Rooftop solar installations are likely to exceed 2,000 GW globally with more than 1,000 GWh of energy storage capacity by 2050. The report ‘Realizing the Potential of Customer-Sited Solar’ finds that the rapidly falling costs of solar technology have already made it economical for homes and businesses to generate their power in some markets. As a result, residential solar has already exploded in popularity, with more than 2.5 GW installed in 2020 alone.
Households and businesses are adopting solar because of economic reasons such as high internal rates of return (IRR) or short payback periods. Targeted incentives are being introduced by policymakers to generate favourable market circumstances and accelerate deployment in markets where economic tipping points have yet to be reached. Residential solar can generate an IRR of roughly 18.5 percent, or a five-year payback, in France, which witnessed about 500 MW of installations in 2020. Commercial installations, on the other hand, have an IRR of 10.4 per cent, resulting in a nine-year payback.
According to the report, avoiding an unsustainable boom is a crucial issue early in the market’s development. To reflect these evolving dynamics, policy approaches should take into account the decreasing cost of solar over time and provide moderate support. Furthermore, there is a compelling economic case for incorporating solar into new construction. Soft costs, such as marketing and sales costs, as well as labour and construction costs, can be decreased while the benefits remain the same. As solar markets evolve and mature, policymakers and regulators should progressively turn their focus toward energy storage. With the inclusion of energy storage systems, high levels of solar adoption can result in extra energy produced during the day that can be saved for use during the evening hours. Policymakers and regulators should employ measures including adjusted export rates, time-of-use retail power pricing, authorising payments for storage to provide grid services, and implementing demand charges to stimulate the deployment of energy storage.