Are Home Solar Costs About to Plummet?

To predict the future costs of residential solar systems, it helps to understand not only how far prices have dropped in recent years, but what factors are behind those reductions in costs.

Two major organizations that track solar cost trends are the Solar Energy Industries Association (SEIA), an industry group, and the Lawrence Berkeley National Laboratory, funded by the federal government. Both organizations recently published studies that show reductions in all aspects of residential solar energy systems.

Overall, from 2009 to 2010, solar array installation costs have dropped by 17 percent. Costs for wafer and cells each dropped 25 percent, while the cost of a solar panel module dropped 12 percent. Non-module costs, which includes labor installation costs and the inverters that convert solar DC energy into household AC electricity, dropped 18 percent.

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Both studies credited market growth as the major factor in achieving these across-the-board reductions. As the industry grows, more money is invested in cost-cutting technology and methodology. Creating solar panels with greater efficiency gives solar companies a competitive edge.

The better a solar panel becomes at converting every ray of available sunlight into energy, the more cost-efficient they become as well.

SEIA reports that the solar industry has now produced enough modules to double the current number of residential solar energy installations next year. It can take 18 months for a reduction in the cost of materials to affect installation costs.

The fastest-growing sector of the solar market in the United States is solar leasing.

The opportunity to lower monthly electrical bills without purchasing a residential system is a popular option for many homeowners.

SEIA predicts that the combination of solar leasing and dropping module costs will continue to drive the industry forward in the near term.

The Berkeley study noted that some of the solar rebate programs that have sparked market growth are starting to be cut or phased out. The federal incentive program that pays for 30 percent of the cost of a residential solar system is not scheduled to expire until the end of 2016.

Some states, however, are cutting or reducing their solar rebate programs. Also, as the price per watt of solar energy lowers, those incentives based on dollar-per-watt formulas are reduced as well.

When predicting future reductions, it’s important to recognize that it is primarily the growing market for solar that is driving down costs. While experts believe costs will continue to fall in the short term, continuing cost reduction is linked to future market growth.

Considering the wide variety of generous incentive programs that are available now, such as those in Los Angeles, San Francisco, Oakland, San Jose, San Diego, New Jersey, Arizona and much of the East Coast, and the current reduction in residential solar installation prices, there may be no better time to switch to the power of the sun than right now.

Photos via Flickr CC

Posted on October 5th in Solar Funding by Brittany.