Photovoltaic (PV) panels are showing up on more Texas residential rooftops than ever before. According to the U.S. Solar Market Insight report issued by GSM Research/SEIA, Texas added 75 MW of PV solar generating capacity in 2013. While the bulk of this added capacity was associated with utility-scale installations, a respectable share came from residential and commercial rooftop installations.
Texas Residential Solar Issues
While the Texas climate is well-suited to solar energy generation, it is not generally considered a state friendly to rooftop solar systems.
- Residential electricity prices have been relatively stable and affordable at almost 1 cent/kWh below the national average. Therefore, the business case to install rooftop solar systems to reduce electricity bills is not as strong as in California where electricity rates are 2.5 cents/kWh above the national average or Hawaii where rates are more than triple the national average.
- At current electricity rates, payback for Texas rooftop solar systems typically exceeds 10 years. Residents may be leery about owning their homes long enough to realize a return on their investment.
- While utilities in Texas sometimes offer incentives and rebates, the state itself does not provide residential customers any direct incentive to install distributed renewable energy generation.
- The Texas Renewable Portfolio Standard does not have a set-aside for Solar Renewable Energy Credits (SRECs). SRECs, therefore, are generally valued in the market at the same price as those produced by wind generation. Sixteen states and Washington, D.C. have SREC set-asides to encourage the development of solar energy. As a result, SRECs in New Jersey and Massachusetts often sell for over $100 while Texas SRECs are valued at less than $1.
- The process for selling excess generation back into the power grid requires that the customer execute an Interconnection Agreement with the TDU. The TDU then installs a meter with registers for in-flows and out-flows of electricity and notifies ERCOT of the customer’s change to a PV renewable energy profile. Then the customer must contract with a retail electric supplier to purchase any excess generation. Not all energy providers are open to entering into these types of agreements and most require that the customer simultaneously contract with them to purchase all of their electricity needs not met by the solar system.
Supporting Texas Solar Energy
With these issues, it may difficult to understand why there are any residential rooftop solar installations in Texas much less growing at a healthy rate. Some factors driving growth include:
- Texas homes have the fifth highest average electricity usage in the U.S. They also benefit from larger floorplans and, subsequently, more available rooftop surface area. While rooftop installations in many parts of the country are closer to 3 kW, Texas installations are typically 5 kW due to the room for more PV panels and the need for more generating capacity to make the economics feasible.
- For economic and climate reasons, the population Texas continues to increase and become less mobile. Residents may consider an investment with a longer payback as being more attractive than in previous decades.
- Utility incentives, while not always available, can significantly affect the payback period of the investment in rooftop solar generation.
- With the lack of a state incentive, the importance of federal tax credits in making the purchase of a rooftop solar system is magnified. The Residential Renewable Energy Tax Credit covers 30% of the purchase and installation costs. This tax credit expires after December 31, 2016 and may be creating somewhat of a rush to the checkout counter.
Texas Solar Opportunity
Without getting into the quagmire of debating whether governments should subsidize renewable energy technologies, it is obvious that Texas retail electric consumers will have a more difficult time justifying the economics of installing rooftop solar systems without the federal tax credit. Increased participation by retail electric providers in purchasing excess generation could enhance the attractiveness of these systems and provide an important step toward this technology standing on its own merits. Innovative leasing and financing programs are also being offered and further development of these alternatives could open rooftop solar systems to broader segment of Texas retail choice customers.