For the homeowner or business interested in solar, the cost of solar is generally measured in one of two ways. If you’re interested in purchasing the system outright, price is generally quoted per installed watt. For example, a typical residential system is 5,000 watts (or 5 kilowatts). If the quoted price is $4.50 per watt, the total system price is $22,500. However, such purchase arrangements are now practically a rarity. Far more common are financing arrangements where price is quoted in an amount paid per month. So long as this amount is less than the typical monthly utility bill (in many cases the savings are significant) the customer has an economic incentive to put solar on their roof.
However we view cost structure and pricing, 2012 was a banner year in making small-scale solar more affordable. The California Public Utilities Commission found earlier this year that residential solar system costs decreased 28% since 2007. The Q3 2012 SEIA/GTM U.S. Market Insight noted that residential and commercial system costs fell nationwide in the past year by 15%.
These figures are noteworthy, but as market-wide averages they mask an arguably more important trend – prices charged by the most experienced solar installers have come down much more impressively. We’re now building systems in California and throughout the country at price points considered absolutely unthinkable just twelve months ago. In fact, solar systems can today provide electricity at a cost equal or less than retail electricity prices in twenty states.
This fundamental change in solar’s cost equation is largely thanks to solar panel pricing. Priced at roughly $2.00 per watt two years ago, top-tier solar panels can now be purchased wholesale for under $1.00 per watt. Simultaneously, larger solar installers have made meaningful strides in reducing the design, labor, and overhead needed for each system. A fiercely competitive industry landscape also helps ensure that consumers are getting both affordability and quality.
Truly there has never been a better time to evaluate whether solar can help reduce short- and long-term electricity costs. Even if you’ve previously priced a solar electric system, it’s worth taking another look.
There’s also reason to believe that any further cost reductions may be less significant. As noted by the National Renewable Energy Laboratory and Lawrence Berkeley National Laboratory, as hardware costs fall, ‘soft’ paperwork and process costs (e.g. permits, fees, inspections, interconnection requirements) grow in prominence. Indeed, we’ve learned that designing and building top-notch solar systems isn’t a guarantee of success – solar companies must also be highly proficient at dealing with a labyrinth of jurisdiction-specific codes, rules, processes, and forms. Taming this government paperwork monster won’t be easy. Furthermore, while solar panels have become notably cheaper other significant system components – including the inverter, wiring, and aluminum racking – consist largely of metal, which continues to increase in price.
Yet there remains a quiet upheaval underway. Solar becomes more affordable. Conventional electricity becomes more expensive. And we’re working to see that everyone can save money and enjoy the benefits of cost-effective solar energy delivered by systems installed on homes, businesses, and schools.