Cost of Solar Power Continues Massive Drop
Solar energy continues to dominate headlines, and with good reason — it’s clean, it’s effective, and it’s cheaper than ever.
The cost of solar has never been lower. Here’s how the solar drop breaks down throughout the past several decades, and why we can expect it to continue to drop even further.
Solar in the 1970s to 1980s
This graph from Bloomberg (BNEF) shows the extremely stark difference in pricing between solar in 1977 and today:
The price per watt in 1977 began at over $76. In 2013, it was down to $0.74/watt. That makes solar over 100 times cheaper within 35 years.
Solar from the 1990s to 2000
Fast forward to 1992, when the University of South Florida developed a 15.9 percent efficient thin-film photovoltaic cell made of cadmium telluride, breaking the 15 percent barrier for the first time for this technology. Throughout the decade, greater leaps would be made in solar technology, but prices would still not drop to a point that would peak consumer interest.
Nonetheless, this second chart shows prices continued to fall:
Solar from 2010 to 2014
By the time we hit the current decade, solar was really heating up. Thanks to dropping prices per watt, new federal incentives, and new financing options, the cost of solar for the average homeowner really began to drop — and fast — allowing residential homeowners to finally install solar rooftop panels at a much more reasonable rate than in the past.
Just how much more was installed? The Solar Energy Industries Association (SEIA) found the U.S. installed 4,751 MW of solar PV in 2013, up 41 percent over 2012 and nearly fifteen times the amount installed in 2008. More solar had been installed in the U.S. in the last 18 months than in the 30 years prior. And solar accounted for 29 percent of all new electricity generation capacity in 2013, up from 10 percent in 2012. Why, you ask? It’s in part because the average photovoltaic system price fell by 15 percent in that year.
This report from SunShot (part of the U.S. Department of Energy) explains it further, breaking down how module prices in general fell and led to further price drops all around:
Following a period of relatively steady and sizeable declines, installed price reductions began to stall around 2005, as the supplychain and delivery infrastructure struggled to keep pace with rapidly expanding global demand. Beginning in 2008, however, global module prices began a steep downward trajectory, which has been the driving force behind the roughly 50% reduction in the installed price of PV from 2008 through 2013. Those module price declines ceased in 2013, and given the limits to further reductions in module prices, continued deep reductions in installed prices will necessarily require significant reductions in non-module costs.
As for those savings in solar system prices, the National Renewable Energy Laboratory (NREL) published that photovoltaic system prices of residential and commercial PV systems declined six to seven percent per year, on average, from 1998 to 2013, and by 12 to 15 percent from 2012–2013, depending on the system size. Moreover, the average reported prices also fell by roughly $0.24-0.48/watt (from five to 12 percent) during the first half of 2014, relative to 2013.
Another NREL report points out that solar electricity generating capacity grew by a factor of 35 between 2000 and 2013 and accounts for half a percentage of annual U.S. electricity generation. In fact, U.S. states with extensive solar incentives led in both cumulative and annual American photovoltaic solar system installations in 2013, specifically in Arizona, California, Massachusetts, New Jersey, and North Carolina.
Just in the last five years, the solar energy capacity in the U.S. has grown by an astounding 418 percent, according to the U.S. Energy Information Administration’s April 2014 Electricity Monthly Update. Yes, you read that right. It’s just not possible that capacity could have quadrupled had prices remained as high as they were even in 1999.
The Future of Solar
Projects built in 2014 had a lower lifetime cost per kilowatt-hour than projects built in 2010, according to Vox. Conversely, other energy sources like biomass, geothermal, and hydropower haven’t seen big drops in cost lately. The more efficient technologies right now belong to solar.
Despite price drops, there is still a lot of uncertainty surrounding how low those solar system prices will keep dropping over the next five to 10 years. Solar in large measure thanks to government incentives, including a 30 percent tax credit on new installations. Those tax credits are set to expire in the next couple of years, which leaves solar companies and investors asking whether or not the greatly reduced price will still draw new consumers. The alternative left for homeowners who may think it’s too expensive to buy solar panels is leasing, which is generally a bad deal for the consumer.
That said, the consensus seems to be that reducing carbon emissions and increasing solar energy production is well within reach. That’s why states from Hawaii to New York have set out ambitious solar energy goals to meet, as well as why major tech companies like Amazon, Google, and Apple are investing their own capital to build solar farms.
So what is next for solar? Will prices drop even more, down to 50 cents per watt? What states will dominate solar in 2015? Will solar systems being installed generate twice as much power? What about untapped markets, like business and commercial solar? Only time will tell.
Photo Credit: via FlickR under a Creative Commons license