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March 22, 2016

Residential Solar: Myth vs. Fact

March 22, 2016
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The solar industry estimates that solar installations will increase by 119 percent in 2016, growing by 16 gigawatts (GW) this year compared to 7.3 GW in 2015. This rapid rate of growth is being driven by subsidies such as net metering and the solar investment tax credit (ITC). Solar net metering is a state-level policy that requires utilities to pay customers for the excess electricity from their solar panels—almost always at the full retail rate.

Net metering has certainly helped residential solar compete with conventional sources of electricity because of its huge advantages, such as shifting the costs of solar power to households that haven’t installed solar panels. However, it is far from being a free-market approach to electricity generation. Net metering, as currently implemented, is a subsidy that favors solar panels over the rest of the power sources on the grid. Below are some of the hard facts about the residential solar power industry—facts that present a more accurate picture of what some have called the “fastest-growing source of renewable energy in America”—and the policies like net metering that favor it.

Myth #1: Rooftop solar is a cost-effective option for homeowners.

Fact: Without large subsidies, rooftop solar fails to make economic sense.

The most reliable estimates available indicate that electricity from solar panels is much more expensive than electricity from conventional sources like coal, natural gas, or nuclear. According to the non-partisan U.S. Energy Information Administration (EIA), the levelized cost of electricity (LCOE) for new solar photovoltaic (PV) technology will be $125.30 per megawatt-hour (MWh) in 2020. In contrast, EIA estimates the LCOE for new natural gas combined cycle plants to be $75.20 per MWh. Solar PV simply cannot beat new natural gas plants on cost.

Furthermore, IER recently commissioned a study to supplement EIA’s estimates with the levelized cost of electricity from existing resources. The study found that existing coal power plants generated electricity for only $39 per MWh—about one-fourth of the cost of new solar electricity. IER’s study also found—in a brand new addition to the LCOE literature—that new solar PV actually costs $153.7 per MWh after factoring in the “imposed costs” placed on natural gas resources that are forced to back down to accommodate the intermittent output of solar PV on the power grid.[1] Crucially, nearly all discussions of the cost of electricity leave out both the low cost of existing resources and the imposed costs created by intermittent resources.

In the current market dynamic, with low-cost coal resources and very low natural gas prices, rooftop solar is only competitive because of large government subsidies, including the solar ITC and net metering policies. For instance, after Nevada reduced its net metering rates last December, rooftop solar companies—including SolarCity, Sunrun, and Vivint Solar—quickly exited the state. The rapid departure of these solar companies, from one of the states with the most sunshine, demonstrates that solar cannot survive without large subsidies.

Myth #2: Rooftop solar is the future of electricity generation.

Fact: The cost of solar panels has fallen, but solar power still faces the same reliability challenges that it has encountered over its 125-year existence.

Advocates argue that solar power is relatively new and should be supported by subsidies, but it is far from the technology of the future. The development of solar cell technology began during the industrial revolution, and Charles Fritts installed the world’s first solar array in New York City in 1883.

Despite the technology being heavily subsidized since the 1970s, solar power accounts for around 1 percent of total electric production in the United States. The same problems that plagued the industry 125 years ago are still around. Namely, the panels cannot produce electricity when the sun isn’t shining. Electricity must be produced and consumed simultaneously, so the only way to make solar a viable resource would be to pair it with an on-demand storage technology (for example, to install lots of expensive battery capacity), which remains unaffordable for both utilities and families.

Unless both solar panels and batteries become much, much cheaper, solar will continue to be unaffordable.

Myth #3: Solar “allow[s] utilities to better manage their peak electricity loads.”[2]

Fact: There are many times during the year when the sun has already set at peak demand. And as more solar power is added to the grid, the peak demand problem actually gets worse.

According to California’s grid operator on March 8, 2016, peak demand in California occurred at 6:48 p.m.;[3] however, the sun sets just before 6:00 pm. Solar power cannot help utilities manage their peak electricity loads when the peak load occurs after the sun has set.

