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| Fig. 1: Typical residential solar photovoltaic installation. Distributed systems utilize existing infrastructure but face higher per-watt installed costs compared to utility-scale plants. (Source: Wikimedia Commons). |
Data from the U.S. Energy Information Administration (EIA) for July 2025 quantify the operational division between utility-scale and small-scale solar generation. As shown in Table 1, utility-scale plants generated 33,119 GWh, while small-scale installations (e.g., residential rooftops, see Fig. 1) generated 9,973 GWh. [1]
Small-scale systems contributed 23.3% of the total solar output. The data indicate that despite the availability of rooftop surface area, the majority of solar electrons are generated in large, centralized facilities.
The dominance of utility-scale generation (76.7%) is explained by the cost of deployment. The physics of the photovoltaic effect is identical in both applications, but the economics of the installation differ.
According to the National Renewable Energy Laboratory (NREL) Q1 2023 benchmark, the Modeled Market Price (MMP) for a residential PV system is $2.68 per Watt direct current (Wdc). [2] In contrast, a 100-MW utility-scale system costs approximately $1.16 per Watt (Wdc). [2]
This price differential means that a Joule of energy generated on a residential rooftop requires roughly 2.3 times the capital investment of a Joule generated in a central station. This gap is driven by economies of scale: utility projects purchase hardware in bulk and streamline permitting and labor, whereas residential projects incur high per-unit costs for acquisition and installation.
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| Table 1: U.S. Solar Photovoltaic Generation by Scale (July 2025). [1] |
The current U.S. solar generation mix, where utility-scale solar outproduces small-scale solar by a rough factor of 3.29, is a direct consequence of these capital costs. While distributed solar reduces transmission losses and utilizes existing infrastructure, it faces a steep economic barrier. Unless the installed cost of residential systems ($2.68/W) can significantly converge with utility pricing ($1.16/W), centralized generation will continue to dominate the energy landscape.
© Amos Sha. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "Electric Power Monthly, September 2025," U.S. Energy Information Administration, September 2025, Table ES1.A.
[2] V. Ramasamy et al., "U.S. Solar Photovoltaic System and Energy Storage Cost Benchmarks, With Minimum Sustainable Price Analysis: Q1 2023," National Renewable Energy Laboratory, NREL/TP-7A40-87303, September 2023.
