calculate solar’s value underestimates its true value. There may be some truth to that argument, but my question is: if solar has reached parity with fossil fuels why does it need subsidies at all?
The answer is: with the exception of large utility-scale solar projects solar really hasn’t reached parity. That’s despite panel prices plummeting, historically low interest rates, and nonexistent inflation. Now that we’re returning to what would be considered normal monetary and financial conditions, reality is setting in.
So where did this parity argument come from?
If you do a Google search you’ll find articles like the following:
In July 13, 2022 Francesco La Camera, the Director-General of the International Renewable Energy Agency (IRENA) said “2022 is a stark example of just how economically viable new renewable power generation has become.”
And what was the evidence to support that statement: renewable energy saving Europe about $50 billion in 2022. The only problem with that argument is that it was against a backdrop of the war in Ukraine and a massive disruption to EU fossil fuel supplies.
EnergySage, – an industry organization that aggregates data and heavily supports the rooftop solar market – compared solar energy and fossil fuels without subsidies including coal. It cited costs ranging from $0.03/kilowatt-hour (kWh) for small-scale natural gas to $0.06/kWh for coal.
It goes on to say that the world was shocked when in 2016 a major commercial solar installation bid a price of $0.029/kWh.
Two problems: Natural gas is the primary fossil fuel for power plants which are not small-scale. More important, just because a company bid a price below fossil fuels doesn’t mean that they profitably delivered that power. There was no mention as to where that project is today. My guess is belly up.
Don’t misunderstand my point. The cost of renewables has significantly declined over the last decade. My issue is with touting price parity while simultaneously arguing for sustained subsidies. You can’t have your cake and eat it too.