As installation costs continue to decline and retail electricity rates climb, residential solar economics have become increasingly attractive across the United States. According to the latest report from GTM Research, U.S. Residential Solar Economic Outlook: Grid Parity, Rate Design and Net Metering Risk, 20 U.S. states are currently at grid parity, and 42 states are expected to reach that milestone by 2020 under business-as-usual conditions.

Residential solar reaches grid parity when the levelized cost of solar energy falls below gross electricity bill savings in the first year of a solar PV system’s life. While traditional grid parity analyses rely on average retail electricity rates to calculate customer savings, GTM Research used utility and state-specific rate design, system production and installation costs to more accurately gauge solar’s attractiveness.

FIGURE: GTM Research Methodology





Source: GTM Research report U.S. Residential Solar Economic Outlook

When accounting for current net metering rules, rate design, and incentives, California, Massachusetts and Hawaii lead the nation in residential solar attractiveness; in each state, solar can reduce an average customer’s electricity bill by 20 percent to 40 percent during the first year of system life. GTM Research found that North Dakota, Oklahoma and Washington are the least attractive states for solar today.



FIGURE: Today’s Residential Solar Economics in the U.S.



Source: GTM Research report U.S. Residential Solar Economic Outlook

While 20 states are currently at grid parity, the report also explores how rate design and reforms to net metering complicate the residential solar economic outlook in ways that can either strengthen or weaken rooftop solar savings.

“To date, the residential solar market’s growth has primarily come from a handful of states where favorable rate structures and net metering rules have set high, predictable ceilings on savings due to solar,” said Cory Honeyman, senior GTM Research analyst and lead author of the report.

“But with more and more utilities reevaluating net metering rules and rate design, the residential solar economic outlook can no longer depend on a static policy landscape like the one that helped encourage the nearly 1 million homeowners who now have rooftop solar. Looking ahead, it is no longer a question of if, but rather, when and to what extent rate structures and net metering rules will be revised.”

In this report, GTM Research details what might happen under several net-metering reform scenarios. For instance, the report finds that if each state’s largest utility were to add a $50 monthly fixed charge for rooftop solar customers, just two states would remain at grid parity in 2016.

FIGURE: Number of States at Grid Parity in 2016 -- Business-as-Usual vs. NEM Reform Scenarios





Source: GTM Research report U.S. Residential Solar Economic Outlook

Download the report's free executive summary here.