Accelerating residential PV expansion: demand analysis for competitive electricity markets

This article quantifies the potential market for grid-connected, residential photovoltaic (PV) electricity integrated into new homes built in the US. It complements an earlier supply-side analysis by the authors that demonstrates the potential to reduce PV module prices below $1.5/W-p by scaling up existing thin-film technology in 100 MWp/yr manufacturing facilities. The present article demonstrates that, at that price, PV modules may be cost effective in 125,000 new home installations per year (0.5 GW(p)/yr). While this market is large enough to support multiple scaled up thin-film PV factories, inefficient energy pricing and demand-side market failures will inhibit prospective PV consumers without strong public policy support. Net metering rules, already implemented in many states to encourage PV market launch, represent a crude but reasonable surrogate for efficient electricity pricing mechanisms that may ultimately emerge to internalize the externality benefits of PV. These public benefits include reduced air pollution damages (estimated costs of damage to human health from fossil fuel power plants are presented in Appendix A), deferral of transmission and distribution capital expenditures, reduced exposure to fossil fuel price risks, and increased electricity system reliability for end users. Thus, net metering for PV ought to be implemented as broadly as possible and sustained until efficient pricing is in place. Complementary PV buydowns (e.g., a renewable portfolio standard with a specific PV requirement) are needed to jumpstart regional PV markets. (c) 2004 Elsevier Ltd. All rights reserved.