Will solar panels get cheaper?
The price of solar equipment has dropped by 89% since 2010. Will it continue to get cheaper?
If you’re interested in solar and renewable energy, you’re probably aware that the price of both wind and solar technologies have dropped an incredible amount in recent years.
There are a couple questions that homeowners who are thinking of going solar often have. The first is: Is solar power getting cheaper? And other is: If solar is getting cheaper, should I wait before installing solar panels on my house?
I think the answers to both questions are clear. Solar power has gotten dramatically cheaper in the past 10 years, and is absolutely expected to continue to get cheaper. In fact, it’s expected to steadily drop in price through the year 2050. And because the price will always be dropping, there’s really no point in waiting, because there’s no bottom price in sight. Install your solar panels now, especially because tax credits will expire.
Because renewable energy is such an incredibly important part of the economy now and in the future, a lot of high quality research has been done in this area. I’m going to draw information from three different sources, all of which you can regard as highly credible.
Data sources for this article
There are three freely available reports that I’m going to refer to here. I’m only pulling some key points from them, so if you want to read them in depth, they’re available here:
- New Energy Outlook 2019 from Bloomberg New Energy Finance
- Tracking the Sun from Lawrence Berkeley National Laboratory
- US Solar Market Insight from the Solar Energy Industries Association
How much have solar energy prices fallen?
The price of solar has dropped by an incredible amount. Back in 1977, the price of solar photovoltaic cells was $77 for just one watt of power. Today, it’s around $0.13 per watt, or about 600 times less. The cost has generally been following Swanson’s Law, which states that the price of solar drops by 20% for every doubling of shipped product.
This relationship between manfacturing volume and price is an important effect, because as you’ll see, the entire global economy is shifting rapidly toward renewable energy.
As you see in the graph below, the past 19 years has been a time of incredible growth for distributed solar. Distributed solar refers to small systems that are not part of a centralized power plant - in other words, rooftop and backyard systems on homes and businesses throughout the country.
This graph shows how many systems were installed per year. As you can see, there was hardly any market in 2010, and it has exploded in the years since. While there was a drop in 2017, the growth curve in 2018 and early 2019 has continued upward.
Swanson’s Law describes how this massive growth has also led to a massive drop in price: solar module costs have dropped by 89% since 2010.
How much will solar continue to grow in the United States?
The growth of renewable energy has been driven by two things: better technology and manufacturing volumes have driven down the price by so much that the cost of renewables is on par with gas and coal, or even cheaper in many cases.
Second, the majority of people live in states that have a renewable portfolio standard (RPS). An RPS is a mandate from the state government that a certain percentage of the state’s electricity must come from renewable sources.
You can see map of all the states with an RPS at ncsl.org.
These mandates are important for the price of solar because it means there will be a guaranteed market for photovoltaics in the future. By increasing the demand, we’ll see the price of solar panels to continue to drop.
How much should we expect the price of solar to drop?
Bloomberg New Energy Finance (BNEF) makes some predictions about the price of solar in the future. If these seem far out, keep in mind that historically we have tended to underestimate how quickly green technologies would grow, including solar, wind, batteries, and electric cars. All of these have grown much faster than many people have predicted, so these numbers from BNEF might even be conservative.
Here are some highlights from the BNEF New Energy Outlook 2019:
- Solar photovoltaic module prices have dropped by 89% since 2010
- Solar PV prices should drop by another 34% by 2030
- By 2050, thoese prices should drop by a total of 63%. This means utility-scale PV will cost only 2.5 cents per kWh.
- The price of batteries have dropped by 84% since 2010
- Residential solar will grow to be 11% of the total electricity by 2050
Finally, in the near term, Wood Mackenzie forecasts that solar in the US will grow 25% in 2019 compared to 2018. They also predict that in just five years, the total amount of installed solar will have doubled.
How much will solar grow globally?
The United States is actually not the largest market in the world for solar. China is outpacing the US by far, installing solar at about double the rate of the US. China, like most US states, have a renewable energy target. They’re aiming for 20% renewable energy by 2030. That’s a big shift for a country that used coal to power much of its industrial growth.
Here some more highlights from the reports:
- By 2050, half the world’s electricity will be renewable, split roughly 50-50 between wind and solar.
- In 2019, solar power supplies only 2% of the world’s energy, but it will grow to 22% by 2050.
- Massive, grid-scale batteries will be a key catalyst for this growth. Batteries will be 64% cheaper by 2040, and the world will have installed 359 GW of battery power by 2050.
- The cumulative amount of solar investment will hit $4.2 trillion by 2050.
- In that same period, coal usage will drop by half globally, down to 12% of the total energy supply.
- In the United States, we will have nearly stopped building new coal and nuclear power plants. Both technologies will basically disappear from the electric grid by 2050.
- India is projected to continue to build some coal power to meet its growing electricity demand, in part driven by air conditioning which will double globally. India is projected to add 170 GW of coal capacity by 2050, but this will be dwarfed by renewables which will be 1,500 GW in the same time period.
- 67% of India’s electricity will be zero carbon by 2050, and 70% of that will come from solar.
Should you wait for solar to become cheaper?
If you’re trying to decide whether to install solar in your home now or wait for prices to continue to drop, I’d advise not to wait. Do it as soon as you’re financially able to purchase the system rather than take a PPA or lease.
By going solar now, you’re effectively locking in your electricity costs for the next couple decades. By starting the payback period sooner, your investment will start returning dividends to you sooner.
The other important issue is that federal and local incentives for solar will eventually expire. The federal tax credit will be dropping in value in 2020 and disappear for residential customers by 2022.