When and Where DG Penetration is Miniscule, What Then?
Steve Mitnick is Editor-in-Chief of Public Utilities Fortnightly and author of the book “Lines Down: How We Pay, Use, Value Grid Electricity Amid the Storm.”
Picture an elderly couple. Or two young friends sharing the rent, working their first jobs. Or a single mom struggling to raise two toddlers and pay the bills.
Picture a family still recovering from the downturn, slowly restoring their credit score. Another family on government assistance. And one more affluent, living downtown in a towering condo.
What do they have in common? Plenty, actually. They all have hopes and heartaches. For here, for this column, what they share is what they don’t have.
That’s the means or motivation to install distributed generation.
Making electricity to cover some of what their appliances use? Selling the excess to the grid? That’s way down on their list. More likely, not even on their list.
DG installers, being competitive businesses, don’t target these demographics. With their significant marketing, selling and transaction costs, they naturally segment the market and target the highest-return demographics.
You own your single-family house. Your state and local governments offer generous subsidies to DG installers. Your credit is strong. Your roof is large and flat to accommodate twenty or more solar panels.
Your roof gets little shade. Not a consideration when it was built, its orientation and pitch is ideal for catching the sun’s rays.
You’re a large enough user of electricity. Slashing your utility bill would command your attention. Maybe your house isn’t energy efficient. Maybe you run a lot of air conditioning and other watt-hungry appliances.
And you’re in an area where combatting climate change is mainstream. It must be easier to sell DG to a homeowner in a neighborhood of solar roof enthusiasts than in one where an installation would be seen as an oddity.
The penetration rate of rooftop solar thereby, practically speaking, has a hard ceiling. Pun intended.
The penetration rate presently is around one percent. How high can and will it go?
We also want to understand how penetration will vary by area, by income, and by other demographic breakdowns. Who will be the solar have-nots? How will they fare?
There’s evidence DG penetration won’t (can’t) rise to thirty percent of U.S. households for decades. The addressable slice of the overall housing market is the constraint.
Even with robust government subsidies. Even with declining costs for the solar panel component of installation and maintenance costs.
Check out the Census Department’s most recent American Community Survey, for 2015. Crunching the data yields a realistic view of how high rooftop solar can go, and where.
For example, fifty percent of the households in New York City are apartments. The percentage is forty-two percent in Los Angeles and Washington, D.C., and forty-one percent in Houston, Dallas and San Francisco. That’s large swaths of the public that won’t be putting solar on their roofs.
Indeed, nationally, thirty-seven percent of households rent their home. That level increases to forty-one percent in urban America. And fifty-one percent in principal cities.
Sixty percent of District of Columbia households rent. As do forty-seven percent of those in New York, forty-six percent of those in California and Nevada, and forty-three percent in Hawaii.
Of the households headed by someone who is under thirty years of age, seventy-seven percent live in rental housing. Many of them may love renewable energy generation. But few are able to put it on their roof.
The preponderance of renter-occupied over owner-occupied continues to the next older age group. Of the households headed by someone between thirty and forty-four, forty-seven percent live in rental housing.
It’s only when you look at the population over forty-five years of age that you see large numbers of owner-occupied housing.
However, as much as thirty percent of all the households in the U.S. that live in owner-occupied housing are headed by someone who is sixty-five years of age or older. Hard to believe that many of these households are going to sign twenty year leases for rooftop solar.
Put it another way. Fifty-two million households are both owner-occupied and headed by someone who is less than sixty-five years of age. That’s a lot of households to be sure. But it’s just forty-four percent of all U.S. households.
Owner-occupied homes are less likely to have electric heat than homes overall. Just thirty-two percent of owned homes have electric heat versus forty-nine percent of rented homes. If you heat with natural gas or another fuel, the incentive for rooftop solar is less.
Those living in owner-occupied homes have much higher incomes in general. Thirty-three percent of households in owned homes have income over a hundred thousand.
In comparison, only eleven percent of households in rented homes have incomes over a hundred thousand. While thirty-six percent of renters have incomes under twenty-five thousand.
The breakdown by race and origin of households is notable. African American households account for only eight percent of owned homes. Hispanic households account for only nine percent.
In comparison, African American households account for twenty percent of rented homes. Hispanic households account for nineteen percent.
Enough number-crunching. What all this shows is that rooftop solar, as fast-growing as it is, will remain a rarity among large proportions of the American public. And that it will remain a real rarity among households in cities, among those with moderate or low incomes, and among minorities.
Which presents a real problem to utilities and utility regulators. A narrow slice of utility customers (in most areas a very narrow slice), who are generally affluent suburbanites, are increasingly demanding substantial changes in utility service.
Of course, we all want to address their demands to the greatest extent possible. But without doing harm to the seventy, eighty, ninety or more percent of utility customers who can’t or won’t go rooftop solar. Especially when considering that the most vulnerable in our society are predominantly in that seventy, eighty, ninety or more percent.
Perhaps this is why utility-scale and community solar and wind too have such appeal. Apart from utility-scale and community solar and wind being far more effective at combatting climate change, as contrasted with rooftop solar.
These larger renewable installations confer benefits to all, not just the select few.
Which reminds me of the sixties and its student activism. At the time, some shouted: Power to the People! Let’s update this slogan. Clean Power to the People!