There’s a solar boom happening in America. In the last six years, installations of solar panels have jumped 1,700%. Prices for solar energy have fallen 50% to 70%. There’s now a well-established ecosystem of installers and service companies, and plenty of finance options, too.
This is exciting, because solar has potential to be a truly world-changing technology. If we can get the price down enough, we could deploy it almost ubiquitously and do away with a lot of carbon-intensive electricity generation. As a new report puts it, solar is “one of very few low-carbon energy technologies with the potential to grow to very large scale.”
The report, called The Future Of Solar Energy, comes from the MIT Energy Initiative and looks at ways to reduce the cost of solar further, how to develop new technologies that can expand “to very large scale at low cost,” and how to integrate solar into the existing grid infrastructure. Below are five recommendations from the report.
“Third party financing”–where homeowners either lease panels, or agree to buy energy generated from panels installed on their property–has been a big factor behind the solar boom. But it’s not allowed everywhere. Florida, for example, permits only utilities to sell electricity (so much for being the Sunshine State). Georgia, Kentucky, North Carolina, and Oklahoma also have restrictions. These make no sense, the report says.
State and federal grants, low-interest loans, and tax credits available for solar are based on the investment amount people put in. If homeowners take the federal Investment Tax Credit, it’s worth up to 30% of the cost of a solar installation. That’s great, because it encourages people to get solar. But it’s not necessarily efficient in building out the maximum possible amount of capacity. The report proposes subsidies based on the amount of power a system generates, not the cost of that system to the owner. “This change would correct the inefficiency in the current federal program, under which a kWh generated by a residential PV system gets a much higher subsidy than a kWh generated by a nearby utility-scale plant,” the authors say.
Many states have Renewable Portfolio Standards requiring electricity producers to generate certain percentages of power from renewables. The report recommends creating a national trading system by which producers could meet their obligations wherever it was cheapest. So, for example, a utility in Oklahoma might like the look of the fantastic wind resources in Texas and decide to site a wind farm there instead of its own state. Or, it could simply buy clean power credits from other producers. In theory, such a system would cut the overall cost of moving to a less carbon-intensive energy system, including one based around solar power.
About 85% of the cost of installing a residential solar panel comes not from the panels themselves, but from “balance-of-system” costs, including the cost of design, marketing, financing and regulatory requirements, like permitting, interconnection, and inspection (PII). Though panels have fallen sharply in price here, these additional costs remain high compared to other solar leaders, like Germany. The report recommends taking some of the strain off municipal and state authorities by establishing common rules and procedures.
Nothing would help improve adoption rates of solar, or any form of clean power, more than a price on carbon. A carbon tax for instance would push up the price of fossil fuels relative to solar. “A policy of pricing CO2 emissions will reduce those emissions at least cost,” the report says. Unfortunately, carbon taxes are on almost nobody’s agenda in Washington these days, even though carbon taxes have been shown to be effective at reducing pollution without harming the economy overall.