Photographer: Sergio Flores/Bloomberg

Faster Rooftop Solar Growth to Cut Demand From Biggest U.S. Grid

Rooftop-solar panels are being installed in the region covered by the biggest U.S. power grid at a faster pace than expected. That will accelerate the shift away from large generators.

Distributed solar generation on the grid managed by PJM Interconnection LLC, which serves more than 61 million people in the East, jumped 30 percent in April from a year earlier. That rate of growth will likely continue with the extension of tax credits, CreditSights Inc. said in a report Friday. PJM previously forecast that installations would climb by 31 percent this year before slowing to 18 percent in 2017 and 12 percent in 2018.

The rise of solar means that the grid operator may need to secure less supply to meet needs on the hottest days of the year, cutting payouts to owners of nuclear, natural gas and coal plants. Households are going solar as companies like SolarCity Corp. make a big push in parts of the mid-Atlantic states to take advantage of state initiatives. 

An increase in energy efficiency, led by the switch to more efficient light bulbs, had prompted PJM late last year to lower its demand growth projections through 2030. Total demand on the grid that stretches from the mid-Atlantic to the Midwest was forecast to increase 1.3 percent in 2017 from this year.

“If rooftop solar grows more than 30 percent, there’s no reason we couldn’t see electricity demand growth go negative in the coming years,” Greg Jones, a New York-based analyst with CreditSights, said in a telephone interview Friday. 

One of the drivers for faster growth is the extension of a federal tax credit that reimburses developers 30 percent of the costs of solar projects. The tax credit had been scheduled to expire at the end of this year, but Congress in December unexpectedly extended it. That month, Bloomberg New Energy Finance estimated that the extension would drive about $38 billion of investment in solar power through 2021.

PJM’s projections show a dramatic drop in distributed solar on its grid because they were made based on the assumption the tax credits would expire. “The official load forecast comes out at the end of the year, it gets checked and vetted and reviewed with committees before it’s finalized and put up; and then three days later Congress extended the investment tax credit,” PJM spokesman Ray Dotter said by phone Friday. 

When PJM revises its forecasts later this year, there will be likely be “higher growth in rooftop solar than last year primarily because of the investment tax credit,” he said.

Before it's here, it's on the Bloomberg Terminal.