Feb 25 | 2015

Will homebuyers still want solar in the age of cheap oil?

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oil-well-smallHere’s the thing. Cheap oil has caused all kinds of chaos over the past quarter. Does the new low in oil prices mean that residential solar is over? Will homebuyers consider a house with solar panels in this energy market?

Short answer? That’s not even the right question.

First off, oil yields gasoline: it’s largely an automotive play—petroleum is far too expensive to power electric generation, or even home heating for most folks these days.

Solar, on the other hand, yields electricity, which is why rooftop solar is so interesting a play for homebuyers—what you don’t use for your own power needs can be sold back to the grid. So what if oil prices have halved? As recently as 2010, an oil price crash would’ve gutted the solar industry, perhaps even put it under.

No longer.

Renewable energy is about electricity and solar represents barely 1% of North America’s power generation today…but look out below: the International Energy Agency predicts that solar will be the planet’s largest single source of electricity come 2050.

In fact, solar is likely to benefit from a perfect storm that’ll only drive demand higher: the collapse in global oil prices coincides with a global shortage of solar panels this year. Bloomberg’s solar expert maintains the current energy market can’t harm solar’s long-term prospects for world energy domination: “You couldn’t kill solar now if you wanted,” Jenny Chase of Bloomberg New Energy Finance emphasizes.

Here’s the deal: renewables aren’t threatened by cheap oil—it’s cheap electricity that slows adoption of green technologies, because solar, wind and tidal are all about power generation.

Hold your horses! I just opened my power bill and it’s more expensive than this time last year even though I have a houseful of fluorescent bulbs, a hyper-efficient new fridge and a two year-old washer-drier…plus we ditched our dishwasher in favour of family elbow grease and around-the-sink conversation. Electricity prices are going up even as natural gas prices (gas fires the turbines that still make most of our non-hydroelectricity) bottom out.

So why are we all beefing at rising power costs?

Because we’re not actually paying more for the power itself—all over the western economies governments, private investment and power utilities are on a long-term spending binge for infrastructure. The big banks and financial research houses are all documenting multiples of two, three and four-times growth in grid investment over the past four decades.

Contrariwise, power generation prices are falling so fast solar will easily beat coal and natural gas. Here’s two bellwethers: Apple just announced a 3000-acre, $850M investment in a solar system that will power all its HQ, all its servers and all its California stores; the project will be online by the end of 2016—it’s a 25 year contract, unheard of for an non-utility company. The deal triples Apple’s solar capacity. It’s a huge deal, one timed to harvest big US federal energy subsidies. Elsewhere, IKEA has committed to 100% renewable by 2020, largely through wind; Wal-Mart’s leading retailers with over 100Mw of solar capacity right now.

So. Do homebuyers want solar, even now? Short answer: yes. And those homebuyers who don’t are ignoring a sea-change—the solar genie is out of the bottle. And there’s no going back. The data says so: the US Energy Council’s Berkeley Lab’s startling study shows just how far solar has come in the last five years, down to a new homes fact sheet that’s an eye-opener. Read it: it’s the new reality.

Doesn’t take a rocket scientist to know that Canadians use huge amounts of power, more per capita than Americans, especially now, with this bitterly cold winter. Solar energy is a market reality…and it’s going to drive sales as Canadian homebuyers absorb the energy lessons of the sunset of fossil fuels for residential power.