Is Low-Cost Solar Trickling Down?
Photo credit: Horizon Energy Systems
A weak economy and credit crunch have sent solar demand plummeting in the last year. In the span of months, solar manufacturers’ main issue turned from a noticeable lack of supply to a sudden overabundance of it. As bad as that may be for suppliers and manufacturers, that should spell good news for homeowners who are eager to see expensive panel prices — a major historical barrier to residential solar deployment — fall into a more reasonable range.
But are these plummeting prices trickling down to homeowners on the solar movement’s front lines? It would appear so, although the trend is just beginning. Finding specific information on cost per watt of current solar installations is not all that easy, as most industry analysts are taking a macro-approach to the current crisis.
Photo credit: Horizon Energy Systems
The average cost per watt of solar electricity has certainly been dropping, from $7.60 to $6.40 per watt since October and the market crash. The imminent rise of thin-film solar panels will only send this price further down. Although less efficient, manufacturing innovation has facilitated production costs, breaking the $1.00 barrier, as in the case of industry leading First Solar.
The cost of a residential solar system has two main cost factors: equipment and labor. Traditionally (as in the last five or so years), solar panels themselves ran about $4-5 per watt. Add installation costs and the going rate for solar systems was $9-10 per watt. As you can see, production costs reaching one dollar for thin film panels will have a massive effect on overall pricing. Even for conventional silicon-based panels, prices are dropping down to around $3 per watt before installation.
Therefore, we are seeing a big barrier to residential solar installations come down – in the short term thanks to weak demand and through the long term because of advanced technology. For now, while panel prices are dropping, and homeowners can enjoy some of that discount, the trickling down of solar costs has only just begun by many accounts. With subsidies, cost of solar installations are already down to roughly $5 per watt in California, by far the nation’s leader in solar installations. With new federal subsidies to boot, the end cost should fall for everyone this year and continue to do so over the next several years, even as incentives phase out.
Most experts see demand for solar beginning to rise once more in the short term. As it does so prices should level off, although reaching their former peak is unlikely. Now the main issue is making sure people have steady jobs from which they can afford a solar energy system.
Posted on May 21st in Going Solar by Dan.