First of all "keep going down" ? Good, but they're, well, not there yet. I don't think it's possible for residential solar to become actually profitable given that we already have an electricity grid, without causin the consequences illustrated below. For now lots of things are still under subsidy, and this masks the problem.

Second solar has the problem that it creates a tragedy of the commons. This has been obvious in several European markets now. Once built, the electricity is free, but not continuous. That means that for the majority of the time, traditional utilities have no hope whatsoever of competing with solar prices ... and then comes the 10% not covered by solar or wind (it's easily more than 20%, but I get a feeling we'd get into an argument).

At that point electricity is needed from traditional sources. Of course, because of this they need to be ready at a moment's notice. Capacity needs at that point might vary from 10% of total to 100% of total, so you still need the same fossil fuel capacity you have right now. It doesn't have to run at full speed anymore, of course. It can't be turned off, because when renewables fail, they don't give you much warning (we're talking minutes at most).

Note that means that large scale renewable plants cannot be used to power homes, because of economics. The more of this you have, the less efficient the market becomes (because the smaller ones maintained "for free" by individuals can't be beaten on price).

It has other pros and cons. In the case of plant failure, the system is much more resilient. And in the case that something disables most small plants (say, an earthquake), the system is much more affected than today (because rooftop solar just isn't built to power plant standards). Double this effect for comparison against nuclear (which is built to withstand ridiculous stress for obvious reasons, and that means it can almost always simply remain operational during a disaster)

Here's the kicker :

Disconnecting from the grid is not realistic for most people, Chung said. The current state of battery technology means they have to be replaced after a few years, he said. And putting a system with batteries on a typical house would cost $40,000 versus $25,000 for one without the storage component, he said. Moreover, the battery portion isn't eligible for the tax credits.

(this isn't entirely true, it's only true if you "minimize" the storage component. A battery that can hold 3-5x the power that will ever be drawn from it will last 20-30 years -at least- under that load. If you load it up > 95%, you get 2 years at best)

So we're stuck upgrading the grid ... Or making solar installations 2x or 3x more expensive than the currently are, and not just in money : you need battery chargers, space (batteries aren't small), maintenance, ...

So there's 2 things we "can" do:

1) do what greens suggest, and make the rates reflect the new cost structure. Of course that means effectively raising the rates on traditional electricity by a factor of 10 or 100. This will mean that anyone who doesn't have solar right before this happens is so thoroughly screwed it's not funny.

It will also disproportionately affect the poor. For two reasons. First, they can't pay for their own little renewable plant, and can't get the loan. Second they usually live in highrises that cannot be powered using renewables, except for the penthouse. If you think this is wrong, call up a picture of residential highrises in Hong Kong, you'll see what I mean.

It will also reduce the size of the economy. Energy is one of those non-negotiable things, with almost zero price elasticity. It's effectively a tax. Even more so because the government usually controls the other side.

Oh and, in toto (everything taken together), it's less efficient than centralized production. It's attractiveness (to non-believers) comes entirely from the front-loading of the cost. You invest once and you have 99.99% predictable costs over the entire period. Given that we're running out of oil, for things like Google's datacenters, that's a deal that just can't be beat. It also means that it's now actually possible to give Factories their "dream" electrical contracts : 20-30 year long contracts with fixed prices. You take out a bank loan, build a plant in a place with 100% predictable power usage, and deliver the power over dedicated infrastructure, not connected to the public grid at all.

In short, option 1) will have a lot of victims, and few beneficiaries.

2) We could take the industry's arguments. They do have merit. Electricity is not an optional thing, and taking it away from at least some people is not a reasonable thing to do. So relegating the public grid, and power plants to backup status at 10x or 100x the price per kilowatt is not a reasonable thing to do (for starters, do this anywhere north of New York and you will have the poor in cities freeze to death in large numbers like we had 70 years ago).

Furthermore, allowing people to upload power in the grid really does require modifications. Downward-only plants are much simpler than bidirectional plants. They're also smaller, so in many cases new land must be bought by the utility company.

Who must pay for this ? The industry's argument is simple : if they're forced to accept power from solar, then the people actually doing the feeding in must pay for the modifications, and the loss of ROI in the plants. That's only reasonable, as their solar investment is worth much less without the ability to feed it into the grid, and those power plants.

So ...

So we're back to where we were 10 years ago. Many people want small solar (and in some industrial cases, small-scale wind plants). Who pays for the real cost, in the massive grid modifications, the new market equilibrium (that requires a much higher electricity price), and the necessity of keeping tons of plants spinning idle ?

Either the people installing solar do, or everybody does. My personal opinion is probably clear : we don't have a choice : we must make anybody who wishes to feed in power to the grid pay. And when solar grows large enough without feeding into the grid (which will be the obvious response), we will need to tax renewable installations. The alternatives have consequences that are simply not acceptable.

This is not an issue of crooks defending corporate profits (not that I'm saying that's not part of it). This is an issue of how powering a society gets financed.