The price of solar equipment has dropped by 89% since 2010. Will it continue to get cheaper?
If you’re interested in solar and renewable energy, you’re probably aware that the prices of wind and solar technologies have dropped an incredible amount in recent years.
There are a couple questions that homeowners who are thinking of going solar often have. The first is: Is solar power getting cheaper? And other is: If solar is getting cheaper, should I wait before installing solar panels on my house?
The price of solar panels, inverters, and lithium batteries has gotten cheaper over the past 10 years. Prices are expected to continue to drop – in fact, solar is projected to steadily decline in price through the year 2050.
However, the cost of solar installation will not drop at the same rate because hardware costs are less than 40% of the price tag for a home solar setup. Don’t expect home solar to be dramatically cheaper in the future. In fact, your cost may increase as local and government rebates expire.
If you’re thinking of adding solar to your home, waiting probably isn’t going to save you money. Install your solar panels now, especially because tax credits do expire.
How much does it cost to install solar panels on a home?
There are a lot of factors that go into the cost of a home solar panel system, and a lot of choices you can make that affect the final price you pay. Still, it’s useful to know what the industry trends are.
The price compared to 20 or 10 years ago is impressive, but the recent decline in price isn’t nearly as dramatic. This means that you can probably expect the cost of solar to continue to drop, but don’t expect a big cost savings.
How much have solar energy prices fallen?
The price of solar panels has dropped by an incredible amount. Back in 1977, the price of solar photovoltaic cells was $77 for just one watt of power. Today? You can find solar cells priced as low as $0.13 per watt, or about 600 times less. The cost has generally been following Swanson’s Law, which states that the price of solar drops by 20% for every doubling of shipped product.
This relationship between manufacturing volume and price is an important effect, because as you’ll see, the entire global economy is shifting rapidly toward renewable energy.
The past 20 years have been a time of incredible growth for distributed solar. Distributed solar refers to small systems that are not part of a utility power plant – in other words, rooftop and backyard systems on homes and businesses throughout the country.
There was a relatively small market in 2010, and it has exploded in the years since. While there was a drop in 2017, the growth curve in 2018 and early 2019 has continued upward.
Swanson’s Law describes how this massive growth has also led to a massive drop in price: solar module costs have dropped by 89% since 2010.
Hardware costs versus soft costs
When you think about a solar system, you might think that it’s the hardware that makes up most of the expense: the racking, wiring, inverters, and of course the solar panels themselves.
In fact, hardware accounts for only 36% of the cost of a home solar system. The rest is taken up by soft costs, which are other expenses that the solar installer must bear. These include everything from installation labor and permitting, to customer acquisition (i.e. sales and marketing), to general overhead (i.e. keeping the lights on).
You’ll also notice that soft costs become a smaller percentage of system costs as the system size increases. This is especially true as you go from residential to utility scale projects, but large residential systems generally also have a lower price-per-watt than small systems. This is because many costs, such as permitting and customer acquisition, are fixed and don’t vary much (or at all) with the system size.
How much will solar grow globally?
The United States is actually not the largest market in the world for solar. China is outpacing the US by far, installing solar at about double the rate of the US. China, like most US states, have a renewable energy target. They’re aiming for 20% renewable energy by 2030. That’s a big shift for a country that used coal to power much of its industrial growth.
By 2050, 69% of the world’s electricity will be renewable.
In 2019, solar power supplies only 2% of the world’s energy, but it will grow to 22% by 2050.
Massive, grid-scale batteries will be a key catalyst for this growth. Batteries will be 64% cheaper by 2040, and the world will have installed 359 GW of battery power by 2050.
The cumulative amount of solar investment will hit $4.2 trillion by 2050.
In that same period, coal usage will drop by half globally, down to 12% of the total energy supply.
Residential solar installed costs have stopped dropping, but people are getting better equipment
The latest report from Berkeley Lab shows that the installed cost of residential solar has flattened out in the past couple of years. In fact, in 2019, the median price rose by about $0.10.
On the face of it, that might make it seem like solar has actually started to get more expensive. It hasn’t: costs continue to drop every year. In fact, what’s happened is that residential customers are installing better equipment, and getting more value for the same money.
For example, in 2018, 74% of residential customers choose micro inverters or power optimizer-based inverter systems over less expensive string inverters. In 2019, this number took a big jump to 87%.
Similarly, in 2018, the average solar homeowner was installing solar panels with 18.8% efficiency, but in 2019 the efficiency rose to 19.4%.
So while the invoice price those homeowners are paying for solar these days is flat or even slightly increasing, they’re getting better equipment for the same money.
Should you wait for solar to become cheaper?
In large part because of the stubborn nature of soft costs, if you’re wondering if you should wait for costs to drop further, we would recommend not to wait. Only 36% of the cost of a home solar installation is related to hardware costs, so waiting a few years won’t result in the kind of dramatic price drops we’ve seen in the past. Solar hardware is already very cheap.
Today, either wind or PV are the cheapest new sources of electricity in countries making up around 73% of world GDP. And as costs continue to fall, we expect new-build wind and PV to get cheaper than running existing fossil-fuel power plants.
Post time: Jun-29-2021