Energy Update: Why isn’t Solar Taking Off?

With solar panel prices dropping it seems almost every month you would think that roof tops throughout the world would be covered with them. But that’s not the case. In my neighbourhood of hundreds of homes here in Toronto one house has solar panels. It seems that what I observe here is not too dissimilar to other urban residential areas in North America.

U.S. statistics from 2010 and 2011 show that residential solar is growing but not nearly at a pace to displace the more traditional energy sources – oil and natural gas. In fact residential solar decreased as a total percentage of photovoltaic system installations in the U.S. from 2009 to 2010, from 36 to 30%. Instead the growth has come from the non-residential market.

Why is this happening?

1. Subsidies to encourage residential solar are coming to an end in European and North American countries. Where subsidies remain residential solar panel sales continue to grow.
2. Solar installation costs remain high. Do-it-yourself solar kits from U.S. big box hardware stores start as low as $2,500 for a solar water heater to over $10,000 not including installation for a off-the-grid photovoltaic system with battery storage.
3. Connecting photovoltaic systems to the power grid to take advantage of feed-in-tariffs to offset the cost of installation has proven to be problematic. Residential solar installers report backlogs of a year or more before homes get hooked up to the main grid. This makes residential solar even with subsidies and tax incentives less attractive.
4. Falling prices for photovoltaic panels has put financial pressure on the manufacturers and installers of solar. Instead of more businesses getting into the game, many are pulling out. Recently the selling price for photovoltaic modules dropped from 95 cents per watt to 80 cents. This followed a year in which prices dropped by 50%. For many manufacturers this has wiped out their profits. For installers holding inventory it means to stay competitive they have to sell below cost and try and make it up in services.
5. A third-party ownership model where a utility provider or supplier takes the headache out of installing solar on residential roofs in return for doing the installation and maintenance for a monthly fee has yet to take off as a business model although there are some early players trying to do this.

In North America today, natural gas remains the primary energy supplier to residential homes. And with natural gas prices stable or falling, and supply growing, the day when solar energy becomes ubiquitous seems far in the future of the 21st century.