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Why isn’t rooftop solar cheaper in America? In Australia in 2024, a standard rooftop system can cost as little as 90 cents per watt. In the U.S., a similar system might go for $4 per watt. If America could come even close to Australia’s rooftop solar prices, then we would be able to decarbonize the power system much faster than we are now.
Mary Powell has the answers. She is the chief executive officer of Sunrun, a $2.6 billion company that is the country’s largest rooftop solar and battery installer. Sunrun has set up or managed more than 900,000 rooftop systems across the U.S. Powell previously led Green Mountain Power, Vermont’s largest investor-owned power company.
On this week’s episode of Shift Key — a continuation, of sorts, to one of our most popular early episodes — Rob and Jesse talk about how the rooftop solar business works and what’s driving America’s higher costs. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
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Here is an excerpt from our conversation:
Jesse Jenkins: And so, just some stats to start off the conversation. The latest quarterly solar update from the Department of Energy notes that the average cost of a 2 to 10 kilowatt residential rooftop system in the U.S. is roughly $4 per watt, DC, installed. That’s the full installed system costs, not just the modules.
I just looked up solarchoice.net.au, the Australian site that tracks bids and costs in Australia, which has one of the most vibrant rooftop solar industries in the country. There, you can now install a rooftop solar system in Sydney for just under $1 U.S. per watt, which is quite remarkable — you know, dramatically cheaper than it was a few years ago, but also dramatically cheaper than the U.S residential solar market, by a factor of four.
And so obviously, if we could knock the cost of rooftop solar in the U.S. down by another 75%, it would be an incredible value proposition all over the country. So, how do we get there, Mary? What explains why solar in the U.S., rooftop solar, is much more expensive than it is in places like Australia — I should say, it’s not just Australia. It’s also, you know, the U.K. and Germany and Belgium and other places. Why is it so much more expensive here now than it is in these other countries? And how do we drive down the cost of residential solar installations in the U.S. so that we can unlock that potential here, too?
Mary Powell: Yeah, for sure. I mean, that is so exciting when you think about it, Jesse. What gets me so excited when you say that is I think, ‘Oh my gosh, we are selling all across America now with savings against what people are paying for utility power.’ So customers — even at our current costs. So back to your question on how I see the future, just think about how powerful that will be as we continue to innovate and figure out ways to drive down the cost.
Now, that said, the biggest driver of the cost difference is the way the American energy system is built. And not just that, but we have 40,000 AHJs in the United States that each have their own distinct solar process and rules. And in Australia they have fewer than 600.
Robinson Meyer: And those are like cities?
Powell: It’s housing jurisdictions. It’s like — let me give you an example. In DuPage County, Illinois, we have to have a full time employee pull permits all day. Only one permit at a time.
You know, the other big thing in the U.S. is our whole energy system, as we know, it is very much driven by state and regional rules. Like rules of the road, a lot of regulatory differences from one jurisdiction to another, a lot of massive differences from one utility to another. So, you know, interconnection for residential is still costly, time consuming, and is even prohibited in some areas. Interconnection fees for home solar systems from utilities range from $100 to $10,000. So, one of the bright spots is the work that Sunrun was involved in, a lot of players were involved in, and that Secretary Jennifer Granholm is really focused on, which is SolarAPP+. So, that is one way to drive down the cost, Jesse.
Back to the difference: So really, I would say, the biggest difference is bureaucracy. When you talk about Australia and you talk about the U.S., that’s the biggest difference.
This episode of Shift Key is sponsored by…
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Music for Shift Key is by Adam Kromelow.
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A conversation with Jillian Blanchard of Lawyers for Good Government about the heightened cost of permitting delays
This week I chatted with Jillian Blanchard, vice president of climate change and environmental justice with Lawyers for Good Government, an organization that has been supporting beneficiaries of the Inflation Reduction Act navigate the uncertainties surrounding tax credits and grant programs under the Trump administration. The reason I wanted to chat with Jillian is simple: the IRA is under threat for the first time under a Republican Congress. I wanted to understand how solar and wind projects could be impacted by the House Republican reconciliation bill and putting IRA tax credits in doubt. I learned a lot.
The following conversation was lightly edited for clarity.
Okay, Jillian, what’s the topline here? How would the GOP reconciliation bill impact individual projects’ development?
There are big chunks of the reconciliation bill that will have dramatic impacts on project development, including language that would repeal or phase out bipartisan and popular tax credits in a way that would make it very, very difficult to invest in projects. I can get into the weeds next.
