The Sun Also Rises: Going Solar in Arizona

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Undeterred by recent clashes with utility companies and regulators, the Arizona solar industry continues to expand into the residential sector. Carl Haessler examines a few of the considerations for those considering upgrading to a rooftop PV system.

Arizonans are begining to think harder about where their energy comes from. Homeowners and renters across the state are increasingly turning to distributed forms of electricity generation; some seek to save money on utility costs, others to reduce the environmental impact of their energy consumption, and still others turn an eye to greater levels of independence from traditional utility providers. Wind, industrial solar, residential solar, geothermal, and other renewable energies are all contributors to the growth of non-traditional generation. Of these technologies, none has become more prevalent in sunny Arizona than the now-ubiquitous residential PV array.

The concept is attractive in its simplicity and efficacy: install solar panels on the roof of a home, and allow that home to generate a significant portion of the electricity it uses from a clean, abundant, and renewable resource. Save money on electricity costs while reducing reliance on large-scale power production, thereby minimizing the environmental impacts of traditional electricity generation.

2013 was a breakout year for residential installation nationwide, and last year the Grand Canyon State ranked above all but California for residential capacity installed. But solar proponents also saw growing pains as utility companies faced the necessary task of adapting to this emerging industry. In Arizona, the largest utility providers have pursued policy reforms that will protect their bottom line in the face of shifting cost structures. What must an aspiring solar owner consider prior to making the commitment?

Installation costs

The large capital costs necessary to begin a rooftop solar project can be an intimidating hurdle for potential consumers. Despite this, Arizona’s residential solar market continues to exhibit strong growth, even as utility companies shy away from residential solar installation in favor of large-scale renewable projects. The continued growth of residential solar is due in part to two aspects of the state’s PV industry. First, state and federal incentives (in the form of grants, tax breaks, rebates, and other subsidies) provide for a significant reduction in overall costs to the end user. Second, financing and leasing programs offered by solar installers give consumers more options for payment in the event that they are unwilling or unable to meet the high startup price. 

Many of these programs are contingent on a contractual agreement between the consumer and the utility company. Contracts can vary in duration from 5 to 30 years, so potential customers must fully consider the implications of entering into a lease agreement or accepting federal or state subsidies. Leasing programs are designed to recoup the costs of building a solar array over the lifetime of the lease, but also to create a profit for the installer. While this kind of financing decreases the price of admission into the solar market, it typically results in a higher price per kilowatt over the lifetime of the installation versus buying the equipment outright.

Storage versus net metering

Arizona’s rooftop solar industry began as a boutique market, catering primarily to well-to-do consumers with the financial means to afford the higher cost of going solar, and the ethical or environmental motivation to do so. As the industry develops, the ultimate goal is to provide cost structures that are competetive with conventional power generation, and to provide reliability and consistency on par with the status quo — that is, to give consumers the on-demand electricity they have grown accustomed to getting at the flip of a switch, regardless of whether the sun is shining. 

The most common method to provide solar customers with this reliability and consistency is through a net metering agreement with the utility company. Often this means that power produced from a home’s PV array is not consumed directly onsite, but rather is fed back into the grid as general surplus power, and the homeowner is credited every month for excess energy produced. In order to qualify for some financial incentives, homeowners must commit to a 10-, 15-, or even 20-year contract under such a system.

The other option available to consumers is to build on-site storage capacity. Instead of feeding surplus energy back into the main grid, all electricity produced by the rooftop panels is stored and used at the home itself, usually through a bank of deep-cycle batteries that discharges power into the home’s electrical system. Homes that opt for this system typically remain connected to the grid and still use utility-provided power to supplement shortfalls in solar supply; stored energy from solar provides the majority of electrical power to the home, with grid backup to fill in the gaps in production. Such a system bypasses the net metering relationship with the utility company, but the costs of on-site storage are less likely to be offset by tax breaks, subsidies, or other financial incentives. 

Capabilities and limitations

Perhaps the most important consideration for homes considering solar electricity is the variable nature of PV generation. Improvements in technology and materials have undoubtedly raised the level of efficiency, but rooftop arrays are still subject to seasonal peaks and valleys.

Analysis of one Tucson residential array showed that from 2010 to 2013, the winter months actually generated the highest levels of solar electricity, due to the cooler daytime temperatures. Despite longer periods of sunshine and higher angle exposure during the summer months, high ambient temperatures and convective heat from hot roof surfaces caused a marked drop in efficiency, particularly during July and August. 

Distributed energy and the future

Residential solar has become a market phenomenon. The ability to generate and use energy on-site is changing the nature of the customer-provider relationship between utility companies and residents. Arizonans who opt to go solar are requesting a more direct role in producting the energy they use. While the overall percentages of residential solar are still quite small, rapid growth has the attention of both state regulators and utitility providers, who all agree that the landscape of Arizona’s energy industry is being restructured by this shift toward distributed generation.

Rooftop PV installers have streamlined consumer access to on-site generation, and as the state’s industry grows it will continue to encroach on what was once a largely homogenous utility market. While state and federal programs helped get the renewable industry off the ground, the momentum of modern renewables comes from local consumers themselves. Solar installers provide Arizona’s consumers with a readily available source of renewable distributed generation, and as a result rooftop solar will remain a perennial player in the energy market in years to come.