Rooftop solar has been an extremely hot industry in 2014 as the economics of installing solar are becoming attractive for both companies and consumers. Solar power systems can now be installed with $0 down through loans or leases in some parts of the country, and more regions are reaching grid parity every year.
What's surprising is where solar energy is already cheaper than the grid. The usual suspects like California and Arizona are already seeing solar costs fall below grid parity, but massive states like Texas and New York that aren't typically thought of as solar hotspots are reaching grid parity, and the industry is only going to expand from there.
Where solar is now beating the grid
The Union of Concerned Scientists recently released a study that shows where rooftop residential solar is already as cheap as buying electricity from the grid. You can see the infographic below and states like California, Nevada, and Arizona highlight the industry's hotspot in the southwestern corner of the country.
But notice that the Northeast is seeing solar costs fall below the cost of the grid as well, something that doesn't seem obvious given the fact that the region isn't known for an abundance of sun. But remember that the cost of solar energy has to be compared to the cost of the existing grid, and the Northeastern U.S. typically has higher energy prices than areas like the Midwest.
Where solar will soon be competitive
The other interesting part of this analysis is where solar energy will soon be competitive with the grid. Florida, Arkansas, Alabama, and Louisiana will soon be able to turn an abundance of sun into power at economical prices. For the Gulf of Mexico, which has long been known for oil and gas production, this is a shift in energy production that could reshape the way the country thinks about energy.
Within three years, a majority of the country's population will see solar energy as a viable alternative to buying electricity from the grid. That alone is the kind of revolution we've never seen in the energy industry.
How to play the growing solar trend
As residential solar becomes more affordable, there are a few companies profiting from the trend. SolarCity (NASDAQ:SCTY) is the nation's leader in residential solar and currently has offices in 13 states and Washington D.C. As new markets become economical, it's certain that SolarCity will expand their reach further across the country.
Vivint Solar is the second largest installer in the country and will soon hit the market with a highly anticipated IPO. This East Coast focused company has recently spread its reach to the West Coast, a market it hopes will bring further fuel to the company's rapid growth.
SunPower (NASDAQ:SPWR) takes a slightly different approach, making the world's most efficient solar panels and then using independent dealers to install solar systems. When combined with a large utility and commercial business this is a highly profitable solar company, something SolarCity and Vivint Solar can't yet say.
Foolish bottom line
Reaching competitive costs has made solar mainstream, and you can see that the industry will only spread as costs come down. The locations that are economical for solar today may surprise you, but it'll be even more shocking how quickly the industry spreads across regions known for oil and gas. The progress in solar may just shift the way the country thinks about its long-term energy future.
Travis Hoium manages an account that owns shares of SunPower and is personally long SunPower shares and options. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.