When you think of Elon Musk, you probably think first of rockets and electric cars. You might not know that in addition to being CEO of both SpaceX and Tesla Motors, eco-entrepreneur Elon Musk is chairman of Solar City, a company run by his cousin, Lyndon Rive.
Musk and Rive recently announced two major forward-looking developments at Solar City. First, they promised that within five to 10 years, all solar panels manufactured by Solar City will come with a battery pack. They also announced plans to build the world’s largest solar panel factory in New York, and Rive plans to follow the construction of his flagship factory with 10 more just like it. By the time they’re done, Musk and Rive estimate they’ll drive down the cost of installed solar panel systems by half. Their work highlights how much more affordable solar is becoming in the U.S.
What Solar Costs Now
Solar panel costs have dropped significantly over the past 35 years. They’re 100 times lower than they were in 1977 and about half the price that they were in 2008. According to the U.S. Solar Market Insight report, the cost to purchase residential solar panels is about $0.70 per kWh. However, other costs including installation and permit fees significantly increase costs for homeowners. U.S. Solar Market insight puts the cost of an installed residential solar panel system at $3.83 per watt as of Q2 2014.
A number of factors are making solar more affordable both for U.S. residents and innovative businesses. Proceeds from solar energy are now being used to finance publicly traded securities. For example, several utility companies have issued securities called Yieldcos, which promise steady dividends and high payout ratios for investors. Additionally, solar prices in some regions have become competitive with other power generation sources, including natural gas. For the first time in history, utility companies are purchasing solar power instead of purchasing power generated using traditional fossil fuels. This development has caused future business innovators, including scientists, engineers, and today’s MBA students, to anticipate that solar power could become a viable competitor in the energy market.
Solar Innovation in the U.S.
Arizona is the nation’s largest producer of solar power. Both Arizona Public Service and Tucson Electric Power, the two largest electricity providers in the state, have announced plans to install and own residential rooftop photovoltaic (PV) cells for interested customers. For a small net metering charge of about $5 for the average household, the utility companies will buy back excess power returned to the grid by these residential panels. Customers can also lease power from large farms of PV cells, or solar gardens, in Arizona.
For their part, Musk and Rive hope that their standard battery packs will help solve one of solar’s major inconveniences, which is intermittent power production. Tesla Motors will produce at least some of the battery packs at a lithium-ion battery manufacturing plant that Musk plans to build in Nevada. Musk’s plan is risky because most lithium-ion batteries — and solar panels, for that matter — are manufactured in Asia at low, heavily subsidized costs.
Solar City bets that increased consumer demand for green energy, along with innovative utility company solar monetization plans like those in Arizona, will soon put solar power within the reach of ordinary Americans. Also, looming import tariff increases could drive up the prices of Asia-produced solar panels, enabling products manufactured in America to become more competitive pricewise.
Solar for Business
Any ecopreneurist should look at green energy sources for business operations including green energy for manufacturing and office facilities. However, small companies often face significant obstacles in obtaining financing for PV system installations. Many entrepreneurs have limited credit history, and their installations have site-specific project requirements that make them more expensive than standard residential installations.
Fortunately, both states and larger commercial developers have started to invest in small commercial installations. Right now, both Massachusetts and New York are releasing incentive programs at solar energy, and these programs are designed to incentivize small businesses to finance solar system installations. Also, businesses with access to solar garden power can also lease a share of those large installations in lieu of installing PV panels. If Solar City succeeds, solar power will become accessible to everyone, including small business owners, within the next couple of decades.