Graph of the Day: Solar value – past, present and future

How did solar get to where it is today? And how will the solar future pan out? John Farrell at the Institute for Self-Reliant States has written a neat history of solar economics which, along with some interesting charts, illustrates that a key part of solar’s past success will also be key to its success in the future.

Starting at the beginning: the past, says Farrell, is characterised by subsidisation and net metering: a revolutionary concept “allowing smaller scale arrays… to connect to the grid at low cost, and for that solar energy to be credited to the producer’s electric bill as though it were a comparable amount of energy conservation.”

The present, he says, is marked by a new dynamic in solar economics, ushered in by solar growth and falling prices. “For the first time in many places, solar electricity from the rooftop is cheaper than utility-provided power – without subsidies!  And in particularly sunny places, the levelized cost of solar may even be below the ‘value of solar,’ meaning that solar energy producers… could make a return on investment just on these merits. 

This ‘present’ phenomenon, says Farrell,  will occur in different parts of the US at different times, but will happen throughout within five to seven years. “What’s important to note is that there’s a convergence: the retail electricity price, the value of solar, and the levelized cost of energy from solar panels are all relatively close.

As for the future, Farrell predicts significant political problems if policies remain unchanged. But the key to “the continued expansion of distributed solar power may rely on modifying a bedrock of distributed solar policy,” he says.

“No matter the changes, it’s important that the future distributed solar policy embrace the same principle as net metering: democratic access to the means of producing local energy with reasonable and equitable compensation.”