During the summer in California, for example, peak loads occur while the sun is still up, but during other times of the year the peak is frequently after the sun has gone down. These changing peak load times, combined with solar power’s intermittency, prevent rooftop solar from dependably meeting electricity demand.

Perhaps counter-intuitively, the capacity value of solar power at times of peak demand actually falls as more solar panels are installed. In fact, it quickly falls to zero.[4] That is because of the way additional solar power skews the net load curve, as we discuss below.

Myth #4: Solar power helps “create a smoother demand curve for electricity.”[5]  

Fact: Solar imposes additional strain on the grid and other electricity producers by creating a more uneven demand curve.

One picture shows why this is a myth. The chart below is from California’s grid operator (CAISO) on March 9, 2016. The dark blue line shows actual demand throughout the day. The green line show the net demand, or the electricity demand minus wind, solar, and other renewable resources. Clearly, the blue line is smoother and changes less drastically.

Screen Shot 2016-03-22 at 2.55.40 PM

Source: California ISO,

Another important note from this chart is that solar—driven in large part by net metering—is making electricity generation less efficient. The most efficient sources of electricity generation are nuclear, combined cycle natural gas, coal, and hydro. With the exception of hydro, the other sources are most efficient when they run at near-constant output without large swings in electricity production.

Because wind and solar are intermittent, the chart above shows electricity demand now has two demand peaks during the day, which means grid operators are forced to use more fast-acting (and less efficient) natural gas turbines to meet demand, rather than rely on more nuclear, combined cycle natural gas, and coal plants throughout the day. The real challenge for the electricity grid is the steep increase in net demand after 3:00 pm, when solar power fades in the afternoon just as electricity demand increases. This steep increase in production, as solar power fades and demand goes up, requires an unprecedented amount of “ramping” up and down each day, increasing the cost of the reliable resources doing the heavy lifting.

Solar can be more helpful during summer months when the sun is still up during the highest demand periods of the day. But on days like the one shown in the chart above, solar shifts electricity production from more efficient and cost-effective sources of electricity generation (nuclear, combined cycle, and coal), to less efficient and more expensive sources of electricity generation (natural gas turbines). In other words, relying on backup generation to fill in the gaps created by wind and solar is inefficient and makes the demand curve less smooth.

Specifically, net metering creates reliability problems because it requires the “distribution grid to be changed from a one-way delivery system to a complicated two-way network.” This two-way network can have unintended negative consequences on reliability. Since solar energy cannot ramp up or down on demand, grid operators have trouble balancing power generation if there’s too much solar. Solar energy causes periods of over-generation during the day, followed by steep ramping needs from conventional sources in the evening. This so-called “duck curve”—named for its shape— becomes more pronounced as more solar energy is added. 

Myth #5: Residential solar has achieved “grid parity” in many part of the U.S.

Fact: Grid parity is a meaningless concept unless or until solar power becomes dispatchable.

Sometimes described as the “break-even” cost for residential solar, grid parity is reached when an energy source becomes cost-competitive with electricity from the grid, which is primarily produced by conventional sources such as coal, natural gas, and nuclear power plants. However, the idea that renewable energy sources can achieve grid parity is meaningless, because renewable energy sources do not function like conventional sources such as natural gas, nuclear, or coal generation.

Not all energy sources are created equal: dispatchable generation resources (e.g., natural gas) can produce power on demand, but non-dispatchable resources like solar vary based on weather and time of day. As the U.S. Energy Information Administration (EIA) explains, dispatchable power plants “generally have more value to a system than less flexible units,” including intermittent solar panels. Grid operators have to balance the amount of electricity being generated at any moment, so solar can actually make their jobs significantly harder.

A recent study from Deloitte found that subsidies are critical for solar to reach grid parity in some parts of the country. If solar power is truly competitive on the grid (as those trumpeting grid parity suggest), it shouldn’t require continual government handouts. Instead, if solar power can compete with new natural gas power plants as well as existing coal, nuclear, and hydroelectric plants—the most economical power plants on the grid—then it’s time to remove solar power’s training wheels. However, as is evident from IER’s levelized cost study, solar PV remains uncompetitive on the grid, since solar electricity costs three or four times more than electricity from existing natural gas or coal.[6]

Myth #6: Net metering makes it easy for households to go “off the grid.”

