Residential solar often struggles to compete with commercial and utility-scale solar industries in terms of system pricing. Smaller average facility sizes, less standardization in supply chains, and relatively large upfront costs to prospective system owners make it difficult for residential solar markets to take advantage of economies of scale efficiencies, which makes it difficult for homeowners to invest in a solar installation on their roof.
Nevertheless, a few states offer favorable markets for residential solar installations. According to a SEIA/GTM Research report on US solar industries, California, Arizona, New Jersey, Colorado and Pennsylvania were the top five US states for residential installations in 2010, based on MW capacity installed. California stood alone with nearly 128 MW of residential capacity added in 2010, while the next four states ranged from roughly 14-28 MW in the same year. Two important features are common in these states that make solar a viable economic and environmental solution for homeowners. First, homeowners can take advantage of third-party financing programs. These options either provide a lease for the system or a power-purchase agreement (PPA), in which the homeowner buys solar power at a competitive fixed rate over for 10-20 years. The leading companies that currently offer these options include Sungevity, SolarCity, SunRun and SunPower. In 2010, as many as 30% or more of residential solar systems were installed with a lease or PPA in states where these financing options were readily available.
Secondly, these states frequently offer aggressive incentives to install PV panels on residential rooftops. As residential systems are excluded from participating in the federal 1603 cash-grant, states encourage residential solar investment with rebates, tax incentives and SREC programs. Each of the top five states provides at least one of these options. By lowering a project’s upfront costs and improving the ROI, these incentives drive demand by making an installation more affordable. As larger developers with access to financial capital and more efficient supply chains are attracted to these markets, average system costs decline due to market maturity. The ten most affordable states for installing residential systems in 2010 include the top five listed above, in addition to two others (Maryland and Ohio) that have also established SREC markets.
Stay posted for a series of blogs that feature states with emerging markets for residential solar installations.