As you’re probably aware, the U.S. home solar market is booming. Solar is the fastest-growing source of power generating capacity in America – and residential rooftop solar was the fastest-growing part of the solar market, with 186,000 households going solar last year representing the third straight year of greater than 50% growth for this segment.
This skyrocketing growth isn’t because of a sudden explosion in environmental consciousness – although having everyone from Leonardo DiCaprio to Pope Francis talking up how going solar can save the planet certainly doesn’t hurt. Instead, it’s primarily due to good old-fashioned dollars and cents – going solar can save you money, since generating your own solar power is less expensive than buying electricity from your utility in many cases.
But how did going solar get to be so cheap – and is it going to stay this way? Right now, the home solar market is witnessing a perfect storm of circumstances that are combining to make going solar easier and cheaper than ever. However, there are serious questions about whether these prices are going to continue their seemingly-inevitable downward trend – in fact, there’s good reason to think there may be some turbulence in solar prices in the years ahead.
To understand why, let’s look at the three main factors that are creating this perfect storm:
Declining Panel and Installation Costs:
The costs of solar panels themselves are falling steadily as manufacturers build ever-larger and more efficient factories to serve a solar market that is booming all over the world, not just America. And, in addition to these serious manufacturing economies of scale, we’re also seeing major declines in “soft costs” – all the costs other than the panel itself, such as system design, integration, and installation – as solar installation companies become larger and more sophisticated. These factors have combined to reduce the cost of going solar from about $9 per watt a decade ago to less than $3.50 a watt today.
Temporary Government Incentives:
As part of the 2009 stimulus bill, the federal government extended an income tax credit equal to 30% of the costs of a solar installation – the Residential Energy Tax Credit – through the end of 2016… Which is pretty soon, all things considered! There are also numerous local and state-level incentives that may be available depending on where you live – but most of these are temporary as well.
Finally, a big part of the solar boom has been the growing availability of solar financing plans that allow you to go solar for little or no money down, allowing homeowners to start saving on utility bills without big up-front costs – which makes the decision to go solar pretty easy, all things considered. An increasing share of this financing is coming from solar loans – which the National Renewable Energy Laboratory (NREL) estimates will save homeowners up to 30% more in the long term than other financing alternatives. Companies like Mosaic have no money down home solar loans.
So, what does this mean for the cost of going solar going forward? While those solar panel costs are likely to keep coming down, the amount of government incentives are definitely going to come down too – and there’s a lot of debate in the solar industry over whether the former are going to happen quickly enough to keep up with the latter, or whether we’re going to see a sharp increase in the cost of going solar on January 1, 2017. Given this uncertainty however – and given the ready availability of no-money-down financing these days – it makes sense that homeowners who have done their homework are planning to go solar ASAP, since this “perfect storm” might be ending soon.