Four Factors That Lowered The Cost of Solar

cost of solar

4-26-2015 Four Factors That Lowered The Cost of Solar

Everyone in the solar energy world can agree on at least one point: the cost of solar has dropped significantly. There are many different theories as to why and how this happened. NPR’s Planet Money segment took a look at some of these theories. The hosts discussed some of the major factors that affected the cost of solar when they attended a residential rooftop solar installation in a New York neighborhood.

Solar Panels

About eight years ago, one solar panel would’ve cost about $1,000. Today, one solar panel costs about $200-250. Solar panels are a major factor in the cost of solar, so a decrease in their price translates to cheaper solar.

Part of the reason behind this price drop is increased production of solar panels. The majority of the solar panels that enter the U.S. market are made in China.

When China first got into solar panel manufacturing, it built a huge number of solar panel plants and started churning out an unprecedented number of panels. Those panels flooded the solar market, driving down the prices.

The law of supply and demand came into effect here, and many American companies couldn’t compete with lower panel costs, so they went out of business. To survive the sudden influx of cheap panels, other companies became innovators.


Solar panels aren’t the only thing that’s affected the cost of solar. Installation has gotten faster, which has helped make it cheaper. Through a more standardized installation process and better tools, solar panel installers have managed to cut the installation time by about three-quarters.

Five years ago, it would’ve taken an installation crew of six about two days to put solar panels on a four bed, two bath house. Now, it takes them only half a day. They arrive in the morning, install the panels, and leave in time to get lunch at their favorite restaurant.

By spending less time installing solar panels, installation crews are able to cut the cost of solar for homeowners, making it more accessible.

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Creative Financing

Even with the drop in solar panel prices and the shorter installation time, the cost of solar is still too much for many Americans. It’s not uncommon for an entire PV rooftop solar system to cost about $25,000. Most Americans don’t have that much money sitting in their bank accounts, so paying for a solar system in full is out of the question.

Loans, too, can be a problem because of the required down payment. Solar City, and other companies like them, have figured out a low-cost way to get solar panels to people who want them: solar leasing. With solar leasing, homeowners don’t own the solar panels on their roofs, so they pay a monthly rent to Solar City for them.

There’s little to no down payment, and people still get to enjoy a lower energy bill while paying for solar in smaller, more manageable chunks.

Government subsidies

The last factor that’s really affected the cost of solar is subsidies. The federal solar investment tax credit (ITC) has been a huge help in lowering the cost of solar for homeowners. There are also state subsidies that many homeowners can take advantage of as well.

There is one caveat to these subsidies: homeowners who lease their solar panels don’t get the subsidies because they don’t own the solar panels. The leasing company gets the subsidies.

Changing Demographics and the Cost of Solar

With such a significant drop in the cost of solar over the past few years, it’s not surprising that the demographics of solar homeowners have changed, too. Solar used to be a luxury good that only the wealthiest of Americans could afford. Now, it’s not uncommon to see solar in middle class neighborhoods. For a complete look at the new solar homeowners, check out GreenLancer’s profile of average solar homeowners.

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