The Decline In The Cost Of Solar To Slow

While the cost of solar has been ever-changing in the solar power industry, the pace of this change is starting to slow.

What’s beginning to happen in the solar industry is what has happened to many other industries; maturation has led to massive and rather quick reductions in the costs of producing goods while reductions in marketing and service costs occurred at a much slower pace. It’s quite amazing to consider the fact that the cost of producing solar panels is about one-hundredth of what it used to cost; a reduction from about $70/watt to about $0.70/watt. Other costs involved with going solar have not fallen nearly as much.

As can be seen from the cost of solar page, the average cost to go solar with an affordable installer is approximately $3.00/watt in early 2017. Not too long ago, equipment costs alone were $3.00/watt, now they are approximately half of that figure. How much further down can the cost of panels and other necessary solar equipment go from here? The answer is – not much.

Smaller and regional solar installers have also found ways to reduce their customer acquisition, overhead, and labor costs. However, these costs have not come down nearly as quick as the cost of solar panels have in, say, the past 10 years since solar has begun to be adopted in good numbers.

The following graph from GreenTech Media and The National Renewable Energy Laboratory (NREL) shows pricing changes in solar since 2001.
cost of solar breakdown
As can be seen from the graphic, Modules and Inverters decreased rapidly as a percentage of the total cost of installing solar while Racking and Labor increased as a total percentage of costs over the years. The cost of installing solar decreased in all categories, however, Labor and other Overhead costs did not decrease as rapidly. This also means that installers’ profit margins are being increasingly squeezed.

Some predict that the average industry-wide cost of going solar at the residential scale will be about $2.50/watt in the early 2020’s, which means some installers may be slightly cheaper. This brings the per kilowatt hour cost of solar down to as low as $0.05/kWh, not much cheaper than the $0.06-$0.08/kWh possible right now. Sure, it’s the difference in paying $15,000 for a solar panel system instead of $12,500. However, going solar now can offer more savings than waiting a few years for prices to drop a little further.

The most exciting changes to happen to the renewable energy industry in the coming years will occur in the energy storage space. Price reductions for energy storage systems will undoubtedly occur as this technology becomes adopted and energy companies seek more innovation and at the very least, incremental improvements. These cost reductions may not be as significant as we’ve seen with solar cells, but they’re on the way nonetheless. This will all add up to a situation in which it makes financial sense to have battery backed-up solar power in every home.

Much like 2016, 2017 should prove to be another great year for the solar power industry. Prices are starting level off. Homeowners and business owners all across America are becoming increasingly aware of the truly enormous economic value inherent in solar power.

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