Rooftop Solar: Challenges for 2017 – 9/28/16

Rooftop solar installations, which surged more than 1,000% since 2010, will barely grow at all in 2017, according to data collected by Bloomberg.

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Compared to a 21% this year, residential installations in 2017 are expected to increase by less than 1% even as the EIA expects utility-scale renewable energy to grow substantially.

World energy consumption

There are many possible sources of the disconnect: utilities are pushing back against mandates to buy the electricity, low electricity rates are reducing the economic benefit of installing rooftop solar systems, and unexpected shifts in tax policies are influencing demand, to name a few.

On the utility front, the industry is taking another look at net-metering policies, where consumers sell excess power back on the grid, and rethinking the costs and benefits of the relationship. As solar gets more popular and eats into their revenues, utilities in multiple states are starting to see the benefits of needing less new capacity and infrastructure getting outweighed by the number of people offsetting what they pay at night with what they make in the daylight.

Another factor figuring into the economics of installing solar panels is declining retail prices for electricity in some markets due to the natural gas glut. The shale oil and gas boom produced enough cheap fuel that it effectively put a cap on electricity prices in 2015 and 2016, according to the EIA.

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Perhaps most significantly, Congress unexpectedly extended a major tax credit for solar power developers. Initially set to expire at the end of 2016, the tax credit gave many developers and customers a significant incentive to move their projects to this year to qualify. Now that the credit has been extended to at least 2021, there is no driving force to prompt installations. In fact, the initial rush to make the 2016 deadline will probably result in more revenue that would have otherwise come in 2017 or 2018 into 2016 income statements.

So despite the continued fall of solar panels prices and an extension of a favorable tax credit, rooftop solar companies will now likely have to explain  to stockholders why growth in 2017 pales in comparison to 2016.

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