A new Stanford study reveals that most U.S. homes can reduce electricity costs and weather blackouts with solar panels and battery storage, but homeowners need to act before federal tax credits expire.
A compelling new study from Stanford University reveals that the majority of U.S. households could significantly reduce their electricity costs and endure power outages by installing rooftop solar panels and battery storage systems. The study suggests a pressing need for families to invest in these systems before the end of the year to take advantage of federal tax credits.
According to the study, around 60% of U.S. homes could see a reduction in their electricity costs by an average of 15% with the installation of a solar-battery system, factoring in the annualized capital and operating expenses.
Impressively, this same system could enable 63% of households to withstand local or regional blackouts, meeting about half of their electricity needs on average. For these families, this would either result in savings on their electricity bills or at least prevent an increase in costs.
However, the remaining households for which solar-battery systems are not cost-effective are typically the ones that already face higher utility bills and frequent power outages.
“With electricity rates now rising in most states, shaving utility bills can help people quite a bit, but the ability to ride out local or regional blackouts is becoming very important to many families,” senior author Ram Rajagopal, an associate professor of civil and environmental engineering and of electrical engineering at Stanford, said in a news release. “That’s because U.S. electricity infrastructure is old and getting replaced slowly, while the extreme weather events like hurricanes and heat waves that cause blackouts are becoming more frequent, intense and longer lasting.”
Published August 1 in the journal Nature Energy, the study involved a high-resolution, nationwide assessment of over 500,000 U.S. households’ access to solar photovoltaic (PV) and battery storage. A policy brief on the subject was released alongside the study in the same issue of Nature Energy.
Federal Tax Credits
The One Big Beautiful Bill Act, signed into law on July 4, will discontinue the residential clean energy tax credits from the Inflation Reduction Act of 2022 at the end of this year.
Homeowners currently can deduct 30% of their investment costs in solar panels and battery packs from their federal taxes, equating to a $12,000 rebate on a $30,000 solar array and $10,000 battery system.
“The bill does affect our analysis starting next year since our calculations include the 30% federal tax credit,” added lead author Tao Sun, a postdoctoral scholar in Rajagopal’s lab, who earned his doctorate earlier this year in the Department of Civil & Environmental Engineering, a joint department of Stanford’s School of Engineering and Doerr School of Sustainability. “However, homeowners can still access tax credits indirectly after 2025 through leasing arrangements or power purchase agreements. These indirect benefits will continue until 2027 for solar and 2033 for batteries.”
Sun calculated that the removal of this tax credit would reduce the economic viability of solar-battery systems from 60% to about 32%, though this percentage is expected to recover to 60% by 2033 as the cost of battery packs continues to decline.
Declining Utility Payments
Changing trends in state policies also play a significant role in the financial viability of residential battery storage. Many states are now lowering the compensation homeowners receive for selling excess electricity to local utilities, which historically made battery storage less financially appealing.
With lower payments for excess solar power, homeowners can now find it more beneficial to store surplus energy for personal use when the sun isn’t shining, effectively reducing costs by avoiding retail electricity rates.
Non-Economic Areas
The researchers also highlighted that households in states with frequent power outages generally benefit less from solar-battery systems. Meanwhile, those facing higher electricity bill burdens usually see only moderate savings from such installations.
Surprisingly, regions that stand to gain the most cost reductions also achieve higher levels of affordable backup power.
“The solar-battery benefits often fail to align with the areas that need them most, like in certain high-outage-risk states where only one-fourth of households can get affordable backup power from solar-battery systems,” added co-author Arun Majumdar, the dean of Stanford Doerr School of Sustainability. “As weather extremes like heat waves intensify the frequency and severity of power outages, ensuring affordable, secure and sustainable backup power is increasingly critical for at-risk homes.”
Path Forward
The study’s findings underscore the need for targeted economic incentives, financing mechanisms and community-based programs to support regions with high financial and reliability needs but low economic viability for solar-battery systems.
“Economic incentives, financing mechanisms and community-based deployment programs that target areas with high financial and reliability needs but low economic viability of solar-battery systems could help families that need such systems the most,” Sun added.
As Rajagopal emphasized, ongoing research and future innovations like mobile energy storage could further enhance the affordability, sustainability and resilience of energy systems.
Source: Stanford University