One of the biggest benefits of solar power is the ability to save money — both by cutting the amount of energy you use from the grid and by selling excess power back to the grid. This article takes a deep dive into the different financial benefits of installing solar on your roof. If you're ready to go solar, Panasonic is here to help with helpful resources and expert installers.
For decades, electricity has flowed one way: from power producers to public utilities, which then distribute it over vast distances to households and businesses. That utility-to-consumer status quo, however, is getting challenged. A growing number of Americans have started generating electricity from solar panels installed at their homes. And new technologies and a fleet of startups are allowing people to not only independently power their homes but also store and sell excess solar power to their neighbors.
With this shift, small-scale energy generation and storage facilities (like a residential building outfitted with a solar panel and battery) could not only become a source of income for the people who own the tech but it could improve things for everyone else. People on the traditional grid could see lower costs, greater grid reliability, and less volatile energy prices.
Instead of relying on monolithic utilities and power plants to keep the lights on, the rising popularity of solar panels and battery storage might upend the unidirectional utility power model and electricity markets. The country's electrical grid is quickly turning from a river into a lake, with people able to generate, share, and make money off their own electricity.
Power plants on every roof
While the home-installed solar industry is still a small slice of the country's energy generation, the number of people putting panels on their roofs is growing rapidly. Six percent of single-family, owner-occupied homes in the US had rooftop solar panels at the end of 2022, generating about 37 million megawatt hours a year – enough to power 3 million to 4 million households.
And the rate of residential installation is booming: A record 700,000 homeowners installed arrays in 2022, according to the trade group Solar Energy Industries Association. Though the overall percentage of Americans with rooftop solar remains low, some states are much further down the road: California, Texas, and Florida were the top three in solar-installation capacity for the past three years.
Many more people will be incentivized to install solar power and energy storage with the subsidies provided by the Inflation Reduction Act and the Solar Investment Tax Credit. In addition to taking power production into their own hands, many of these households are also installing battery-storage units, which collect surplus energy to be used on a (literal) rainy day or sold back into the grid.
Beyond home setups, community solar – a system in which customers can subscribe to power produced by a local solar project – is expected to grow by 8% a year through 2028, eventually generating 14 gigawatts, enough to power over 10 million homes.
Once a household generates its own power and has a battery that stores excess energy, there are a few ways a homeowner could earn income from the tech. One way is to simply sell excess supply back to their utility, which pays the customer a fee for the right to distribute the electricity elsewhere. One of the largest California utilities, PG&E, partnered to pilot such a program, which paid customers an up-front $750 fee for the right to sell their stored energy to other customers on hot summer nights.
Photo courtesy of Panasonic Eco Systems
And the market may become more lucrative for homeowners. Many newer solar setups use smart technology, which could determine the optimal energy-selling strategy. When spot energy prices are cheap, out-of-the-box trading software could buy power from the grid to power the household and store the solar energy generated on the roof.
When prices are higher, it could sell excess supply from the battery back to a utility, thus maximizing the payments. Arcadia, a Washington, DC-based startup launched in 2014, already collects meter data from utilities to help its customers track carbon exposure and predict optimal times in the day to purchase electricity on the open market. This algorithmic trading program could help homeowners turn a passive profit and help smooth demand on the broader grid.
The greater autonomy in power production and consumption may allow people to use the electrical devices they buy as mini batteries – a refrigerator or an electric vehicle might dynamically interact with the electricity market to charge themselves when power prices are low and feed some of their energy back to other devices when prices are higher.
The US Department of Energy even gave a name to these aggregations of distributed resources: virtual power plants. The DOE's report on the future of VPPs projects that the tech could eventually generate 80 to 160 gigawatts of power annually, which could supply up to 20% of energy needs during times of peak demand in 2030 – while costing 40% to 60% less than alternatives such as natural gas.
Another option for homeowners is peer-to-peer energy trading. Instead of selling the electricity to the utility, which then distributes it, people could agree to sell their excess power directly to their neighbors using pre-existing grid infrastructure.
While this sort of energy sharing would still require the physical cables, substations, or other infrastructure owned by a utility or a city (for which they would charge some fee), people could use third-party apps to buy and sell electricity directly from homes and businesses in their community that are using solar panels. Australia's Localvolts, for example, allows consumers to negotiate peer-to-peer clean-power contracts using an online-trading platform – similar to buying stocks from an online broker. Users buy and sell electricity with any counterparty, whether it's a neighbor or the broader electricity market.
This kind of energy trading could eventually scale up so that consumers could customize their energy use depending on their needs and particular preferences. For instance, someone may elect to only buy clean energy produced by a specific group (small local businesses, for instance) or from a select set of producers based on various environmental, social, or geographical characteristics.
While the central electrical utility would still be needed as a backup as the market scales, with enough surplus, the big players might eventually be cut out of supplying power to some homes.
A win-win
Distributed energy and virtual power plants are obviously beneficial to the people who decide to sell off their electricity – customers with installed solar roof capacity already save about $200 in yearly energy expenditures, and they could save $500 or more each year with the technological improvements provided by peer-to-peer energy trading and smart appliances. Beyond becoming a side hustle for sun-drenched homeowners, the new technology also has plenty of benefits for non-income generators as well.
Peer-to-peer energy sharing could drive down the cost of power for all consumers. The relatively cheap cost to produce solar electricity and the shorter distances to transport the power make it a more cost-effective option for those who are able to access VPPs and other energy-saving devices. There are, of course, concerns about the reliability of solar energy.
While energy decentralization can't solve all of those problems – if the sun doesn't shine for a week, then consumers will have to rely on backup energy from the main grid – a network of distributed energy suppliers and storage backup can ease the peak loads so that utilities are able to better deploy their own energy. In a world with more self-sustaining households, the grid becomes more reliable and less prone to blackouts while consumers become less vulnerable to one-off price shocks during sudden heat spikes or deep freezes.
Early evidence shows that the savings and increased reliability could be widespread. The purchase and installation of a distributed energy resource appears equitable across income ranges. In fact, households with incomes under $100,000 made up half of solar adoption in 2021.
The growth of peer-to-peer power plants would also be a boost for the government's investment in green energy. The return on investment afforded by bill savings and surplus power sales would also reduce the need for government subsidies and tax breaks on clean power and storage, a benefit for fiscal planning and governmental budgeting.
Making it a reality
Australia, much of the EU, the UK, and 14 US states allow electricity customers to choose their own power retailers. Texas and California, two of the largest solar-generating states in the US, have deregulated the electricity trade and allow the free flow of power, and more states may follow in their footsteps once the benefits of VPPs and DERs materialize.
By connecting solar-powered homes to neighboring houses and businesses, people could make some money while providing benefits for other consumers, their communities, and the planet at large.
As more consumers join local power networks through platforms like Arcadia and Localvolts, the virtuous cycle of market forces and price competition could lower electricity prices. The optimization of power consumption may also lead to an imaginative reassessment of home devices and vehicles: Instead of blindly consuming energy while they charge, gadgets attached to the grid could become sources of energy in a shortage.
For example, the cost of charging an electric car will come down as the vehicle learns to grab power from the grid only when prices are cheap – and it could even become a battery for other appliances in a pinch.
As the world grapples with the need to shift away from oil and other fossil fuels, people will be looking for ways to make the electrical transition more cost-effective and secure. By connecting solar-powered homes to neighboring houses and businesses, people could make some money while providing benefits for other consumers, their communities, and the planet at large.
This article was written by Kartik Menon from Business Insider and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
