7 reasons why solar has become cheaper over time

By: Brooke Nally, SolarPowerAuthority

Forty years ago, if a residential homeowner wanted to install solar panels, they’d struggle to find an installer and battle with the utility company over their reduced electric bill. Today, the cost of solar panels is roughly 100 times cheaper than it was in the mid-1970s, certified solar installation companies are plentiful and utility companies all over the country work with homeowners to make solar installation easy.

This trend of lower costs and better interconnection shows no sign of slowing. Every year, it’s becoming more affordable to install solar panels—in fact, solar officially became cheaper than traditional, carbon-based fuel sources in several countries just last year.

Here are seven factors that have contributed to those plummeting solar costs.

1. Increased popularity

Solar panel popularity has surged over the past few years. In 2016 in the United States, more than one million homes had residential solar installations. Pew Research Center found that nine in ten adults are in favor of expanding solar power use, and job growth in the industry increased 20 times faster than the national average for employment growth in 2015. As more consumers become aware of—and pay for—solar power, the market has more capital for development of cheaper, more efficient panels.

2. Broader market reach

Historically, only states known for their copious amounts of sunshine—think California and Florida—were thought to show potential for solar. Now, however, some of America’s biggest emerging markets for solar energy are in surprising areas: Colorado, New York and even Texas (where public policy historically hasn’t been kind to solar adopters).

3. Corporate adoption

Major companies like Walmart, Apple IKEA, and Target have installed solar panels at some of branches and set a great example for other corporate citizens and private residents alike. These corporate buy-ins have the added effect of encouraging solar growth and development, thus driving overall costs down.

4. Cheaper and more efficient materials

Thanks to increased demand and more developmental resource allocation, the materials used to build solar panels are getting cheaper: in three years, select module costs dropped about 60%. Inverter prices are also dropping, though at a slightly lower rate. Those lower costs are also paired with increased efficiency, further increasing the overall value of solar.

5. Big tax incentives

Federal and state tax credits have offset pricey solar costs for individuals and businesses. The Solar Investment Tax Credit provides a 30% credit for those who install residential or commercial solar arrays. The credit was recently extended out to 2021, though the credit amount steps down after 2019. Some states also offer their own additional tax credits for solar installations.

6. Environmental concern

Big Oil has come under big fire for the harsh effects of fossil fuel production. The environmental consequences of carbon dioxide output are harsh, and the United States is the second-largest producer of those emissions. But solar panels—and, indeed, most other forms of alternative energy—don’t release harmful CO2 emissions beyond what is generated during the equipment production phase. So as legislators and organizations look for ways to scale back harmful greenhouse gas production, many have worked to popularize and subsidize solar arrays for the good they do.

7. Decreased soft costs

Outside of material and installation, solar panels require a host of soft costs like permitting, inspection, transportation, marketing, financing and customer acquisition. According to the US Department of Energy (DOE), these soft costs often represent more than half of the cost of a residential solar system. Fortunately, the DOE introduced the SunShot Initiative to help address market-slowing information gaps and drive soft costs down countrywide.

These developments all represent huge wins for the environment—and for the solar industry. In the next few years, we could possibly see even further cost dips, depending on what the current administration decides to emphasize. But either way, there’s little doubt that solar energy has a place in the future of the world’s electricity generation.

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