By David Anthony and Tao Zheng
Whoever 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 the crude oil price fluctuated 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 that every residential home in the U.S. had a solar roof. We can 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 A recent report from the 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, also increased significantly. Based on a study by the Solar Energy Industries Association, cumulative grid-connected PV in the U.S. has now reached over 2.3 GW. The top seven states (such as California and New Jersey) installed 88% of all PV in Q1 2011. However, U.S. solar markets fell behind some European countries, most notably Germany. In 2010 alone, Germany installed 7.4 GW of PV systems and currently has an install base of 14.7 GW 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 the commercial, public, and non-profit sectors. 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 earnings, and lack of transmission losses.
A simple estimation of rooftop PV market size starts with total roof space available. Based on data from the 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 the 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 a PV access factor and the PV power density to the estimate technical rooftop capacity for both residential and commercial buildings. The PV access factor takes into account, building orientation and 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 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 712.2 GW in year 2015. The following chart represents the state-by-state results of the technical potential:
National Renewable Energy Lab (NREL) applied a different approach, using the Solar Deployment System (SolarDS) model to estimate that the technical potential of the residential and commercial rooftop PV markets are approximately 300 GW 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 the 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 significant 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 with 1% annual growth projection in next 25 years, the technical potential of electricity generation from rooftop PV can take over 1/3 of U.S. electricity consumption. As indicated in the following chart from the U.S. Energy Information Administration (EIA), total solar generated electricity, from both solar thermal and PV, represents less than 0.1% of total electricity generation in 2009. Rooftop PV has a huge market growth capacity, 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.
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 a 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.
Comparing residential and commercial markets for BIPV, the residential sector has more advantages using standard-sized BIPV materials. Many commercial buildings require custom sized panels, 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 buildings 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 sector. The residential rooftop PV market has a bright future with huge market potential, and already has shown 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 also has the potential to create millions of job opportunities for Americans. 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 the rooftop PV market will take 20 years to reach 100% penetration. In the past 10 years, the average annual new home construction is 1.47 million units. Considering the 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 installation jobs.. In addition, it will create 240,000 jobs per year for maintenance services, with a total of 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” estimate excludes the re-roof market which could add to both employment and BIPV installation.
With the 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 electricity rates approach “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.
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”.