Why Solar Costs Are Rising

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Solar energy’s clean, renewable, and infinite source made it the energy source of the future. By the early part of the 2000s, the solar energy industry had experienced an average annual growth of 68% and contributed 40 gigawatts of power to America’s power grid. The budding industry powered 6.5 American households and provided jobs to almost 374,000 of the population as solar panel installers.

However, things are about to change in the solar power industry as we enter the end of another decade. The tax exemptions awarded to solar power switchers will be gone in a few years, and the Trump administration has approved additional tariffs on solar panels and equipment. Soon, solar power won’t be as cheap as it used to be and if there is a good time to switch to solar power, that time is now.

Disappearing Tax Exemptions

Solar power saw a steady rise in patrons upon the enactment of the Solar Investment Tax Credit in 2006. Anyone who decided to switch to solar power and outright purchased a module for installation would enjoy a 30% credit on their income taxes. The tax exemptions were originally planned for implementation from January 2006 up to December 2007, but numerous laws were passed to extend the tax exemptions up to 2019. As a result of the multi-year extensions on the tax credit, solar equipment and rates continued to depreciate while technological efficiencies and installation rates improved.

However, there is a glaring development that most people overlook.

As legislators extended the SITC to encourage long-term investments in solar power, the tax exemptions will be reduced by 2019. Any solar project that begins at the start of 2020 will step down to a 26% tax credit. By 2021, the tax credits will reduce to 22% for projects that start within the year. Afterwards, commercial establishments will continue to get a permanent 10% tax credit while residential users will not receive tax credits anymore.

This is why most people have been encouraged to switch to solar power before 2019. Installing a solar module after that would mean an additional 30% cost on the equipment as the tax credit would be completely gone by then.

Additional Tariffs on Solar Prices

While some may have prepared for the impact of the tax credit reductions, a recent announcement by the Trump administration further sealed the inevitable inflation of solar power.

In January this year, President Donald Trump announced a 30% tariff on all imported solar panels plus an additional 25% tariff on Chinese-made solar module imports. The aftermath was expected as Reuters reported in June that solar installation projects worth approximately $2.5 billion had been cancelled because of the tariffs.

The tariffs were implemented after a couple of American solar manufacturers lobbied to impose a 50% tariff on solar imports which they claimed were harming their business, especially the cheap imports from China. Suniva, a Georgia-based solar cell manufacturer, filed bankruptcy in April 2017 and attributed its financial decline to the lower prices of foreign-produced solar panels.

In October 2017, the International Trade Commission released its analysis of tariffs on imported solar panels and suggested tariffs as high as 35%. The Trump administration eventually settled with its own number: a 30% tariff. Because of the new tariffs, analysts at Bloomberg New Energy Finance estimate an increase of up to 3% for rooftop solar panels; while solar farms which contribute energy to a shared grid might hike prices up to 10%.

Consumer Impact

For those who have already invested in solar power systems, they would have to consider the rate hikes in their bottom-line. This might also result in businesses slowing down or even halting production which can be detrimental for the majority of employees in the industry.

An average homeowner who is looking into using solar energy needs to act fast. NOW is the best time to invest in solar energy before the tariffs permanently take hold and raise the prices.

Pros and Cons on Residential Solar Panels

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Sometimes utility bills are just plain annoying. Money put into the headaches of basic living means it can’t be spent elsewhere. But thankfully due to modern technology, we have an answer: and that answer is installing solar panels for your home.

Why Solar Panels Make Sense For Your Residence

From a residential perspective, it’s mostly upsides for the consumer. There’s not even really a con if the house is still connected to the grid, not unless the panels in question are hideously expensive and financing isn’t an option. The first advantage of solar panels is the obvious: you start saving on electricity, thus the system pays for itself out of those savings. How long the repayment period is depends on several factors, that being upfront cost, anything for financing, overall maintenance, and electricity prices of the utilities. Generally speaking, a solar PV system should pay for itself in about five to fifteen years, or fewer if there are any government incentives in play, like tax credits, and the like.

