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The Cost of Installing Solar Panels: Plunging Prices, and What They Mean For You

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Installing rooftop solar panels has never been more affordable. UCS’s new solar infographic highlights the remarkable drop in the cost of rooftop solar in recent years, and how people are getting systems for even less, or even for zero dollars down. Here’s how the numbers add up (or down), and why—and how you can get in on the action.

As we show in the infographic and our new Solar Power on the Rise report, prices for household solar photovoltaic (PV) systems started dropping around 2009, and fell by almost 30 percent from 2010 to 2013. They went from an average of around $32,000 for a five-kilowatt system to under $23,000 — before tax credits or other incentives.

Getting below $10,000

But the price drops don’t stop there. Homeowners and others can take advantage of a federal tax credit that sends 30 percent back to you at tax time.

At least 45 states and Washington, D.C., also have state tax incentives for homeowners and businesses, and some local governments offer additional incentives, like property tax exemption. Some states have rebates, and some have solar carve-outs in their broader renewable electricity standards that offer solar system owners a chance for additional revenue.

All told, in leading states, the price drops and combination of incentives mean that an installed system could cost less than $10,000—a far cry from what solar was costing just a few years ago. And it means that some people are seeing payback periods of as little as 4 to 6 years.

UCS solar power infographic panel 1 - falling prices

Why solar costs are falling

There are several factors for the price drop:

  • Economies of scale is a big one. Global solar panel production (for rooftop and other markets) grew from 24,000 megawatts (MW) in 2010 to 40,000 MW in 2013 — a 67 percent increase in just three years. China has also come on the scene in a big way in recent years, which has lowered market prices.

    Source: National Renewable Energy Laboratory Workers install PV modules on an Englewood, CO, home. Jobs are just one of the economic benefits that come from the increased investment in renewable energy spurred by state renewable electricity standards.

    Source: National Renewable Energy Laboratory

  • Reductions in “soft” costs, is another important piece. Soft costs are those associated with things like sales and marketing, local permitting, and hookup to the local electricity grid — and even how much profit installers make on a given transaction. Many of these pieces are related to economies of scale, too: more systems in a given area means some fixed or first-time costs (advertising, or introducing a local inspector to rooftop solar) can get spread over a larger customer base.

What all that means is that, in more than half of U.S. states, solar could be at or near the point of “grid parity,” where power from a system on your roof could cost about the same as what you get from your electric utility. (Check out my colleague Mike Jacobs’ thoughts on solar grid parity.)

How about zero dollars down?

Another way that solar has been becoming much more accessible is through innovative ownership structures, particularly leases or power purchase agreements. Leases aren’t new — auto dealers and customers make good use of them — but in recent years they’ve taken the solar world by storm.

Under these types of arrangements, you might be able to pay little or nothing up front to get solar on your roof, then pay a monthly fee or pay for the solar electricity each month based on how much it actually produces.

As with the lease/buy decision that people make when they’re on the market for a car or truck, those types of deals won’t be for everyone. But it turns out that a lot of people are pretty keen on the idea: third-party-owned arrangements account for two-thirds of new home systems.

How do I get a piece of the action?

So how do you get in on the fun, take charge of your electricity bill, push for a cleaner energy future, and maybe end up with a great investment? Here are a few ideas:

  • Check out incentives. The DSIRE website is a great resource for all kinds of energy (and efficiency) rebates and incentives, including ones for solar.
  • Ask your neighbor. If someone you know has gotten solar, find out what you can about where and under what terms he/she got it.
  • Call around. See what solar suppliers in your area can offer, in terms of systems and products, plus financing.
  • Read Solar Power on the Rise. Okay, so it might not actually get you in on the fun, but it’s a quick read and it’ll give you a better sense of the technologies, the issues, and the opportunities.

As our solar infographic helps show, there’s a revolution happening, and it’s worth looking into.

 

Posted in: Energy Tags: , ,

About the author: John Rogers is a senior energy analyst with expertise in renewable energy and energy efficiency technologies and policies. He co-manages the Energy and Water in a Warming World Initiative (EW3) at UCS that looks at water demands of energy production in the context of climate change. He holds a master’s degree in mechanical engineering from the University of Michigan and a bachelor's degree from Princeton University. See John's full bio.

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  • Dave

    Global solar power costs have fallen dramatically over the last five years, thanks to latest technologies and federal policies. Further cost reductions by 2020 are expected to bring the cost down to between $50 – $70 per MWh. According to PV Solar Report “Solar power will be the cheapest energy in the world by 2020″. Read the article at http://bit.ly/Y7ftBV

    • ucsjrogers

      Thanks, Dave. There are certainly lots of trends pointing in the right direction. Mighty impressive. – John

  • chetanyadav

    Yes the cost of the solar roof is decrease because many people use the solar roof.

    Read more……….
    http://www.solarpanelchandigarh.com/voltage-stabilizers/

    • ucsjrogers

      Thanks for weighing in, Chetan. Improvements in the economies of scale, cost, performance, and efficiencies of electronics have been part of the solar’s recent success. Inverters turn the DC (direct current) output from solar panels into the AC (alternating current) that we use in our houses, Microinverters let each panel operate independently, so that even if one gets shaded by trees, the rest can keep working at full power. Maximum power point trackers help keep it all performing optimally. All good stuff, and important tools for the solar revolution. – John

  • http://solarbrokerscanada.com/ Solar Brokers Canada

    Yes definitely its better to own the system. Now with the Free Solar program by the Government of Ontario, residential consumers can get the system installed on their rooftop for free.

    • ucsjrogers

      Thanks, Canada. Lots of great options out there, and part of the excitement of solar is the many different solutions springing up to make solar happen even more quickly. – John

  • inductancereluctance

    “How about zero dollars down?” Then how about a $0 down FHA solar loan with tax deductible interest that lets you keep the 30% federal tax credit and any other applicable incentives.

    This excellent article illustrates why it’s far better to own rather than sign an expensive 20 year solar lease or PPA contract. Prices are far too low now to even consider a lease.

    • ucsjrogers

      Thanks, inductance. Purchase options definitely have their place, and that piece seems poised to grow again. And it’s certainly worth exploring different financing options, since most of us don’t have that kind of cash on hand.

      Leases and power purchase agreements have been really important in helping the pie to grow, though, and are still worth considering for lots of people, where they’re allowed.

      - John

  • ChrisHeinz

    Lexington, KY. I recently got a quote. $28K w $10K tax breaks. But, only covers 1/2 my energy needs (11K KWH of 18K KWH), and takes 14 years to pay for itself in energy savings. Plus very unresponsive sales — no answers to questions I asked. I guess I need to keep shopping around.

    • inductancereluctance

      Then you need to shop at Kentuckysolar .com where prices are as low as $1.59 per watt for a complete system and your return on investment is only 4 to 6 years. Even less if you install it yourself. A system of that size should only cost you less than $10,000 installed after only applying the 30% federal tax credit.

    • ucsjrogers

      For a major purchase like this, Chris, shopping around certainly makes sense. It’ll certainly be true, though, that some markets are more developed — more suppliers, more competition, lower prices, better service — than others. You’re helping to drive that by showing your interest and your willingness to invest. Thanks for that. – John

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