There was a time not too long ago when photovoltaic (PV) solar panels where a luxury item that wealthy people bought to make a statement. Reliable solar panels capable of powering an entire house were prohibitively expensive even when considering federal, state and local incentives. Even if the solar panels worked reliably for 20 years or more, the chances of them paying for themselves in the form of lower energy bills was a pipe dream.
As time went on, the federal government, along with many states, started offering even more lucrative incentives to help spur development of alternative energy sources like wind power, geothermal energy and solar power generation. Some of these efforts were successful, but these new policies were criticized for only helping the wealthy at the expense of all rate payers. “Middle class people can’t afford to invest in alternative energy systems.” the critics would say.
In 2017, things have changed. Solar panels prices have dropped significantly to the point where they are a viable option for middleclass families. Solar panels not only help families reduce greenhouse gas emissions, but they can actually save money (in the long run) on a home’s energy costs; especially when you factor in tax credits and friendly solar energy billing incentives. But what if we took these rate payer subsidies away?
What is Net Metering:
Aside from the dramatic cost reductions in solar panel equipment installation over the last 7 years, there is another major factor that helps families reduce their home’s energy cost. This incentive is called net energy billing or Net Metering. Net metering is a controversial provision that allots solar panel owners credits for excess energy they send back to the grid when their solar panels create more energy than their home uses. These credits can be carried over to other time periods when the solar panels can’t keep up with a home’s energy usage (at night time, during cloudy days, shortened winter days, etc.). There are currently over 40 states offering some form of net metering incentive to encourage residents to buy more alternative energy sources (wind, solar, mirco-hydro, etc.).
What is the Controversy with Net Metering:
Critics of net metering policies argue that net metering unfairly shifts energy transmission costs entirely on to regular non-solar using utility customers. Solar panel owners with net metering are credited for the full retail price of the power they generate including transmission costs meaning homes connected to the grid with solar panels pay virtually no money to help maintain the infrastructure that keeps their home connected to the power grid. Critics also argue that the dramatic price drop in solar panel equipment has made costly incentive programs like net-metering and tax credits completely unnecessary.
The Future of Net Metering:
The future of net metering is uncertain. According to PV Magazine, there are currently 16 states considering changes to their net metering policies. Among them is Maine. The Maine Public Utilities Commission (PUC) is considering a program to phase out net metering over the next 10 years. This action has come after a comprehensive new solar energy bill failed to get enough votes in the state legislature to overturn a veto by Maine Governor Paul Lepage. The bill featured a new incentive proponents referred to as Next Metering. Under the proposed bill (that failed) consumers would enter in to long term contracts at artificially high prices to sell excess solar power they generate back to the grid. The bill had wide support among a variety of the state’s stakeholders (including utility companies, solar panel installers, the state’s Public Advocate, among others) but fell two votes short to override the governor’s veto. I’m also against the bill because the contract terms were too long (in my opinion) and would have rate payers paying substantially above average prices for the solar power their neighbors were selling back to the system for many years down the road (when they could have gone out in 5 years and bought the same solar panel system they have now for 1/2 the cost). The bill just wasn’t that well thought out for me; but that’s a separate discussion.
Are Solar Panels Worth it Without Incentives:
One of the biggest concerns potential solar panel customers have when considering whether it makes sense to purchase a solar panel system is what will happen if these solar incentives are discontinued. In other words, are solar panels a viable option without net metering?
In 2017, the average cost of a solar panel system sufficient to power an “average” sized home (assuming a 5KW system) is predicted to cost between $10,000 and $15,000 after you consider federal, state and local tax credits. Assuming an average monthly energy savings of $100, a new solar panel system could still pay for itself in 8 to 12 years. With net metering, this payback period will be closer to 6 to 8 years.
The Future of Solar Panel Costs:
I believe we’re going to see even more price drops in solar panel pricing in 2017 and beyond. Incentives are good to get people familiar and comfortable with a particular technology; for example, Toyota Priuses sell on their own merit now because people appreciate the value they provide, even without tax credits and other incentives. I believe we’re getting close to the point with solar power energy as well.
In another 5 years, I predict solar panels will cost less than $8,000 to install on an average sized home WITHOUT incentives, combine this with new home battery bank systems from Tesla and other manufacturers and things will really start to get interesting in the home power generation sector.
I also believe solar companies are the country are doing themselves a disservice by being so vocal against efforts to change net metering policies; they’re scaring potential customers away who are afraid these incentives will disappear (even though they’re not needed). The reality is, it won’t be long before these incentives aren’t needed at all. Solar panels will sell themselves, just like the Prius does.
Without incentives, solar panel manufacturers (and installers) will have even more drive to reduce the cost of their offerings to make them more economically feasible. The future is ours.
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