Which is better: rooftop solar or utility-scale solar?

Most people know that if you want to cook some, say, chicken wings, it’s a lot cheaper to go to a big-box store and buy a 50 lb frozen box of wings than a small pack from your grocery store.

And yet, many people will choose to pay a higher per-wing price and go with the smaller package, because often that’s what makes the most sense.

In this one respect, solar panels are a little like chicken wings. Because of economies of scale, large solar farms are cheaper than residential rooftop solar. In fact, utility-scale solar is a lot cheaper: about $0.80 per watt compared to an average of $2.84 per watt for residential solar according to the SEIA.

In spite of this significant price disparity, the federal government subsidizes both the same: the solar ITC tax credit is currently 26% whether you’re installing a few kilowatts on a house or a several megawatts for a solar farm.

Why? If the goal is to install as much solar as possible, shouldn’t governments subsidize only utility-scale solar and get a bigger bang for its buck?

Not necessarily. While the sticker price of big solar farms is undoubtedly cheaper than small home installations, there are other benefits to rooftop solar that make the total cost of rooftop solar closer than the price might indicate.

If you’re a policy wonk and are hesitating to add solar to your house because you’re weighing the societal benefits of rooftop vs utility solar, this article might be helpful.

Terms to know: rooftop solar, distributed solar, behind-the-meter solar

First of all, let’s define a few terms. Residential rooftop solar is sometimes called distributed solar or behind-the-meter solar by policy folks.

Distributed solar refers to small solar installations that are scattered around a community. This is in contrast to centralized power plants, whether the power plants are traditional fossil fuel, wind turbines, or big solar farms.

Behind-the-meter means power generation that’s on the customer’s side of the meter, such as home solar panels. Unless the utility company has installed a special electric meter called an RGM meter (most don’t), the utility has no idea how much electricity your solar panels are generating. From their point of view, a rooftop solar array that’s generating electricity just looks like a reduction in electricity use by the home.

Rooftop solar, distributed solar, and behind-the-meter solar are terms that are sometimes used interchangeably, but they don’t mean exactly the same things. For example, distributed solar could mean ground-mounted solar arrays. Still, when you see these terms used, they often refer to small solar installations not owned by big utility companies.

What are the advantages of distributed solar?

Excess electricity generated by distributed solar gets fed back into the electric grid where its used by other electricity customers in the neighborhood. This simple process has a lot of advantages:

Less electricity is wasted in transmission wires.

Have you ever felt the cord of a hair dryer or space heater after its been running for a few minutes? It’ll be a little warm, and that’s because of electric resistance that turns electricity into wasted heat. Transmission wires that carry electricity from power plants into your home have the same effect. Although they have much higher voltages to reduce losses, about 5% of the electricity in the US is lost in transmission. Considering that there are about 10,346 power plants in the US, we could retire many power plants if we could somehow eliminate these losses.

Distributed generation helps to solve this problem. Electricity might normally have to travel dozens or hundreds from miles from a power plant into your home, resulting in losses along the way. But if you have rooftop solar panels the electricity only has dozens of feet to travel, not miles, and resistive losses are minimal.

Transmission capacity is a problem.

One problem with centralized power plants is that you need transmission wires, and those wires are a lot like highways: they might be big, but they don’t have unlimited capacity. While utility-scale solar farms might be cheaper upfront than home solar panels, if you simply keep adding more farms, you eventually run into the problem of limited transmission capacity.

Ideally you would locate solar farms to avoid transmission bottlenecks, but land use restrictions might not always make that possible. This means that if you want to know the true cost of utility-scale solar, you need to add the price of transmission too.

While distributed solar also makes use of the electric grid, the low-voltage local transmission grid is a different beast than high-voltage, long distance transmission that involves much larger wires and substations.

Transmission wires poses other problems, including fire risk.

Even if transmission lines were free, they aren’t zero impact. This is perhaps most evident in California where under-maintained PG&E transmission lines have been implicated in wildfires that have caused billions of dollars of damage.

Distributed solar places less demand on transmission lines, reducing these costs and risks. PG&E is coming around to this idea too, and even planning independent “microgrids” that substitute batteries and distributed generation where transmission would traditionally be used.

Hawaii is in the process of a similiar project where 6,000 solar homes with batteries will form a virtual power plant.

Building transmission lines involves a lot of bureaucracy

If you’ve had solar panels installed on your house, you know that part of the process is waiting for permits. Usually, you need permits from both the city and the utility company. While this might seem like a bureaucratic pain, that’s nothing compared to what’s involved in upgrading the transmission grid, which typically involves years of planning and agencies at multiple levels of government.

Even though grid modernization, as an infrastructure goal, has been talked about at the federal level for years, it moves at the gradual speed you would expect of any massive infrastructure project. It’s not just the price tag but planning, approvals, and the coordination of multiple levels of government.

In contrast, adding home solar panels is a relatively nimble process that takes only a few months on average.

Bottom line: both distributed and centralized solar have a role to play

In the end, the future electric grid is going to look a lot different from the electric grid of the past. Instead of a smaller number of big generating plants, the future grid - which is already happening - will be a mix of big renewable power plants, small distributed generators with smart inverters, lots of batteries, plugged-in electric vehicles that send power back into the grid, and a huge amount of real-time data so that grid operators can see and control everything that’s going on.

This means that it’s not really correct to ask whether rooftop solar or utility-scale solar is better. We need both, and we need to build it as quickly as possible if we’re going to meet the goal of mitigating climate change.