The findings of the recent joint report by research firm Bloomberg NEF (BNEF) and Schneider Electric estimate that 167 million households and close to 23 million businesses worldwide could be hosting their own clean power generation by 2050. However, to unlock these major decarbonisation benefits both policy and tariff redesigns will be essential.
Reported findings
The report, “Realising the potential of customer-sited solar”, finds that the rapidly falling costs of solar technology have already made it economical for homes and businesses to generate their own power in some markets. In Australia, for example, the payback period for households investing in solar has been favourable, at less than ten years, since 2013. As a result, adoption has already taken off, with more than 2,5 gigawatts of residential solar added in 2020 alone.
“Customer-sited solar is a huge opportunity that is often completely overlooked. Thanks to falling costs and policy measures, it’s already being rapidly deployed in some markets. Its massive scale up is very likely,” said Vincent Petit, head of the Schneider Electric TM Sustainability Research Institute, and SVP of global strategy prospective and external affairs at Schneider Electric. “This is vital for decarbonising the power sector and offers huge additional consumer benefits. It’s time to embrace this transformation.”
He also noted that these solar installations can generate economic returns for the hosting homes and businesses, as well as wider benefits in terms of:
- Carbon emissions reductions.
- Peak load reductions.
- Employment opportunities.
Kickstarting the market
Experience shows that solar adoption mainly occurs when there is an economic case for households and businesses investing in the technology, usually in the form of high internal rates of return (IRR) or short payback periods.
A key consideration at the early stage of market development is to avoid an unsustainable boom. Policy designs should account for the fact that solar costs will continue to fall over time, and moderate support to reflect these changing dynamics.
In regions where the economics have not yet reached such tipping points, policymakers are introducing targeted incentives to create favourable market conditions and bring forward deployment.
Solar for new-build homes and businesses
The economic case for adding solar during the construction of new buildings is particularly strong. This is because so-called “soft costs”, such as marketing and sales costs, as well as labour and construction costs, can be reduced, while the benefits remain the same.
Energy storage and flexibility
As solar markets develop and mature, policymakers and regulators must gradually shift their emphasis towards unlocking flexibility and encouraging the adoption of energy storage.
“The evolution of customer-sited solar is to add some form of flexibility, which has the ability to unlock a much higher penetration of solar,” said Yayoi Sekine, BNEF’s head of decentralised energy. “The most obvious form of flexibility is batteries, but energy storage will come in many forms, including shifting demand and using electric vehicles.”
Tools to encourage energy storage include:
• Adjusted export rates (the payments offered to solar owners when they export energy to the grid).
• Time-of-use retail electricity rates (which reflect the lower generation costs of solar during the daytime).
• Enabling payments for storage to provide grid services (sometimes called aggregation payments).
• Implementation of demand charges (primarily for business customers).
These levers are generally meant to make rates more reflective of generation and grid costs but are also likely to encourage energy storage.
The report investigates these mechanisms in depth, and provides individual use case analysis for France, Spain, Australia, California (U.S.) and New Jersey (U.S.), as examples of markets at different stages of maturity.
The full report is available via the following link: https://assets.bbhub.io/professional/sites/24/BNEF-Schneider-Electric-Realizing-the-Potential-of-Customer-Sited-Solar_FINAL.pdf
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