The compelling economic case for global policymakers to follow the lead set by California in mandating solar on newly-built homes has been laid out in a report by U.S. analyst Bloomberg New Energy Finance and French electrical equipment company Schneider Electric.
The Realizing the Potential of Customer-sited Solar study claims the five-year payback period for solar arrays retrofitted onto buildings in the Golden State is halved for systems installed at the initial construction stage of buildings, because of reductions in marketing, sales, labor and construction costs. Thus, according to yesterday’s report, solar systems on new-builds in California can offer an internal rate of return (IRR) of 40% per year on their investment cost, rather than 20% IRR offered by retrofitted systems.
BloombergNEF and Schneider have calculated the 18.5% IRR for retrofitted solar systems in France could rise to as much as 28% if photovoltaics were to be made compulsory on new-build homes.
The thrust of the report is the need for legislators to introduce policies to unlock global rooftop solar potential which, the authors of the study claim, could drive 2 TW of household and commercial on-site solar by mid century, plus around 1 TWh of local energy storage.
France and California, together with Spain, Australia, and the U.S. state of New Jersey, were examined in the study, with the authors noting successful incentives had helped drive around 500 MW of rooftop PV in the former market by last year, with French businesses able to enjoy a nine-year payback for on-site commercial systems. The economics of home solar in Australia have prompted a wave of more than 2.5 GW of residential arrays.
The ability of residential and commercial energy storage systems to enable on-site solar to help balance the grid should also prompt politicians to encourage batteries, said BloombergNEF and Schneider, with policy nudges suggested including adjusted rates paid by utilities for excess power exported to the grid; time-of-use electricity prices, “aggregation” payments to homes and businesses for use of their storage systems; and demand charges levied on businesses for consuming electricity during peak hours.
In a nod to the initial feed-in tariffs offered for solar electricity in many markets as the technology first emerged – most of which were withdrawn at short notice, with some governments retroactively reneging upon contracts – the report cautioned legislators against laying down incentives which could fuel “an unsustainable boom,” given solar and storage technology appears set to get cheaper over time.
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