Also, for those worried about their house value, don’t worry; solar panels increase property value. A lot of homeowners are interested in solar, but either haven’t looked into installation, or don’t have the financial means to install a system. If you’re looking to move elsewhere, it still may be worth it to install solar panels for when you sell the house as this will certainly help increase the value of your residence.

We should also look at the situation from the view of the electricity provider, which is by necessity, a bit different. First and most important is that solar panels produce the most energy during the peak times when energy is most in demand, which helps relieve the burden on providers. Not only that, but it also means they won’t have to invest in more equipment to cover peak load, which helps keep electricity prices down.

There Aren’t Really Any Cons For Solar Panels

From a residential perspective, it’s mainly a matter of cost. True, solar panels have gone down in price, and will continue to do so, but the price is the only con at the present. Without the option to finance, or any tax credits or rebates, the cost of a system may be too much. Further, some homes may have difficulty installing solar panels due to the roofing on their residence: slate or cedar tiles are found in older homes, most notably; solar installers often have a hard time working on these types of roofs.  Other difficulties on the roof are skylights or roof decks. The option of ground mounted solar panels also exists; though that has its own difficulties for residences lacking enough ground area.

On the provider’s side, there’s the problem of actually having too much residential solar connected to the grid, such that solar generation covers more than 20% of the load. The grid becomes unstable at such a percentage. However, this is easily compensated for by energy storage, either on the consumer side or the provider side.

Conclusions

On the whole, solar is the future, especially in the face of public opinion and investor choices. There are practical and financial hurdles to consider, but they’re hurdles, not roadblocks. If you think you can jump over them, consider your future well secured.

 

Solar To Take Over US Electricity By 2022

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According to Yuri Horwitz, co-founder and CEO of Sol Systems, solar power will be the main form of electricity generation by the time 2022 hits, despite the tariffs imposed by the Trump administration. In a report released on the 15th of February 2018, Horwitz names three reasons for solar power to advance.

Public Support

Polls show significant support for renewable energy. A Pew poll of January 2017 notes 65% of Americans would prefer to develop alternative energy sources, as opposed to 27% who would rather expand production of fossil fuels. A Gallup poll of March 2018 notes that 59% of Americans prefer environmental protection to development of energy supplies, and that 63% would rather emphasize conservation, as opposed to 32% who would rather emphasize production. A second Gallup poll of March 2017 saw 71% of respondents favour emphasis on alternative energy, versus 23% who prefer oil, gas, and coal.

Horwitz believes that this base of public support will become important, as the US continues to develop its renewable energy assets.

Solar Rises to the Challenge

Horwitz then considers natural gas, currently America’s primary fuel in terms of power generation. He notes an increase in production that will lower prices by 2019, but also is concerned that the long-term picture doesn’t look as good. New gas discoveries have fallen to a 70-year low, and continue to fall, and recent studies show that the least expensive wells have already been tapped. Whether or not these are valid concerns, there are also projections that estimate prices to rise to $79-$85, depending on location, by 2039.

Solar, on the other hand, is getting cheaper all the time. Solar-based power purchase agreements are getting cheaper every year, and many such agreements in 2017 for delivery in 2018 and 2019 came out at a price below the range for new-build natural gas. As solar develops, prices are fully expected to go even lower, not just due to after-the-fact costs, but also because the technology is maturing. Raw material prices are going down, manufacturers are figuring out how to use less material to achieve the same result, and performance in output per watt is increasing.

Investors Want Solar

Horwitz’s third point is based on a detailed analysis of the current state of the stock market. Boiled down, the current market is shrinking and growing more expensive to invest in; investors are looking for stability over the long term, which solar assets offer. Also, Horwitz cites ‘a global preference for dollar-denominated investments, specifically infrastructure, and especially renewable energy investments’. This preference has driven large investors towards renewable, and thus capital for utility-scale solar is expected to remain cheap or grow even cheaper.

Conclusion

The simple fact of the matter is that the money has to go where it’s cheap, and right now, with public interest in renewable energy, the good bet is on solar. It just so happens that solar is also the environmental option. With the three factors above, it’s well on track to overtaking other sources.