As electricity costs surge many see residential solar as a solution, despite federal changes
U.S. consumers spent on average $1,760 on electricity in 2023, second only to gasoline. And those residential electricity costs are expected to increase 13-18 percent by 2026. Why? Blame it on infrastructure changes needed for data centers. They supply computational power for AI and cryptocurrency and help drive up the cost as power companies pass them on to consumers. Some residents are hoping residential solar panels will save them money.
Electricity rates on the rise
AES Ohio has filed for a 14-percent increase, which if approved, would force customers in Dayton and other parts of the state to pay $261 more a year. The other supplier, Duke Energy, started increasing electricity rates this summer for Cincinnati residents. The 25-percent hike translates into an average $10 extra a month. Both companies say they need to cover the costs of infrastructure improvements. AES Ohio Foundation is a supporter of Brick by Brick.
Demand for electricity is growing faster because of an increasing number of data centers in the U.S. These are huge warehouses with computer equipment and cooling fans that support artificial intelligence and cryptocurrency. Ohio has nearly 200 of these, mostly near Columbus.
Utility companies are increasingly making infrastructure improvements to support the data centers. Northern Virginia is known as the data center alley because it has the most-more than 500, and one study found data centers would drive up that state’s energy usage 183-percent by 2040.
Analyst Julien Dumoulin-Smith, managing director at the global investment banking firm Jefferies, covers the power utilities and clean energy sectors and told Brick by Brick, “I think what we’re seeing, especially in the Mid-Atlantic of late, there are bills going up in a rather acute way, driven by the factors that we’re talking about that are data centers, right? First and foremost, and again, in a world in which it’s not just the need to drive inflation because construction materials and the sector itself is building out rapidly, but in this way, electricity bills are going up directly because they’re competing with data centers for electricity.”
This leaves homeowners looking for solutions. Brick by Brick’s Hernz Laguerre Jr. reported on a couple of them in this podcast.
Rooftop solar
Five million US homes have rooftop solar; that’s about 7 percent. The number of houses with solar panels has tripled since 2017 and before recent changes to federal tax credits were announced, solar overall was on track to become the largest source of electricity generation in the U.S. by 2050, according to the Solar Energy Industries Association.
The anticipated increase was before the budget reconciliation bill set the deadline for the 30-percent federal solar tax credit earlier than expected: December 31,2025. To get the credit homeowners must have solar panels installed and working by the end of the year.
Dumoulin-Smith says leasing companies will still get the government tax credit through 2027 and then indirectly have credits flow back to consumers.
He says, “Think about this as like an auto car lease or your consumer car lease, if you will. Think about the analog here where you have these residential solar companies that can offer you a lease and because there are commercial entity leasing, their tax credit doesn’t actually expire yet and so you’ll see the industry extend well beyond the end of 2025 and the tactical expiration of the consumer credit under the guise of these leasing arrangements.”
How much does it cost and what can you save?
The national average to buy a home solar system is between $20,000-30,000. However, solar panels in Ohio cost more at $33,142.
The U.S. Department of Energy says on average, homeowners save more than $50,000 over 25 years. The estimated life of the system is 30-35 years.
Without tax credits it would take 17 years, on average, for homeowners to earn back their solar investments. The New York Times reports an analysis by Morgan Stanley projects rooftop solar demand could fall by 85-percent through 2030.
There are federal, state and local grants and rebates through utility companies you might be able to get.
How do you cover what’s left? Andy Holzhauser is partner and co-owner of Donovan Energy in Cincinnati. He says a traditional bank isn’t usually an option, despite your green mindset.
He says, “A home or a building that is more efficient, there’s a lot of data in the marketplace that says it’s a more stable building financially. You’re reducing operating costs in that home or building and thus, the home or building owner has greater ability to repay a loan. That said, it’s hard to just go to a bank and get an off-the-shelf financing product.”
Green Banks offer savings. The nonprofit Columbus Region Green Fund is one. Later this year it will offer a loan that’s not determined by your credit. It’s underwritten on your ability to pay, like sending in your utility bill on time. That’s important if you don’t have a good credit score.
And Executive Director Zach McGuire is also encouraging apartment building owners to get solar and pass the savings onto their renters. The organization does this by having contracts with both.
SolarViews did a study on the 2023 top ten states for solar. It was based on tax credits, net metering, electricity prices, solar carve-out, rebates, average system payback and more, and found Massachusetts, Colorado, Washington, D.C., Maryland, New York, Minnesota, Rhode Island, New Jersey, Illinois and Connecticut were in the top ten.
Solar for low-moderate income households
Study shows it reduces energy insecurity
PhD candidate Madeline Yozwiak studies clean energy and issues related to climate change in the electricity system. She wanted to find out how much of a financial boost having rooftop solar would give low-to-moderate-income homeowners. She led a study to find out.
