• While most people know that solar is good for the environment, what is seldom discussed about the technology is why solar power is important to both homeowners and the US economy as a whole.  In the last ten years, solar installations have grown at a rate of 59% annually in the US, creating an economic engine that is helping people save money and creating thousands of jobs.  

    So it’s clear that the industry has become an essential part of the US economy, but the question remains as to how and why it has become so important.  Let’s take a look at what has been powering the industry and the reasons it has become such a critical part of our economy today.


  • 1. Reinvestment Through The Federal Solar Tax Credit

    A large part of solar’s rapid growth has been due to the Federal Solar Investment Tax Credit (ITC) as an incentive to make the switch to solar.  The Solar ITC was originally enacted with Energy Policy Act of 2005 and was set to expire in 2007.  The goal of the Solar ITC was to aid the solar industry in it’s beginning stages, giving people the incentive that they could use 30% of the cost of their solar installation as a credit against any federal tax liability they had. This law has been a great incentive that has allowed hundreds of thousands of homeowners to reinvest in their home, paying themselves for their solar instead of having to pay the government the average $5,000-$6,000 payment that is 30% of the average system.

    Since its early stages, the Solar ITC has been extended several times, but most recently a spending bill in Congress extended it through 2021.  Now there will be an incremental phase-out of the credit after 2019, dropping to 26% credit in 2020, 22% in 2021, and then after 2022 only commercial solar panel systems will qualify and for a 10% credit.  Homeowners who want to get the most credit from their solar installation should go through the process before this phase-out begins.

    The great thing about the Solar ITC is that it allows homeowners to invest a substantial amount of money into a home addition that will save them a substantial amount of money in the long run. For investment savvy homeowners, the Solar ITC makes it more appealing to go solar; you get a free $5,000 - $6,000 to install a system that will start saving you money every month, and at the end of your payback period you will be making no payments, and paying no utility bills.  It’s an obvious win for homeowners, which is a huge part of why the adoption of solar energy has been so rapid.

    The effect of the Solar ITC can be clearly seen when you look at installation trends over the past five years.   Installations grew at a steady pace between 2010 and 2015 and then spiked dramatically in 2016 when the residential solar ITC was set to expire.  Experts thought the industry would collapse if the ITC was not extended, but luckily that was not the case. And though 2017 did see a decrease in installations, it was not the doomsday scenario that was predicted.  With the ITC still in place, homeowners continued to install at a rapid pace, reinvesting their hard earned money in their homes and allowing the industry to continue flourishing and growing.

  • 2. Financial Savings for Homeowners

    With both the Solar ITC and solar installation heading more mainstream, an increasing amount of homeowners have woken up to the benefits of solar power at home.  While some may claim they install solar for the environmental benefit, most homeowners are making the switch for the financial savings that solar installation presents.  Solar helps homeowners produce their own power from the sun, which allows them to use less power from the utility company. In most cases, this allows people to completely eliminate their electric bill, meaning that instead of paying the utility company every month for power that is subject to rate increases and environmental factors, they will only be making payments towards their solar, all of which are less than what their power bill would have been otherwise.  So even though homeowners will be making monthly payments if they finance their solar, they will still be saving as the payment will be less than what their power bill had been.

    In most cases, homeowners can completely offset any power they consume from the power company by producing excess solar energy during the day, such that they earn credits for the power they use at night.  Net Metering is a system that allows homeowners who are connected to the grid to sell their extra solar power back to the utility when they don’t need it, earning credits for when the house is consuming more than it is producing.  So optimally, by producing enough power during the day, you can earn enough credits to offset the power you need at night.

    In San Diego, SDGE has recently changed the way solar homeowners receive credits and buy power back.  The new rate structure is called Time Of Use, and essentially, it charges different amounts for power throughout the day.  The standard Time of Use rate structure homeowners go on when they use solar is called DR-SES, which makes it so power used or produced during the day (what they refer to as “off-peak” hours) is much cheaper than the power used or produced in the evening on-peak hours (4-9pm).  What this means is that when the solar is produced during the day, people can then sell excess power at a much cheaper price. There are other rate structures you can opt-for that make this difference in rates less dramatic, but the bottom line is you just have to install enough solar panels to ensure you’re generating enough credits in the off-peak times to offset your usage in the on-peak times.

    While savings differ between households, some studies estimate that the average solar homeowner in California can save around $29,424 in 20 years by eliminating their electric bill.  Note that this is an average in California, and in reality, savings in San Diego, where electricity is 37.63% more expensive than the national average, would be even more substantial.  If you take into account rising utility rates and decreasing panel prices, the deal becomes even sweeter.

  • 3. More Savings = More Spending

    As a sort of trickle-down effect from solar savings, homeowners will have a more disposable income to spend on other good, that, as a net effect, will benefit the economy as a whole.  While it is hard to put a number on exactly how much money will flow back into the economy as a result, we can assume that the more savings people have, the more money they will spend.  That’s the whole point of solar renewable energy. It’s an investment that ultimately is going to put more cash in the hands of the homeowners than if they had not installed in the first place.

    The savings that a solar installation can bring can also prompt homeowners to spend on home additions that they may not have considered before due to the increase in electricity the addition would demand.  One common way this plays out is when homeowners get more solar panels than they need installed to power home additions like hot tubs or granny flats. If a homeowner knows they are going to install a hot tub, for example, they can get enough solar panels installed beforehand to offset that future anticipated usage cost. This means that the contractors and hot tub companies will benefit from solar, as homeowners who wouldn’t consider such an addition in the past due to power prices will now be more open to these extra additions.

  • 4. Helping the Auto Industry

    Many homeowners are using solar to power their electric cars as well, which has no doubt sparked an increase in electric car sales as well.  Data indicates that there is a strong correlation between electric vehicle ownership and solar ownership, a recent poll finding that approximately 28-40% of electric car owners also have solar at home.  These homeowners know that if they get enough solar installed to offset their power bills as well as fully charge an electric car, then they can save on gas by utilizing the solar.  Whether most of these homeowners bought the electric car or solar first is unclear, but there’s no doubt that this combo is prompting purchases of both solar and electric vehicles.

  • 5. Powering an American Job Growth Machine

    Due to the recent wide adoption of solar, there is now a huge demand for solar installers across the nation.  Over the past few years, the solar industry has created more jobs in America than almost any other industry, with about 51,000 new employment opportunity in 2016 alone. This increase has risen solar jobs to about 260,000.  Studies show that this growth is expected to continue and that solar installer is set to become the fastest growing job in America in the next ten years.  

    This explosive job growth has been great news for the American economy, as it has provided hundreds of thousands of jobs to the people who support the transition to solar.  With many factories and plants moving offshore due to cheap labor, solar has been able to provide a respite for those workers who formerly depended on these jobs. Solar installation jobs pay well and typically provide full-time hours, so they are providing and will continue to provide great jobs for our middle class.


  • About the Author

    Michael Powers


    Michael is one of the founding partners of Stellar Solar. In 2001, he helped launch The Home Depot’s national solar energy program which is now offering home solar through hundreds of stores in nearly a dozen states. He is a writer and marketing professional with over 30 years’ experience in the fields of energy, market intelligence and leadership training. He currently serves as treasurer and board member of Global Energy Network Institute (GENI), a San Diego-based non-governmental organization that advocates linking renewable energy resources around the world using electricity transmission.