Residential Solar Energy: Power to How Many People?

A friend of mine recently installed an array of solar panels (photovoltaic generation) on his roof.  It's part of an Austin Energy plan that makes it straightforward for well-heeled consumers to get a turnkey installation done.  After a stretch of sunny days he'll meet me for lunch and tell me how much power he sold to the utility that week. 

I was reminded of this when I read a recent article by environmental writer Bill McKibben in The New Yorker.  Entitled "Power to the People," McKibben describes how residential solar-power installations such as the one at my friend's house are getting cheap enough so that ordinary blue-collar workers and other middle-class types can afford them, at least when their electric utility cooperates in various ways.  McKibben starts his piece with the story of a couple in Vermont who had their house made over for energy conservation and production:  better insulation, a heat-pump heating unit, all-LED lighting, and a solar panel on their garage.  After the installations, their electricity usage for a heating season (October to January) went down by 16%, and they were able to get by without starting up their old oil-burning furnace at all. 

McKibben is supporting the presidential run of Bernie Sanders, the far-left independent senator from Vermont.  But to read his New Yorker piece, you might not guess it—he sounds more like a free-market libertarian.  His main point is that it's starting to make not only environmental and political sense (depending on your view of the environment and politics) but economic sense for more people to go solar and invest in energy-saving technology, simply because it's getting cheaper to do so.  And so McKibben is looking to the free market to do what his years of playing a prophetic Cassandra in the wilderness of environmentalism haven't done so far:  to foster a major move away from fossil fuels and toward renewable energy for electric power.

 While I welcome Mr. McKibben's newfound friendliness toward the market economy, one can question how realistic his optimism is.  As he points out in the article, one of the main obstacles in the way of further adoption of solar power in private housing is the electric utilities themselves.  While some, notably in California and Vermont, have been in the forefront of renewable-energy initiatives, others feel threatened by the idea of home-grown electricity.  And the reason is money. 

Nearly all electric utilities are regulated to some degree by state utility commissions, which allow them to set rates that guarantee a certain profit in exchange for highly reliable delivery of power.  This sort of environment fosters conservative behavior and a set of rules that favors the status quo.  For example, if people start making their own power, who pays for the expensive and maintenance-intensive electric grid, especially if more and more fossil-fuel-burning power plants that feed it are shut down?  The economic incentives built into the system were not designed for power to go backwards, and it's not clear how the organizations that operate distribution networks are going to get paid for what they do in a highly distributed power-generation situation such as the use of extensive solar power would create.

Here in Texas, things are a little less regulated than in other places.  It's not quite true here, as McKibben states in his article, that "utilities are granted exclusive rights to a territory."  That's true for electric distribution companies, but not for electric generation in Texas, where most electric-utility customers can choose from a variety of generation sources, including renewables such as wind power.  And partly due to a recently phased-out subsidy, Texas leads the nation in terms of wind-powered electric generation.  So in a way, there's evidence even in fossil-fuel-friendly Texas that what McKibben hopes will happen is already happening.

But a totally free market for electric power is almost inconceivable, and so we have to look soberly at what it would take for renewables (solar being the newest contender) to make a significant dent in the use of fossil fuels for electric power in the U. S.  According to the U. S. Energy Information Administration, about two-thirds of all electric power in the U. S. is produced by burning coal, oil, or natural gas.  Say we wanted to reduce that fossil-fuel usage by a third, out of concern for climate change and so on.  Anything smaller would be a drop in the bucket  (and we're not even getting into the question of what other countries are doing and whether this U. S. contribution would make a difference globally).  That's about a trillion kilowatt-hours per year (10¹⁵ watt-hours, for you exponential-notation fans).

Now, suppose everybody—not just upper-class environmentalists, but everybody in every kind of rental and owner-occupied housing in the U. S.—installed solar panels with an average generating capacity of 5 kW, which is the typical size for residential installations.  That is an upper limit, by the way—clouds, nighttime, and other issues mean that you don't get 5 kW twenty-four hours a day.  Even if everybody had solar panels, we would still need the utility network for emergencies, to ship surplus power to places where it was needed, and so on.  The question is, would we be able to make a dent in that trillion kilowatt-hours?

My very sketchy back-of-the-envelope calculations say yes, sort of.  You would still need peak-capacity generators hooked to the grid to deal with hot days and so on.  But yes, you could afford to shutter a lot of old coal-burning power plants if everybody installed solar panels.

And while we're dreaming, how would we pay for all those solar panels?  A typical residential solar installation today is still expensive—$18,000 might be a typical actual cost, not including subsidies, tax breaks, and so on.  While this figure is going to decline in the future, it can't follow the path of Moore's Law and get down to practically zero, because there's a certain amount of labor involved, and even if we could make solar panels for free they don't climb up on the roof by themselves.  Multiply $18,000 by over a hundred million U. S. housing units, and you get $1.8 trillion.  The U. S. federal budget for 2015 is $3.8 trillion.  As you can see, this solar-installation idea is not a trivial deal.  Even if it were spread out over a decade, you'd be spending each year as much on solar panels in the U. S. as one optimistic solar-industry estimate says annual global sales will be by 2021.

Yes, it could be done.  But I think it's clear that unless there is a huge degree of government intervention in the forms of subsidies, incentives, or other external market manipulation, the free market isn't going to put solar panels on everybody's roof any time soon.  Maybe President Bernie Sanders could do it, but offhand I can't think of any other way.

Sources:  Bill McKibben's article "Power to the People" appears in the June 29, 2015 edition of The New Yorker, pp. 30-35.  I used statistics on the fraction of electric energy produced with fossil fuels from the website http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3.  The Solar Energy Industries Association website www.seia.org has plentiful data on historical and current trends in solar-energy installations.  The 180-billion-sales-by-2021 figure is from http://www.solarmaxtech.com/global-solar-market-could-exceed-180-billion-dollars-by-2021/.