Still think solar panels are an expensive way to generate electricity? Think again. Solar energy system costs have fallen significantly in recent years, becoming increasingly competitive with power from electric utilities across the US. And as the global solar industry grows, prices look set to fall even further.
According to Deutsche Bank’s 2015 Solar Outlook report, solar energy system costs are likely to drop 40% in the next 4-5 years, in keeping with the steep downwards trend of the past decade. Given that utility electricity rates are only going to continue to rise, this means solar is set to become an increasingly attractive financial option for homes and businesses around the US – and the world.
Another report titled “Renewable Energy Generation Costs in 2014” released in January by the International Renewable Energy Association (IRENA) backs up Deutsche Bank’s conclusions. Like the Deutsche Bank report, IRENA also concludes that falling costs have made solar financially competitive with grid electricity in many parts of the world – including much of the US. The report also shows that there have been dramatic declines in the cost of solar energy systems in the past few years (including a 3/4 drop in the cost of solar panels) – and says that there is still substantial room for further cost reductions as the solar industry expands.
Key takeaways:
- Both Deutsche Bank and the International Renewable Energy Agency (IRENA) have recently released reports saying that solar energy system costs have come down significantly in recent years, and that they will only continue to fall further in the future
- As solar systems costs come down, electricity prices will continue to rise; this will only increase the attractiveness of solar energy as an investment for homes and businesses
- Even without subsidies, solar energy is already cost-competitive with grid electricity in many states
- Because solar energy system costs have come down so dramatically, owning your solar system (either through cash purchase or by financing with a $0-down solar loan) is more feasible and financially attractive than ever
- Owning your solar system will save you more money in the long run than financing it through a solar lease or power purchase agreement (PPA)
- The fact that solar costs are going to fall further does not mean that you should wait to buy a solar system – federal, state and local incentives for solar energy systems are gradually being scaled back, and utility electricity rates continue to rise
Solar already cost-competitive with utility electricity in parts of the US
The main takeaway from these reports is this: Depending on your location, solar energy may already be cost-competitive with the electricity that you purchase from your utility – even before you take federal, state and local incentives into account. This phenomenon is known as ‘grid price parity’ – or, when talking about rooftop solar systems, sometimes ‘socket price parity’. In many parts of the US (and the rest of the world), solar has already reached this important milestone.
In Hawaii, for example, solar energy’s levelized cost of energy (LCOE – cost of a solar system divided by the total electricity it will produce during its lifetime) is already significantly lower than the cost of utility electricity (as per Figure 20 below). This makes going solar a financial ‘no-brainer’ for any Hawaiian with an shade-free roof – and in fact, going solar in Hawaii may be a more attractive prospect than anywhere else in the country.
But that doesn’t mean that Hawaii is the only place where going solar makes good economic sense. Although the exact prices vary from state to state, unsubsidized solar is on average already at grid parity for the US as a whole (as per Figure 20 below). Federal and state incentives for solar power and other renewables only sweeten the deal further.
Are you interested in learning more about the financial benefits of going solar in your state? EnergySage can help you compare your options: Get an instate estimate and join our free Solar Marketplace today.
What does more affordable solar mean for you?
Lower costs are certainly good news if you are in the market for a solar energy system. This is true for two main reasons:
1) It is now easier than ever for you to own a solar energy system.
One of the driving forces behind the rapid expansion of rooftop solar in the US in recent years has been the introduction of $0-down solar leases and power purchase agreements (PPAs). These two solar financing options were incredibly important in making rooftop solar financially attractive and bringing it into the mainstream. Under these programs, a third-party company owns your solar system and sells you the electricity it generates at a rate that is lower than what you pay your electric utility. The company who finances the system makes money and you (ideally) save money.
Solar leases and PPAs programs were originally conceived when solar energy system prices were significantly higher than they are now, and purchasing a solar system was not a realistic option for most ordinary homeowners. But now, with solar costs coming down and with the introduction of $0-down solar loans, owning your solar system is not only realistic – it is also in fact a financially sensible move.
2) Lower solar energy system costs mean greater savings on your electricity bill.
The National Renewable Energy Laboratory (NREL) has recently released a report highlighting the benefits of owning your solar system instead of leasing it. NREL concludes that purchasing your system with cash could save you as much as 30% more money on your electricity bills over the course of your solar system’s lifetime (25+ years) than if you financed your system with a solar lease or PPA.
We here at EnergySage have also written about the pros and cons of purchasing vs leasing your solar energy system. You can read more here: “Should I buy or lease my solar energy system?”
Should I wait until solar energy system costs have come down further before I get my system?
This is a question that we receive regularly here at EnergySage. Even as solar energy system costs come down, federal, state and local incentives for solar power are gradually being scaled back. The combination of these two factors is shaping the US solar market in interesting ways – for example, they’ve made it possible for solar loans to become an attractive alternative to solar leases.
It also means that it if you wait until tomorrow you’re not necessarily going to get a better deal on your solar system. The purpose of incentives is to create a market for something; once a market is created and self-sustaining, costs will come down as competition increases. From a governmental perspective, incentives are ideally phased out so that out-of-pocket prices remain relatively stable.
Also remember that for every day that you do not have your solar energy system, you are paying more for your electricity than is necessary. So why wait? If you’re thinking about going solar, do it while the incentives are strong.
You can read more on this topic here: Is now the right time to buy a solar energy system or should I wait?
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