As we near the halfway point of 2021, prices for many goods and commodities are skyrocketing. Lumber has more than quadrupled in price in recent months along with a huge house-buying frenzy and limited supplies. Crude oil and metals prices are also steadily on the rise with the reopening of the economy. Food prices are also feeling the pressure. But what about solar panels? Is the price of solar panels expected to incraese in 2021?
It’s a good question. The demand for solar panels has steadily increased in recent decades and has exploded in recent years. Typically these demand pressures would push prices higher and higher, but is this the case for solar panels in 2021?
SOLAR PANEL PRICES EXPECTED TO CONTINUE PLUMMETING IN 2021
In the past few decades, the price of solar panels has plummeted a mindblowing 99%, according to analysis by MIT. In 1975, the cost of solar panels was over $100 per watt! But today, solar panels can be found for less than $0.20 per watt.
What was once considered a pricey curiosity to some and an unaffordable dream source of energy to others has now become mainstream. It has also become a major fixture of the nation’s energy infrastructure.
But can prices get any cheaper than they already are? Could the cost of solar panels continue to decrease even more than they already have?
The truth is, yes, solar panel costs are expected to continue decreasing into the future. This is the case in all solar sectors: residential, commercial, and utility.
According to analysis by Wood Mackenzie, a global energy research and consulting group, between 2020 and 2025, solar system prices are expected to decrease by 17% for residential solar installations, 16% for commercial solar, and 20% for utility solar.
What could be causing such a dramatic and persistent decrease in the cost of solar panels? Let’s take a look.
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WHAT HAS CAUSED DROP IN SOLAR PANEL PRICES?
The dramatic and steady decrease in solar panel costs have been caused by a number of factors. All of these factors have converged to create a solar panel market that is making solar more affordable than ever while continuing to push the price down.
Production Increase & Efficiency: One of the main factors that has pushed the price of solar panels down in recent decades is the massive increase in solar panel manufacturing, particularly in Asia. China is the behemoth in the room when it comes to solar panels, and it has a firm grip on the solar panel manufacturing landscape. Where once the United States was the leader in solar technology and manufacturing, in the 1990s China saw its chance and began investing heavily to supply the world’s growing solar needs.
In 2020, Chinese solar panel manufacturers continued their solar manufacturing marathon. Several large-name Chinese solar manufacturers pledged to expand their production capacities by spending billions of dollars and forecasting the production of several Gigawatts of solar panels per year.
This increase in solar panel availability and manufacturing competitiveness is having a strong downward pressure on solar panel price that is not expected to let up anytime soon.
Reduced Hardware Costs: As the solar panel market has continued to heat up in recent decades, the price of parts and hardware involved in the solar panel manufacturing and installation process have also come down significantly.
Solar panels require specialized pieces of equipment, such as framing, brackets, railing, and inverters. As the demand for solar panels has ramped up, the manufacturing capacity for the necessary hardware for those solar panels has also increased. This has made such components both more available and more affordable, further bringing down the cost of solar panels and solar installation.
Better Panel Technology: Another significant factor that has brought down the cost of solar panels is improved solar panel technology. With increased solar research and development, solar cells have become more and more efficient. This means that solar panels can produce more and more energy while taking up less and less space. The fewer solar panels a household needs to install, the lower the cost of installation.
This trend in solar panel efficiency is expected to continue as new materials and types of solar panels are developed.
COVID-19 Impacts: One unexpected factor that influenced the cost of solar panels in 2020 was the COVID-19 pandemic. Initially, COVID-19 lockdowns caused huge disruptions in solar panel manufacturing and supply chains, which brought huge uncertainty to the market. This initially sent shockwaves through the solar industry, with solar panel costs expected to rise sharply.
However, COVID-19 also placed negative pressures on solar panel costs. This came as construction projects on new homes and businesses paused, homeowners and businesses delayed purchasing and investment, and the overall demand for electricity in the world decreased. All these factors came together to decrease the overall demand and price of solar panels. And as economies open up, construction resumes, and spending ramps back up, existing supplies of solar panels will continue to place negative pressure on solar panel prices.
WHY HASN’T INCREASED DEMAND RAISED SOLAR PRICES?
The sharp declines in solar panel prices might seem counterintuitive, seeing as demand for solar is at all-time highs. This demand has only gotten more intense with the extension of the solar tax credit to 2023 and declining prices.
This demand would normally cause a steady increase in solar panel prices, but why not now?
In addition to the reasons we outlined above, the world as a whole is experiencing a monumental shift in the way it sees energy and the future of energy infrastructure.
Not only has the US gradually shifted towards renewable energy in recent decades, this trend has been seen throughout Europe, Asia, Australia, Africa, and South America. As the threat of global climate change and the limited supply of fossil fuels loom over our heads, the shift to renewable energy is a natural result of our instinct to adapt and survive.
SHOULD YOU WAIT TO BUY SOLAR?
With solar panel prices falling dramatically in recent years, some consumers have wondered whether they should wait it out and let prices fall even more. But is it a wise idea to wait to buy solar panels?
The truth is that while solar panel prices have been steadily dropping, that does not guarantee future price decreases. Changes in the market can be dramatic and cause price uncertainty.
Additionally, solar incentives will begin to expire in the coming years, meaning consumers could miss out on huge discounts and tax credits.
Plus, if demand for solar panels keeps rising and supply cannot keep up with demand, prices might start to level out or begin to increase again.
To get a better idea if you should invest in solar today and how much you could save with solar panels, contact Green Ridge Solar. We are your local Oregon solar experts, and we provide a free solar analysis. You can even use our handy Solar Calculator.
With your free solar analysis, you can see where your solar panels could be placed, how much energy you could offset, and how much money you could save over the lifetime of your home.
Contact Green Ridge Solar to learn all about solar energy today.