Who ever thought that every home in America would have a radio, a television, a phone, a computer, and now a solar rooftop? If it can be imagined, then it can be done.
As crude oil price fluctuates between $70 and $110 a barrel in the past year, and nuclear power plant expansion has been restricted after Japan’s disaster, renewable energies, such as photovoltaic (PV), have potential to fill the void left by the dwindling nuclear capacity. Let’s imagine what if every residential home in the U.S. had a solar roof? It is our interest to estimate the maximum potential of rooftop PV capacity in America, assuming 100% market penetration.
Before the market size estimation, let’s review the current trend of the U.S. solar markets. Recent report from Interstate Renewable Energy Council shows the solar installed base of PV installation in 2010 doubled compared to the solar installed base in 2009, while installed capacity for other solar technologies, such as concentrating solar power (CSP) and solar thermal collector, has also increased significantly. Based on a study by Solar Energy Industries Association, cumulative grid-connected PV in the U.S. has now reached over 2.3GW, with top seven states (such as California and New Jersey) installed 88% of all PV in Q1 2011. However, U.S. solar markets fall behind some European countries, most notably Germany. In 2010 alone, Germany installed 7.4GW of PV systems and currently has an install base of 14.7GW install base, more than six times the U.S. cumulative solar installation. Germany’s solar market is traditionally driven by residential installation, supported by generous government incentives. The primary barrier stopping American homeowners from PV installation is cost.
Historically, the U.S. PV market has been driven by the non-residential sector with 42% of total installation in 2010, including commercial, public sector, and non-profit. However, residential and utility sectors have been gaining ground steadily with market share of 30% and 28%, respectively. Distributed rooftop represents the largest segment of the U.S. PV market. It is fueled by declining PV prices, government incentives, retail electricity rate earning, and lack of transmission losses.
Simple estimation of rooftop PV market size can be started with total roof space available. Based on data from U.S. Census Bureau, total U.S. housing units were 127.7 million in 2009. According to the National Association of Home Builders, the average home size in the United States was 2,700 square feet in 2009. If we assume average number of floors per building is two, the total residential roof space available is 172.4 billion square feet. In a more detailed rooftop PV market penetration scenario analysis, Navigant Consulting Inc. (NCI) used PV access factor and PV power density to estimate technical rooftop capacity for both residential and commercial buildings. The PV access factor takes into account of shading, building orientation, roof structural soundness, as well as cooler and warmer climates in different states. The resulting PV access factors for residential and commercial buildings are 25% and 60%, respectively. The PV power density is calculated with a weight-averaged module efficiency using market share for the three most prevalent PV technologies today: crystalline silicon, cadmium telluride, and CIGS. The resulting PV power density is 13.7 MW/million ft2, assuming an average module efficiency of 18.5% in 2015. The total rooftop PV technical potential can be calculated as:
Rooftop PV technical potential = Total roof space available * PV access factor * PV power density
Based on the NCI study, the combined U.S. rooftop PV technical potential, independent of economics, for both residential and commercial building will reach 712.2GW in year 2015. The following chart represents the state-by-state results of the technical potential:
Figure 1. U.S. rooftop PV technical potential in 2015, estimated by Navigant Consulting Inc.
National Renewable Energy Lab (NREL) applied a different approach, the Solar Deployment System (SolarDS) model, to estimate that the technical potential of residential and commercial rooftop PV market are approximately 300GW each by year 2030. In the NREL model, shaded roofs and obstructed roof space were eliminated, and customer adoption rate was considered to cover economic factors, such as PV cost, policy incentive, and financing.
Based on above potential market size analysis, the current cumulative grid-connected PV installation only represents 0.3% of total U.S. rooftop PV technical potential, which indicates a huge market potential. In addition, the rooftop PV system has to be replaced every 15 to 20 years, which represents another market opportunity. If we use the NCI estimated U.S. rooftop PV technical potential of 712.2 GW in 2015, assuming 100% market penetration, we can estimate how much electricity energy can be generated by such power. If we assume 10 hours/day and 200 days/year with sunshine, the total rooftop PV generated electricity energy will be 1,424 billion kWh, or 1,424 TWh, in U.S. by 2015. Compared to the total U.S. electricity generation of 3,953 TWh in 2009, the technical potential of electricity generation from rooftop PV can take over 1/3 of U.S. electricity consumption demand. As indicated in the following chart from U.S. Energy Information Administration (EIA), total solar generated electricity, from both solar thermal and PV, only represents less than 0.1% of total electricity generation in 2009. Rooftop PV has a huge market capacity to grow, and the dramatic installation cost drop will accelerate the rooftop PV market penetration. The current crystalline solar module price has dropped to $1.25/watt, compared to $2.80/watt two years ago.