Fact: Completely disconnecting from the electric grid is costly and complicated. Going “off the grid” isn’t a realistic option for most homeowners.

Leaving the electric grid behind isn’t as simple as just installing solar panels. Instead, going off the grid would require a great deal of new, expensive technologies (including sufficient battery storage) or limiting power consumption to match solar production during daylight hours. But these realities haven’t stopped solar companies from advertising their products as miraculous innovations: Elon Musk (Tesla CEO and SolarCity chairman) even argued, “You could actually go, if you want, completely off the grid,” using solar panels and battery packs.

However, these rosy predictions don’t line up with the facts. IER analyzed the economics of using Tesla’s Powerwall battery alongside solar panels and determined that the payback period for such a set-up could be 31 years. Although energy storage could be useful in some contexts, Tesla’s battery also isn’t suited “to store daily household solar generation” on a consistent basis or to power the large appliances that Americans regularly use.

According to a report on Seeking Alpha, the necessary components for an off the grid lifestyle would be solar panels, an inverter, a battery system, a charger or load manager, and an optional backup generator. While this may seem basic, the author argues that “design challenges are considerable and off-grid economics are highly questionable.” Additionally, researchers at the University of Sydney found that going off the grid isn’t likely to be an economical option, even considering future cost declines for solar panels and battery storage.

Because of the high expense of battery storage and the intermittency of solar power, having a backup generator would be essential for many homes attempting to go off-grid. While fossil fuel-fired generators are the most useful for this purpose because they can be dispatched on demand, they might be an unattractive option for individuals trying to leave the grid for environmental reasons. In the end, going “off the grid” isn’t practical for most families who want reliable, affordable power.

Myth #7: Residential solar is a key part of the movement toward a 100 percent renewable grid.

Fact: Relying on 100 percent renewable energy is not economically feasible, and the companies making those claims are still getting the vast majority of their electricity from conventional sources.

Huge businesses like Apple and Microsoft like to make people think their data centers or entire organizations are run off of renewable energy, but these claims are misleading. Ultimately, any household or company hooked up to the power grid receives the majority of their electricity from conventional sources; it’s simply impossible to separate renewable generation from the rest of the electricity once it’s on the grid.[7] What these companies are doing instead is essentially an accounting gimmick that allows them to claim to be “100 percent renewable” while, in reality, they are using the exact same power mix as everyone else on the grid.

Even if going “100 percent renewable” were possible, it isn’t economical yet and may never be. According to MIT Technology Review, as increasing amounts of solar are “added to the energy mix, the economics become increasingly unfavorable.” Solar power still provides less than 1 percent of electricity generation in the U.S., so the difficulties of integrating more and more intermittent power from the sun or the wind will only become more pronounced.

Myth #8: The majority of subsidies for rooftop solar go to homeowners.

Fact: Most subsidies go to multi-billion dollar corporations.

The growth in residential solar is driven by third-party ownership model, where neither the electricity consumer (i.e., homeowner) nor energy producer (i.e., utility) owns the solar panel. Third-party financing is the dominant method to fund residential solar installations, consisting of 72 percent of residential installations in 2014.

Just three companies, including Vivint Solar, SunRun, and Elon Musk’s SolarCity accounted for 48 percent of residential installations for the first three quarters of 2015, and all depend on net metering to operate. When Nevada changed its net metering policy earlier this year, those three solar companies fled the state. According to The New York Times, SolarCity CEO Lyndon Rive admitted, “‘I don’t think anyone forecasted this risk,’ Referring to the potential to gain new customers in Nevada, he said, ‘It’s impossible for anyone to do it — it makes no financial sense for a consumer.’”

