This is an extract from a recent report “Rooftop solar on the rise” prepared by Environment America Research & Policy Center.
Rooftop solar generation in the U.S. increased more than 10x in the last decade. Rooftop solar power has experienced explosive growth over the last decade. America generated 10 times as much power from small-scale solar installations in 2022 as it did in 2012 – an increase of 55,322 GWh. Two thirds of that growth occurred between 2017 and 2022. In total, solar panels on rooftops and in other small-scale applications in the U.S. generated 61,281 GWh of electricity in 2022. That’s equivalent to the power used by 5.7 million typical American homes. The top five states for total rooftop solar generation in 2022 were California, Arizona, New York, Massachusetts and New Jersey.
Solar on homes is driving the growth in small-scale solar. A boom of solar panels on homes has driven the growth of rooftop solar in the U.S. In 2014, when the U.S. Energy Information Administration started tracking small-scale solar generation by sector, the residential sector contributed just 44% of all power production from small-scale installations – less than 5,000 GWh. Commercial solar – that is, solar on the sites of businesses, warehouses and distribution centers – led the way at that time, with 46% of all small-scale solar production, producing about 5,150 GWh. Today, residential solar produces 64% of all electricity from small-scale installations. Residential solar produced 39,510 GWh of electricity in 2022 while commercial produced 17,724 GWh. This is an indication of the increased popularity of solar power among homeowners and landlords, but also a concerning sign for America’s ability to tap the abundant solar energy potential on structures such as warehouses and superstores.
The industrial sector has historically been a minor player in distributed solar. Nevertheless, that sector, which includes agriculture, construction, mining and manufacturing, generated about 3.5 times more electricity from rooftop solar in 2022 than it did in 2014. The growth of commercial generation has been significant, but somewhat more modest, growing by 12,578 GWh over that same period. Most states are generating more electricity from solar on homes than from solar on businesses and industrial sites, but there are exceptions, including some of the top states for rooftop solar, such as New York, which has encouraged the growth of commercial solar with incentives and community solar programs.
Leading states are experiencing rapid growth in solar, while others are lagging. The growth of rooftop solar has not been uniform across the country. California has historically dominated the market for small-scale solar, but many other states have seen significant growth. States such as Texas, New York, Florida and Arizona are starting to catch up, with rooftop solar generation at least doubling in each of those states between 2017 and 2022. There is considerable regional variation in the amount of electricity generated from rooftop solar. About one half of rooftop solar generation is in the West. The Northeast produces just under one-quarter and the Southwest, Southeast and Midwest produce the rest.
Rooftop solar still has room to grow
The U.S. has so far only tapped about 1/28th of rooftop solar potential. Rooftop solar likely has the technical potential to generate electricity equivalent to about 45% of all national electricity sales at the 2022 level of demand. In 2022, the U.S. only generated about 1.5% of all electricity used from rooftop solar. A look at the top 10 states for rooftop solar potential shows the vast amount of untapped clean energy potential in many states – including the nation’s leading solar states.
Taking full advantage of the potential for rooftop solar would enable some states to obtain a large share of their electricity from the sun. In 2016, the National Renewable Energy Laboratory found that California has the technical potential to generate electricity from rooftop solar equivalent to 74% of its electricity sales. Maine and Vermont could generate electricity equivalent to 60% of electricity sales and 20 other states could generate electricity equivalent to one-third or more of electricity sales. While solar panels produce more electricity at some times than others, and are therefore limited in their ability to meet all of a region’s electricity needs, small-scale solar – particularly when paired with energy storage – can meet a large share of America’s demand for energy.
Big opportunities ahead for solar on businesses. Commercial and industrial sites across America are prime candidates for distributed solar installations. Solar panels on superstores, warehouses, farms and other sites could help businesses save money and provide a large supply of clean energy. Rooftop solar can reduce commercial and industrial buildings’ reliance on electricity from the grid by as much as 80% and save companies up to 95% on their electric bills. The rooftops of American warehouses have the potential to generate 185.6 TWh of solar electricity each year – enough to power almost 19.4 million average homes. That means warehouses could generate electricity from rooftop solar equivalent to the electricity use of about 16% of all U.S. households.
