GTM Research: 20 US States at Grid Parity for Residential Solar

But rate design and net energy metering will determine tomorrow’s solar economics

BOSTON, Mass. (February 10, 2016) – As installation costs continue to decline and retail electricity rates climb, residential solar economics have become increasingly attractive across the United States. According to the latest report from GTM Research, U.S. Residential Solar Economic Outlook: Grid Parity, Rate Design and Net Metering Risk, 20 U.S. states are currently at grid parity, and 42 states are expected to reach that milestone by 2020 under business-as-usual conditions.

Residential solar reaches grid parity when the levelized cost of solar energy falls below gross electricity bill savings in the first year of a solar PV system’s life. While traditional grid parity analyses rely on average retail electricity rates to calculate customer savings, GTM Research used utility and state-specific rate design, system production and installation costs to more accurately gauge solar’s attractiveness.

FIGURE: GTM Research Methodology
(http://www.greentechmedia.com/content/images/articles/parity_methodology.png)
Source: GTM Research U.S. Residential Solar Economic Outlook

When accounting for current net metering rules, rate design, and incentives, California, Massachusetts and Hawaii lead the nation in residential solar attractiveness; in each state solar can reduce an average customer’s electricity bill by 20 to 40 percent during the first year of system life. GTM Research found that North Dakota, Oklahoma, and Washington are the least attractive states for solar today.

FIGURE: Today’s Residential Solar Economics
(http://www.greentechmedia.com/content/images/articles/grid_parity_by_state.png)
Source: GTM Research U.S. Residential Solar Economic Outlook

While 20 states are currently at grid parity, the report also explores how rate design and reforms to net metering complicate the residential solar economic outlook in ways that can both strengthen and weaken rooftop solar savings.

“To date, the residential solar market’s growth has primarily come from a handful of states where favorable rate structures and net metering rules have set high, predictable ceilings on savings due to solar,” said Cory Honeyman, senior GTM Research analyst and lead author of the report.

“But with more and more utilities reevaluating net metering rules and rate design, the residential solar economic outlook can no longer depend on a static policy landscape that fueled the nearly 1 million homeowners now with rooftop solar. Looking ahead, it is no longer a question of if, but rather, when and to what extent rate structures and net metering rules are revised.”

In this report, GTM Research details what might happen under several net metering reform scenarios. For instance, the report finds that if each state’s largest utility were to add a $50 monthly fixed charge for rooftop solar customers, just two states would remain at grid parity in 2016.

FIGURE: Number of States at Grid Parity in 2016: Business-as-Usual vs. NEM Reform Scenarios
(http://www.greentechmedia.com/content/images/articles/state-grid-parity.png)
Source: GTM Research U.S. Residential Solar Economic Outlook

Download the free executive summary here.

One Comment on “GTM Research: 20 US States at Grid Parity for Residential Solar

  1. Is grid parity based on a leased or purchased solar system? Why would a utility add a $50 charge to a solar customer? Is that just for argument’s sake, or does it have to do with a leasing expense? With an purchased system, the home owner would be selling back electricity to the utility, so any charges wouldn’t be the other way around. I’m just trying to understand how this calculation was made.

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