Unfortunately, many residential solar companies rely on deceptive sales practices to coerce consumers into signing a multi-decade contract, offering zero-money down installations while sweetening the deal by promising no maintenance costs and reduced electricity bills. For example, an 88-year old woman was tricked into signing a $66,000 solar contract by a solar salesman in July 2015, and the owners of Stealth Solar were ordered to pay $92,000 in restitution due to “illegally advertised services” including “deceptive telemarketing, bogus mailers, untrue promises of savings and government subsidies.”

Arizona Attorney General Tom Horne released a consumer alert in June 2014 that warned against “unethical behavior” from solar companies, and Attorneys General in Louisiana, Mississippi, Connecticut, and Vermont have all warned consumers of the predatory tactics employed by the residential solar industry.

Myth #9: Net metering benefits all Americans.

Fact: Net metering subsidizes homeowners with solar panels, who are, on average, wealthier than homeowners without solar panels and significantly wealthier than families who do not own a home.

An MIT Energy Initiative study, The Future of Solar Energy, found that when residential solar generation is compensated at retail value of electricity, “the result is a subsidy to residential and other distributed solar generators that is paid for by other customers on the network” and called for “network charges” to “remove the extra subsidy.”

The added costs shifted onto non-solar households can be substantial. In California, for example, Southern California Edison (SCE) projected a $16.7 billion shift onto non-net metering consumers, while Pacific Gas and Electric estimated a $24 billion shift over the next decade. San Diego Gas & Electric claimed that the non-solar customers pay about $160 million more annually because of net metering.

The benefits of net metering policies are largely limited to the wealthy. A 2013 study prepared for the California Public Utilities Commission on net metering found that net metering households had a median income of $91,000 compared to the state median of $54,000. A study published by the Louisiana Public Service Commission found that “median income for an LPSC-jurisdictional solar [net metering] installation is about 35 percent higher than the median statewide income level.”

For many families, purchasing solar panels simply isn’t feasible. The National Renewable Energy Lab (NREL) estimated, “49% of households are currently unable to host a PV system when excluding households that 1) do not own their building (i.e., renters), 2) do not have access to sufficient roof space (e.g., high-rise buildings, multi-unit housing), and/or 3) live in buildings with insufficient roof space to host a PV system.” The benefits of rooftop solar are concentrated because fewer low-income and middle-class families own their homes or have the resources to install solar panels.

Myth #10: Homeowners will unambiguously save money by “going solar.”

Fact: The savings from installing solar panels are either exaggerated or even negative.

The residential solar industry makes claims about the supposed savings solar panels will deliver on monthly electricity bills, but these savings frequently don’t materialize or are overstated. In some cases, contracts with solar companies can cause electricity bills to increase. The Wall Street Journal reported that Paul Braverman, 79, signed a 20-year lease with Sungevity in 2013 because “he believed he would cut his overall utility payments.” In reality, he ended up paying about $800 more annually. Sungevity argued that he had been using much more energy than in the past, but data from the Arizona Public Service revealed that “wasn’t the case” and the solar company refunded Mr. Braverman $1,600.

In another case, a class action lawsuit alleged that Sunrun deceptively based savings claims on its website on the assumption that utility rates would rise 6 percent annually, but data provided by Pacific Gas and Electric Co. showed that rates have leveled off since 2008.

Furthermore, most solar contracts contain price escalators, meaning that monthly payments rise over the course of the contract regardless of a change in utility rates. Customers may be misled about energy-price escalators mandated in the contract, which could amount to a 5 percent annual increase in lease payments. Ultimately, customers pay nearly double the retail price of the panel over the course of their contracts, according to the Wall Street Journal.


Residential solar power is growing rapidly, particularly because of the prevalence of policies like net metering. But while proponents of solar power are reciting a number of claims that sound too good to be true, we offer facts that tell the real story behind the myth.

What the net metering discussion needs now is critical analysis—of the claims made by solar companies, the reliability problems associated with solar power, and the high cost of rapidly increasing the amount of solar power on the grid. Such analysis is essential to making rational decisions when it comes to household energy investments and state and federal energy policy.

