Abstract Solar space heating and cooling systems normally require some form of back-up to take account of protracted periods of cloudy weather. With relatively low utilization, capital costs are likely to be the most crucial aspect in choosing such back-up systems and the tendency will be to choose systems running on electricity or natural gas. Widespread adoption of solar power could have a profound effect on utility demand patterns. The authors examine here the possible effects, pointing out that the cost-effectiveness of solar power can be crucially dependent on the rate structure chosen and on whether the system is considered from the point of view of the customer or the utility. In the appendix they also provide details of current R&D on solar space heating in the USA.