On-site commercial solar is growing – about 3% over five years, according to a 2022 report, and with major corporations beginning to see the value of going solar, that growth is expected to continue. Lowe’s, the home improvement retailer, is one example of a major company that has invested in solar. Lowe’s announced earlier this year it plans to install rooftop solar panels at 174 locations in California, New Jersey and Illinois. Rooftop solar will help Lowe’s reach its renewable energy and greenhouse gas emissions targets and, when complete, the solar projects will supply about 90% of the anticipated energy usage at each site. For many other companies, though, huge opportunities for rooftop solar are still untapped. Companies like FedEx, for example, have millions of square feet of roof space that could be capturing the sun’s rays and producing electricity.
State policy plays an important role in making it easy – or difficult – to take advantage of the solar energy potential of commercial rooftops. In New Jersey, for example, a new law that went into effect in July 2022 requires that all large new warehouses set aside at least 40% of roof area for the future installation of a solar system – one of a number of policies that could ease the way for future commercial solar projects. On the other hand, state legislation that makes it more difficult for commercial buildings to afford, permit or connect solar power can create obstacles to the growth of commercial solar.
Distributed solar can coexist with industrial sites. The relatively small land-use footprint of distributed solar makes it compatible with a variety of industrial land uses. Solar panels can be installed on many types of industrial infrastructure not suitable for other uses, like the roofs of factories, or share space with water treatment facilities or landfills. For example, landfills in the U.S. currently have total solar capacity of about 2.4 GW but, with 10,000 closed landfills across the country, there’s the potential to increase that capacity 25-fold.
Governments and nonprofits can save money with solar power. In addition to homes and businesses, distributed solar installations are also a cost-saving, emissions-reducing energy option for nonprofits, local governments, houses of worship and schools. Under the Inflation Reduction Act, nonprofits and local governments are eligible to benefit from tax credits for rooftop solar installation. The act made nonprofits eligible for an elective pay option under the Solar Investment Tax Credit (ITC), enabling schools, hospitals, charities, faith-based organizations, rural electric co-ops and other tax-exempt entities to receive payments equivalent to 30% of the cost of installing a solar PV system
Rooftop solar is thriving in places with strong pro-solar policies
States with pro-solar policies generate more power from rooftop solar than those that lack pro-solar policies. Current federal incentives under the Inflation Reduction Act are helpful, but state-level policies remain the primary driver in shaping the complex policy landscape that influences solar growth. One way to get a sense of how good a job states are doing encouraging the growth of rooftop solar is to look at rooftop solar generation per capita. Larger states tend to have more potential for rooftop solar, so a larger number isn’t always an indication that one state is doing better than another.
For example, the small New England states of Rhode Island and Vermont don’t look like they generate very much electricity from rooftop solar (527 GWh and 211 GWh in 2022, respectively), but both rank among the top states for rooftop solar generation per capita. This suggests that these states are doing a relatively good job at getting on track to reach their rooftop solar potential. On the other end of the spectrum, Texas generates a relatively large total amount of electricity from rooftop solar (2,995 GWh in 2022) but is middle-of-the-pack on generation per capita.
Solar incentives: State-level solar incentives for homeowners and business owners include state property tax credits and property tax exemptions, typically meaning that property owners do not have to pay property tax on the added value of the solar array or on some portion of it; low-cost financing, which helps property owners who want to go solar afford a loan in order to do so; and sales tax exemptions for solar energy systems, which exclude some purchases of solar arrays from state sales tax. These incentives can help homeowners and business owners to afford the cost of rooftop solar installation. Some states also offer direct cash payments or certificates of sellable value for every kWh produced, such as renewable energy credits or solar renewable energy credits. These policies have helped make going solar more attractive and economical in these states.
Supportive rate design: Net metering gives homeowners and business owners credit for any electricity their distributed power systems generate and feed back into the grid. For every extra kilowatt-hour that their solar array supplies to the grid, they receive some form of compensation. Over time, states and utilities have devised an array of ways to compensate consumers for solar power, including “net billing” and value-of-solar tariffs. These compensation mechanisms, in turn, differ greatly in their implementation from state to state. For the sake of simplicity, many use the term “net metering” as a generic catch-all to describe all these varying ways of compensating solar producers. Net metering is critical to the economic viability of rooftop solar. Some states have standards for net metering that utilities regulated by the state’s utility commission are required to follow. Other states allow utilities to mostly set their own net metering practice.
