The dual identity of rooftop solar
We usually purchase energy, not because we value energy per-se, but because we value the energy services they provide – natural gas because we want warm homes or petrol because we want to get somewhere.
The curious thing about solar is that many consumers are buying solar, not just for the energy, but because they value solar as a consumer product. Remaining connected to the grid is an essential prerequisite for maximising the value of solar – solar is not adding energy services that wouldn’t otherwise be available. The solar heating Sun Lizard product (seen on the ABC Inventors) was an example of a useful but high-priced consumer product that mostly gave householders the satisfaction of having a solar product installed on their roof.
Rooftop solar is perhaps unique in being the first energy supply product that is part of consumer culture. Josh Floyd suggests that solar has a kind of dual identity at the microeconomic level. The fact that it operates outside of the conventional energy paradigm is the reason that electricity utilities have struggled to effectively grapple with the rapid uptake of solar. Similarly, many environmental economists argue that the high carbon abatement cost of solar leads to the misallocation of low-carbon investment if carbon abatement is the goal.
From a net-energy perspective, the interesting question is the degree to which the installed solar capacity contributes to national wealth and taxation, and how much could be considered consumer surplus (i.e. consumers deriving satisfaction from the ownership of solar). A food corollary might be to consider to what degree a value-added food service (i.e. restaurant service, premium wine, etc.) contributes to calories and nutrition, and to what degree society remains dependant on the mass production of grains and staples to underpin calorific and nutritional intake. Consumers that elect to consume a greater proportion of their income on discretionary foodstuffs do so because they value the ‘food service’ – the purchase of expensive wine is an example. But in the context of ensuring that everyone has adequate nutrition and calories, it might be unreasonable to expect the cost of premium wine to be absorbed into the cost of bread and milk, for example.
The case of off-grid solar represents the paradox of green consumerism – householders chose to forgo the purchase of other consumer products in order to buy into a culture of sufficiency. Yet the additional energy cost of going off-grid far exceeds the energy cost of remaining connected and simply reducing energy consumption.
Despite making up a small proportion of annual energy supply, solar is nonetheless leading to a reappraisal of the Australian wholesale electricity market. It is a global characteristic of electricity systems, that unlike pharmaceuticals and computer software, investment on research and development makes up a very small proportion of revenue. Hence solar is leading the charge for a consumer-centric re-examination of electricity supply and may eventually disrupt the conventional tariff model.
My work with energy-return-on-investment suggests that the maximum value from solar is likely to be achieved with a small amount of storage attached (2 to 4 hours) where it can add value to the low-voltage distribution network. Although most attention has been directed towards considering how distributed solar might interact with other renewable energy, the combination of solar and a small quantity of storage could arguably work better with conventional baseload. In the long-run, I think the penetration of rooftop solar is going to be limited to 10 to 15% in most regions because of the strong seasonality at latitudes higher than around 30 degrees and low annual capacity factor – the global distribution of population and wealth tends to be in regions at greater than 30 degrees latitude.