HOME SOLAR SYSTEM MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

Market Challenges And Opportunities

Home Solar System Market Drivers

• Declining costs of solar photovoltaic systems: The costs associated with solar photovoltaic (PV) systems including panels, inverters, and other components have declined significantly over the past decade. This has been driven by improvements in solar cell technologies, manufacturing scale, and supply chain efficiencies. The levelized cost of electricity from residential solar PV systems has reduced by over 70% since 2010. As solar power achieves grid parity in more regions, homeowners are finding solar to be an economically viable option to meet their electricity needs and reduce dependence on utilities. The declining costs are a major driver fostering the adoption of rooftop solar and growth of the home solar system market globally. For instances, according to the International Renewable Energy Agency (IRENA), the global weighted average price of utility-scale solar PV fell 82% between 2010 and 2019.
• Supportive government policies and incentives: Governments across the world have implemented various policy measures and financial incentives to accelerate the deployment of solar energy systems at the residential level. These include capital subsidies, feed-in tariffs, renewable portfolio standards, net metering, and solar renewable energy credits. For instance, the federal solar tax credit in the U.S.,, allows homeowners to deduct 26% of the cost of installing a solar system from their taxes. Such incentives along with renewable purchase obligations make home solar power attractive, thus overcoming the cost barriers and driving market growth.
• Innovations in solar technologies: Advancements in solar cell, module and system technologies are contributing to higher efficiencies, improved reliability and lower costs, thus making home solar solutions more viable. For instance, Programmable Electrical Rules Checking (PERC) , heterojunction, bifacial, and other high-efficiency solar cells have increased module efficiency to over 20%. Smart modules with integrated microchips aid better energy yield monitoring and outage mitigation. Expanding battery storage capacities, smart inverters and EV integration are also driving technological improvements in the home solar ecosystem. For instances, the U.S. Energy Information Administration predicts that annual solar PV installations in the U.S. are expected to rise to 19 gigawatts by 2023, up from 14 gigawatts. These trends point towards home solar continuing its strong growth trajectory in response to technology-driven reductions in costs and increases in system performance.
• Growing electricity prices and demand: Rising retail electricity prices coupled with increasing power consumption in residential buildings due to economic growth, rising incomes, and improving access to electricity is escalating the demand for solar energy systems from homeowners. With savings on monthly energy bills over long-term, solar power helps consumers hedge against energy inflation and recurring fuel costs. This consumer pull is likely to persist, with the outlook for continued electricity price rise, thus driving uptake of rooftop solar.

Home Solar System Market Opportunities

• Emerging battery storage systems: The coupling of solar power systems with battery-based energy storage opens new opportunities for home solar growth. It allows residential consumers to store excess solar power during daylight hours for later use when sunlight is unavailable. This improves solar energy self-consumption and provides backup power during grid outages. Cost declines, improving performance of lithium-ion, and other emerging battery chemistries, and evolving business models like solar+storage as a service will drive the adoption of integrated solar and storage solutions. For instances, according to the International Renewable Energy Agency (IRENA), the global average price of lithium-ion battery packs dropped by 97% between 2010 to 2021 to about US$230 per kWh International Renewable Energy Agency. 2022. Several manufacturers are claiming battery price levels below US$150 per kWh which will make battery storage very attractive add-on for solar homes.
• Off-grid applications: Home solar systems present a promising decentralized energy access solution for millions living in remote areas without reliable grid connectivity. The advances in standalone solar systems, DC appliances and productive use applications enable affordable off-grid electrification. Government programs supporting solar deployments to unelectrified homes and communities in developing countries would create substantial opportunities for the off-grid home solar market segment. For instances, according to the International Energy Agency, around 770 million people worldwide lacked access to electricity in 2020, most of who live in rural areas of Asia and sub-Saharan Africa. For these populations, stand-alone solar home systems can provide a reliable and sustainable source of energy for lighting, fans, mobile charging, and powering of basic appliances.
• Integration with smart technologies: The convergence of solar systems with artificial intelligence, big data analytics, IoT and smart home technologies will create new capabilities for homeowners. Smart solar monitoring, predictive maintenance, voice assistants, automated control of appliances will drive smarter, efficient utilization of solar energy. Solar + storage integrated with home energy management systems and EV charging enables customized solutions, thereby expanding home solar use cases.
• Peer-to-peer solar energy trading: Peer-to-peer solar trading allows consumers with rooftop solar panels to sell excess generation to their neighbors. Blockchain-enabled distributed ledger technologies facilitate such decentralized energy transactions between prosumers and consumers directly. This creates opportunities for home solar owners to become part of a local shared solar community and monetize excess solar power, thereby boosting returns on investment. Startups piloting peer-to-peer energy trading networks could accelerate its adoption.

Home Solar System Market Restraints

• High upfront costs and long payback periods: Despite declining solar PV costs, the high upfront investment that is required for installing complete solar systems remains a key adoption barrier. Additional expenses related to roof upgrades, electrical works, permits, and labor costs add to the overall price for homeowners. The long payback period of over 4-8 years on initial investment lowers consumer motivation for installing on-site solar systems. For example, according to the U.S. Energy Information Administration's 2020 data, during the economic slowdown caused by COVID-19, the residential installed solar capacity in the U.S decreased by 13% as compared to the previous year 2019.

Counterbalance- Make systems are more affordable through innovative financing options like leases, power purchase agreements (PPAs), and loans. The key market player should seek government incentives and rebates that can lower the cost for consumers. Investing in more efficient production technology can help in  reducing the manufacturing costs.

• Intermittency of solar power generation: The intermittent nature of solar energy generation arising from diurnal cycles and unpredictable weather conditions like cloud cover limits the use cases for homeowners. Reliable power supply cannot be ensured solely that is based on rooftop solar systems, unlike continuous electricity from the grid. This poses an adoption restraint especially where net metering policies are unavailable. For instances, according to the International Renewable Energy Agency (IRENA), only about 8% of the population in rural areas of sub-Saharan Africa had access to electricity in 2020, thereby indicating the need for decentralized off-grid solutions. However, the intermittency concern of solar remains a significant barrier in these resource-constrained regions.
• Lack of supportive infrastructure and limited roof space: Inadequate transmission and distribution infrastructure for decentralized renewable power integration along with lack of net metering facilities in parts of developing countries slow down home solar market growth. Suitable roof space constraints, structural issues, and ownership barriers in high-rise apartments also limit installations. Limited product standardization and underwriting challenges impact solar financing options.