But it’s worth saying first – the group of programs aside from tax credits that [House Republicans] would repeal represents every single part of America. Hundreds of projects that will not go forward if these programs are not going well. And they have several legally obligated grants that EPA has already mucked up in a litany of ways. But what they’re proposing to do is to pull the rug out from under those programs. On top of that they want to pull any unobligated funding out.
I think it’s extremely misrepresentative to say these are not big cuts. They’re significant cuts to clean air and clean water across the board.
Help me get into the weeds about how phasing out the credits will make it harder to invest in a project.
Right now, a bank might want to invest a certain amount of money in a clean energy project because they know on the back end they can get 30% or 40% back on their investment. A return through tax credits. They can bank on that, because tax credits are a guarantee.
Was that an intentional pun? “Bank”?
Yeah, it is. I love a good pun. You opened the floodgates, that was a mistake.
But anyway, the program itself was supposed to be around until at least 2032 and the bank could bank on those tax credits. That’s a big runway, because projects could get delayed and you could lock in the credit as soon as you started construction.
Now they’re doing a phase-out approach where if your project is not placed into service before a certain date, you don’t avoid the phase out. You don’t get any protections if you’re starting your project now or next year. It has to be placed in service before 2028 or else your project may not be eligible. You are constructing it, you are financing it, but then through no fault of your own – a storm or whatever – then suddenly that project is no longer entitled to get 30% or 40% back.
That’s a big risk. And banks don’t like risk.
Opposition on the ground also delays projects the way a storm does. Would this empower those opponents?
Oh, totally. Totally. If anyone wants to fight a project, a bank might be even less likely to invest in it. The NIMBYs for that particular project become a risk.
What would you tell a developer at this moment who is wondering about the uncertainty around the IRA?
I would tell them that now is the time to speak up. If they want to stay in this business and make sure their energy stays as low-cost as it already is, they need to speak up right now, no matter what their political party affiliation is. Make it clear solar isn’t going away, wind isn’t going away, storage isn’t going away. These are markets America needs to be competitive with the rest of the world.
Investors are only just now starting to digest what the proposed cuts will mean, especially for energy storage.
Is Wall Street too sanguine about the House of Representatives’ proposal to gut the Inflation Reduction Act? When the House Ways and Means Committee unveiled its language on the law on Monday — phasing out tax credits, implementing strict restrictions on business relationships with Chinese companies, and altering when projects are eligible for credits — some investors responded to the cutbacks by driving up the prices of some clean energy stocks.
The residential solar company Sunrun traded up on Tuesday by 8.6%, and the American solar manufacturer First Solar was up over 22%. (Stock movements on Monday were largely in response to the pause of the U.S.-China trade war, also announced that morning.)
“The early drafts of a Republican tax and spending bill weren’t as bad for renewables as feared,” wrote Barron’s. Morgan Stanley analysts used the same language — “not as bad as feared” — in a note to clients on the text. “Industry was bracing for way worse,” Don Schneider, the deputy head of public policy for Piper Sandler and a former Republican staffer on the Ways and Means Committee, wrote on X.
While many analysts — and, to be honest, journalists at Heatmap — have issued dire warnings about how the various provisions of the Ways and Means language could together make much of the IRA essentially impossible to use, even before the tax credits phase out, investors on Wall Street and in Washington seem to have shrugged them off. Some level of cutting was all but inevitable, and “not as bad as it could have been” is reason enough to celebrate — plus there’s also “it’ll probably change, anyway.”
There’s something to this. A group ofmoderate Republicans criticized the language on Wednesday as too restrictive, specifically citing changes to three overarching features of the tax credits: when projects would be eligible for tax credits, where companies are able to source components and materials, and whether companies are allowed to freely buy and sell tax credits generated by their projects. (Wouldn’t you know it, these complaints largely echo what Heatmap has written in the past few days.)
In the Senate, meanwhile, Republican Kevin Cramer of North Dakota, said that the text as written would be too damaging to advanced nuclear and enhanced geothermal generation. The phase-out timelines in the Ways and Means language are “too short for truly new technologies,” Cramer told Politico.
Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress, told me that he expects the bill to evolve in a way to meet the concerns of Senate Republicans like Cramer.
“Given considerations both political and procedural, like the more flexible reconciliation instructions Senate Finance is afforded relative to House Ways and Means and the disproportionate impact current text entails for technologies Republicans traditionally favor, like nuclear, geothermal, and hydropower, I think it’s fair to say that this text will change over the coming weeks,” he said.