It was a collaboration between the Energy Justice Lab at Indiana University and the Lawrence Berkeley National Laboratory. Their findings show rooftop solar does lead to a large reduction in energy insecurity among low-to-moderate-income households within the U.S.
According to Yozwiak, “It’s between a 15 to 46-reduction (of energy insecurity) across the different measures that we looked at and the different types of energy and security or the indicators that we asked households about include their ability to pay their utility bill each month, their ability to keep their home at a comfortable temperature and their likelihood of needing to forego needed expenses in order to afford their utility bill.”
The effect was even greater if the homeowner was able to save up for the entire system rather than leasing it over time.
Yozwiak says the savings from solar can be greater as electricity becomes more expensive. She wants the low-to-moderate income to have options.
Solar for All goes away
Yozwiak’s study shows why the cancellation of the Solar for All program is concerning to many advocates. Ohio received $156 million from the U.S. EPA, as part of this program, to make solar more accessible for low-to-moderate-income residents.
Dayton planned to use the grant to put solar on 900 residential rooftops of low-to-moderate-income residents. Cincinnati was going to build a solar array in a former landfill to help 1,300 residents save 20-percent on their electric bill. Both cities are now trying to find the money to move forward.
Without federal solar funding there may be another way to serve the same low-to-moderate-income population.
Concord Street Solar
A pilot program is underway in Cincinnati’s Walnut Hills neighborhood from the quasi-governmental agency The Port. The entity, along with the Walnut Hills Redevelopment Foundation built eight income-restricted homes on Concord Street. The Port put thirteen solar panels on four of the homes. The solar panel arrays cost $16,000 per house. Alex Powers bought one of the row houses and noticed it had solar on his walkthrough.
That’s a welcome bonus for Powers who’s also concerned about his rising electric costs.
He told Brick by Brick, “We live in a world of Duke Energy. There’s not really much other options out there for us to get energy from. So, it’s like whatever they say goes and if there’s anything I can do to bring that price down, especially with an all-electric home I’ll take it.”
Four of the eight income-restricted homes on Concord Street in Walnut Hills have solar.
The solar panels will save Powers $100 a month and the system is his to keep. Executive Vice President and General Counsel Andrew Garth says The Port used expiring federal tax credits and fronted the rest of the cost. And that benefits homeowners.
“They pay zero dollars for that and after five years in the house the solar becomes their own asset. In the meantime, we have a service warranty to cover all of the repairs, if anything should be needed to go wrong and the solar panels themselves are under warranty for over twenty years.”
Garth thinks this idea can be expanded to other communities. He’s working with the State of Ohio to essentially have plug and play options that people can take and adopt and apply to their own communities.
Limitations
Residential solar panels have suddenly gotten harder to afford, given the expiration of the 30-percent federal tax credit. But as energy analyst Julien Dumoulin-Smith points out leasing companies will receive solar credits from the government and theoretically pass the savings onto homeowners through at least 2027.
Solar can be expensive, and it’s estimated that unless you pay it upfront, you may not earn back your solar investment for 17 years. The panels last 30-35 years.
Looking ahead
It’s unclear how the repeal of federal tax credits will affect the solar industry. Morgan Stanley projects demand could fall by 85-percent through 2030, according to The New York Times. Solar panel companies are already going bankrupt.
As you might guess, repealing the solar tax credits could have other negative effects on the economy. According to the Economic Impacts of Repealing Technology-Neutral Tax Credits study, by 2032, nineteen states, including Ohio, would see higher energy prices and fewer jobs. It’s estimated Ohio would have nearly 6-thousand fewer jobs, an increase of 6-percent in electricity prices for households, and a 10-percent increase for businesses.
But as electricity prices increase homeowners might be forced to find other alternatives like residential solar.
What role do you think residential solar plays in reducing energy insecurity and keeping people housed? We want to build community around context and solutions in our cities. Your feedback is very important to the effort, as we continue to dig deeper into the responses to some of our most pressing social issues, including the housing crisis. Click on the green button to take a short survey to help reinforce and refine our work. Thank you.
Ann Thompson – Host, Producer
Over the last thirty years in Cincinnati, Ann Thompson has brought a wealth of knowledge and expertise to her reporting. She has reported and anchored for WVXU, WKRC, WCKY, WHIO-TV and Metro Networks and freelanced for NPR, CBS and ABC Radio. Her work has been recognized by the Associated Press and she has won awards from the Association of Women in Communications and the Alliance for Women in Media. She is a former News Director and Operations Manager. Ann has reported from India, Japan, South Korea, Germany and Belgium as part of fellowships. Ann thinks of the Brick by Brick project as “journalism for good.” She serves as host and producer. Ann lives in Anderson Township with her husband Scott. They have two boys. Jake graduated from the Air Force Academy in 2022 and Kurt attends West Point.
