Own a solar panel? You’re probably lowering energy costs for all your neighbors

Installing solar panels in your home doesn’t just reduce your own electricity costs but also the ones of your entire neighborhood, a new study showed. Researchers have found that solar photovoltaic (PV) owners are actually subsidizing their non-PV neighbors’ thanks to the lower costs of solar compared to fossil fuel power generation.

Image credit: Michigan Technological University

PV technologies have had a rapid industrial learning curve, which has resulted in continuous cost reductions and improved economics. This constant cost reduction pressure has resulted in Chinese-manufactured PV modules only costing now US$0.18 per watt, for example. Technology is constantly improving and bringing down costs.

The International Renewable Energy Agency (IRENA) has confidently predicted that PV prices will fall by another 60% in the next decade. IRENA expects between 80 to 90 GW of new solar capacity will be added globally each year over the next five to six years, consolidating China as the biggest and fastest-growing solar market in the world.

A group of researchers at Michigan Technological University wanted to look at whether solar panels were driving up electricity costs for people without panels. It’s a common argument been used over the years by utility companies, governments, and regulators to slow down the progress of PV, especially among homeowners and small businesses.

But the researchers found that the opposite was actually true, with PV owners subsidizing their non-PV neighbors. This is due to the avoided costs for new grid, reserve, and generation capacity, as well as for avoided operation and maintenance and environmental and health liabilities due to fossil fuel power generation. So in other words, solar panel owners were reducing the costs of their neighbors instead of increasing them.

“Anyone who puts up solar is being a great citizen for their neighbors and for their local utility,” research co-author Joshua Pearce said in a statement. “Customers with solar distributed generation are making it so utility companies don’t have to make as many infrastructure investments while, at the same time, solar shaves down peak demands when electricity is the most expensive.”

Of course, solar panel owners also get direct benefits. When you use solar energy, you rely less on utilities to give you electricity. Consequently, your monthly bills go down, and you can even earn a credit on your statement. Electricity companies also pay customers for using panels for the extra energy they don’t use in a month, so you make money (in some countries, at least). However, we might not be supporting solar panels enough. The study suggests more measures need to be taken to ensure that PV owners aren’t “unjustly” subsidizing electric companies across the US.

The study was published in the journal Renewable and Sustainable Energy Reviews.

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