Solar in the Spotlight

Solar power could help the United States achieve energy independence.

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Over the past seven years, carbon emissions have fallen by 13 percent in the United States.

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The situation isn't quite so black-and-white, according to other industry experts who say that while the rise in customer use of rooftop solar is a concern it isn't a death knell for utility companies. That's because there's plenty of work to do updating the nation's 100-year-old electricity grid infrastructure, says Gary Stern, director of regulatory policy at Southern California Edison. "There is potentially less need for new transmission lines as a result of local generation," Stern says. "But we're not hungry for new investment—there's plenty of opportunity dealing with and upgrading the existing distribution system."

Nevertheless, a fundamental sea change is occurring when it comes to the principles that have governed the power industry for more than a hundred years. Until recently, electricity generation has been almost solely wed to large, centralized power generation plants with transmission and distribution lines connected to demand centers because that was the most economical way to produce and deliver power to customers.

[READ: U.S. Winning the Clean Energy Race]

But that predictable, century-old formula is crumbling, as a new economy of scale emerges in the manufacture of solar panels, which have become increasingly cheaper in recent years. "Now the economy of scale is in manufacturing, putting out larger and larger volumes of things that look more like a silicon chip," Burr says. "It's an approach to the economy of scale that caught utilities blindsided."

Despite the steep drop in equipment and installation costs, the solar industry still faces hurdles in expanding adoption, not least of which are state regulations that prevent or make it very difficult for solar service companies to operate in certain states. Although those in the industry welcome a more coherent national strategy when it comes to the place of renewable energy in electricity generation, the reality is oversight of utilities has historically been left up to state and local governments. That has resulted in drastically different policies across the country with just 22 states plus Washington, D.C., and Puerto Rico that authorize or allow third-party solar power purchase agreements, according to the Database of State Incentives for Renewables and Efficiency.

In other states, third-party-owned solar is limited to certain sectors, and burdensome permitting processes and costs associated with connecting panels to the electricity grid can be a deterrent to the adoption of rooftop solar. "It's funny because Florida has 'Sunshine State' plastered everywhere as their state motto and yet they don't allow solar service," Sunrun's Fenster says.

Nevertheless, he is confident that options such as third-party ownership have the potential to fundamentally transform the way Americans get their electricity while also saving consumers money and helping the environment. Solar makes up only about 1 percent of the power used on grid now, but by 2016 Fenster expects solar power will be able to undercut about $30 billion a year in electricity sales to homeowners.

"Residential has always been the best end market for solar because homeowners pay the most for power, and they stretch the transmission and distribution network the most," Fenster says. "There's a significant transfer in consumer power arising from solar because now homeowners can generate their own power at a lower cost."

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