States with supportive rate design policies make it easier for solar panels to “pencil out” economically for would-be solar homeowners and businesses, reducing the amount of time it takes consumers to pay back the initial cost of solar energy in energy savings and, in turn, encouraging more rapid solar adoption. Changes to net metering programs can have big impacts on solar installation rates. In addition to how compensation for exporting excess power works, the overall design of retail rates in states impacts the growth of rooftop solar. Fixed fees for owners of distributed generation systems, for example, disincentivize going solar in North Carolina.
Interconnection policies: Interconnection policies are those that dictate the processes, technical requirements, timelines and costs associated with connecting distributed generation systems to the grid. In many states, applicants for rooftop solar face long interconnection delays and unpredictable costs. Freeing the Grid, an ongoing initiative that tracks interconnection policies in the U.S., grades states’ interconnection policies from A to F. The better the grade, the easier it is for property owners to get a rooftop solar system up and running.
Permitting: In many places, before installation can begin, solar projects must apply for interconnection and approval from the local electric utility, approval from their local jurisdiction, such as a city or county building department, and a local building permit. These steps all serve important purposes, but can be unnecessarily slow and costly, especially when multiple local authorities have overlapping jurisdiction over solar project approval, meaning that each project must be inspected and approved by multiple authorities.
Slow, costly permitting processes are a barrier to the growth of rooftop solar in many places. The median duration of the permitting process for a PV system in the U.S. is 50 days, but there is considerable variation within that; about 30% of applications take less than one month, but 19% take more than four months. For commercial projects, interconnection applications can take anywhere from six to 14 months to process for approval.
Automated permitting can help standardise permitting processes, reducing costs and shrinking project timelines while relieving some of the administrative burden that traditional permitting places on local jurisdictions. The National Renewable Energy Laboratory and the U.S. Department of Energy have developed the Solar Automated Permit Processing Plus (SolarAPP+) software to make it easier for jurisdictions to issue permits for code-compliant residential PV systems
Fast-growing solar states show the power of strong policies
Pro-solar policies pay off in Massachusetts: Massachusetts has some of the best net metering and incentive policies in the country for encouraging the growth of rooftop solar, and it shows in the state’s production of solar energy. Massachusetts ranked fourth in the nation for total rooftop solar generation in 2022 and fourth for rooftop solar generation per capita. Massachusetts is also a top producer of solar power by businesses – only California generated more solar power from commercial rooftops in 2022 – and, compared to most states, generates a relatively large amount of electricity from solar on industrial sites
Innovation in New Jersey: The Mid-Atlantic may not be the warmest or sunniest place in America but that hasn’t stopped New Jersey from becoming a rooftop solar powerhouse. Generating 3,172 GWh of electricity in 2022, New Jersey ranked fifth for total rooftop solar generation. New Jersey supports both residential and commercial solar with state-level incentives. It also offers net metering at the full retail price. Additionally, New Jersey supports a community solar program that proves solar can fit almost anywhere.
Building solar from the ground up in South Carolina: South Carolina is no solar giant, but it has seen rapid growth in rooftop solar since 2014. Like many other states, South Carolina had essentially no rooftop solar installed a decade ago. But from less than one GWh generated in 2014 to nearly 100 GWh in 2022, solar on businesses has helped to propel South Carolina to a place in the middle of the pack nationally today.
Less-supportive policies put solar progress at risk: Leading states have shown that rooftop solar blooms where strong pro-solar policies make it advantageous to homeowners and businesses. Yet, across the country, there is no shortage of cautionary tales of states that reversed course on solar policy, or simply never adopted strong solar policies to begin with. Rooftop solar growth in those states has typically lagged, stalling the nation’s transition to clean energy. Recent policy moves in the nation’s leading state for rooftop solar – California – could lead to a similar drop in solar adoption there, making that state’s road to a clean energy future more difficult.
Room for growth in the Midwest: The Midwest’s rooftop solar growth has lagged that of other regions, due in part to weak net metering policies and a lack of clear renewable energy goals. However, there are signs of improvement. The Midwest currently generates less energy from rooftop solar than any other region, but that is not for lack of potential. In most of the Midwest metro areas tracked by Project Sunroof, more than half of all buildings are solar-viable. Cities like St. Louis, Mo. and Topeka, Kan., have tremendous rooftop solar potential, but the upper Midwest also has prime real estate for solar installations. Chicago roofs, for example, could generate 6.8 million MWh of electricity every year – enough to avoid about 6 million metric tons of carbon dioxide emissions.
Access the complete report here
