The Rooftop Solar Industry Could Be on the Verge of Collapse

Rooftop solar power has long been heralded as a game-changer in the transition to clean, sustainable energy. The promise is simple: harnessing the power of the sun to reduce electricity bills, shrink carbon footprints, and provide energy independence to homeowners. However, this seemingly bright future faces mounting challenges that threaten to dim its prospects. Rising interest rates, evolving government policies, and reports of unethical sales practices have cast doubt on the industry’s growth and long-term sustainability. At this crossroads, it’s crucial to understand whether rooftop solar is facing a temporary setback or if it’s on the verge of a more serious collapse. In this blog, we’ll explore the factors affecting the rooftop solar market, the obstacles it must overcome, and whether it can adapt and thrive in the years ahead.

Key Takeaways

What is the Solar Industry

The United States uses a variety of energy sources and technologies to generate electricity. The sources and technologies have evolved over time, and some are used more than others. The three primary categories of energy for electricity generation are fossil fuels (coal, natural gas, and petroleum), nuclear energy, and renewable energy. Most electricity is produced using steam turbines that harness fossil fuels, nuclear, biomass, geothermal, or solar thermal energy. Other major electricity generation technologies include gas turbines, hydro (water) turbines, wind turbines, and solar photovoltaics.  

The U.S. Energy Information Administration (EIA) publishes data on electricity generation from both utility-scale and small-scale systems. Utility-scale systems encompass power plants that have at least 1 megawatt (MW) of electricity generation capacity. Small-scale systems, on the other hand, have less than 1 MW (1,000 kilowatts) of electric generation capacity. In 2023, total U.S. utility-scale electricity generation amounted to approximately 4.18 trillion kilowatthours (kWh). The EIA estimates that around 0.07 trillion kWh of electricity were generated using small-scale solar photovoltaic systems, representing a small but growing portion of the country’s energy mix.

Solar Panels and PV at its Prime

You may have noticed solar PV or photovoltaic installations popping up on rooftops, fields, and roadsides more frequently. But have you ever wondered how they actually convert sunlight into energy? The simple answer lies in the use of semiconductors. However, there is more to it than just that. Solar energy has various forms, such as heat, light, mechanical energy, or electricity. In the solar thermal energy process, sunlight generates power for steam or gas turbines. Another method involves solar cells converting sunlight into electrical current. In the 1950s, Bell Labs introduced silicon photovoltaic cells, which were more efficient and cost-effective than earlier selenium cells. Today, PV power dominates the solar power market, accounting for over 95% of the market share.

Before delving into the specifics of how solar cells operate, it is essential to note that multiple solar cells connect to form a module. These modules then create a solar system or installation. For instance, a typical residential rooftop solar system consists of approximately 30 modules.

Energy Storage with Solar Batteries

“Energy storage” involves technologies that can gather electricity. Moreover, it converts it into a different form of energy (chemical, thermal, or mechanical). Then, it discharges it as needed. Lithium-ion batteries are a prime example of this technology. While energy storage is not entirely efficient, it enables the flexible utilization of energy from its original generation at various times. This happens as some energy is lost during the conversion and retrieval processes. Therefore, storage is capable of enhancing system efficiency and resilience, as well as improving power quality by aligning supply and demand.

Storage facilities vary in their energy and power capacities, with energy capacity referring to the total amount of energy they can store (typically in kilowatt-hours or megawatt-hours), and power capacity indicating the rate at which energy can be discharged (typically in kilowatts or megawatts). These varying capacities can be utilized for different purposes. For instance, short-term storage can assist in maintaining a consistent operation of a solar plant during fluctuations in output caused by passing clouds. In contrast, long-term storage can be valuable in ensuring supply over periods when solar energy production is low or during severe weather conditions.

The Collapse of the Rooftop Solar Industry

According to forecasts from the research company Wood Mackenzie, residential solar energy will experience a 13% growth in 2023. Additionally, following a 31% increase in 2021 and a 40% rise in 2022. However, a 12% contraction is expected in 2024, partly due to higher interest rates and recent legislative changes in California that affect the financial appeal of solar energy. Despite these challenges, representatives from the residential solar industry argue that the sector is not in trouble. Stephanie Bosh, vice president of communications for the Solar Energy Industries Association, projects an increase in the number of homes with rooftop solar from 4 million to 10 million by 2030, even with a decline in installations in 2024.

The issue of high-interest rates and policy changes would not be as significant if the major solar companies were not already experiencing financial difficulties and having to increase their debt at a higher cost. SunRun reported a loss of $1 billion in the previous quarter, while Sunnova acknowledged that one threat to its expansion is its reliance on securing funding from external investors.

Consumer Loans and its Lies

The residential solar industry faces criticism for participating in deceitful sales tactics and misleading financial agreements. Thus, many customers are stuck with costly loans and poorly performing systems. Accusations include sales agents concealing lease and loan terms, exaggerating consumer incomes on loan applications, and falsely promising tax breaks that customers do not qualify for. These actions have drawn parallels to the subprime loan crisis, exposing a trend of exploitation and financial insecurity.
As legal battles increase and consumers seek justice for these unethical practices, it is clear that there is a critical need for tighter regulation and greater transparency within the solar industry. This situation emphasizes the importance of safeguarding consumers and using ethical sales methods to ensure the sustainable advancement of solar power, allowing its advantages to be accessible without placing unjust financial burdens on homeowners.

