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Won't Solar Prices Keep Dropping?

Solar Basics | 2 min read

Advances in technology have positively impacted our life experiences and have often reduced the costs of many of the products we purchase today. At the risk of revealing my age here, I recall the first calculator I used in 1979 when I entered the workplace. It had “advanced functionality” and had cost the company over $1,000 to purchase! By today’s calculator standards, it had very little functionality and it sounded like a mass of gears grinding together when it ran.


Calculators have come a long way! So what about solar arrays? Aren’t they constantly improving and dropping in cost? Shouldn’t I wait to buy?


The Declining Cost of Solar


Without a doubt, the costs of solar electricity generation facilities have been declining for years now. According to the National Renewable Energy Laboratory of the U.S. Department of Energy, the cost of installing solar panels on the average home has plummeted 70 percent since 1998, from nearly $86,000 for a 5-kilowatt installation (the average residential solar array) to just $26,000 in 2014. Over the past five years, most sources indicate decreases have ranged between 8 %– 13% annually.


Here at Paradise Energy Solutions, we also monitor these trends, and one thing we have noticed is that for each of those five years since 2010, the rate of pricing decreases has slowed. There is a good reason for this. A solar installation consists of numerous cost factors, from solar modules and inverters to wiring and miscellaneous hardware, and engineering and installation labor costs. Some of these costs are facing inflationary pressures, meaning costs are rising! The most dramatic cost decreases have been in hardware like modules and inverters due to the ever-increasing volumes associated with more solar installations, thus resulting in improved efficiencies and reductions in manufacturing costs.


However, as these hardware costs drop, their portion of the entire cost “pie” of a solar install also decreases, slowing the rate of decline in total solar system costs if the other parts of the “pie” don’t also decrease. While we work hard to reduce costs in our permitting processes and administrative costs, often referred to as “soft costs”, it stands to reason the cost slide of solar will slow, and could even reverse, at some point in the not so distant future.


So Why Buy Now?

This anticipated decline in prices could lead one to conclude that I should wait until next year, or the next year or the next.... However consider these arguments against that thinking. Interest rates on loans and other investments remain at all-time lows. Additionally, the US Government is in the midst of stepping back the solar investment tax credit. In 2020, this credit lets your recover 26% of installation costs. In 2021, it steps down to 22%. In 2022, the step down comes to an end at just a 10% credit for commercial systems only. 


As costs likely slide in the future, so will incentives, and quite possibly by more than the reduction in costs. Also most public utility prices show a 10 year average annual increase of between 2% and 5%. Waiting will prevent you from recognizing savings today, so why not now?


At Paradise Energy Solutions, we would love to help you work through the process of considering this great investment opportunity today! Send us a message to learn more.


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