Falling solar costs: Good for buyers, bad for makers

There's a paradox in the global solar industry: When manufacturers are suffering, things are looking up for consumers.

Lux Research yesterday released its latest industry analysis which projects fast growth in the amount of solar power installed, at 15.5 percent per year, but flat revenue until 2016. Reflecting the same dynamic of falling product prices, a report from Navigant Consulting yesterday found that the price of solar modules, or solar electric panels, is down almost 20 percent so far this year.

The reports put numbers on the brutal price competition among makers of solar photovoltaic panels where global competitors continually shave down the price per watt. For panel producers, it means shrinking profit margins and worries over whether demand is strong enough to absorb the output of rising manufacturing capacity, according to analysts.

But for consumers, it means a rooftop solar array will deliver more bang for the buck. A less obvious effect is that lower hardware prices also improve the prospect that solar leasing, rather than buying panels outright, will become more widespread.

"For companies that would offer a solar lease (falling panel prices) help make the model work better so they can expand the offering to new states and geographies and to projects that otherwise might not have penciled out," said Shayle Kann, a solar industry analyst at GTM Research. "Eventually that will bleed into wider availability."

Buying a rooftop solar array costs in the neighborhood of $30,000 depending on the size, before a 30 percent federal tax rebate and state incentives. Solar panels themselves, though, are far less than half the cost of the entire system. Installation is about half the overall cost and other hardware, such as inverters , figures in as well.

As a result, even the rapid decline in panel prices seen in the first half of this year has only a muted impact on consumers. The impact is more dramatic for installers and companies that offer solar leases, Kann said.

Solar leases and other financial arrangements are designed to get around the upfront cost of solar PV. It's a model that's grown rapidly over the past few years and is being offered by more companies.

Rather than buy the panels, consumers pay a monthly fee which lowers their overall electricity bill. It can either be a predetermined fee set for 20 years in the case of a lease. In a power purchase agreement, the consumer buys the power from the panels at a lower rate than the grid retail rate.

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Falling solar costs: Good for buyers, bad for makers
Falling solar costs: Good for buyers, bad for makers

Installation is about half the overall cost and other hardware, such as inverters, figures in as well. As a result, even the rapid decline in panel prices seen in the first half of this year has only a muted impact on consumers.



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