Figure 2. U.S. electricity generation mix in 2009.
(Source: EIA Electric Power Monthly, October 2010)
There are two ways to assimilate PV arrays with rooftops: either integrated into them, or mounted on them. Mounting PV panels on rooftop requires more dangerous labor practices and is not aesthetically pleasing. Building-integrated photovoltaics (BIPV) are photovoltaic materials used to replace conventional building materials in roof, skylights, or facades. The advantage of BIPV over conventional roof-mounted PV panels is that the initial cost can be offset by reducing the amount spent on building materials and labor. BIPV also appears unobtrusive on a building structure. Current innovations have led to increasing diversity of BIPV products on the market, including rigid BIPV tiles and transparent BIPV glass. Advances in thin-film PV technologies have led to flexible solar tiles and shingles.
BIPV market competition has shifted from module provider to construction site. The fight for BIPV leadership in building and construction has begun. A recent article from Greentech Media points out the only way to realize BIPV is to be active in the architecture and early design of the building, consulting on matters as integral as the compass orientation of the building. For example, OneRoof Energy, a California-based residential BIPV provider, established strategic alliance with a national network of roofing contractors. The exclusive integrator relationship, as well as its innovative financing program to reduce homeowner installation cost, provides strong competitive advantages for the company to gain market share nationwide. Please excuse our shameless self-promotion as David Anthony one of the authors of this article is an investor and board member of OneRoof Energy.
Figure 3. Residential BIPV Installation
By comparing residential and commercial market for BIPV, residential sector has more advantages using standard-sized BIPV materials. Many commercial buildings require custom size panel, due to specs from the building designer. It is impossible for BIPV makers to prepare a variety of custom-sized modules in a mass production line. In addition, landlords of commercial building in many cities have no incentive to install BIPV. For example, in New York City, the electricity bill is paid by the tenant not the landlord. Therefore, the real BIPV opportunity stays with residential sector, not commercial building. Residential rooftop PV market has a bright future with huge market potential, and already shows strong growth in recent years. The BIPV market could reach $5.8 billion in 2016, based on a report from Pike Research.
Beside electricity generation, the rooftop PV market could also have potential to create millions of job opportunities for America. For a typical 0.5 MW solar installation, it will take 6 contractors for installation and another 3 full-timers for maintenance per year. We assume rooftop PV market will take 20 years to reach 100% penetration. In the past 10 years, the average number of annual new home construction is 1.47 million units. Considering recent housing market slow down, we can assume the new home construction will be 1 million units per year over the next 20 years, which is 0.78% growth of U.S. total housing units. Therefore, the total U.S. rooftop PV technical potential will reach 800 GW in 2030. For a simple estimation, we assume 40 GW/year for the next 20 years. Each year, we assume the rooftop PV market will create 480,000 jobs for installation. In addition, it will create 240,000 jobs per year for maintenance service, with total 4.8 million jobs for the next 20 years. Therefore, the rooftop PV market could generate more than 5 million jobs for U.S., if we assume 100% market penetration by 2030. This “back of the envelope” excludes the re-roof market which could add to both employment and BIPV installation.
With potential to create over 5 million jobs and one third of U.S. electricity energy, the rooftop PV system will become more lucrative for investors, government and US home owners. As PV electric rates are approaching “grid parity”, there is no reason for U.S. to lag so far behind Germany, if government provides enough inventive and infrastructures for PV market development.
Given the upcoming 2012 election year we hope President Obama, Texas Governor Perry and former Massachusetts Governor Romney read this article.
Article by David Anthony and Tao Zheng
David Anthony is the Managing Director of 21Ventures, LLC, a VC management firm that has provided seed, growth, and bridge capital to over 40 technology ventures across the globe, mainly in the cleantech arena. As mentioned above David is an investor and on the board of directors of OneRoof Energy, LLC. David received his MBA from The Tuck School of Business at Dartmouth College in 1989 and a BA in economics from George Washington University in 1982.
Tao Zheng is a material scientist in advanced materials and cleantech industry. He held 20+ patents and patent applications, and published many peer-reviewed papers in scientific journals. Tao Zheng received his B.S. degree in polymer materials sciences from Tsinghua University in China, and a Ph.D. degree in chemical engineering from University of Cincinnati. He obtained his MBA degree with distinction in finance and strategy from New York University, Stern School of Business, where he was designated as “Stern Scholar” and received “Harold Price Entrepreneurship Award”.