Financial Costs of Solar

The residential solar sector faces criticism for participating in deceitful sales tactics and misleading financial agreements. Therefore, numerous customers are stuck with expensive loans and inadequate systems. Accusations range from sales staff concealing lease and loan terms to exaggerating consumer incomes on loan forms and offering tax credits that customers do not qualify for. These actions have drawn parallels to the subprime mortgage crisis, highlighting a trend of exploitation and financial uncertainty.
With legal actions increasing as customers seek redress for these unethical behaviors, the solar industry needs stricter oversight and honesty. This situation emphasizes the importance of protecting consumers and using ethical sales techniques to promote the sustainable advancement of solar power. Thus, ensuring it is accessible without imposing unjust financial burdens on homeowners.

How NEM 3.0 contributes to the collapse of solar

Implementing California’s net energy metering (NEM) policy known as NEM 3.0 has dealt a significant blow to solar owners by significantly reducing the compensation they receive for excess electricity they generate. With export rates dropping by around 75%, homeowners will take much longer to recover the costs of their solar systems. Moreover, it will decrease the amount of money they can save. While NEM 3.0 aims to promote battery storage in conjunction with solar panels to improve grid reliability, it unfairly disadvantages customers who rely solely on solar power for their energy needs.

Starting on April 15, 2023, a revised billing system under NEM 3.0 will impact solar panel setups. This new method determines the rates for exported solar energy using the “Avoided Cost Calculator.” As a result of this change, compensation for solar power will be based on wholesale prices instead of retail prices. This shift significantly reduces the financial benefits of owning a solar system. Owners will now experience a notable decrease in the value of the electricity they export, weakening the economic feasibility and motivations provided by previous net metering policies.

To know more about the status of the Solar Industry, check out our video here:

Future of the Solar Industry

Despite facing significant challenges, the future of the residential solar industry holds promise. The current downturn, characterized by layoffs and softening demand, is seen as an opportunity for restructuring toward a more sustainable and equitable model. Analysts predict a shift toward localized solar installations, akin to the successful approach observed in Germany, which could make solar energy more affordable and accessible in the U.S.

The optimism extends to the industry’s ability to rebound and adapt, addressing affordability and consumer protection issues. This hopeful outlook is grounded in the belief that the solar sector can overcome current obstacles through innovation and a community-focused approach. Furthermore, leading to a more decentralized and consumer-friendly market.

The narrative also underscores the importance of redirecting responsibility for climate action from individuals to larger entities, such as corporations and governments, to ensure a collective and effective response to climate change. In summary, the solar industry’s future is envisioned to be one where solar energy is accessible to a broader audience, supported by policies prioritizing fairness, sustainability, and the well-being of consumers, contributing significantly to global environmental goals.

Conclusion

The rooftop solar industry is navigating turbulent waters, with rising interest rates, policy changes like California’s NEM 3.0, and concerns over financial and ethical practices clouding its future. These challenges are significant, and the near-term outlook includes a potential slowdown in adoption, especially as consumers weigh the economic costs against the benefits. However, the long-term prospects of rooftop solar remain cautiously optimistic. Innovation in energy storage, shifts toward localized and community-based solar solutions, and a stronger focus on consumer protection could help the industry rebound. If solar companies, policymakers, and consumers work together to address current hurdles, the industry can emerge more resilient, continuing to play a vital role in the fight against climate change and the quest for energy independence. Ultimately, the future of rooftop solar will depend on its ability to evolve, ensuring that clean energy remains accessible, affordable, and sustainable for all.

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Frequently Asked Questions (FAQ)

1. How can I benefit from installing solar panels?

Installing solar panels can lead to significant benefits such as reduced electricity bills, increased property value, lower carbon footprint, access to clean energy, and potential tax incentives or rebates from the government.

2. What is the role of the Department of Energy in the solar market?

The Department of Energy plays a crucial role in the solar market by supporting research and development of solar energy technologies, setting energy efficiency standards, providing funding for solar projects, and promoting the growth of renewable energy sources.

3. How does rooftop solar contribute to reducing inflation?

Rooftop solar can help reduce inflation by providing homeowners and businesses with a stable source of energy that is not subject to fluctuations in traditional energy prices. Additionally, generating your own solar power can lead to long-term cost savings.

4. What are the key considerations before installing solar PV systems?

Before installing solar PV systems, it is important to assess your energy needs, evaluate your property’s solar potential, understand local regulations and incentives, choose a reputable solar company, and consider factors like upfront costs, maintenance, and energy storage options.

5. How does solar energy contribute to the reduction of carbon emissions?

Solar energy is a clean and sustainable source of power that produces electricity without generating harmful greenhouse gas emissions