Finally, days after the Ways and Means committee made its thinking public, Wall Street seems to be catching on to the implications. The new foreign entities of concern rules pose a particularly huge danger to the renewable energy sector, according to Jefferies analyst Julien Dumoulin-Smith, and especially to energy storage, which would be the key provider of reliability on a renewable-heavy grid. Energy storage looks to account for almost 30% of new generator additions this year, according to the Energy Information Administration.
“We think the market got it wrong for storage,” Dumoulin-Smith wrote in a note to clients. The market has yet to “digest and fully interpret the implications of proposed tariff and tax policy, which as currently written do not bode well for storage,” he said. The foreign sourcing language “is more restrictive than initially thought, with some industry stakeholders calling the proposal a near repeal on IRA.”
The storage supply chain is intensely entangled with China. Many companies, including Tesla,have been forced to disclose to investors just how reliant they are on China for their storage businesses.
China alone accounted for 70% of battery imports in 2024, according to industry analysts at BloombergNEF, over $14 billion worth. About a quarter of the metals used in battery manufacturing — especially graphite — came from China, BNEF figures show. For specific battery chemistry like lithium iron phosphate, which is popular for stationary storage products, the supply chain is essentially 100% Chinese.
Wall Street revenue and profit estimates “do not adequately capture the extent of risks” facing the U.S. storage industry, Dumoulin-Smith wrote. The storage company Fluence’s stock fell around 1.5% today, and is down over 5.5% since close of trading on Monday, as the market began to digest the House language.
It is possible that the foreign sourcing rules will be loosened and phase-outs for tax credits and transferability lengthened, Venkatakrishnan told me, but not in a way that would endanger the overall structure of the bill. Cuts to the Inflation Reduction Act are a key source of revenue for the Republican bill-writers to ensure as many of the tax cuts they want can fit within the budgetary scope they’ve given themselves.
“Any adjustments will be made with an eye toward ensuring budgetary offsets are sufficient to enable success of the broader enterprise,” Venkatakrishnan said. In other words, as much as some lawmakers may want to see these tax credits preserved, ultimately, they’ve got to pass a bill to ensure Trump’s tax cuts stick around.
And more of the week’s biggest conflicts around renewable energy projects.
1. St. Lawrence County, New York – It’s hard out here for a 2-megawatt solar project in upstate New York.
2. McKean County, Pennsylvania – Swift Current Energy is now dealing with an insurgent opposition campaign against its Black Cherry wind project.
3. Blair County, Pennsylvania – Good news is elsewhere in Pennsylvania though as this county has given the go-ahead for a new utility-scale Ampliform solar project, the BL Hileman Hollow Solar project.
4. Allen County, Ohio – The mayor of Lima, a small city in this county, is publicly calling on Ohio senators to make sure that the pending reconciliation bill in Congress ensures Inflation Reduction Act tax credits can still apply to municipalities.
5. Vanderburgh County, Indiana – Orion Energy’s Blue Grass Creek solar project is now facing opposition too, with Orion representatives telling local press they actually expected some locals to be against the project.
6. Otsego County, Michigan – That state forest-felling solar farm that Fox News loved to hate? That idea is no more.
7. Adams County, Illinois – The Green Key solar project we’ve been following in the town of Ursa has received its special use permit from the county after vociferous local opposition.
8. Dane County, Wisconsin – We’re getting a taste of local worry about how the GOP’s efforts to change the IRA could affect municipal energy planning, thanks to the village of Waukanee.
9. Olmsted County, Minnesota – The fight over Ranger Power’s Lemon Hill solar project is evolving into a nascent bid to give localities more control over permitting renewables projects.
10. Cherry County, Nebraska – This county is seeking an investigation into whether Sandhills Energy’s BSH Kilgore wind farm is violating zoning standards after receiving requests from residents who are against the project.
11. Albany County, Wyoming – Bird conservation activists fighting wind projects in Wyoming claim the Interior Department is providing them incomplete information under the Freedom of Information Act about wind turbines and eagle deaths.
12. Santa Fe County, New Mexico – Renowned climate activist Bill McKibben is publicly going on the attack against opponents of an individual solar project, the AES Rancho Viejo solar farm near Santa Fe.
13. Apache County, Arizona – Opponents of the Repsol Lava Run wind project are now rallying around trying to stop transmission for the project.
14. Klickitat County, Washington – The Cypress Creek Renewables solar project we told you last week got fast-tracked by the state Energy Facility Site Evaluation Council? Turns out the county had a moratorium on new solar and anticipated a chance to formally file public comments before that would happen.