A conversation about solar

For this energy-themed issue of Photonics Focus, the primacy of solar energy in the renewables mix stood out. We wanted to know more, so we asked David J. Feldman an economist, financial analyst, and solar-energy markets guru for the National Renewable Energy Laboratory (NREL).

Here's what he had to say:

What does the national renewable energy laboratory (NREL) do, and how does its work impact the solar infrastructure in the US?

NREL is the only federal laboratory dedicated to clean energy research and development. We help identify, develop, engineer, and design manufacturing processes for new photovoltaic (PV) products, as well as products that might support accelerated PV deployment, such as energy storage. We also help advance the deployment of solar infrastructure in the US through work designed to lower costs, improve solar integration onto the grid, and provide technical assistance for state and regulatory authorities.

Solar accounted for 43 percent of all new electricity generating capacity in 2020—first among all technologies for the second year in a row. what is the primary driver of this success?

There are four primary drivers of the acceleration of solar adoption. First, the rapid drop in price has made solar competitive with traditional sources of power generation in large parts of the US. NREL estimates that from 2010 to 2020, the cost of energy for US utility-scale PV systems dropped 83 percent. Second, the federal government extended the investment tax credit (ITC), first in 2015, and then again in 2020. They also revised it to drop over time, from 30 percent all the way down to 10 percent. The idea is to create incentives to deploy PV systems while the ITC is still available. Third, many states have set aggressive targets, requiring electricity supplied within their state to come from renewable energy sources, and/or set up regulations encouraging commercial and residential PV deployment. Many utilities now have mandates to procure a certain amount of electricity from renewable sources, which goes up over time. So that's even more reason to lock in solar now. What's more, most commercial and residential customers in the US now have the ability to feed electricity into the grid from their solar-energy systems and get retail credit for the energy. Finally, as part of their environmental sustainability plans, many corporations have procured a large amount of solar energy from both onsite and offsite sources.

What role have incentives played in the uptick of commercial and/or residential solar?

I would differentiate between incentives and regulatory structure. Certainly, state incentives have played a large role in US PV deployment and still drive demand. However, some states, such as California and Hawaii, have large levels of deployment despite many state incentives phasing out. That's due to their high electricity rates and sunny skies. However, another key element driving demand is regulatory structure. The vast majority of commercial and residential PV systems feed some of their electricity to the grid. How they are compensated for that exported electricity can have a big impact on the competitiveness of many solar-energy systems.

Are tax incentives and grants still needed to encourage adoption of solar?

All forms of energy are incentivized in some way by federal and state governments—from exploration and production of fuel, to electricity generation. Many states, which once offered incentives and grants no longer do, yet still have robust solar-energy markets. That said, as solar becomes a larger share of the electricity mix, its relative value decreases. Some of this can be mitigated, but the cost of solar energy will have to continue to fall or it may become oversaturated in some regions.

What technological changes/improvements in solar PV are spurring residential and commercial adoption?

Solar panels continue to get cheaper and more efficient, requiring less labor and supporting material for the same amount of energy at a cheaper price. Some of this is due to technology advances by companies with support from the government, and some of it is due to the increasing size of the solar supply chain. There have also been innovations and improvements in the design of other equipment used for a solar-energy system, such as inverters and racking, which has lowered their costs and potentially decreased installation times. Companies have come up with innovative solutions for acquiring customers, such as group purchasing programs. Some jurisdictions have improved their processes to permit and interconnect a PV system, saving installers time and money.

What is the impact of geography on the rate of installation of residential solar PVs?

Geography plays an important role in residential PV installation. PV panels do produce more electricity in places like Arizona. Still, PV can be competitive in regions with less sun depending on other factors, such as the cost of retail electricity in that area. Washington state gets a significant portion of its energy from very inexpensive hydropower, for example, whereas New York City has an old, expensive distribution grid.

Does NREL have a target percentage for residential energy being provided by solar?

We do not set targets for solar adoption; we analyze the feasibility of scenarios under many different modeling lenses. Still, NREL estimates that residential rooftops in the US have the potential to produce 1,000 TWh a year, or about 25 percent of what the US consumes. (bit.ly/nrelest).

Have electric utilities been negatively impacted by individual homeowners installing solar PVs? That is, are the utilities experiencing a drop in revenue because people are adopting solar?

Behind-the-meter PV systems operate in many ways like an energy efficiency device. That is, if a homeowner is sourcing a portion of its power from the PV system, it's as if they are consuming less electricity from the utility's perspective. Many utilities earn a return based on how much electricity they sell, so residential PV systems effectively cause them to sell less, which can affect profit. However, there are alternative business models that encourage utilities to perform services that are more in-line with activities that support residential PV while still earning a profit. We are seeing a switch to these models across the country from New York to Hawaii.

If you could say anything to the PV research community, what would it be?

Keep up the good work. Research can take a while to get to the marketplace, but we continue to see decades of research and development coming online and lowering the cost of solar electricity.

William G. Schulz is managing editor of Photonics Focus.