IER’s Travis Fisher, Mark Febrizio and Matthew Sabas contributed to this report.

[1] These numbers are from a forthcoming update to IER’s LCOE-Existing study. For the original report, see: Tom Stacy and George Taylor, What is the True Cost of Electricity?, Institute for Energy Research, June 30, 2015,

[2] Solar Energy Industries Association, Net Metering,

[3] California ISO, Renewables Watch, Mar. 8, 2016,

[4] The capacity value of solar is discussed in IER’s forthcoming report. Also see, EnergySkeptic, Capacity value of solar is low as penetration increases which could suppress investment, June 5, 2015,

[5] Solar Energy Industries Association, Net Metering,

[6] These numbers are from a forthcoming update to IER’s LCOE-Existing study. For the original report, see: Tom Stacy and George Taylor, What is the True Cost of Electricity?, Institute for Energy Research, June 30, 2015,

[7] See conversation starting at 8:50, Alex Epstein, Power Hour: Travis Fisher on the 100% Renewable Scam, Center for Industrial Progress, February 5, 2016,

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  • violetmoon

    I live in an area of the US that gets the least amount of sun than any other area in the country. (Proven by Yoder Brothers a few decades ago) Solar power will not work well here.

    • LeslieFish

      But wind, tidal, mini-hydro and thorium would. Think outside the box,

      • violetmoon

        But, this article is strictly on solar power, not on alternative energy sources.. We also do not have a lot of wind. No Hydro power and no other energy source I know about except natural gas. We have a lot of coal, but both coal and gas have exhaust. Strip mining was used for many years. Also not good for the land. But, again, solar power in my area of Ohio is a no go for the most part. My in-laws used it to heat ;water in Ca, but Sacramento gets a lot of sun.

        • LeslieFish

          The fact that solar alone can’t power the whole country is no reason to give up on it. Our existing power-grid also relies on multiple sources: hydro, coal, nuclear — plus everything the alternative-energy experimenters or putting into it.

          • violetmoon

            I never said I did not like it, only that I can not use it. Gas and oil are finite and need to be replaced asap. I support all alternative energy sources, but this one is a no go for me and the Canton, Akron area of Ohio.

          • LeslieFish

            It sounds like what you need is a Thorium nuclear plant. Look that up on the Internet. It’s probably not something a gang of citizens could build by themselves, but look around and see who’s willing to invest.

  • Marshall Rosenthal

    If a poor technology that runs at 10% efficiency can be sold to the credulous, that everyone else is forced to pay for, why not? Right.

    • LeslieFish

      The first steam-engines, which powered the western world in the 19th century, were lucky if they got as high as 10%. It was enough to drive the Industrial Revolution.

      • Marshall Rosenthal

        This is not steam power. It works in space because there is no night nor clouds to interfere with it’s constant operation. It can provide for most of the electronic needs of space craft and space stations. On the ground, it cannot provide the kind and amount of electricity that today’s society, the electricity consuming sector of it, requires. It is used, however, to fuel the what ifs and nice dreams of people who are increasingly forced to pay for this scheme by fiat; that is, the producers of actual power through fuels like coal, natural gas, and nuclear. They must purchase CARBON CREDITS before they can bill the consumer for the actual power that they produce. They must pass this inflation on to the rate payers, whose power bills have tripled, or more. In states where this practice is invoked, business and industry cannot thrive, resulting in mass exodus and loss of jobs. Economies are degraded and fail. Witness that of Greece that has borrowed billions of euros from German banks without the ability to repay those loans for the building of vast wind turbine arrays. Let’s not compare apples and oranges.

        • LeslieFish

          The obvious solution is to use mixed/multiple systems; that’s why I also mentioned wind, mini-hydro, tidal, Thorium-nuclear, fuel-ethanol and hydrogen. BTW, did Greece ever complete those wind-turbine arrays?

