Consumers being used to paying for electricity on a monthly, rather than on an upfront basis, is the single biggest factor undermining potential homeowner adoption of rooftop solar in the United States.
If you follow solar energy closely, and even if you do not, chances are, you’ve heard that solar will soon be reaching, or already has reached, “grid parity” in multiple places in the United States and around the world.
Basically, “grid parity” means solar-generated electricity costs the same, or less, than natural gas generated electricity, coal-generated electricity, nuclear power generated electricity, etc.
The solar industry — and solar lovers/proponents — think grid parity is a big deal.
But, at least in terms of rooftop solar and the individual American household and interest/desire and, most important, follow-through on actually going solar, grid parity is nowhere near as important as many advocates make it out to be.
Grid parity will not suddenly rocket solar energy past utility produced electricty for the vast majority of American homeowners, even for those who could afford home solar, and who would, in the long-term, benefit tremendously from rooftop solar.
Grid parity celebration fails to take into account the single most important difference between the traditional utility delivered model of electricity production and consumption by individual homeowners and rooftop solar: With the traditional model, you do NOT pay your utility bill forward 20 years [sorry about the bold-faced, underlined caps, but I truly do NOT think most solar proponents get this, though, I, personally, do NOT get why they do not get it ;-)]
Consumers don’t want to pay electricity forward
With rooftop solar, you do pay your electric bill forward — decades forward. And, my friends, 90 percent of Americans are not especially excited about paying their utility bill forward decades, even if it will save them thousands and thousands of dollars in the long run.
Grid parity is largely meaningless in terms of individual rooftop solar ownership because most Americans are creatures of electric bill habit, and they have been habituated — for decades and decades — to paying smaller amounts on a per month basis for their electricity rather than a huge lump sum for a decades supply of electricity.
Take my neighbors here in sunny, perfect for solar Aurora, Colo., for example. They’ve lived in the same house for more than 20 years, and they are certain to live in this home another 20 to 30 years. They’ve got a great, south-facing rooftop, just like mine.
“Steve” approached me recently saying he was considering going solar. But, when he discovered that his out of pocket costs would be around $12,000 — not the $4,000 he was hoping for — solar turned out to be “too expensive” for them. No amount of persuasive effort on my part to point out that they’ll will definitvely, 100 percent, save thousands of dollars over time by installing a rooftop solar system, will get Steve and his wife to change their minds.
Because they, like 90 percent of Americans, are not accustomed to, and therefore simply do not want to/refuse to, pay their utility bill forward — at least not when the forward premium pushes into five figures. And that — even with a very low interest loan — is precisely what rooftop solar requires homeowners to do.
People — very smart people — who could easily qualify for a 1.9 percent financing rate for a solar loan, and who would save thousands of dollars, will not, I repeat, will not budge on the rooftop solar is “too expensive” line until it is cheap, cheap, 5 times, maybe even 10 times cheaper than it is now.
Is $1.43 per watt too expensive?
Heck, five years ago, when we went solar and paid $8,000 out of pocket for a 5.6 kW solar system that covers 100 percent of my home’s electricity + 15,000 miles of driving in an all-electric Nissan LEAF, I could not even convince my own wife that solar wasn’t “too expensive.”
I showed her, on paper, that we would save thousands, tens of thousands of dollars across the long term, but all she saw was that we didn’t have the savings to pay up front for our system. Hence, solar was “too expensive”.
My wife is a very smart woman — she has her master’s degree in public health and crunches health statistics for a living. I still could not persuade her. I made the decision that “we” would buy a rooftop solar system anyway, and, unfortunately, this decision on my part that brought me tremendous joy, and inspired me to lauch SolarChargedDriving.Com in September of 2009, is part of the reason, a very small part, but a part nonetheless, why, in a couple of months, my wife and I — having been together for nearly 20 years — will be officially divorced.
Now, I’m not saying there’s as much friction about money, and short term vs. long term spending and savings in every household as their was in ours. I am saying “grid parity” doesn’t mean all that much in terms of individual homeowners with rooftops suitable for solar suddenly leaping from the utility, pay as go model to the rooftop solar pay-it-all-up-front model of electricity production and consumption.
Zero percent loans?
Indeed, homeowner aversion to stepping up to a pay-your-electric-bill forward to save in the long term model is precisely why solar leasing was, and still is in some places, hugely popular.
In sum, grid parity is largely meaningless in terms of individual rooftop solar ownership because most Americans are creatures of electric bill habit, and they have been habituated — for decades and decades — to paying smaller amounts on a per month basis for their electricity rather than a huge lump sum for a decades supply of electricity. Yes, a loan, no matter how low the interest rate — unless, it’s 0 percent — equals psychologically a “huge” sum in most people’s eyes.
Home rooftop solar will have to be very cheap indeed — cheaper even than the pretty darn crazy cheap $1.43 per watt cost my wife and I paid in 2010 thanks to huge Xcel Energy rebates which are a thing of the past — for the homeowner rooftop solar revolution to unfold.
True, few American consumers think about car purchases or home purchases in these terms — though they probably should. They pay their car and home forward, big time — indeed, most never end up paying off their home loan. However, thanks to having been habituated to monthly electric bills, these same folks think of home rooftop solar (purchased with a loan) as a “huge” upfront payment, one most simply do not want to do.
Home rooftop solar will have to be very cheap indeed — cheaper even than the pretty darn crazy cheap $1.43 per watt cost my wife and I paid in 2010 thanks to huge Xcel Energy rebates which are a thing of the past — for the homeowner rooftop solar revolution to unfold in as exciting, and expontential fashion, that some seem to think “grid parity” will usher in.