The U.S. Environmental Protection Agency’s (EPA’s) plan to regulate carbon emissions is just the latest challenge facing the U.S. electric power system. Technological innovation is disrupting old ways of doing business and accelerating grid modernization. Earlier this year, AEE released Advanced Energy Technologies for Greenhouse Gas Reduction, a report detailing the use, application, and benefits of 40 specific advanced energy technologies and services. This post is one in a series drawn from the technology profiles within that report.

Solar photovoltaic (PV) power systems convert sunlight directly into electricity. PV modules (panels) produce direct current, which is converted to grid-compatible alternating current through an inverter. The flat-plate PV modules are commonly mounted on the roofs of residential and commercial buildings. The two main PV materials used in modules are crystalline silicon and thin-films such as cadmium telluride. The former is more commonly used for residential and commercial buildings due to its higher efficiency and associated smaller footprint, which is a desirable characteristic for rooftop applications. 

The residential solar market in the United States is booming; nearly 800 MW of residential solar capacity was added in 2013, a 60% increase compared to 2012, along with over 1,100 MW of non-residential (commercial, government, school, and non-profit) solar PV in 2013, a 4% increase. Aside from the improving economics of PV and supportive policies in several states, the growth of residential and commercial solar has been spurred by improvements in sales channels and the availability of third-party financing options, whereby building owners lease the systems or purchase the output under a long-term power purchase agreement (PPA). Whether by a lease or PPA, third-party financing removes a key obstacle – the up-front cost of the system. The industry has also been able to improve its access to capital. For example, SolarCity recently became the first solar company to securitize its distributed solar assets, paving the way for more abundant and lower cost solar project capital.

Distributed solar power reduces emissions through avoided generation and helps to reduce strain on the grid by providing additional local capacity. The installed cost of PV systems continues to decrease due to improvements in technology, economies of scale, and efforts to reduce “soft costs.” In some states, the levelized cost of PV is on par with grid retail prices In states such as California, New Jersey, and Massachusetts, solar rebates and solar renewable energy credits have made solar competitively priced and sales have taken off. At the end of Q4 2013, residential solar systems cost on average $4.59 per watt, down 8.7% from 2012, while the price of non-residential PV systems fell over 16% from 2012 to $4.26 per watt. Over the past two years, about 200,000 U.S. homes and businesses installed rooftop solar systems (about 3 GW of capacity), which is equivalent to 1% of American coal plant generation capacity. Numerous studies have shown the extent to which solar energy can effectively reduce carbon emissions. The Western Wind and Solar Integration Study, performed by NREL, evaluated the impacts of operating the Western Interconnect with high penetrations of wind and solar. With the Western Interconnect obtaining 33% of electricity from wind and solar, the study found that CO2 emissions could be reduced by 29%-34%, or the equivalent of 260-300 billion pounds per year.