Why go solar? Homeowners say: 'To save money'

Residential solar heats up
Residential solar heats up   

Pat Kennell's motivation for installing sun power in his home is typical of the solar industry's new customer: He did it to save money.

The retired police officer from Stony Point, New York, said his cost of energy per kilowatt hour will go from 20 cents with the local utility company to 13 cents with his new solar technology. And it didn't cost him anything to install. The firm Kennell worked with, SolarCity, offered him a lease program, where customers with long-term contracts can have the equipment installed and maintained for free. Rivals of SolarCity offer similar programs.

Read MoreWhy US sunpower may have lots of room to grow

"I needed to save money. I'm retired, my wife is 70, we needed to save some cash, and solar is good for the environment. I expect to save about 25 percent off my energy bill," Kennell said.

Kennell isn't alone. The residential solar market is on fire, with homeowners installing solar systems all across the country—sometimes trying to help the environment, other times just looking to save money. And while the trend has sent solar stocks on a tear, it could disrupt some traditional energy companies.

U.S. home solar penetration still stands at less than 1 percent, but estimates suggest it could grow to as much as 20 to 30 percent by 2020. In dollar terms, the market is expected to hit $6 billion in just a couple of years.

Read MoreTesla's D-Day: The hype versus the reality

Technicians install solar panels on a house in Mission Viejo, Calif.
Mario Anzuoni | Reuters
Technicians install solar panels on a house in Mission Viejo, Calif.

SolarCity, one of the industry leaders with 36 percent market share, says that its crews are working seven days a week to meet demand, and sales representatives have multiple consultations per day to talk to people looking to make the transition to solar. Other solar firms express confidence in the overall market as well.

"The market has a ton of potential. It's already sizable. We have three players valued at over a billion dollars, yet we're only in less than 1 percent of U.S. households," said Lynn Jurich, CEO of privately held Sunrun. "So if you look at the 140,000 homes that received solar last year, we can be competitive with local utility power in about 20 million homes."

The Kennells expect their home to generate 83 percent of its yearly power needs from its new solar panels. And for times when the sun just isn't enough, the home continues to be connected to the traditional utility grid so that it can have a backup source of energy generation.

Read MoreOPEC: Mild winter to pressure oil price even further

When it comes to that traditional utility grid, however, the solar companies' gain could be utilities' pain. Companies like SolarCity are operating in their current capacity essentially as utility companies, so they're disrupting the system and taking market share. Government rules require utilities to support green energy initiatives, so they have to comply and keep solar homes on the grid.

"Basically, we provide power to the customer just like a utility does—it's just at a reduced rate. We like to consider ourselves a producer of power," said Tim Ferdinand, a regional operations manager at SolarCIty.

"There are government mandates in place that influence the utilities. So right now, they're accepting solar systems on a pretty wide scale—maybe not for forever, but for the foreseeable future," Ferdinand said.

"Basically, we provide power to the customer just like a utility does—it's just at a reduced rate. We like to consider ourselves a producer of power." -Tim Ferdinand, regional operations manager, SolarCIty

Some solar firms, at least, indicate that they're interested in partnering with utilities, not threatening them.

"The relationship [between solar companies and utilities], is mixed, honestly," said Jurich of Sunrun. "I think we're a threat to some, and I think people see the adoption, they see that it's inevitable that solar is going to become a mainstream product. And for some, that's threatening, and for others, they look at it like a business opportunity."

Read MoreSouth China Sea: Lots of oil, but lots of uncertainty

Investors have long loved solar stocks, the group has been on a tear. SolarCity, for example, has gone on a run of greater than 400 percent over the last five years. But analysts still like solar stocks because there is so much growth potential.

The exchange-traded funds are one way to play solar, with the Guggenheim Solar ETF and the Market Vectors Solar Energy ETF two of the most popular.

Individual names to watch include SolarCity, First Solar , Suntech, Trina Solar, and NRG Energy.