          • Marshall Rosenthal

            To the best of my knowledge both Greece and Crete are replete with wind turbine arrays and fields of pv solar. These have been built by Greek companies with borrowed funds. The Greek government is incapable of bailing them out. This is economic collapse. Wind and solar are not viable options. They are absurdly costly and result in the opposite of the dream of “renewable energy”, energy poverty and economic collapse.

  • xilarekdal

    The long term costs to the environment we see happening as we speak as a resultof tearing up the earth for Coal, Drilling for Oil and laking waste to large spans of land and wildklife, as well as rupturing the Earths Crust and polluting the water and soil with Fracking. If ya don’t like Solar because you can’t get ALL the Citizens to send ya money every month then Why don’t you find new ways to invest your vast wealth that Producing Carbon Emission has filled your off shore accounts with and put on your thinkin caps and ya might just rediscover Teslas Revelations that Westinghouse ripped away from him….There is a Law Of Diminishing Returns and it is clear that the Carbon Harvesters are resorting to last ditch efforts to keep funding their habit of Greed and Running Rough Shod over the Planet and its Peoples.

  • Qanni Katifa

    Hopefully, scientist are busy looking for a more efficient. cost effective storage system to make this more affordable for the world. It’s hard to believe they haven’t evolved this technology by now.

  • LeslieFish

    What you’re not saying here is that solar-electric research was stalled for decades by development of hydro-electric govt. projects — which were all geared toward huge dams and generators, which needed big companies or big governments to manage them. Not until the ’60s did anyone start thinking of mini-hydros, such as series of undershot wheels. Likewise, the govt. decreed that, when nuclear power was developed, it only involved uranium/plutonium — which could be made into bombs — rather than the much cheaper and safer thorium system (which India is rapidly developing, only now). And I’ve noticed that the govt. did not require coal-burning plants to put catch-traps on their smokestacks, which would have caught the smoke and condensed it into coal tar and coal oil — valuable chemical products, especially useful to the textile industry. The cost of the catch-traps would have amortized by the sales of coal tar and coal oil within a few years, but the big energy companies didn’t want to spend the money. And never mind the deliberate discouraging of fuel-ethanol development. Are you seeing a pattern here? It’s an unholy alliance between big govt. and big power-corps, an expansion of the military-industrial complex which has proved so disastrous in the past.

    So when the citizens began not only demanding a switch to cheaper, safer, renewable energy sources but started making experiments in that direction by themselves (oh, horreurs!), the govt. had to scramble to make up for lost development time. Yes, it’s now subsidizing solar, and wind, and even ethanol and hydrogen — all of which have a lot of lost ground to cover, but they’re doing it. Right now there’s furious research and development being done on cheaper, lighter, more efficient solar converters, on more efficient wind-generators, on cheaper and faster fuel-ethanol generation, on safer and more efficient hydrogen containment, on mini-hydros and — finally — thorium nuclear plants. They’re all frantically trying to make up for decades of lost time, and *if the subsidies hold out*, they’ll make it. They’ll all become quite, quite competitive with the Big Energy systems, thank you.

    And that is exactly why the big energy corps and their flacks are trying so hard to make the govt. give up the subsidies. There’s nothing righteous or idealistic about it; they’re simply trying to kill off their up-and-coming rivals.

  • Interest read. I’m definitely sharing this with some friends and coworkers.

    Solar Wizzit
    Monroe, NY 10950
    (845) 637-2030
    Solar Wizzit – Solar Energy Orange County, New York

  • ebola131

    Last week I stumbled across a quote from Thomas Edison that was published in February 1883.

    “The storage
    battery is, in my opinion, a catchpenny, a sensation, a mechanism for
    swindling the public by stock companies. The storage battery is one of
    those peculiar things which appeals to the imagination, and no more
    perfect thing could be desired by stock swindlers than that very
    selfsame thing. … Just as soon as a man gets working on the secondary
    battery it brings out his latent capacity for lying. … Scientifically,
    storage is all right, but, commercially, as absolute a failure as one
    can imagine.”

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